The SEC accused Lindbergh of misappropriating $75 million from his insurance companies

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A day after a judge set a new trial date in the bribery case of former Carolina insurance executive Greg Lindbergh, the U.S. Securities and Exchange Commission charged Lindbergh and an associate with defrauding clients out of $75 million by using undisclosed transactions .

An SEC release said Lindbergh and Christopher Herwig of Raleigh, North Carolina, and their Malta-based Standard Advisory Services violated federal investment and fraud regulations, according to the suit.

Regulators alleged that the defendants misappropriated more than $57 million in client funds and that Standard Advisory collected more than $21 million in consulting fees in connection with these schemes.

“In an effort to cover up the fraud, Lindbergh claimed to have orchestrated the schemes through complex investment structures and a network of subsidiary companies and claimed to have used the proceeds to pay himself or divert the funds to other Lindbergh businesses,” it said. the SEC statement.

Lindberg owned Standard Advisory Services while Herwig was its portfolio manager, the complaint said. The transactions also included four North Carolina insurance companies that Lindbergh owns.

Lindbergh

Lindbergh, who owned a number of insurers and a reinsurance trust, served 21 months in prison after being convicted of trying to bribe North Carolina’s insurance commissioner in 2018, seeking more favorable treatment from state regulators. That conviction was overturned in June by a federal appeals court, which said the judge erred in jury instructions, and Lindbergh was released from prison.

On Monday, a federal judge set a new trial date for March 2023.

In a statement sent Tuesday, a spokesman for Lindberg said the SEC is now “stacking up” and that the suit comes despite the fact that regulators have seen thousands of pages of documents that prove they were wrong in their assumptions.

“They claimed they were not exposed; we showed them actual disclosures,” Lindberg spokeswoman Susan Estrich said in a statement. “They claimed that the companies were not real; we showed them that they are. We showed them bank records to prove where the money went and to prove that there was no private “piggy bank” and that no policyholder lost a penny. We traced the money they couldn’t trace.

The SEC’s complaint, filed in federal court in North Carolina, agreed that the transactions were designed to hide things — an elaborate attempt to cover up the alleged fraud.

“The basic premise of defendants’ fraudulent scheme is simple: Lindbergh,
Herwig and SASL, all fiduciaries, repeatedly recommended and transacted
that were not disclosed and were not in the best interest of their clients,” the suit says. “Anyway,
the mechanics they used to commit the fraud were complex by design.

By around 2017, Lindbergh had acquired 100% ownership of four North Carolina insurance companies and a reinsurance trust, “which gave him control over hundreds of millions of dollars in premiums from their policyholders. Although the funds were to be used to pay policyholders’ insurance claims, Lindbergh treated the funds as his own assets and used them for whatever purpose he decided was in his best interest,” the SEC complaint said .

Lindbergh then ordered his insurance companies to enter into “illogical” investment advice
service agreements with SASL. From July 2017 to 2018, Lindberg, Herwig and SASL breached their fiduciary duties, acted in their own self-interest and raided the assets of their consulting clients, SEC lawyers said.

In one alleged scheme, Lindbergh and Herwig advised their Carolina insurance companies to sell their interests in certain Lindbergh-related special purpose vehicles (“SPVs”) and then
to repurchase the same investments through a different investment instrument at a higher price.

“Lindberg pocketed the difference, which was more than $57 million,” the lawsuit alleges. In 2017 and 2018, Lindbergh and Herwig had insurers enter into 13 such transactions, and the men allegedly used the fraudulent profits to enrich Lindbergh and support his other businesses.

“All along, North Carolina insurance company board members were kept in the dark about the Lindbergh embezzlement,” the complaint says.

As a result of the schemes, “the long-term liquidity of the investment portfolios of the North Carolina insurance companies was compromised and they were subsequently placed into receivership,” the suit says.

Lindbergh and Herwig refused to testify during the SEC investigation, asserting their Fifth Amendment right against self-incrimination.

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