Thornburg Mortgage Case 08/21/2007

May 30, 2012 (Update) -- Proposed $2 million settlement. According to the Notice:

Securities Involved: Thornburg Mortgage, Inc. (“TMI” or the “Company”) common stock and/or preferred stock purchased or otherwise acquired in the open market and/or in or traceable to the Offerings1 during the period between April 19, 2007 and March 19, 2008, inclusive (the “Class Period”).

Settlement Amount: $2,000,000 in cash plus interest (the “Settlement Fund”). Your recovery from the Settlement Fund will depend on the amount and timing of your purchases/acquisitions of TMI common stock and/ or preferred stock, and the timing of your sales, if any, of such common stock and/or preferred stock. Depending on the number of claims filed and when Class Members purchased, acquired and sold their TMI common stock and/or preferred stock, the estimated average recovery per damaged share of TMI common and preferred stock will be approximately $.01. Please Note: This average is only an estimate, and is before deduction of Court-approved fees and expenses.

The Lawsuit: The Settlement of the above-captioned action (the “Litigation”) resolves class action litigation over allegations as to whether certain defendants misrepresented the Company’s business and financial condition during the Class Period, causing financial injury to members of the Class. The Settlement, if approved, will resolve claims against the Settling Defendants (i.e., Garrett Thornburg, Larry A. Goldstone and Clarence G. Simmons (collectively, the “Individual Defendants”) and Anne-Drue M. Anderson, David A. Ater, Joseph H. Badal, Eliot R. Cutler, Paul G. Decoff, Michael B. Jeffers, Ike Kalangis, Owen M. Lopez, Francis I. Mullin III, and Stuart C. Sherman (collectively, the “Dismissed Defendants”)). The Settlement does not resolve claims against any other defendants, and the Litigation will continue against the Non-Settling Defendants.2 See Question 2 below for more information.

August 21, 2007 -- According to a press release dated Aug. 21, 2007, a class action lawsuit was filed against the Company and certain of its officers and directors, alleging violations under Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), 15 U.S.C. ss.78j(b) and the rules and regulations promulgated thereunder by the SEC, including Rule 10b-5, 17 C.F.R. ss.240.10b-5 (the “Class”).
Specifically, the Complaint alleges that throughout the Class Period, defendants issued numerous, positive financial statements, annual and quarterly financial reports filed with the SEC, press releases, and other public statements that described the Company’s financial performance. The Complaint further alleges that these public statements were materially false and misleading because they misrepresented and failed to disclose the following adverse facts, among others: (a) that the Company was facing increasing margin calls; (b) that its available leverage had significantly diminished; (c ) that its financial situation had deteriorated to the point where it must sell certain assets; and, (d) that as a result of the foregoing the Company reported overstated financial results.
As a result of defendants’ false statements, TMI’s stock traded at artificially inflated price during the Class Period, reaching a high of $30.64 per share on June 17, 2005.
The complaint further alleges that on August 20, 2007, before the market opened, the Company published a press release over the Business Wire detailing that it was forced to sell $20.5 billion of its top-rated mortgage backed securities to boost its liquidity. This announcement was made in the wake of the August 14 announcement that the Company had to stop funding loans due to the credit crunch. The Company had been unable to repay nearly $8.4 billion of commercial paper outstanding as of June 30, 2007 because buyers of the paper demanded terms and covenants that the Company was either unwilling or unable to satisfy.
As a result of these disclosures, the Company’s price per share fell $1.73 by midday trading, a 9% decline over its previous close on extremely heavy volume.