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TMST U.S. Trustee looks to appoint examiner amid misappropriation allegations
By Caroline Salls
Pittsburgh, Sept. 16 - TMST, Inc.'s U.S. Trustee asked the U.S. Bankruptcy Court for the District of Maryland to order appointment of a Chapter 11 trustee to oversee the company's bankruptcy case, according to a Wednesday court filing.
According to the motion, TMST, formerly known as Thornburg Mortgage, Inc., explored a strategy of acquiring a depository financial institution to strengthen its balance sheet and asset base before its bankruptcy filing.
U.S. Trustee W. Clarkson McDow said the company's chief executive officer Larry A. Goldstone and chief financial officer Clarence G. Simmons formed a new entity within days of the bankruptcy filing to continue to explore the previous strategy.
Following the formation of the new entity, McDow said Goldstone and Simmons continued to serve as CEO and CFO, respectively, "and continued to be highly compensated at their prepetition salaries with the assets of TMST and its related debtor entities."
In addition, the U.S. Trustee said the company's special corporate counsel was hired by the new entity to represent it in corporate matters. McDow said this engagement was not disclosed until after allegations surfaced that Goldstone and Simmons were misappropriating estate assets in connection with the new company's start-up.
McDow also said a preliminary investigation showed that a number of TMST's employees were being paid by the company while performing services for the new entity "with no apparent benefit to the debtors."
TMST, formerly Thornburg Mortgage, Inc, is a Santa Fe, N.M., lender specializing in jumbo mortgages. The company filed for bankruptcy on May 1 and its Chapter 11 case number is 09-17787.
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