Thornburg Mortgage Seeks $2 Billion From JPMorgan, Citigroup
May 02, 2011, 5:40 PM EDTBy Linda Sandler
(Updates with eight lawsuits in next-to-last paragraph.)
May 2 (Bloomberg) -- JPMorgan Chase & Co., Citigroup Inc. and three other banks helped to push Thornburg Mortgage Inc. into a “free-fall” bankruptcy, the insolvent firm’s trustee said in a lawsuit seeking to recover $2 billion for creditors.
After making “unjustified” margin calls, the banks extracted more than $700 million of margin and interest payments from Thornburg, then sold their collateral and left the company to file for Chapter 11 protection during the credit crisis in May 2009, trustee Joel Sher said in an April 30 filing in U.S. Bankruptcy Court in Baltimore.
Sher, who is liquidating the firm, now called TMST Inc., accused the banks of using “market disruption as a justification to initiate a collusive scheme to take control of the debtors and eventually drive them into bankruptcy.”
“We believe the suit is without merit,” Danielle Romero- Apsilos, a Citigroup spokeswoman, said in an e-mail. Joseph Evangelisti, a JPMorgan spokesman, declined to comment.
Banks are sometimes targeted by bankrupt companies that are trying to recover money for creditors. Lehman Brothers Holdings Inc. sued JPMorgan for $8.6 billion, saying the bank helped to cause its downfall. The trustee liquidating Bernard Madoff’s defunct firm is demanding $6.4 billion from the bank, accusing it of assisting Madoff’s Ponzi scheme. JPMorgan is fighting both lawsuits.
Bear Stearns
Credit Suisse Group AG, Royal Bank of Scotland Plc and UBS AG, or their affiliates, also are defendants in the lawsuit. JPMorgan was named because it bought assets from Bear Stearns Cos., a lender to Thornburg.
Michael Geller, a Royal Bank of Scotland spokesman, and Duncan King, a Credit Suisse spokesman, declined to comment, as did Torie von Alt, a UBS spokeswoman.
The trustee last year sued former Thornburg executives, saying they conspired to start a new business using cash and information taken from the company.
Thornburg was organized as a real estate investment trust and mainly invested in residential mortgage-backed securities. Assets totaled $24.4 billion as of Jan. 31, 2009, according to court documents.
JPMorgan has a $386 million claim against Thornburg, and Citigroup said it is owed more than $395 million, according to Sher’s filing. Both banks are based in New York.
Sher filed eight lawsuits from April 28 to April 30, seeking money from Barclays Plc, Goldman Sachs Group Inc., Bank of America Corp. and other companies.
The bankruptcy case is Thornburg Mortgage Inc., 09-17787, U.S. Bankruptcy Court, District of Maryland (Baltimore).
--Editors: John Pickering, Stephen Farr
To contact the reporter on this story: Linda Sandler in New York at lsandler@bloomberg.net.
To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net.
