SEC drops crisis-era case against ex-Thornburg executives

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By Nate Raymond

<span class="articleLocation”>The U.S. Securities and Exchange Commission on
Friday dropped its case against two former executives at
now-defunct home lender Thornburg Mortgage Inc in a lawsuit
brought in the wake of the 2008 financial crisis.

In papers filed in federal court in Albuquerque, New Mexico,
the SEC said it would no longer pursue its civil case against
former Thornburg CEO Larry Goldstone and former CFO Clarence
Simmons, which had been set for a re-trial on Feb. 21.

The decision marked a setback in the agency’s push to hold
executives accountable in connection with the U.S. housing
meltdown and financial crisis, and came after a jury in July
returned a mixed verdict in the initial trial in the case.

The jury found Goldstone and Simmons not liable on five of
10 counts while deadlocking on the other claims. The SEC later
in September dropped three remaining claims and said it would no
longer pursue what the defense called its central
allegation.

Randall Lee, a lawyer for Goldstone and Simmons, said his
clients were “thrilled to have finally been exonerated.”

“We always believed that the evidence in this case
demonstrated that our clients had acted in good faith in
attempting to navigate through the early stages of the financial
crisis,” Lee said in a statement.

The SEC did not immediately respond to a request for
comment.

Thornburg, which specialized in making “jumbo” home loans
larger than $417,000 to borrowers with good credit, filed for
bankruptcy in May 2009 amid the U.S. financial crisis.

The SEC’s lawsuit, filed in 2012, accused Goldstone, Simmons
and former Thornburg Chief Accounting Officer Jane Starrett of
hiding the company’s fast-deteriorating financial condition at
the onset of the financial crisis.

The SEC at that time claimed that Goldstone and Simmons
defrauded investors by overstating Thornburg’s income by more
than $400 million and falsely reporting a profit rather than a
loss for the fourth quarter in its 2007 annual report.

That claim, though, was dropped by the SEC in September
following the initial trial.

Goldstone continued to face a claim based on statements he
made after Thornburg’s annual report was filed. Both Goldstone
and Simmons also faced a claim that they misrepresented or
omitted facts to the company’s auditors. They denied wrongdoing.

Starrett agreed in May to pay $25,000 to settle the lawsuit
without admitting or denying the allegations.

The case is Securities and Exchange Commission v. Goldstone
et al, U.S. District Court, District of New Mexico, No.
12-00257.



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