SEC drops charges in Thornburg case

Only two fraud counts remain in play as major allegations tossed

The federal Securities and Exchange Commission has dropped the three most serious of five charges against Thornburg Mortgage executives

SANTA FE — Only two fraud charges remain against former Thornburg Mortgage executives after the federal Securities and Exchange Commission dropped three pending claims last week.

A defense lawyer said the SEC has abandoned its major allegation against Larry Goldstone and Clarence Simmons III — that they hid more then $400 million in losses at the onset of the housing market collapse that led to the bankruptcy and ultimately the demise of Santa Fe-based Thornburg, once New Mexico’s largest publicly traded company.

“After eight long years they’ve now concluded that the centerpiece of their case has no merit,” said Randall Lee of Los Angeles, among the attorneys representing Goldstone and Simmons.

The SEC maintained in a 2012 lawsuit that Thornburg’ s leaders — CEO Larry Goldstone, CFO Simmons and chief accounting officer Jane E. Starrett — covered up the company’s deteriorating financial condition at the onset of the housing crash by issuing misleading statements and half truths, including by overstating income by $428 million in a 2007 annual report.

Starrett reached a settlement with the SEC earlier this year, just before the trial started in front of U.S. District Judge James O. Browning in Albuquerque. She agreed to pay a $25,000 penalty and can’t practice as an officer or director of an SEC-regulated company for three years.

In July, a jury cleared Goldstone and Simmons of five counts but deadlocked on five others. In its Friday filing, the SEC dropped three of the pending counts but said it will try to prove two others at retrial. The SEC said in an email statement Monday that it had no additional comment.

“They started this investigation in 2008,” said Lee, the defense attorney. “It took them four years to file charges in 2012 and it took another for four years for the case to get trial . ... It’s really a travesty that is has been hanging over Mr. Goldstone and Mr. Simmons for eight years now.”

In one remaining count, Goldstone is accused of violating federal law and SEC rules or making reckless or false statements in 2008 when he said in a CNBC interview that Thornburg Mortgage had “the liquidity and cash available to support the portfolio” and reported in an email to the company’s Investor Relations Group that it still had sufficient operating cash. The other count set for retrial accuses both Goldstone and Simmons of making false statements to, or misleadingly omitting facts for, an accountant.

Thornburg Mortgage’s 2009 bankruptcy filing, listing $36.5 billion in assets, was among the largest in U.S. history.