SEC obtains judgement against Lindberg co-defendant in fraud case

By John Hilton

A North Carolina judge approved a settlement with former insurance executive Christopher Herwig, who the Securities and Exchange Commission accused of teaming with financier Greg Lindberg to defraud investors of $75 million.

Herwig agreed with the SEC's findings and "shall pay disgorgement of ill-gotten gains and prejudgment interest thereon," the order states. "The amounts of disgorgement and civil penalty shall be determined by the Court upon motion of the Commission."

In addition, "prejudgment interest shall be calculated from July 1, 2017, based on the rate of interest used by the Internal Revenue Service for the underpayment of federal income tax," the order states.

Herwig worked for Lindberg on an alleged scheme to siphon 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, according to court documents.

Herwig also faced criminal charges, including money laundering, wire fraud, and investment adviser fraud, in the Western District of North Carolina stemming from the same activities. Herwig has since pleaded guilty to one count of conspiracy in the criminal case and is awaiting sentencing.

Fiduciary oath an issue

The SEC complaint names a Malta-based registered investment adviser, Standard Advisory Services Limited, and two top executives: Lindberg and 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 faces other legal troubles. He 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 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.

Finally, Lindberg was indicted in February on federal fraud charges. He recently lost an appeals court decision that could expose him to millions in damages.

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.

Senior Editor John Hilton covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.