ABQJOURNAL NORTH: Thornburg Executives Resign

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Thursday, September 17, 2009

Thornburg Executives Resign

By Mark Oswald
Of the Journal
      Larry Goldstone, the longtime president and CEO of bankrupt Thornburg Mortgage, and the Santa Fe-based company's chief financial officer have both resigned amid allegations that they've improperly used Thornburg employees and resources to help start up a new company.
       Wednesday, a branch of the U.S. Department of Justice filed a court motion spelling out the allegations and asking for appointment of a trustee to take over Thornburg's reorganization or an examiner to investigate the alleged misappropriation of Thornburg resources to help Goldstone's new firm.
       The diversion of Thornburg resources “for the benefit of insiders constitutes a breach of fiduciary duties” for a debtor like Thornburg in a bankruptcy case, says the motion filed by the U.S. Trustee, a Justice Department program that serves as a watchdog for bankruptcies.
       Further, the motion states, the use of Thornburg employees “by its senior officers to staff start-up aspects of a new and undisclosed company is, at its very best, strong evidence of incompetence and/or gross mismanagement.”
       The U.S. Trustee last week filed a less specific motion calling for Goldstone and other Thornburg executives to answer questions about a “potential misappropriation” of assets at Thornburg.
       Goldstone, in a brief phone interview, confirmed his resignation but said he wasn't at liberty to say more or comment on the potential probe.
       Also Wednesday, Thornburg Mortgage — now officially known as TMST Inc. — filed notice with the federal Securities and Exchange Commission that both Goldstone and CFO Clarence Simmons had resigned.
       The resignations “arose as a result of a disagreement between them and the company with respect to policies concerning the allocation and use of resources, including employees,” between Thornburg and the new company founded by Goldstone and Simmons, SAF Financial Inc.
       Thornburg's board of directors “has determined that the policies implemented by Messrs. Goldstone and Simmons were not appropriate, and the Board has taken steps to abolish those policies, including implementing management changes,” the SEC filing states.
       Anne-Drue M. Anderson, 48, a Thornburg director since 2003, has been named Thornburg's new president, the SEC filing said.
       Thornburg Mortgage, a high-end lender that once was New Mexico's largest publicly traded company, declared bankruptcy earlier this year, a victim of the collapse of the mortgage-backed security market. About 150 employees were laid off.
       In a court motion filed Sept. 9 in Thornburg's bankruptcy case, which is being heard in Maryland, the U.S. Trustee sought an order that Goldstone, Simmons and Thornburg vice president of corporate communications Amy Pell appear to answer questions and produce documents.
       The U.S. Trustee Program is part of the Justice Department that “helps investigate bankruptcy fraud and abuse” in coordination with the FBI, U.S. attorneys and other law enforcement agencies, according to its Web site.
       In its new motion filed Wednesday, the U.S. Trustee for Maryland says that “within days” of Thornburg filing for Chapter 11 bankruptcy in May, Goldstone and Simmons started SAF to continue exploring Thornburg's “prior strategy of acquiring a depository financial institution from which to build up an asset base for mortgage lending.”
       After starting SAF, Goldstone and Simmons “continued to be highly compensated” by Thornburg, the motion states. A preliminary investigation indicates they also used “a number” of Thornburg employees to work on the SAF start-up “with no apparent benefit” to Thornburg, the motion says.
       The use of Thornburg workers for SAF came to light when an anonymous whistle-blower letter was sent about Aug. 25 to the official committee of Thornburg's unsecured creditors asserting that Goldstone and Simmons were “misappropriating a portion of (Thornburg's) payroll to help fund work on a new start-up.”
       On Sept. 10, a related motion was filed, this one by the committee of unsecured creditors. That motion also seeks interviews with Goldstone and Simmons about SAF Financial.
       The new company's creation “without prior disclosure raises a host of questions and concerns” about potential use of Thornburg “assets, opportunities, employees and professionals” for SAF, the motion states.
       Asked about the court filings, Goldstone said Wednesday that “something should be filed in a day or two” but that he couldn't provide additional comment. He and Garrett Thornburg started Thornburg Mortgage in Santa Fe in 1993.
       A separate Thornburg company, Thornburg Investment Management, has continued to thrive. The Thornburg Cos. moved into a new office complex in northwest Santa Fe earlier this year.
       Efforts to reach Simmons and Pell for comment Wednesday were unsuccessful.
       Anderson, Thornburg's new president, is a director of Enterprise Development International, a nonprofit microlender for people in poverty in Third World countries. She worked as president of Neighborhood Housing Services of America, an Oakland, Calif., nonprofit, in 2000 and 2001 and prior to that was an executive vice president of H.F. Ahmanson & Co. and Home Savings of America.

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