S.E.C. Charges Three Former Mortgage Executives With Fraud The Securities and Exchange Commission filed fraud charges on Tuesday against three former executives at Thornburg Mortgage, once the nation's second-largest mortgage company after Countrywide Financial, saying that they hid the company's deteriorating financial condition at the onset of the financial crisis in 2008. Thornburg, once a publicly traded company that focused on jumbo and super-jumbo adjustable rate mortgages, needed constant access to financing, which included money borrowed from various lenders. Thornburg was subject to margin calls if the value of its adjustable-rate mortgage securities that were serving as collateral for its loans fell below designated thresholds. In the weeks leading up to the release of the company's 2007 annual report that was due on Feb. 28, 2008, the company was facing a severe liquidity crisis, the S.E.C. complaint said. But instead of disclosing its problems, the S.E.C. says, the three executives overstated the company's income by more than $400 million and falsely recorded a profit rather than an actual loss for the fourth quarter of its 2007 annual report. The executives also did not disclose its problems to its auditor, the S.E.C. said. In its civil suit, the S.E.C. named Thornburg Mortgage's chief executive, Larry A.Goldstone; its chief financial officer, Clarence G. Simmons III; and its chief accounting officer, Jane E. Starrett. By the time the company filed an amended annual report on March 11, its stock price had collapsed by more than 90 percent. Thornburg never recovered and filed for bankruptcy on May 1, 2009. In a statement, Mr. Goldstone and Mr. Simmons said the allegations were without merit and that they had communicated candidly with investors. "We are profoundly disappointed by the S.E.C."s lawsuit, which is based on unfounded claims, emails taken out of context and inaccurate interpretations of management's actions surrounding the company's financial filings at the height of the financial crisis in February and March 2008," according to a statement released by Mr. Goldstone and Mr. Simmons. Mr. Goldstone said he never sold any company stock, while Mr. Simmons said he sustained losses on the small number of shares he sold. In a separate statement, Ms. Starrett also said the complaint was without merit.