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July 07, 2016
Chris Laursen Contributes to Defendants' Win in TMST Mortgage Case

In the recently decided case SEC v. Goldstone et al, Brattle Principal Chris Laursen submitted an expert report and testified in the jury trial held in the U.S. District Court for the District of New Mexico.

The case was brought by the SEC in March of 2012, accusing Thornburg Mortgage Inc. executives Larry A. Goldstone and Jane E. Starrett of fraudulently overstating income by more than $400 million in the company’s 2007 10-K filing. According to the complaint, Thornburg faced more than $300 million in margin calls in the weeks leading up to the February 2008 filing of the annual report. The SEC alleged that because Thornburg was facing a liquidity crisis and had been unable to meet margin calls immediately, the executives knew or should have known they did not have the ability to retain impaired mortgage-backed securities until expected recovery.

In his expert report and testimony, Mr. Laursen addressed market practices and accounting for security repurchase agreements (repos), including issues related to margin calls. He also discussed the financial crisis of 2007 and 2008, and how the Federal Reserve responded to various events. Additionally, Mr. Laursen explained how he previously advised financial companies and examiners to determine whether securities should be designated as “other than temporarily impaired” (OTTI) for financial reporting purposes.

After a three-week trial, the jury unanimously returned five counts in favor of Thornburg executives and deadlocked on five others. Related to Mr. Laursen’s testimony, the jury found in favor of the executives on counts including aiding and abetting books and records violations and the filing of false materials with the SEC and making false certifications.