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U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 19903 / November 8, 2006

SEC v. Jeremy R. Lent, et al., Civil Case No. C-04-4088-CW (N.D. Cal.)

The Securities and Exchange Commission ("Commission") today announced that it has reached settlements in pending litigation against five former officers of NextCard, Inc. ("NextCard"), relating to an alleged financial reporting fraud at the company. Among other relief, the settlements provide for the defendants to pay approximately $1.4 million, representing proceeds from their sales of NextCard stock, penalties and prejudgment interest, into the Court registry for the benefit of NextCard shareholders. The settlements were approved by the Honorable Claudia Wilken in the case SEC v. Jeremy R. Lent, et al., Case No. C-04-4088-CW, in the United States District Court for the Northern District of California.

NextCard became a public company in 1999 and marketed credit cards exclusively through the internet. As alleged in the Commission's complaint, by late 2000 NextCard's credit card losses and delinquencies were higher than expected. The complaint alleges that, in order to conceal this information from investors, the defendants resorted to a series of undisclosed accounting adjustments that artificially lowered NextCard's reported credit losses and delinquencies for fiscal year 2000 and the first and second quarters of fiscal 2001, and misled investors about the health of the company's credit card loan portfolio. NextCard declared bankruptcy in 2002.

The defendants, who consented to the settlements without admitting or denying the allegations against them, are:

  • John Hashman, Chief Executive Officer - Ordered to pay stock sales proceeds, penalties and prejudgment interest of $208,072; permanently enjoined from violating the antifraud provisions of the federal securities laws (Section 17(a) of the Securities Act of 1933 ("Securities Act"), Section 10(b) of the Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder) and from aiding and abetting violations of the books and records and periodic reporting provisions (Sections 13(a) and 13(b)(2)(A) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder); and permanently barred from serving as an officer or director of any public company;
     
  • Yinzi Cai, President and Chief Operating Officer - Ordered to pay stock sales proceeds, penalties and interest of $172,257, and permanently enjoined from violating the antifraud provisions of the federal securities laws (Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder);
     
  • Bruce Rigione, Chief Financial Officer - Ordered to pay a penalty of $50,000; permanently enjoined from violating the antifraud provisions of the federal securities laws (Section 10(b) of the Exchange Act and Rule 10b-5 thereunder) and from aiding and abetting violations of the books and records and periodic reporting provisions (Sections 13(a) and 13(b)(2)(A) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder); and barred from serving as an officer or director of any public company for five years;
     
  • Douglas Wachtel, Controller - Ordered to pay stock sales proceeds, penalties and prejudgment interest of $93,223; permanently enjoined from violating the antifraud provisions of the federal securities laws (Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder) and from aiding and abetting violations of the books and records and periodic reporting provisions (Sections 13(a) and 13(b)(2)(A) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder); and barred from serving as an officer or director of any public company for five years; and
     
  • Jeremy Lent, Chairman and Chief Strategy Officer - Ordered to pay $894,000 in stock sale proceeds, penalties and prejudgment interest; and permanently enjoined from violating the antifraud provisions of Sections 17(a)(2) and 17(a)(3) of the Securities Act. The claims under Section 17(a)(2) and 17(a)(3) of the Securities Act involved negligent conduct in connection with the sale of NextCard common stock. In addition, the Commission and Lent filed a stipulation with the Court dismissing with prejudice the Commission's remaining claims against Lent under Section 17(a)(1) of the Securities Act, Sections 10(b), 13(a) and 13(b)(2)(A) of the Exchange Act and Rules 10b-5, 12b-20, 13a-1 and 13a-13 thereunder. No settlement payment was made by Lent or the Lent Family Trust on the basis of the dismissed claims.

In addition to the relief described above, Wachtel consented to the entry of an order in a separate Commission administrative proceeding suspending him from appearing or practicing as an accountant before the Commission for five years.

The Court's approval of the settlements with all five defendants concludes the Commission's litigation in this case.

 

http://www.sec.gov/litigation/litreleases/2006/lr19903.htm


Modified: 11/08/2006