Friday, October 16, 2020

No. 393: Greg Lindberg—Another Update on the Federal Criminal Case against Him and His Associates

No. 388 (August 24, 2020) was the latest of several updates on the federal criminal lawsuit against Greg E. Lindberg and three associates. Here I provide another update to reflect important recent developments in the case. (See U.S.A. v. Lindberg, U.S. District Court, Western District of North Carolina, Case No. 5:19-cr-22.)

District Court Judgments
On August 28, U.S. District Judge Max O. Cogburn Jr. issued a judgment against Robert Cannon Hayes, who was the chairman of the state Republican party in North Carolina. He had pleaded guilty to five counts. Counts 1 through 4 were dismissed on the government's motion. On the fifth count, Judge Cogburn sentenced him to one year of probation, a $100 assessment, and a fine of $9,500.

On September 4, Judge Cogburn issued a judgment against Lindberg sentencing him to 87 months in prison on each of two counts to be served concurrently, followed by three years of supervised release on each count to be served concurrently, an assessment of $200, and a fine of $35,000.

Also on September 4, Judge Cogburn issued a judgment against John D. Gray, a Lindberg consultant who had been found guilty by the jury on two counts, sentencing him to 30 months in prison on each count to be served concurrently, followed by two years of supervised release on each count to be served concurrently, and an assessment of $200. The judgments against Hayes, Lindberg, and Gray are in the complimentary package offered at the end of this post.

Notices of Appeal
On August 19, as indicated in No. 388, when Lindberg was sentenced to 87 months in prison, his attorney told Judge Cogburn that Lindberg planned to appeal, and asked the judge to allow Lindberg to remain free pending the appeal. Judge Cogburn denied the request and ordered Lindberg to report to prison when directed by prison officials.

On September 2, Lindberg filed a notice of appeal to the U.S. Court of Appeals for the Fourth Circuit of Judge Cogburn's August 19 denial. On September 9, John D. Gray, a Lindberg consultant who was found guilty by the jury, filed a notice of appeal to the Fourth Circuit.

On October 7, after Lindberg was instructed to report to prison on October 20, Lindberg filed a motion to extend the self-surrender date for two reasons associated with the COVID-19 pandemic. One reason related to Mr. Lindberg's health, and the other related to interference with the preparation of his appellate brief. On October 13, Judge Cogburn denied the motion. Lindberg's motion to extend and Judge Cogburn's denial of the motion are in the complimentary package offered at the end of this post.

The Appellate Court
On September 10, in the Fourth Circuit, Lindberg filed a motion for release pending appeal. On September 15, the government opposed the motion. On September 18, Lindberg replied to the government's opposition. On September 23, in a one-sentence order, Circuit Judge Diana Gibbon Motz, with the concurrence of Circuit Judges Barbara Milano Keenan and Stephanie D. Thacker, denied Lindberg's motion for release pending appeal. (See U.S.A. v. Lindberg, U.S. Court of Appeals, Fourth Circuit, Case No. 20-4470.)

General Observations
At this writing (October 14), Lindberg's date of October 20 for reporting to prison apparently still stands. I plan to report further developments in this case.

Available Material
I am offering a complimentary 38-page package consisting of the judgment against Hayes (5 pages), the judgment against Lindberg (7 pages), the judgment against Gray (6 pages), Lindberg's motion to extend the self-surrender date (17 pages), and Judge Cogburn's denial of the motion to extend (3pages). Email jmbelth@gmail.com and ask for the October 2020 package about Lindberg.

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Friday, October 2, 2020

No. 392: The Commodity Futures Trading Commission and Thirty State Securities Regulators File a Lawsuit Against Eight Defendants

On September 22, 2020, the Commodity Futures Trading Commission (CFTC) and the securities regulators of thirty states filed, temporarily under seal, a complaint in federal court against TMTE Inc. (also known as Metals.com) and seven other defendants. The regulators are those in Alabama, Alaska, Arizona, California, Colorado, Delaware, Florida, Georgia, Hawaii, Idaho, Indiana, Iowa, Kansas, Kentucky, Maine, Maryland, Michigan, Mississippi, Nebraska, Nevada, New Mexico, New York, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Washington, West Virginia, and Wisconsin. 

On the same day, the plaintiffs filed an emergency motion for a statutory restraining order, a memorandum in support of the motion, an appendix in support of the motion, a bench memorandum, and a recommendation for appointment of a temporary receiver. Two days later, CFTC lifted the seal on the complaint. (See CFTC v. TMTE, U.S. District Court, Northern District of Texas, Case No. 3:20-cv-2910.)

The Complaint
The plaintiffs allege that, from at least September 1, 2017 through the present, the defendants "have engaged and continue to engage in a fraudulent scheme to defraud at least 1,600 persons throughout the United States into purchasing gold and silver bullion." Here are four items from the "Summary" section of the complaint:
4. Defendants' scam is particularly egregious because they preyed on persons between 60 and 90 years of age and swindled them out of their retirement funds by charging them fraudulent prices to purchase Precious Metals Bullion.
6. Defendants directed SDIRA [self-directed individual retirement accounts] and Cash Account investors to purchase specific Precious Metals Bullion at grossly inflated prices that bore no relationship to the Prevailing Market Price. Defendants did not disclose the actual value of the Precious Metals Bullion and instead provided investors with invoices showing exorbitant and unreasonable prices.
9. Contrary to Defendants' material misrepresentations and omissions, Defendants knew or had a reckless disregard for the truth that virtually every one of their SDIRA and Cash Account investors during the Relevant Period lost the majority of the funds invested in fraudulently overpriced Precious Metals Bullion.
15. Unless restrained and enjoined by the Court, Defendants are likely to continue engaging in the acts and practices alleged in this complaint or in similar acts and practices, and funds they have obtained fraudulently may be misappropriated or otherwise dissipated.
The complaint includes thirty counts of alleged wrongdoing, one count for each of the thirty states. The complaint is in the complimentary package offered at the end of this post.

The Order
The case has been assigned to U.S. District Judge Sam A Lindsay. On September 22, U.S. District Judge David C. Godbey issued an order granting the plaintiffs' emergency motion for a statutory restraining order. He also approved the plaintiffs' recommendation for the appointment of a temporary receiver, and appointed Kelly Crawford to that position. The order is in the complimentary package offered at the end of this post.

General Observations
I learned of this case through a press release issued by the Texas State Securities Board, which is headed by Texas Securities Commissioner Travis J. Iles. The fact that the CFTC and the securities regulators of thirty states are the plaintiffs prompt me to believe that this is an important case.

Available Material
I am offering a complimentary 129-page package consisting of the complaint (106 pages) and the order (23 pages). Email jmbelth@gmail.com and ask for the October 2020 package about CFTC v. TMTE.

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Wednesday, September 30, 2020

No. 391: AXA Equitable Life—Two Individual Lawsuits about the Reinstatement of Universal Life Policies

Malcolm H. Wiener (Wiener), a resident of Connecticut, filed two individual lawsuits against AXA Equitable Life Insurance Company (AXA) about his efforts to reinstate three universal life insurance policies that had lapsed. One of the cases, referred to in this post as "the New York case," began in 2015 and remains ongoing. The other case, referred to in this post as "the North Carolina case," began in 2018, went to trial in 2020, and post-trial motions are pending. (See Wiener v. AXA, U.S. District Court, Southern District of New York, Case No. 1:16-cv-4019; and Wiener v. AXA, U.S. District Court, Western District of North Carolina, Case No. 3:18-cv-106.)

The New York Case
Wiener filed the New York case in a state court in Connecticut. AXA removed the case to a federal court in New York, where AXA is based. The case has dragged on ever since. The most recent docket item, a declaration in support of a motion for summary judgment, was filed on August 25, 2020.

Wiener filed a third amended complaint in 2016. The defendants are three AXA companies and David Hungerford, Wiener's AXA agent. Wiener was born in 1935. In 1986 and 1987, at the age of 51, he bought three AXA universal life insurance policies. The polices were for $9 million, $9 million, and $2 million. Shortly thereafter he reduced them to $7.2 million, $7.2 million, and $1.6 million.

In 2013, when Wiener was aged 78, he received by regular mail a policy termination notice and an application for reinstatement. He promptly submitted the application for reinstatement, together with the necessary medical evidence of insurability. Three months later, AXA denied the application for reinstatement.

The third amended complaint describes the matter in detail and includes eight counts of alleged wrongdoing. The complaint and AXA's answer to the complaint are in the complimentary package offered at the end of this post.

The North Carolina Case
Wiener filed the North Carolina case in a state court in North Carolina, where AXA has a major service office. AXA removed the case to federal court in North Carolina. The case recently went to trial, and the jury rendered its verdict on September 10, 2020. The verdict form contained three questions:
  1. Was Plaintiff Malcolm Wiener injured by the negligence of Defendant AXA Equitable Life Insurance Company?
  2. What amount is Plaintiff Malcolm Wiener entitled to recover from Defendant AXA Equitable Life Insurance Company?
  3. By what amount, if any, should Plaintiff Malcolm Wiener's actual damages be reduced because of his unreasonable failure to avoid or minimize his injuries?
The jury's answers to the questions were: (1) Yes, (2) $16,000,000, and (3) $8,000,000. On the same day, the clerk of the court entered judgment in accordance with the verdict. Also on the same day, the judge issued an order providing the parties with ten days to file post-trial motions. Wiener's complaint, AXA's answer to the complaint, and the jury verdict form are in the complimentary package offered at the end of this post.

General Observations
I believe, but am not certain, that the answer to the second question on the jury verdict form (the $16 million of damages) is the sum of $7.2 million, $7.2 million, and $1.6 million, which are the reduced death benefits of the three policies. I do not know how the jury arrived at the answer to the third question on the verdict form (the $8 million reduction in the damages). I tried, without success, to contact an attorney for Wiener in the North Carolina case to see whether he can confirm my belief about how the jury arrived at the $16 million in damages, and to help me understand how the jury arrived at the $8 million reduction in damages. I plan to post a follow-up when and if I learn anything further.

Available Material
I am offering a complimentary 76-page package consisting of Wiener's third amended complaint (without exhibits) in the New York case  (31 pages), AXA's answer to the third amended complaint (19 pages), Wiener's complaint (without exhibits) in the North Carolina case (12 pages), AXA's answer to the complaint (12 pages), and the jury verdict form (2 pages). Email jmbelth@gmail.com and ask for the September 2020 package about Wiener v. AXA.

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Wednesday, September 9, 2020

No. 390: Philip Falcone and a Series of Amazing Developments

In No. 389 (August 26, 2020), I wrote about the termination of Philip A. Falcone, who had been chairman, president, and chief executive officer of HC2 Holdings, Inc. (NYSE:HCHC) from 2014 to 2020. I said my interest in Falcone arose from his involvement with a block of long-term care (LTC) insurance policies originally issued by Kanawha Insurance Company. I also said that, because Falcone was no longer connected with that block, I did not plan to write further about him. However, shortly after No. 389 was posted, I learned of a series of amazing developments that prompted me to prepare this further update.

James Corcoran
James P. Corcoran served as Superintendent of Insurance in what was then New York State's Department of Insurance from March 9, 1983 to January 26, 1990. I have known Corcoran since that time, although not well, and have always considered him above reproach.

Falcone hired Corcoran in 2015 to serve as executive chairman of Continental Insurance Group Limited (CIGL) to provide state insurance regulators, who were concerned about Falcone's admission of wrongdoing in a 2013 settlement with the Securities and Exchange Commission, with assurance that Falcone and HC2 would have no involvement in the day-to-day operations of any insurance companies HC2 might own or acquire. On April 2, 2020, HC2 terminated Corcoran without cause.

CIGL's Complaint
On May 22, 2020, CIGL and two affiliates, one of which is Continental General Insurance Company (CGIC), filed a lawsuit against Corcoran in a Texas state court. Here is the first paragraph in the "Nature of the Action" section of the complaint:
Continental brings this action against its former Executive Chairman, James P. Corcoran, for breaches of his fiduciary and contractual duties arising out of a secretive scheme to wrest control over Continental from its current sole shareholder, HC2 Holdings Inc. ("HC2"), through a campaign of subterfuge and lies. Mr. Corcoran, a longtime insurance executive, was hired by HC2 in 2015 to run its newly acquired Continental family of insurance companies. By 2019, however, Mr. Corcoran had abandoned his allegiances to both HC2 and the Continental companies he had been hired to lead and instead embarked on a campaign to line his own pockets at their expense.
The complaint includes four counts: breach of duty of loyalty, breach of fiduciary duty, breach of contract seeking damages, and breach of contract seeking injunctive relief. The full complaint is in the complimentary package offered at the end of this post. (See CIGL v. Corcoran, 395th Judicial District, Williamson County, Texas, Cause No. 20-0754-C395.)

Corcoran's Answer
On June 22, Corcoran filed an answer to the CIGL complaint. Here is part of the first paragraph in "The Facts" section of the answer (the full answer is in the complimentary package offered at the end of this post):
This lawsuit is nothing more than an ill-advised, transparent strike suit by Plaintiffs in an effort to diffuse the fact that they unlawfully terminated a whistleblower for reporting improper conduct. Corcoran was hired by CIGL in 2015 for the express purpose of providing assurance to insurance regulators that CIGL's parent company, HC2 Holdings, and its chairman, Phil Falcone, would have no involvement in the day-to-day operations of any of the insurance companies HC2 was looking to acquire... [O]ne of Corcoran's primary roles ... was to ensure that CGIC did not run afoul of any regulatory requirements by permitting Falcone improperly to become involved with and influence CGIC's operations, which conduct would subject CGIC to significant penalties, including the revocation of its certificate of authority to operate. But when Corcoran on multiple occasions raised legitimate concerns with Falcone and HC2's general counsel ... regarding Falcone's attempts to improperly influence CGIC and its officers, which concerns Falcone ignored and instead continued his improper influence, Corcoran was compelled to report such conduct to CGIC's regulator, the Texas Department of Insurance. And when Corcoran reported these facts to HC2's board of directors ... [they] forced CIGL to terminate Corcoran in retaliation. In their blatantly disingenuous effort to recharacterize their retaliatory discharge as somehow a justified business decision, Plaintiffs literally make up facts about an alleged "shadow" scheme in order to defame Corcoran and justify his termination, notwithstanding the fact that their falsehoods have gotten the better of them, since their current claims contradict CIGL's prior admission that its termination of Corcoran was "without cause."
Corcoran's Motion to Compel Arbitration
As mentioned earlier, HC2 terminated Corcoran on April 2, 2020. However, his employment agreement provides that disputes
shall be resolved exclusively and finally by arbitration in New York County, New York, in accordance with the Employment Arbitration Rules and Mediation Procedure of the American Arbitration Association.
On July 6, Corcoran filed in the Texas state court a motion to compel arbitration and for a stay of discovery and further proceedings. The briefing on the motion to compel has not yet been completed.

Corcoran's Whistleblower Complaint
The Sarbanes-Oxley Act of 2002 (SOX), which was enacted in the wake of accounting scandals such as those at Enron and WorldCom, provides for the filing of whistleblower complaints with the U.S. Department of Labor. On August 27, Corcoran filed such a complaint against HC2. Here is the first paragraph of the complaint (the full complaint is in the complimentary package offered at the end of this post):
As counsel of record, we submit this SOX whistleblower complaint on behalf of James Corcoran, who was terminated after complaining to senior management and ultimately the board of directors about material misstatements made by a publicly traded company which failed to correct those statements but instead fired him, as explained below.
CGIC's Statutory Financial Statements
During the preparation of this post, I reviewed the three most recent statutory financial statements that CGIC submitted to state insurance regulators: (1) the annual statement for the year ended December 31, 2019, and dated February 28, 2020; (2) the quarterly statement for the quarter ended March 31, 2020, and dated May 15, 2020; and (3) the quarterly statement for the quarter ended June 30, 2020, and dated August 14, 2020.

The first statement above showed Corcoran as one of the directors, but did not otherwise mention him. However, in the "Notes to Financial Statements," on page 19.18, under "Note 22 - Events Subsequent," the following statement appears:
On January 2, 2020, the Company received notification from the Texas Department of Insurance that a limited scope exam would be conducted as of December 19, 2019. The scope of the examination would focus on company operations including but not limited to corporate governance, related party activities, affiliated agreements and investment activities. The Company has complied with all request [sic] at this time.
The second and third financial statements above make no reference to Corcoran. Also, they do not appear to contain anything relevant to the subject matter of this post.

MG Capital's Report on HC2
MG Capital (MGC) describes itself as "a privately-held investment firm based in New York City that focuses on investing in complex, event-driven opportunities." MGC is a major shareholder in HC2. On April 13, 2020, MGC issued a 97-page, single-spaced report entitled "Time for a Better Board and Vision." The report is harshly critical of the HC2 board, including Falcone, and offers a replacement slate of directors. The MGC report may be found here.

General Observations
I think the CIGL Texas state court lawsuit against Corcoran is outrageous. At this time, however, I have no further comments because there are several related and important matters that are currently pending. Among them are the motion to compel arbitration, the SOX whistleblower complaint, and the ongoing investigation by the Texas Department of Insurance. I plan to follow and report on future developments.

Available Material
I am offering a complimentary 80-page package consisting of the CIGL complaint against Corcoran (25 pages), Corcoran's answer to the complaint including exhibits (49 pages), and Corcoran's SOX whistleblower complaint (6 pages). Email jmbelth@gmail.com and ask for the September 2020 package about Falcone.

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Wednesday, August 26, 2020

No. 389: Philip Falcone's Departure from His Public Company

Falcone and Kanawha
My first post mentioning Philip A. Falcone (CRD#1442413) was No. 242 (November 20, 2017). There I said a block of long-term care (LTC) insurance policies, originally issued by South Carolina-domiciled Kanawha Insurance Company, was being acquired by Continental General Insurance Company (CGIC), a subsidiary of HC2 Holdings Inc. (NYSE:HCHC). The Kanawha LTC block had been acquired earlier by Humana, but Falcone announced in late 2017 that CGIC was acquiring Kanawha's LTC block.

On July 12, 2018, the South Carolina director of insurance issued an order approving the merger of Kanawha into Texas-domiciled CGIC, and the redomestication of Kanawha from South Carolina to Texas. The order included a "continuing obligation of CGIC" that "Falcone shall not have any role in the day-to-day operations of Kanawha or CGIC pre- or post-merger." The order also included a requirement that HC2 maintain a certain risk-based capital ratio for CGIC.

Falcone and the SEC
In No. 244 (December 11, 2017), I discussed Falcone's settlements with the Securities and Exchange Commission (SEC). On August 16, 2013, Falcone and Harbinger Capital Holdings LLC, his New York hedge fund, settled two SEC complaints, admitted wrongdoing, and paid civil penalties of more than $18 million. Falcone agreed to be barred from the securities industry for at least five years, but he was not barred from serving as an officer or director of a public company. In 2014, Falcone became chairman, president, and chief executive officer of HC2. In HC2's filings with the SEC, there was no disclosure of Falcone's settlements with the SEC. Also, in CGIC's statutory filings with state insurance regulators, there was no disclosure of Falcone's settlements with the SEC; indeed, there was no mention of Falcone's name.

The Revolt
In No. 357 (February 25, 2020) I said Falcone was facing a shareholder revolt. On January 27, 2020, several disgruntled HC2 shareholders filed with the SEC some proxy material that included a letter to shareholders announcing a plan to file a preliminary proxy statement in which the disgruntled shareholders would solicit votes for the election of their own slate of directors. Here is the final section of the letter:
Time for a Change: Management's unsuitability, consistent under performance and self-dealing patently disqualify them from continuing to manage the Company. This is why we intend to run our own slate for the Company's board at the next meeting of shareholders as a matter of first priority. Management has wasted six years destroying shareholder value. It's time for a fresh approach.
A Glaring Omission
On February 11, 2020, HC2 filed with the SEC an 8-K (significant event) report. A press release was attached to the 8-K. The 8-K and the press release announced the appointment of an additional member to the board of directors, increasing the size of the board from five to six. However, the 8-K also included these comments, which inexplicably were omitted from the press release:
The Compensation Committee of the Board ... has determined that Philip A. Falcone ... will not receive any bonus or other incentive compensation in respect of 2019, whether under the HC2 Executive Bonus Plan ... or otherwise.... Additional information regarding these matters will be provided in the 2020 Proxy Statement.
Falcone's Compensation
On May 27, 2020, HC2 filed with the SEC some proxy material that included the 2019 summary compensation table. The table shows that for 2019 Falcone received $600,000 of salary and no other compensation. The same table shows that for 2018 he received $600,000 of salary and $10,935,545 of other compensation (stock awards, option awards, and non-equity executive plan compensation), for a total of $11,535,545. The report accompanying the summary compensation table includes an extensive discussion of Falcone's compensation.

Falcone's Departure
On July 6, 2020, HC2 issued a press release. It said, among other things:
The Company additionally announced that, in light of the recent change in the Company's executive management, Philip A. Falcone will not be included on the Company's slate of director nominees for the Annual Meeting [scheduled for July 30, 2020].
General Observations
I originally wrote about Falcone because of his involvement with Kanawha's LTC insurance block. Now that he is no longer connected in any way with that block, I do not plan to write further about him.

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Monday, August 24, 2020

No. 388: Greg Lindberg Heads to Prison

Background
No. 309 (April 17, 2019) was my first post about a federal criminal lawsuit against Greg E. Lindberg (Durham, North Carolina) and three associates. I provided updates in No. 320 (July 1, 2019), No. 338 (October 24, 2019), No. 355 (February 13, 2020), No. 361 (March 25, 2020), and No. 387 (August 13, 2020).

Lindberg is the founder and chairman of Eli Global LLC, an investment company, and the owner of Global Bankers Insurance Group, a managing company for numerous insurance and reinsurance companies. The other defendants are John D. Gray, a Lindberg consultant; John V. Palermo Jr., a vice president of Eli Global; and Robert Cannon Hayes, chairman of the state Republican party in North Carolina.

The defendants were charged with conspiracy to commit honest services wire fraud, bribery concerning programs receiving federal funds, and aiding and abetting. Hayes was also charged with making false statements. The case is in federal court in Charlotte under U.S. District Judge Max O. Cogburn Jr. (See U.S.A. v. Lindberg, U.S. District Court, Western District of North Carolina, Case No. 5:19-cr-22.)

Recent Developments
On February 18, 2020, the trial began. The defendants in the trial were Lindberg, Gray, and Palermo. Hayes had pleaded guilty before the trial. On March 5, 2020, the jury found Lindberg and Gray guilty. The jury found Palermo not guilty.

Lindberg and Gray filed motions for a new trial; the judge denied the motions. The government filed a motion for forfeiture of property as to Lindberg and Gray; the judge granted the motion. The government filed a sentencing memorandum on Hayes, and requested probation.

On August 12, the government filed a sentencing memorandum on Lindberg and Gray. For Lindberg, the government asked for a sentence of 168 months in prison, followed by three years of supervised release, and a fine of $250,000. For Gray, the government asked for a sentence of 121 months in prison, followed by three years of supervised release, and a fine of $35,000.

On August 12, Lindberg filed a response to the government's sentencing memorandum. He asked for a sentence of 12 to 24 months.

On August 13, Gray filed a response to the government's sentencing memorandum. Citing his advanced age, his health conditions, and COVID-19, he asked for a sentence of home confinement.

On August 19, sentencing developments occurred. However, as of 5:00 p.m. on August 21, the court docket contained no information about the sentencing developments. I learned about the sentencing developments through articles in The Wall Street Journal and the Charlotte Observer, both of which have been following the case closely.

On the night of August 19, Mark Maremont and Leslie Scism of the Journal reported that Lindberg was sentenced to seven years and three months in prison. They reported that a Lindberg attorney told the judge Lindberg plans to appeal, and asked the judge to allow Lindberg to remain free pending the appeal. They reported that the judge denied the request and ordered Lindberg to report to prison when directed by prison officials. The Observer reported that Hayes was sentenced to probation. I do not yet know what sentence has been imposed on Gray.

General Observations
Lindberg presumably will appeal to the U.S. Court of Appeals for the Fourth Circuit in Richmond. I have not yet heard anything about the results of the investigation the judge ordered after he learned that a Lindberg consultant had conducted a "post-trial juror interview." I plan to report further developments.

Available Material
I am offering a complimentary 73-page package consisting of the August 12 government sentencing memorandum (18 pages), the August 12 Lindberg response (36 pages), and the August 13 Gray response (19 pages). Email jmbelth@gmail.com and ask for the second August 2020 package about Lindberg.

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Thursday, August 13, 2020

No. 387: Greg Lindberg—An Update on the Federal Criminal Case Against Him and His Associates

In No. 309 (April 17, 2019), I first reported on a federal criminal lawsuit against Greg E. Lindberg and his associates for their efforts to bribe the North Carolina commissioner of insurance. I have provided four updates: No. 320 (July 1, 2019), No. 338 (October 24, 2019), No. 355 (February 13, 2020), and No. 361 (March 25, 2020). In the latter, I reported on a March 18 court order directed at Lindberg and others when one of his associates contacted a juror after the trial and verdict. Here I provide another update, on two August 4 court orders. (See U.S.A. v. Lindberg, U.S. District Court, Western District of North Carolina, Case No. 5-19-cr-22.)

Background
Lindberg is the founder and chairman of Eli Global, LLC, an investment company, and the owner of Global Bankers Insurance Group, a managing company for numerous insurance and reinsurance companies. In March 2019, a federal grand jury charged Lindberg and three others with criminal wrongdoing. The others were: John D. Gray, a Lindberg consultant; John V. Palermo Jr., a vice president of Eli Global; and Robert Cannon Hayes, chairman of the state Republican party in North Carolina. The indictment charged the defendants with conspiracy to commit honest services wire fraud, bribery concerning programs receiving federal funds, and aiding and abetting. Hayes was also charged with making false statements.

On February 18, 2020, the trial began. The defendants were Lindberg, Gray, and Palermo. Hayes had pleaded guilty and was awaiting sentencing. The trial ended after eleven trial days. On March 5, the jury found Lindberg and Gray guilty on counts 1 and 2. The jury found Palermo not guilty on counts 1 and 2. On March 13, the government filed a motion for forfeiture of property as to Lindberg and Gray.

On March 18, the judge issued an order directed at Lindberg, Gray, and others after he learned that an individual affiliated with the defendants had spoken with a juror after the trial and verdict. Information from a "post-trial juror interview" could be used by the defendants in preparing appeals. The judge referred the matter to the local U.S. Attorney for investigation, and ordered that Lindberg, Gray, their attorneys, and their consultants refrain from contacting jurors during the investigation and until further order of the court.

On April 2, Lindberg and Gray filed motions for a new trial. On May 6, the government filed, under seal, presentence investigation reports on Lindberg and Gray. On May 13, the judge held a hearing on the government's motion for forfeiture of property. On May 20, Lindberg objected to the presentence investigation report on him. On June 3, Gray objected to the presentence investigation report on him.

The First August 4 Order
On August 4, the judge issued an order granting the government's motion for forfeiture of property as to Lindberg and Gray. Here is part of the concluding section of the order (the full order is in the complimentary package offered at the end of this post):
It is, therefore, ordered that the Government's motion for Preliminary Order of Forfeiture is granted, as follows:
  1. Based on the trial evidence and defendants' convictions, the United States is authorized to take and maintain possession of the following property, and that property is hereby preliminarily forfeited to the United States for disposition according to law, provided that such forfeiture is not subject to any third-party claims and interests, pending final adjudication:
    • Approximately $979,128.63 in funds seized from a Wells Fargo Bank Account ending in 0809, such account held in the name of North Carolina Growth and Prosperity Alliance, Inc.; and
    • Approximately $475,629.82 in funds seized from a Wells Fargo Bank Account ending in 0817, such account held in the name of North Carolina Growth and Prosperity Committee, Inc.
  2. The Government shall publish notice of this order....
  3. Upon adjudication of all third-party interests, this Court will enter a Final Order of Forfeiture. If no third party files a petition within the time provided by law, then this Order shall become final by operation of law.....
The Second August 4 Order
Also on August 4, the judge issued an order denying the motions of Lindberg and Gray for a new trial. Here is part of the concluding section of the order (the full order is in the complimentary package offered at the end of this post):
After a three-week trial and three days of deliberation, a properly instructed jury considered the relevant evidence and found the defendants guilty of conspiring to commit honest services fraud and of federal funds bribery, based on their offers to provide the Commissioner of the North Carolina Department of Insurance with millions of dollars in campaign contributions in exchange for removing and replacing his Senior Deputy Commissioner as the employee responsible for regulating the defendants' companies. Contrary to the defendants' assertions, the law and evidence supported that verdict. Thus, the Motions for Judgment of Acquittal and for New Trial are denied....
The Government's Sentencing Memorandum on Hayes
On August 10, the government filed, not under seal, its sentencing memorandum on Hayes. Here is the concluding paragraph (the full memorandum is in the complimentary package offered at the end of this post):
For the foregoing reasons, the government respectfully requests that the Court determine that the defendant's Guidelines offense level is 4 and his Criminal History Level is 1. The government further respectfully requests that, taking into consideration the sentencing factors set forth in section 3553(a), the Court sentence the defendant to probation.
General Observations
This case has a long way to go. For example, it is likely the defendants will appeal the verdict to the U.S. Court of Appeals for the Fourth Circuit. I plan to continue reporting on developments in the case.

The March 18 order suggests that the judge was concerned about the post-trial juror interview. I have not yet heard anything about the results of the investigation the judge requested.

Available Material
I am offering a complimentary 74-page package consisting of the first August 4 order (14 pages), the second August 4 order (55 pages), and the government's sentencing memorandum on Hayes (5 pages). Email jmbelth@gmail.com and ask for the August 2020 package about Lindberg.

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