Embattled financier Greg Lindberg is set to face trial on Securities and Exchange Commission charges after a judge denied a motion to dismiss last week.
Lindberg, who also faces a second federal trial on bribery charges, allegedly participated in a $75 million fraud, the SEC alleged in an August complaint. The complaint names a Malta-based registered investment adviser, Standard Advisory Services Limited, and two top executives – Lindberg and Christopher Herwig.
From July 2017 through 2018, according to court documents, Lindberg and Herwig violated their fiduciary oath to advisory clients by fraudulently causing them to engage in undisclosed related-party transactions that were not in their best interest.
A Lindberg spokesperson has said that the SEC complaint is weak and was filed after the SEC was "shown millions of pages of documents to prove them wrong.”
Lindberg was freed from prison last summer after serving nearly two years on a conviction for attempting to bribe North Carolina Insurance Commissioner Mike Causey. The federal government has said it intends to retry Lindberg on those charges.
Lindberg had been sentenced to more than seven years after being convicted of attempting to bribe Causey to secure preferential regulatory treatment for his insurance business. The 4th Circuit panel declared that Judge Max Cogburn had erred by giving jurors in Lindberg’s trial misleading instructions before they began deliberations.
Lindberg, founder of the private equity firm Eli Global, eventually acquired several insurers and grouped them together as the Global Bankers Insurance Group. Insurance profits soared and ultimately enabled Lindberg to funnel $2 billion to Eli Global, according to a Wall Street Journal report. That attracted regulators and initiated Lindberg's downfall.
Mounting legal woes
Meanwhile, documents in a new criminal case were unsealed in late December in the Western District of North Carolina. The case is being handled by the Fraud Section of the Department of Justice’s Criminal Division and is aimed at Herwig – for now. No court documents identify Lindberg by name in the case, but refer to him as “owner” of the companies Herwig worked at.
A plea deal between the government and Herwig, a chief investment officer and director of companies owned by Lindberg, was announced at the same time the case became public. It is unknown whether Herwig is assisting the government's investigation of Lindberg.
Court documents describe Herwig and Lindberg siphoning off millions of dollars from a number of insurance companies through a series of loans and other transactions, then using the money to acquire and operate other companies,
“I invested over $500 million in my insurance companies. I never took a penny of dividends. The allegation that I somehow defrauded them while investing $500 million in them and taking no dividends is entirely absurd," Lindberg said. "I also hired over 100 investment professionals, lawyers, and accountants and spent tens of millions of dollars on their compensation to ensure that insurance reserves were invested according to the affiliate loan compliance plan that I personally drafted."
Many policyholders of Lindberg's insurance companies continue to wait for their funds amid ongoing liquidation proceedings. A North Carolina Superior Court judge placed Colorado Bankers Life Insurance Co. and Bankers Life Insurance Co. into liquidation in November.
According to court documents, Lindberg controlled four insurers – Colorado Bankers Life Insurance Co. and Bankers Life Insurance Co., Southland National Insurance Corp. and Southland National Reinsurance Corp. – with about 262,000 policyholders combined.
Southland National Insurance Corp., and its approximately 84,000 policyholders, was previously placed into liquidation, court documents say.
According to the N.C. insurance department, the liquidation order means policy obligations will be assumed by various state guaranty associations up to their state coverage limits. Standard guaranty association coverages protect policyholders up to $300,000.