In May 2007, the Santa Fe City Council approved a $45 million bond to build a new campus for the eponymous companies of local finance tycoon Garrett Thornburg.
By that fall, Thornburg's mortgage company began investigating a new strategy: buying a bank in order to unlock new sources of funding. Had the strategy succeeded, Thornburg might have been eligible for some of the $700 billion federal bailout that followed.
Things worked out differently.
This May, Thornburg Mortgage, now known as TMST, filed for bankruptcy protection. Its largest creditors include Wilmington Trust, Citigroup, JP Morgan and Wells Fargo—companies that have together received at least $79 billion in federal bailouts.
It is from these gigantic institutions that former Thornburg CEO Larry Goldstone and other top executives allegedly stole to form a new company that would follow the strategy conceived in 2007. The executives falsified records in order to pay themselves, employees and third-party vendors with hundreds of thousands of dollars owed to TMST's creditors, court documents allege.
The campus Thornburg built overlooking Santa Fe now stands as a potential crime scene. And the allegations come not from federal regulators—or even from the creditors—but from the TMST board.
Last week, US Bankruptcy Judge Duncan Keir approved the appointment of a Chapter 11 trustee to take over the dismantling of TMST from its management. Two separate parties in the case tell SFR the judge found implausible TMST's claim that Goldstone, former Chief Financial Officer Clay Simmons and other principals in the new company, SAF Financial, acted without the knowledge of Thornburg's board.
"The judge basically said, 'Yes, I'm going to grant the trustee motion, because these people have shown they can't be trusted,'" one source, employed by a TMST creditor, says.
The trustee may be the only person with the power to answer a key question: Was Garrett Thornburg duped by his longtime colleagues? Or did he and the board decide to throw their old friends under the bus? The answer depends on what Thornburg knew and when.
Virtually no one involved in this story agreed to comment. SFR left messages at the homes of Goldstone, Simmons, Thornburg and others. All went unreturned. Thornburg Investment Management spokesman David Miller had no comment via email.
However, bankruptcy case files offer some clues.
On April 26, 2009—just days before Thornburg Mortgage's bankruptcy filing—the company's board was asked to waive its "corporate opportunity" to profit from the 2007 idea to take over a bank, a strategy Goldstone and Simmons hoped to pursue "separate from TMST."
According to TMST's attorneys, the board "declined to waive TMST's corporate opportunity."
After the bankruptcy, Goldstone approached Thornburg "with respect to a potential investment in SAF," Thornburg told fellow board members this fall, according to meeting minutes. But Thornburg declined.
His logic is hard to follow. For some reason, Thornburg didn't trust two top executives enough to invest in their new company. Yet TMST explicitly left itself the option of taking a stake in whatever Goldstone produced. Then, for months, TMST allowed Goldstone, Simmons and other employees to work on SAF matters inside Thornburg's Ridgetop Road campus.
"It doesn't smell right to me," the creditor's employee tells SFR.
Then there is the whistle-blower letter, from which the creditors learned of SAF's misappropriation. The anonymous Aug. 25 letter was sent to creditors' attorneys; TMST's new top executive, Anne-Drue Miller Anderson, claims to have received the letter on Aug. 29. At the Sept. 15 board meeting, Thornburg said "he was not aware prior to the receipt of the anonymous letter" that SAF was misappropriating funds.
That may be. It may also be that the letter came from someone attempting to pin as much responsibility as possible on Goldstone and the other SAF founders.
On Sept. 11, Anderson told Goldstone and Simmons it would be their last day at Thornburg. The following day, she says in court papers, the locks to their offices were changed and their building passes deactivated.
Sometime earlier, TMST claims, Goldstone and Simmons made off with company cell phones, computers and 40 boxes of files. "I don't know that anyone has actually figured out what's in them," Keith Sobol, a member of the TMST creditors' committee who works for Davis Selected Advisors in Santa Fe, tells SFR.
Goldstone's attorney says a response to TMST's allegations should be filed within a couple of weeks.
SFR's ongoing examination of Thornburg Mortgage is chronicled HERE.