Charges dropped against two former executives at Thornburg Mortgage

Larry Goldstone

The U.S. Securities and Exchange Commission filed a motion Friday in a federal court saying it will drop three out of five remaining civil fraud claims against two former top executives of Thornburg Mortgage, a Santa Fe-based firm that was once the second-largest mortgage company in the nation.

Larry Goldstone, the firm’s former CEO, and Clarence Simmons, the former chief financial officer, were accused by the SEC in March 2012, along with chief accounting officer Jane Starrett, of trying to hide the company’s deteriorating financial condition at the outset of the nation’s housing collapse, including an allegation that they schemed to overstate the company’s income by more than $420 million in 2007.

Starrett reached a settlement with the SEC earlier this year, before the trial began.

In June, a U.S. District Court jury in Albuquerque found in favor of the two men, both Santa Fe residents, on five fraud counts and failed to reach a verdict on five others, including the central charge in the case — the claim that they had filed a false financial statement inflating the company’s income. The SEC is now dropping that allegation.

“The SEC’s decision confirms what Mr. Goldstone and Mr. Simmons have said for years — that they acted in good faith,” truthfully reporting the company’s financial crisis, said Randall Lee of the Washington D.C.-based law firm WilmerHale.

Lee, the lead attorney representing Goldstone and Simmons, said jurors found in June that the pair had not filed false financial statements, but could not agree on whether the men had acted with fraudulent intent — an outcome Lee described as inconsistent. In each of the five charges with no verdict, he said, the jury vote was 11-1 in favor of the former executives.

The federal agency is still pursuing one count against Goldstone and Simmons, a claim that they had misrepresented or omitted information to auditors, and one additional claim against Goldstone that he had made a false statement to investors, Lee said. A new trial on those counts is scheduled for February 2017.



However, Goldstone and Simmons have a motion pending in November that seeks dismissal of all counts against them. Lee said they are hopeful a judge will grant that request.

“They’re happy that the SEC finally recognized that the centerpiece of its case has no merit,” Lee said of his clients. But “it’s really a travesty that this has taken so long.”

The SEC began investigating in 2008, he said. The men waited four years for the civil charges to be filed and another four years to face trial.

Goldstone and Simmons have fiercely disputed the SEC’s claims since the case began.

“Contrary to the SEC’s claims, we did not misrepresent the company’s financial situation at the time; rather, we made full and clear disclosures while working tirelessly to save the company we built and loved,” the two wrote in a letter to the editor published in The New Mexican shortly after the SEC case was filed in 2012. “Despite our best efforts, the financial market challenges were far more overwhelming than the company could survive.”

Thornburg Mortgage filed for bankruptcy in 2009.

The company was started in 1993 by Goldstone and Garrett Thornburg, who also founded Santa Fe-based Thornburg Investment Management, a privately held company that manages stock and bond funds for individual and institutional investors. The two companies were always separate entities, and Garrett Thornburg was never named in the SEC suit.

(1) comment

Shannon Collins

👿What a f#$&in A$$#*&%😈

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