Certified Forensic Loan Auditors, LLC

 
  Upcoming Classes

Search CFLA's Article Archive:

UPDATE: Thornburg Trustee Can Proceed With Suit Against RBC Capital

online.wsj.comMar 29, 2012

By Patrick Fitzgerald of Dow Jones Daily Bankruptcy Review

--Judge says trustee can sue RBC Capital for improperly seizing assets

--Judge dismisses trustee's claim that bank's margin calls were improper or that it acted in bad faith.

--Earlier this month, SEC charged three former Thornburg executives with civil accounting fraud.

A federal judge ruled the court-appointed trustee overseeing the liquidation of Thornburg Mortgage Inc. (THMRQ) can move forward with a lawsuit against RBC Capital Markets LLC alleging the bank shortchanged the mortgage lender when it seized and subsequently sold some of its assets.

Judge Benson Everett Legg of the U.S. District Court in Baltimore said the trustee can sue RBC Capital, the investment-banking arm of Royal Bank of Canada (RY, RY.T), for improperly seizing the assets backing repurchase agreements the mortgage lender had used to fund its business. The judge dismissed, however, the trustee's claim that the bank's margin calls were improper or that it acted in bad faith.

Joel I. Sher, the bankruptcy trustee overseeing Thornburg's liquidation, sued RBC Capital Markets in a breach-of-contract lawsuit over what he alleges were improper margin calls and the subsequent seizure and sale of $573 million in mortgage-backed securities Thornburg financed through RBC.

"RBC ultimately settled on a number that was significantly lower than the value it had assigned to the MBS when it issued its August 14th margin call," Legg wrote in a ruling Friday. "Whether this process was proper under the terms of the [repurchase agreement] is a valid subject for discovery."

Sher said in court filings the securities firm credited Thornburg "with an amount, at minimum, $35 million less than the actual value" of the 27 mortgage-backed securities at issue.

Sher and a spokesman for RBC Capital couldn't be reached for comment.

Prior to its collapse, Thornburg financed its business, including its purchase of mortgage-backed securities, through a series of repurchase, or repo, agreements and swaps deals with banks and securities firms like RBC. Those mortgage-backed securities were typically then pledged as collateral in the deals.

Sher claimed RBC breached the provisions of their repo deal by improperly valuing Thornburg's collateral to create deficits that justified its inflated margin calls.

The trustee has filed similar lawsuits against Barclays Capital Inc. and Goldman Sachs Group Inc. (GS), alleging the firms made improper margin calls that helped drive the mortgage lender into bankruptcy.

Last year, another federal judge dismissed part of the suit against BarCap, the investment-banking division of British bank Barclays PLC (BCS, BARC.LN), alleging the bank acted in bad faith but said Sher could sue over margin calls and subsequent sales. Barclays and Goldman have denied wrongdoing.

Sher also is suing some of the biggest players in Wall Street's mortgage-finance assembly line for nearly $2 billion, claiming a number of banks--including J.P. Morgan Chase & Co. (JPM), Citigroup Inc. (C) and Credit Suisse Group (CS, CSGN.VX)--engaged in a series of "collusive" and "predatory" schemes that resulted in Thornburg's demise. The banks, in court papers, have denied wrongdoing and have moved to have the suit dismissed.

The suits allege Thornburg, once the nation's second-largest independent mortgage company, was undone by a series of unlawful acts taken by investment banks during the mortgage crisis in 2007 and 2008.

Bankruptcy law allows a trustee to unwind certain transfers as fraudulent transactions if they rendered the company insolvent and provided no benefit to the estate.

Sher was named the Chapter 11 trustee of Thornburg, now named TMST Inc., in 2009 after it was discovered former managers had used the lender's employees and assets to launch a new company.

Earlier this month, the Securities & Exchange Commission charged three former Thornburg executives--ex-CEO Larry Goldstone, ex-CFO Clarence Simmons, onetime accounting chief Jane Starrett--with civil accounting fraud. Faced with $300 million in margin calls in early 2008, the SEC said the three overstated Thornburg's quarterly income by more than $420 million.

A lawyer for Goldstone and Simmons said the SEC action "is wholly without merit." A lawyer for Starrett couldn't be reached for comment.

Thornburg, based in Santa Fe, N.M., filed for Chapter 11 protection in May 2009, listing assets of $24.4 billion and debts of $24.7 billion. The bulk of those assets--some $19.7 billion--were held in securitization trusts. Sher is winding down the company and selling its assets for the benefit of creditors.


Back to March 2012 Archive

CFLA was founded by the Nation's Leading Foreclosure Defense Attorneys back in 2007 to serve the Foreclosure Defense Industry and fight pervasive Bank Fraud. Since opening our virtual doors, CFLA has rapidly expanded to become the premier online legal destination for small businesses and consumers. But as the company continues to grow, we're careful to hold true to our original vision. For us, putting the law within reach of millions of people is more than just a novel idea—it's the founding principle, just ask Andrew P. Lehman, J.D.. With convenient locations in Houston and Los Angeles, you can contact Our National Account Specialist and General Manager / Member Damion W. Emholtz at 888-758-2352 for a free Mortgage Fraud Analysis or to obtain samples of work product, including cutting edge Bloomberg Securitization Audits, Litigation Support, Quiet Title Packages, and for more information about our Nationally Accredited and U.S. Department of Education Approved "Mortgage Securitization Analyst Training Certification" Classes (3 days) 24 hours for approved CLE & MCLE Credit (Now Available Online).

SEE BELOW- http://www.certifiedforensicloanauditors.com

Call us toll free at 888-758-2352

Bookmark and Share
spacer
Facebook Like us on Facebook
Twitter Follow us on Twitter
YouTube View our YouTube Videos
LinkedIn Connect to us on Linkedin
 
BBB Logo

 

spacer
Contact us or view our Sample Documents & Audits by completing the form below.

  • Reload
  • Should be Empty:


 

DVD Sets Only $99

 

FREE Mortgage Fraud Analysis

 

Order Cutting-Edge Services Now

 

Quiet Title Packages from Licensed Attorneys

 

Affiliate Services

 

CFLA Sponsored Attorney Links

 

Take-Home Education Package

 

ALB Law Firm

 

Advocate Legal

 

The True News Network

 

Sutton Law Firm, P.L.L.C.

 

Rubenstein Business Law

 

Atighechi Law Group

 

Scunziano & Associates

 

Get Certified to Perform Mortgage Securitization Audits

 

CFLA Training Academy

 

Expert Witness Services

 

Cutting Edge Expert Securitization Reports

 

CFLA Credit Cards

 

Breaking News

 

Letters to the Editor

 

CFLA Weekly Newsletters

 

Code of Ethics

 

Testimonials

 

Instructional Videos

 

Job Opportunities

 

License Opportunities

 

MARS Rule

 

Product Samples

 

Resource Links

 

Servicer Information

 

Foreclosure Laws

 

REST Report

 

Quiet Title Packages from Licensed Attorneys

 

Advertise on CFLA

 

Advertising Space: Mortgage Securitization, Quiet Title

 

Certified Forensic Loan Auditors, LLC
13101 West Washington Blvd.
Suite 444
Los Angeles, CA 90066

Phone: 832-932-3951
Toll Free: 888-758-CFLA (2352)
Mobile Users: CLICK TO CALL
info@certifiedforensicloanauditors.com

   
 
CFLA IS NOT A LAW FIRM AND DOES NOT PROVIDE ANY LEGAL ADVICE. CFLA DOES NOT OFFER FORECLOSURE CONSULTING OR FORECLOSURE RELIEF
SERVICES. CFLA DOES NOT OFFER OR ASSIST WITH ANY LOAN MODIFICATION SERVICE. CFLA ALWAYS RECOMMENDS THAT CLIENTS RETAIN COMPETENT COUNSEL IN THEIR RESPECTIVE JURISDICTION. CFLA HAS A FREE PROGRAM TO REFER CFLA CLIENTS TO LAW FIRMS IN NEARLY EVERY STATE AND CFLA
DOES NOT CHARGE OR OBTAIN REFERRALS FEES FOR THESE SERVICES. SERVICES NOT OFFERED TO RESIDENTS OF THE STATE OF NEVADA.

 
Home About Us Privacy Policy Terms of Service Disclaimer SERVICES Careers Contact Us
 
COPYRIGHT © 2007-2016 Certified Forensic Loan Auditors ™ All rights reserved