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August 17, 2010

THE RACE FOR GOVERNOR: Cutler named in lawsuit

By Matt Wickenheiser mwickenheiser@mainetoday.com
Staff Writer

Gubernatorial candidate Eliot Cutler is named in at least one active class-action lawsuit connected with the bankruptcy of a mortgage giant that he oversaw as a member of the board of directors.

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Eliot Cutler

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Cutler's campaign sent out a media advisory last week, saying an upcoming ad campaign would criticize him for his involvement in Thornburg Mortgage Inc.

Cutler said polling done in Maine sought voters' response to the fact that he served on the board of Thornburg, which was the second-largest independent mortgage company, after Nationwide.

The New Mexico-based firm specialized in "jumbo loans" -- generally more than $400,000 -- to "super-prime" borrowers with strong credit. It was caught in the credit crunch and its business model collapsed. The firm went bankrupt last year and it is liquidating its assets.

Cutler, who is running as an independent, said the polling was done by Democratic candidate Libby Mitchell's campaign, or by a group supporting her. Last week's advisory was issued to put out information about Thornburg and the market conditions that contributed to its collapse.

In the advisory, Cutler's campaign said that "While the (Thornburg Mortgage Inc.) bankruptcy prompted several lawsuits, all Securities Act and other claims against Eliot and the other independent directors that have been adjudicated to date have been dismissed by the U.S. District Court in New Mexico, where the cases have been consolidated."

The Portland Press Herald/Maine Sunday Telegram has obtained court documents from at least one class-action case that is still active. Roney Jr. v. Thornburg et al was filed in October 2008 in U.S. District Court in New Mexico. The last action in the case came in March, and dealt with the withdrawal of an attorney from the case.

It names a list of defendants, including Thornburg, a firm that invested in the company, executives and members of the board of directors, including Cutler. The "class" of plaintiffs is preferred shareholders of Thornburg.

Broadly speaking, the lawsuit alleges that the company and its directors didn't act in the best interests of Thornburg's shareholders and investors, at times misleading them about the direction of the firm.

Cutler's campaign manager, Edward "Ted" O'Meara, said last week's advisory carefully said all cases that have been "adjudicated" have been dismissed.

Adjudicated means the cases have been heard and ruled on by a judge.

O'Meara said this is the only active case of which Cutler is aware. He said Cutler "took comfort" in the fact that the other cases have been dismissed.

"I don't think it's something he's terribly concerned about," said O'Meara. "It's just got to work its way through the system."

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