NC businessman, already in jail for bribery, defrauded his firms, too :: WRAL.com

A wealthy financier defrauded his own insurance companies to get a $40 million loan before unraveling a carefully negotiated agreement meant to unwind a $1 billion investment scheme, a Wake County Superior Court judge found this week.

Judge Graham Shirley’s decision came almost a year after testimony in a complex civil lawsuit against Greg Lindberg, who was once North Carolina’s largest political donor. Lindberg, who is serving time in federal prison for trying to bribe North Carolina’s insurance commissioner, is accused of funneling cash that his insurance companies needed to pay out annuities and other benefits into a maze of other companies that he owned.

The financial questions that Lindberg’s maneuvering left at those insurance companies were so significant that the state took control of them in a process called rehabilitation. Lindberg and the hundreds of corporate entities he set up owe those insurers more than $1 billion, Shirley said in an order filed Tuesday. “Lindberg acted with deceit and with the intent to defraud the plaintiffs,” Shirley wrote.

Lindberg’s legal team didn’t respond Wednesday to a request for comment. He has previously said this lawsuit is “filled with inaccurate and reckless allegations.”

Broader investigation

Lindberg, who once lived in a compound near Durham and also owned Raleigh’s most expensive mansion, is serving more than seven years on federal bribery charges. He was convicted in 2020 of dangling millions in political campaign support if Insurance Commissioner Mike Causey, whose department regulated Lindberg’s insurance companies, would ease up on those companies.

Causey was wearing a wire for the FBI in a sting that also snared then state Republican Party Chairman Robin Hayes, who cut a plea deal and was later pardoned by President Donald Trump.

The civil case, Southland v. Lindberg, deals more with Lindberg’s business empire, and it has offered hints of a second, broader, federal investigation into Lindberg’s dealings. The state-appointed consultant brought in to oversee Lindberg’s insurance companies received a federal grand jury subpoena “regarding the investigation into potential financial fraud,” according to a filing in the civil case.

Investigators with both the FBI and the US Attorneys Office have been tight-lipped about developments in the case.

Insurance companies typically have strong cash flow from monthly premiums, and most states have laws governing how they can invest those premiums to ensure there’s enough money to pay out benefits. Until 2019, North Carolina had not codified an industry standard that forbids companies from investing more than 10% in affiliated companies—companies owned by the same person or entity that controls the insurance company itself.

Lindberg moved insurance companies to North Carolina and took advantage of the state’s law, investing more than 40% of company assets into other businesses he owned. It was done under an arrangement the state Department of Insurance signed approved under Causey’s predecessor, Wayne Goodwin.

After Causey beat Goodwin in the 2016 elections, the department sought to cut this percentage. As regulators and federal investigators dug in, they determined that the companies Lindberg had invested in likely couldn’t cover the insurance policies that would be coming due.

The shortfall was estimated at $1.2 billion, according to court documents in the civil case.

Lindberg agreed to address this in a memorandum of understanding signed in 2019. That agreement included some immediate debt relief—up to $100 million—for Lindberg and his companies, plus a $40 million line of revolving credit.

Lindberg availed himself of these elements of the MOU, but threw up roadblocks to avoid ceding control of the various corporate entities that owed money to his insurance companies, Shirley wrote in his order. Lindberg’s legal team made a number of arguments to excuse this, including that the MOU is not “not a binding contract but instead a non-binding term sheet,” Shirley wrote.

The judge found that one section of the MOU is indeed “an unenforceable agreement to agree,” but he said other parts amount to an enforceable contract with, “multiple references to the parties’ agreement to be legally bound by the terms of the agreement. ”

Damages, appeal

Shirley ordered Lindberg to abide by the agreement and cede control, with the possibility of monetary damages decided at a later date if he does not. Those damages could hit $450 million, according to lawyers for the plaintiffs.

Lindberg, who has a reputation for litigiousness, may appeal, and it wasn’t immediately clear Wednesday what Shirley’s order will mean for policyholders, or when. Causey, who was re-elected as insurance commissioner in 2020, applauded the judge’s decision.

“If Mr. Lindberg and his companies had honored the promises that they made to these insurance companies and their policyholders back in 2019, we might be well on our way to having this matter resolved,” Causey said in a statement. “Instead, he broke those promises. … The NC Department of Insurance will continue its work to hold Mr. Lindberg to his promises and get the policyholders of these companies full access to their policies.”

The insurance companies involved in this case are Southland National Insurance Corp., Bankers Life Insurance Co., Colorado Bankers Life Insurance Co. and Southland National Reinsurance Corp. Lindberg’s affiliated companies were held under the name Eli Global, which has since changed its name to Global Growth Holdings.

State-appointed rehabilitators for the insurance companies said in a statement Wednesday that “it will take time to realize all of the benefits of this judgment,” but that “they are resolved to begin that process immediately.”

“This judgment vindicates the insurance companies’ efforts to hold Mr. Lindberg and his companies to the promises that they have made to the insurance companies,” they said in the statement. “It is an important first step in the best possible plan to try to make the policyholders whole.”

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