By Tom Hals
WILMINGTON, Del., Oct 26 (Reuters) - A bankruptcy judge appointed a trustee to take over the liquidation of Thornburg Mortgage after it was discovered that former executives were using staff and equipment to launch a start-up venture.
Judge Duncan Keir of the U.S. Bankruptcy Court in Baltimore entered the order on Friday.
At a hearing earlier this month, the court heard how 'virtually every employee' of Thornburg was being used to develop a new company being launched by Thornburg's top executives.
A Department of Justice official had asked the court to appoint a trustee to take over the management of Thornburg, which filed bankruptcy in May with $24.4 billion in assets, one of the largest filings of 2009.
The company was once one of the leading providers of 'jumbo' residential mortgages, but now plans to liquidate.
A government attorney had argued that the company's management and board of directors should not be allowed to run the company because they did little after learning on Aug. 11 that the former chief executive and chief financial officer might be misusing company funds to develop their start-up.
The pair resigned on Sept. 15.
The company, which recently changed its name to TMST Inc, had argued in court documents that a trustee is not needed because former chief executive Larry Goldstone and former chief financial officer Clarence Simmons have resigned and conflicted staff have been removed.
According to court documents, in addition to paying themselves $232,000 in bonuses without approval from the compensation committee, Goldstone and Simmons directed bonus payments of $93,000 to other managers of Thornburg Mortgage who were involved in helping launch the SAF project.
SAF was formed to pursue a Thornburg Mortgage strategy to acquire a bank or thrift that would give the company access to deposits and Federal Home Loan Bank funds for issuing mortgages.
In a separate complaint, the company is seeking to recover from the two former executives the funds and staff costs, estimated at $200,000, that it claims were diverted to develop SAF.
In a U.S. Securities and Exchange Commission filing on Monday, the company's current president Anne-Drue Anderson, and directors David Ater, Francis Mullin, Eliot Cutler and Thomas Cooley, submitted their resignations, effective upon the appointment of the trustee.
The case is In re: TMST Inc, U.S. Bankruptcy Court, District of Maryland, No. 09-17787.
(Reporting by Tom Hals, additional reporting by Emily Chasan in New York; editing by Andre Grenon) Keywords: THORNBURG/TRUSTEE (thomas.hals@thomsonreuters.com; 1-302-993-6283; Reuters Messaging thomas.hals.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
WILMINGTON, Del., Oct 26 (Reuters) - A bankruptcy judge appointed a trustee to take over the liquidation of Thornburg Mortgage after it was discovered that former executives were using staff and equipment to launch a start-up venture.
Judge Duncan Keir of the U.S. Bankruptcy Court in Baltimore entered the order on Friday.
At a hearing earlier this month, the court heard how 'virtually every employee' of Thornburg was being used to develop a new company being launched by Thornburg's top executives.
A Department of Justice official had asked the court to appoint a trustee to take over the management of Thornburg, which filed bankruptcy in May with $24.4 billion in assets, one of the largest filings of 2009.
The company was once one of the leading providers of 'jumbo' residential mortgages, but now plans to liquidate.
A government attorney had argued that the company's management and board of directors should not be allowed to run the company because they did little after learning on Aug. 11 that the former chief executive and chief financial officer might be misusing company funds to develop their start-up.
The pair resigned on Sept. 15.
The company, which recently changed its name to TMST Inc, had argued in court documents that a trustee is not needed because former chief executive Larry Goldstone and former chief financial officer Clarence Simmons have resigned and conflicted staff have been removed.
According to court documents, in addition to paying themselves $232,000 in bonuses without approval from the compensation committee, Goldstone and Simmons directed bonus payments of $93,000 to other managers of Thornburg Mortgage who were involved in helping launch the SAF project.
SAF was formed to pursue a Thornburg Mortgage strategy to acquire a bank or thrift that would give the company access to deposits and Federal Home Loan Bank funds for issuing mortgages.
In a separate complaint, the company is seeking to recover from the two former executives the funds and staff costs, estimated at $200,000, that it claims were diverted to develop SAF.
In a U.S. Securities and Exchange Commission filing on Monday, the company's current president Anne-Drue Anderson, and directors David Ater, Francis Mullin, Eliot Cutler and Thomas Cooley, submitted their resignations, effective upon the appointment of the trustee.
The case is In re: TMST Inc, U.S. Bankruptcy Court, District of Maryland, No. 09-17787.
(Reporting by Tom Hals, additional reporting by Emily Chasan in New York; editing by Andre Grenon) Keywords: THORNBURG/TRUSTEE (thomas.hals@thomsonreuters.com; 1-302-993-6283; Reuters Messaging thomas.hals.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.