Sept. 1, 2014

This Week's SFR Picks

Newsletters

Choose your newsletter(s):
* indicates required

SFR Events

Special Issues

 

 

Feds Claim 'Gross Mismanagement' At Thornburg—Or 'Incompetence' At Best

September 16, 2009, 12:00 am
By Corey Pein
Pretend you're a newspaper. Don't worry, it's only temporary.

Now say one of the largest corporate bankruptcies in US history occurs on your turf. Then imagine that, in the course of the bankruptcy case, federal investigators determine the company's management—which includes some of your city's wealthiest and most prominent citizens—has "improperly divert[ed]" company resources and "cannot now be entrusted" to act transparently and honestly.

Unfortunately, your business reporter has been cut to part-time. But you still think this might be story worth mentioning, right? Right?

Not if you're the Santa Fe New Mexican. Or the Albuquerque Journal.

This morning a US Justice Department official asked federal bankruptcy judge to take action against Thornburg Mortgage over claims of misappropriated funds discussed in today's SFR. The filing, by Assistant US Trustee Mark A Neal, basically says Thornburg management should be removed by the court because they used creditors' money to fund startup costs for an entirely new company. (Some management has already departed, as we reported yesterday.)

A story last week by Reuters—the international news wire service, which the dailies presumably keep tabs on—hinted something like this might be coming. And the story of the new company won't be news to SFR readers. But shouldn't the dailies be on this? A federal official is basically saying the CEO of what was one of Santa Fe's largest private employers—a company local politicians both praised and rewarded—is untrustworthy and may have spent money that wasn't his.

"Not only is candor to the Court and [creditors] lacking in this case, but [Thornburg Mortgage] violated chapter 11's basic prohibition on the use of estate assets," Neal writes in his filing. "Furthermore, the use of [Thornburg Mortgage]'s employees by its most 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."

Thornburg employees paid to work for the new company, SAF Financial, "are likely to instead prioritize their work in favor of an emerging entity, owned by insider management, that may offer them future employment. The creation of this...conflict-of-interest is the doing of current management, which cannot now be entrusted to perform their fiduciary obligations," Neal writes.

Click here to download the 14-page filing.

SFR has tried to get a message to company founder Garrett Thornburg, who—unlike Thornburg Mortgage CEO Larry Goldstone and CFO Clarence Simmons—is not named in Neal's filing. (That's Thornburg, pictured.) It's probably past time for him to address these issues.

We'll let you know if and when we get a response. Neal did not immediately return a request for comment.

Thornburg Mortgage is not commenting on anything at all.

 

comments powered by Disqus
 
Close
Close
Close