On Wednesday, the SEC suffered its first trial setback in its FY 2016 federal court trials. Following a trial in the U.S. District Court for the District of New Mexico, a jury reportedly found against the SEC and in favor of two former executives of Thornburg Mortgage (now known as TMST Inc.)on five counts and was unable to reach a verdict on five others.
In 2012, the SEC sued Thornburg’s CEO Larry A. Goldstone, CFO Clarence G. Simmons, III, and chief accounting officer Jane E. Starrett alleging fraudulent misrepresentations and omissions about Thornburg's financial condition, margin call activity, and liquidity. On June 1, 2016, Starrett settled the SEC's case against her, but Goldstone and Simmons took their cases to trial.
The Albuquerque Journal reports that
According to the jury’s verdict form, Goldstone and Simmons were cleared of claims that they violated the law by falsifying “any book, record, or account of a public company” and failing to keep records “which, in reasonable detail, accurately and fairly reflect the transactions and disposition of the assets of Thornburg.” However, the jury couldn’t reach agreement on similarly worded allegations, but with wording about whether the two executives acted recklessly.
SEC Enforcement Division Director Andrew Ceresney stated that the agency still believes strongly in the case "and we will continue to explore all options, including a prompt retrial.” Randall Lee, an attorney at WilmerHale representing Goldstone and Simmons, said he hoped “reason and rationality will prevail,” and the SEC would not pursue the case further.
Following the verdict in this trial, the SEC's trial scorecard in FY 2016 now includes five trials, with a record of 4-1. This week's case marks the SEC's first defeat, as the other four trials resulted in outright victories for the agency (in which it won on all claims). Here is the list as it currently stands:
SEC v. National Note of Utah and Wayne L. Palmer: VERDICT—FOR SEC (Dec. 2015)
SEC v. Bonan Huang, et al.: VERDICT—FOR SEC (Jan. 2016)
SEC v. Payton: VERDICT—FOR SEC (Feb. 2016)
SEC v. Ferrone, et al.: VERDICT—FOR SEC (April 2016)
SEC v. Goldstone, et al.: VERDICT—FOR DEFENDANTS (June 2016)