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Greenlight's Einhorn Resigns From New Century Board

Activist hedge fund manager David Einhorn quit New Century Financial's board late Wednesday, two days after the subprime lender's stock fell 69% following disclosure of a federal criminal probe.

Einhorn is a principal at New York's Greenlight Capital, which owns 3.49 million, or 6.3%, of New Century shares and is its second-largest shareholder, according to Thomson ShareWatch. He announced his resignation in a Thursday filing with the U.S. Securities and Exchange Commission.

The resignation came five days after Irvine, California-based New Century disclosed the criminal probe into securities trading and accounting, and said its survival might depend on its own lenders' easing terms.

Mary Beth Grover, an outside spokeswoman for Greenlight, said Einhorn was unavailable for further comment. A copy of Einhorn's resignation letter was not immediately available. New Century spokeswoman Laura Oberhelman did not immediately return a call seeking comment.

In January, Einhorn called for the ouster of management at business financing company Allied Capital Corp. in the wake of a criminal probe that led to 19 people being charged with fraud, including a former executive at an Allied unit.

Einhorn joined New Century's board last March after resolving a proxy fight in which he sought to oust three directors. Greenlight also won the right to double its then current New Century stake to 19.6 percent. The fund invests about $4 billion.

Before the resolution, Einhorn had contended that New Century shares were depressed "due to a history of capital misallocation, market anticipation of future capital misallocation and a number of other self-inflicted actions."

In Thursday's SEC filing, Greenlight said it had not sold any New Century shares in the previous 60 days, a period in which the shares fell 83%.

Einhorn sat on the 10-person board's finance committee and its public and community affairs committee, according to New Century's Web site.

According to ShareWatch, Los Angeles-based Hotchkis and Wiley Capital Management LLC is New Century's largest shareholder, with a 7.1% stake. Hotchkis referred an inquiry to an outside spokesman, who did not immediately return a call seeking comment.

New Century shares rose 18 cents to $5.34 in morning trading on the New York Stock Exchange. They have fallen from $14.65 since Friday.