TUCSON, AZ-The current management team of StoneWater Mortgage Corp. here has entered into a settlement agreement with First Magnus Litigation Trust in a lawsuit filed in bankruptcy court.

The suit originally consisted of 96 counts and encompassed some 40 defendants, with the major allegation being that a group of seven former First Magnus executives stripped assets and cash from the bankrupt company that were then used to start StoneWater.

After the suit was filed, Karl F.W. Young, at the time president of StoneWater, in a statement said he and the others named in the suit would be stepping aside from running the company to focus their attention on defending themselves against the allegations while allowing StoneWater to continue without the distractions associated with it. The changes were effective on May 1.

Mr. Young was not a part of the settlement, according to a notice of dismissal filed in the bankruptcy court, nor were any of the other members of the group of seven, which also included Gurpreet Jaggi, former president and chief executive of First Magnus; Thomas Sullivan Sr., former chairman of First Magnus; Thomas Sullivan Jr., former vice president of First Magnus; Bill Gaylord, a former officer of First Magnus; Gary Malis, former chief financial officer of First Magnus and currently managing director capital markets for StoneWater; and Dominick Marchetti, former First Magus chief technology officer and current managing direct of loan production at StoneWater.

The agreement will dismiss with prejudice claims against StoneWater, its related companies, current officers, directors and employees.

Under the terms of the agreement, both sides admitted no fault. No other terms were disclosed.

The lead counsel for the First Magnus Litigation Trust, Jamie R. Welton, said in a statement, "The settlement reached with StoneWater is a good result for the creditors and increases the assets from which they may be paid."

Among those who are involved in the settlement is current StoneWater president Doug Lemke. Other individuals who were included in the settlement are Amit Gujral, Joel Herk, Matthew Thrasher, Jasjit Chopra, Phillip Shoemaker and Brett Johnson.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.