Yesterday, the SEC filed a complaint in the United States District Court for the Southern District of New York alleging that three former officers of American Home Mortgage Investment Corp misled investors with regard to the financial stability of the company. Specifically, two of the officers were accused of engaging in accounting fraud and making false and misleading disclosures that were designed to conceal from investors that American Home Mortgage's financial condition and prospects had significantly worsened in the first four months of 2007.

Other significant securities law violations alleged in the complaint include claims that American Home Mortgage's former CEO and CFO made misleading disclosures concerning the risks associated with the mortgages the company originated and held and the company's liquidity, including failure to disclose to either shareholders or auditor the material circumstances surrounding the sale the majority of its multi-billion dollar mortgage-backed securities portfolio in April 2007, which the SEC alleges was required to meet pressing liquidity demands.

In announcing the complaint, the SEC stated that American Home Mortgage's former CEO has agreed, without admitting or denying the SEC's allegations, to a permanent injunction from violating the antifraud, reporting, record-keeping, and internal controls provisions of the federal securities laws and to pay approximately $2.2 million in disgorgement and prejudgment interest and a $250,000 penalty. Pursuant to the settlement, he will also be barred from serving as an officer or director of a public company for five years.

The litigation is ongoing with respect to the other defendants.