The bankruptcy trustee for Thornburg Mortgage this week agreed to settle for $6.5 million a lawsuit against the company's former executives and legal counsel to settle charges that they engaged in a conspiracy to secretly use the failed jumbo lender's employees and assets to launch a new company.
Joel I. Sher, the bankruptcy trustee for Thornburg, sued former company CEO Larry Goldstone and former chief financial officer Clarence Simmons III and their company SAF Financial Inc.
Sher, who is overseeing the firm's final liquidation, also sued lawyer Karen A. Dempsey and her firm, Orrick Herrington & Sutcliffe, for allegedly helping the two cover up their actions.
"The agreement reached among the parties is comprised of a global resolution of all claims asserted by and between the parties," Sher said in papers filed in U.S. Bankruptcy Court in Baltimore.
In addition to the lump sum payment of $6.5 million, "Orrick shall withdraw its final fee application with prejudice and shall return to the bankruptcy estate, all post-petition fees it has already received as well as any retainer it held as of the petition date," said Sher.
Defendants Goldstone, Simmons, and other former insiders had previously denied they acted improperly and sought to have the case dismissed.
Sher, an attorney at Baltimore law firm Shapiro Sher Guinot & Sandler, filed suit against the former executives in March 2010. The settlement was reported by Dow Jones.
Sher has been managing what's left of Thornburg, now called TMST Inc., for more than two years.
In May 2009 The Santa Fe-based Thornburg Mortgage – once one of the largest jumbo and “super” jumbo lenders in the U.S. -- filed for bankruptcy protection, listing debts of more than $1 billion. At the time it was a publicly traded REIT.
Its warehouse lenders included Credit Suisse, JPMorgan Chase, Greenwich Capital, and Royal Bank of Scotland, among others.
