While Thornburg—one of Santa Fe’s largest employers—didn’t directly get a bailout, the US government still got stuck with its junk.

Nailing down the details of these transactions isn’t simple; many of the deals leading up to and following the 2008 financial crisis were constructed as confusingly as possible, in part to deter scrutiny by outsiders. For a brief how-to in financial sleuthing, this post shows how to re-report the Indicators item on Thornburg and the Fed.

Following the Bloomberg story, SFR began by looking up the Fed’s March 31 press release, which offers additional details on the assets it acquired during the Bear Stearns deal, using a government-controlled company called Maiden Lane.

The Fed release links to a PDF file labeled “Holdings of Maiden Lane LLC as of January 29, 2010.” This is the document that shows the Fed’s $1 billion in Thornburg Mortgage securities. This being a somewhat secretive deal, the accounting consists of gibberish:

It goes on like that, for 131 pages.

Fortunately, we know what we’re looking for—the $1 billion Thornburg security mentioned in the Bloomberg story. So we can narrow things down quickly by searching the document for the letters “TM,” which are common to Thornburg’s sundry ticker symbols.

To nail it down, run a Google search on the CUSIP numbers in the far right column.Searching CUSIP and 885220KH5 returns a link to a Securities and Exchange Commission filing by a company called Thornburg Mortgage Securities Trust 2006-1. Bingo!

SEC filings are publicly accessible through a database called Edgar. Bookmark it; the database is full of info reported by thousands upon thousands of companies.

Searching Edgar for Thornburg Mortgage Securities Trust get us closer to the target:

Clicking through to the TMST 2006-1 security leads us to a list of all its filings. Let’s look at the initial prospectus, filed Jan. 20, 2006, which explains just what was for sale—and what the Fed now owns:

For a necessary crash course in deciphering the mortgage-backed-securit-ese that follows in the SEC filing, watch this video by the staff of Marketplace and read this Wikipedia article. (Don’t neglect ProPublica’s bailout guide for up-to-date news and research.)

This snippet, anyway, is easy enough to understand:

This shows that half of the mortgages in this Thornburg security were given to borrowers who provided less than complete documentation of their income and assets, suggesting they perhaps shouldn’t have qualified for a loan in the first place, and may be at risk of default. Thornburg Mortgage executives bragged that they offered loans to only the most creditworthy customers; such standards evidently didn’t apply to the securities Thornburg sold to investors.

Certainly, other companies were even less scrupulous. Bloomberg reports that 94 percent of the mortgages in another Fed-held security had “limited documentation.” Nearly 10 percent of the homes in that security have entered foreclosure. Foreclosure rates in the Thornburg security are not that high—but, as the prospectus shows, interest rates on most of its mortgages aren’t set to increase for several more years.

Cross-posted at Muckraker’s Guide.

Court documents show that in October, the company, now known as TMST, had $24 million in the bank (or rather, banks—foremost among them being New Mexico Bank & Trust). That month alone, TMST made a gross profit of $2.2 million from servicing mortgages—and has made $19.9 million since filing for bankruptcy in May. After legal fees and “general and administrative” costs, TMST has netted $816,773 since the bankruptcy. Of course, all that belongs to its creditors.

The case is also shedding light on what kind of tax burden one of Santa Fe’s largest private employers faces, or rather, doesn’t.

Since filing for bankruptcy, the company has paid a $107,850 in combined state and federal taxes—or 13 percent of its net profit in that time. For comparison’s sake, check out the federal income tax brackets. A married couple making the median income in Santa Fe is going to pay 15 percent. Such a couple is likely to pay property taxes, as well—unlike TMST, which pays no property taxes on its corporate HQ, thanks to a clever deal with the city of Santa Fe.

Click on the image below for a breakdown of TMST’s tax payments.

Note that TMST, which laid off 130 workers in April and more since, has paid all of $973 in unemployment taxes in the months since its bankruptcy. Two years ago, Gov. Bill Richardson—who has received many thousands in campaign contributions from company founder Garrett Thornburg over the years—signed into law a bill that cut employer unemployment tax payments to the lowest rate allowed by federal law, saving corporations an estimated $26 million in 2008.

More on Thornburg after the cut.

Again, props to “Santa Fe Journal” editor Mark Oswald for keeping tabs on the Thornburg story, which Santa Fe’s other daily paper seems unwilling or unable to do. He’s got a story in today’s paper (which you can’t read online without a subscription) about those laptops and documents removed from company property by ex-CEO Larry Goldstone and ex-CFO Clay Simmons before they got the ax.

From Oswald’s story:

A proposed stipulated order filed last week says Goldstone and Simmons now have agreed to deliver the laptops by Thursday to Thornburg Mortgage’s Santa Fe offices on North Ridgetop Road and to not “alter or destroy any data or information” on the computers.

Goldstone and Simmons also will return the boxes of records, but with the stipulation that their attorney will keep documents that they contend “are protected from disclosure pursuant to the attorney-client, work product or other applicable privileges.”

Too late?

As Oswald noted rather slyly, the news came in a “release issued by a New York public relations firm.”

Why resign now? Thornburg cited “shocking allegations” against former executives he’d worked with closely for years. It’s unclear how significant this move is, because Thornburg remains in charge of Thornburg Mortgage Advisory Corporation, a legal entity that technically employs the other company’s executives.

In the late Thornburg Mortgage’s ongoing bankruptcy proceedings, Reuters reported yesterday the company opposes its creditors’ motion to have an independent manager take over while the company is dismantled. Thornburg says it’s “superfluous, not to mention an unnecessary and unwarranted expenditure of time and resources,” according to Reuters. A representative creditor, however, is “been particularly concerned that its cash collateral might be used to finance the unnecessarily high operating costs of this estate.”

Now say one of the largest corporate bankruptcies in US history occurs on your turf. Then imagine that, in the course of the bankruptcy case, federal investigators determine the company’s management—which includes some of your city’s wealthiest and most prominent citizens—has “improperly divert[ed]” company resources and “cannot now be entrusted” to act transparently and honestly.

Unfortunately, your business reporter has been cut to part-time. But you still think this might be story worth mentioning, right? Right?

Not if you’re the Santa Fe New Mexican. Or the Albuquerque Journal.

This morning a US Justice Department official asked federal bankruptcy judge to take action against Thornburg Mortgage over claims of misappropriated funds discussed in today’s SFR. The filing, by Assistant US Trustee Mark A Neal, basically says Thornburg management should be removed by the court because they used creditors’ money to fund startup costs for an entirely new company. (Some management has already departed, as we reported yesterday.)

A story last week by Reuters—the international news wire service, which the dailies presumably keep tabs on—hinted something like this might be coming. And the story of the new company won’t be news to SFR readers. But shouldn’t the dailies be on this? A federal official is basically saying the CEO of what was one of Santa Fe’s largest private employers—a company local politicians both praised and rewarded—is untrustworthy and may have spent money that wasn’t his.

“Not only is candor to the Court and [creditors] lacking in this case, but [Thornburg Mortgage] violated chapter 11’s basic prohibition on the use of estate assets,” Neal writes in his filing. “Furthermore, the use of [Thornburg Mortgage]’s employees by its most senior officers to staff start-up aspects of a new and undisclosed company is, at its very best, strong evidence of incompetence and/or gross mismanagement.”

Thornburg employees paid to work for the new company, SAF Financial, “are likely to instead prioritize their work in favor of an emerging entity, owned by insider management, that may offer them future employment. The creation of this…conflict-of-interest is the doing of current management, which cannot now be entrusted to perform their fiduciary obligations,” Neal writes.

Click here to download the 14-page filing.

SFR has tried to get a message to company founder Garrett Thornburg, who—unlike Thornburg Mortgage CEO Larry Goldstone and CFO Clarence Simmons—is not named in Neal’s filing. (That’s Thornburg, pictured.) It’s probably past time for him to address these issues.

We’ll let you know if and when we get a response. Neal did not immediately return a request for comment.

Thornburg Mortgage is not commenting on anything at all.

Good question.

Reuters business blogger Felix Salmon endorsed her idea, with a caveat:

The borrowers are saying that if Thornburg is willing to sell their loan to an outside investor for 69 cents, it should be even more willing to sell that loan back to the homeowner for 70 cents. But in fact it’s more complicated than that. The homeowners who are willing and able to buy back their own loans for 70 cents on the dollar are generally the most valuable of Thornburg’s borrowers — they’re overwhelmingly likely to be the ones whose loans are worth par, or more. So if Thornburg allows them to buy their own loans back, the value of the remaining mortgages goes down, and the investors aren’t going to be willing to pay 69 cents on the dollar any more.

Also, Kelli K, the author of the Thornburg Borrowers Unite blog, broke a little news the other day, after calling the firm that’s handling Thornburg’s bankruptcy, Houlihan Lokey. Here’s what they told her:

First of all, despite what many of us believed, Thornburg did NOT keep many of our loans on their books. I was told there were “maybe a dozen” mortgages that had not been securitized. In other words, there are a few crumbs at the bottom of the cookie jar.

For everyone else, the only question that remains is who will take over the servicing rights that Thornburg used to enjoy. I was told that the company’s creditors are trying to figure out who walks off with that prize right now. If you received the same email I got yesterday from Thornburg, you already know that it may take up to 90 days for us to learn who the new servicer is.

What’s the upshot for those who live in Thornburg’s backyard? Not much. Not many New Mexicans were Thornburg customers. This is just a little glimpse into the isues that come up in a bankruptcy.