SEC accuses Lindberg of embezzling $75 million from his insurance companies
A day after a judge set a new trial date for the bribery case of former Carolina insurance executive Greg Lindberg, the U.S. Securities and Exchange Commission charged Lindberg and an associate with defrauded clients of $75 million using undisclosed transactions.
An SEC press release said Lindberg and Christopher Herwig, of Raleigh, North Carolina, and their Malta-based standard advisory services violated federal investment and fraud regulations, the lawsuit alleges.
Regulators allege that defendants misappropriated more than $57 million in client funds and that Standard Advisory collected more than $21 million in advisory fees in connection with these schemes.
“In an attempt to cover up the fraud, Lindberg allegedly orchestrated the schemes through complex investment structures and a network of affiliates and used the proceeds to pay himself or divert the funds to other activities. of Lindberg,” the SEC said in its statement.
Lindberg owned Standard Advisory Services, while Herwig was its portfolio manager, the complaint said. The transactions also involved four North Carolina insurance companies owned by Lindberg.
Lindberg, who owned a number of insurers and a reinsurance trust, served 21 months in prison after being convicted of attempting to bribe the North Carolina Insurance Commissioner in 2018, seeking more favorable treatment from from state regulators. That conviction was overturned in June by a federal appeals court, which said the trial judge erred in the jury instructions, and Lindberg was released from jail.
On Monday, a federal judge set a new trial date for March 2023.
In a statement sent Tuesday, a spokeswoman for Lindberg said the SEC was “stacking” and the lawsuit stepped in despite regulators seeing thousands of pages of documents that proved they were wrong in their assumptions. .
“They didn’t ask for any disclosure; we showed them actual revelations,” Lindberg spokeswoman Susan Estrich said in a statement. “They claimed the companies weren’t real; we showed them that they were. We showed them bank statements to prove where the money had gone and to prove that there was no private “piggy bank” and that no policyholder had ever lost a penny. We traced the money they couldn’t trace.
The SEC complaint, filed in federal court in North Carolina, agreed that the transactions were designed to hide things — an elaborate effort to cover up the alleged fraud.
“The basic premise of the defendants’ fraudulent scheme is simple: Lindberg,
Herwig and SASL, all trustees, have repeatedly recommended and entered into transactions
which were not disclosed and which were not in the best interest of their clients,” the suit reads. “Yet the
the mechanisms they used to accomplish the fraud were, by design, complex.
Until about 2017, Lindberg had acquired 100% ownership of four North Carolina insurance companies and a reinsurance trust, “which gave him control of hundreds of millions of dollars in premiums from their Although the funds were intended to be used to pay insurance claims of policyholders, Lindberg treated the funds as its own assets and used the money for whatever purpose it deemed to be in its best interests,” reads the SEC complaint.
Lindberg then ordered his insurance companies to engage in ‘illogical’ investment advice
service contracts with SASL. From July 2017 to 2018, Lindberg, Herwig and SASL breached their fiduciary duties, acted in their own interests and plundered the assets of their advisory clients, SEC attorneys said.
In an alleged scheme, Lindberg and Herwig advised their Carolina insurance companies to sell their interests in certain Lindberg-affiliated special purpose vehicles (“SPVs”) and then
to redeem the same investments through a different investment vehicle at a higher price.
“Lindberg pocketed the difference, which amounted to more than $57 million,” the suit alleges. In 2017 and 2018, Lindberg and Herwig tricked insurers into 13 such deals and the men allegedly used the fraudulent profits to enrich Lindberg and support his other businesses.
“Throughout this time, the board members of the NC Insurance Companies have been left in the dark about Lindberg’s embezzlement,” the complaint reads.
As a result of these schemes, “the long-term liquidity of the NC insurance companies’ investment portfolios was compromised and they were consequently placed in receivership,” the lawsuit states.
Lindberg and Herwig declined to testify during the SEC investigation, asserting their Fifth Amendment right against self-incrimination.
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