Wednesday, April 17, 2019

No. 309: Greg Lindberg and Three Others Indicted by a Federal Grand Jury in North Carolina

On March 18, 2019, in a sealed indictment, a federal grand jury in North Carolina charged Greg E. Lindberg and three others with criminal wrongdoing. On April 2, a magistrate judge unsealed the indictment. On April 3, the case was assigned to U.S. District Judge Max O. Cogburn, Jr. President Obama nominated him in January 2011, and the Senate confirmed him in March 2011, (See U.S.A. v. Lindberg, U.S. District Court, Western District of North Carolina, Case No. 5-19-cr-22.)

The Defendants and the Charges
Lindberg, a resident of Durham, North Carolina, is the founder and chairman of Eli Global, LLC, a Durham-based investment company, and the owner of Global Bankers Insurance Group (GBIG), a Durham-based managing company for several insurance and reinsurance companies. The other defendants, all residents of North Carolina, 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. All four defendants were charged with one count of conspiracy to commit honest services wire fraud and one count of bribery concerning programs receiving federal funds, and aiding and abetting. Hayes was also charged with three counts of false statements.

The arrest warrants were issued in Charlotte in March. Each warrant described the offense as follows:
did knowingly combine, conspire, confederate, & agree with one another, and with others known and unknown to the Grand Jury, to devise & intend to devise a scheme and artifice to defraud and to deprive, by means of material false and fraudulent pretenses, representations, & promises, & to transmit and cause to be transmitted by means of wire communication in interstate commerce, any writings, signs, signals, pictures, & sounds for the purpose of executing the scheme & artifice to defraud & deprive, that is, to deprive North Carolina & the citizens of N.C. of their intangible right to the honest services of the COMMISSIONER, an elected State official, through bribery, in violation of 18 U.S.C. §§ 1343 & 1346
The defendants were arrested and arraigned on April 2. They pleaded not guilty, were released with conditions, and each posted an unsecured appearance bond of $100,000. Pretrial reports were filed under seal on April 3. A docket call is set for July 1. The arrest warrant for Lindberg is in the complimentary package offered at the end of this post.

The Indictment
In most states, the insurance commissioner is appointed by the governor. North Carolina is one of the minority of states in which the insurance commissioner is elected. Commissioner Mike Causey heads the North Carolina Department of Insurance (NCDOI). Paragraph 4 of the indictment reads:
GBIG managed several insurance companies across the United States and was subject to regulation by the NCDOI. Beginning in or about September 2017, and continuing through in or about February 2018, GBIG was subject to an ongoing periodic examination conducted by the NCDOI pursuant to North Carolina General Statute § 58-2-131, which provides that the NCDOI shall conduct a financial examination of every domestic insurer when "prudent for the protection of the policy holders or the public," but "not less frequently than once every five years." Following the periodic investigation, GBIG was subject to a remediation agreement it signed with the NCDOI in or about May 2018.
I asked the NCDOI for the remediation agreement. A spokesperson said it is confidential. I also asked for the examination reports. The spokesperson sent me reports for two Lindberg companies: Colorado Bankers Life Insurance Company (a report that is in the complimentary package offered at the end of this post) and Southland National Insurance Corporation. Both reports are as of December 31, 2015, and dated May 10, 2017. I found no reference to a remediation agreement in either report. Other companies mentioned in the reports are:
Colorado Benefits Administration, LLC
Colorado Benefits Administrators, LLC
Dearborn National Life Insurance Company
North Carolina Mutual Life Insurance Company
Preferred Financial Corporation, LLC
SNG Holdings & Reinsurance Company, Inc.
Southern Financial Life Insurance Company
Southland Benefit Solutions, LLC
Southland National Holdings, Inc.
Southland National Reinsurance Corporation
Paragraphs 14, 30, and 31 of the indictment are important. They read as follows:
14. The defendants corruptly gave, offered, and promised things of value to [Causey], including millions of dollars in campaign contributions and through an independent expenditure committee, in exchange for specific official action favorable to GBIG, including the removal of the Senior Deputy Commissioner of the NCDOI responsible for overseeing the regulation, including the pending periodic examination, of GBIG ("Senior Deputy Commissioner A").
30. On or about February 14, 2018, Lindberg and Gray met with [Causey] in a private conference room at the Concord Regional Airport in Concord, North Carolina. Leading up to the meeting, Gray explained that the meeting would be secret, and told [Causey] that Gray and Lindberg would enter the facility through a different door from [Causey] so that nobody would see them together.
31. During the meeting, Lindberg complained about various issues with the NCDOI, including Senior Deputy Commissioner A. Lindberg stated that she was "deliberately and intentionally and maliciously hurting my reputation with other regulators," and that she's "been lying to you to, to hurt my bad name." [Blogger's note: The end of paragraph 31 is exactly the way it reads in the indictment.]
On the website of the NCDOI, the "leadership" section includes a photograph and biographical information for Chief Deputy Commissioner Dr. Michelle Flynn Osborne. There are no other women in the NCDOI leadership. I asked NCDOI whether I am correct in my belief that "Senior Deputy Commissioner A" is Dr. Osborne. The spokesperson said "need to contact FBI." I have not done so, because I know the FBI would have no comment. The indictment is in the complimentary package offered at the end of this post.

Media Coverage
On March 1, 2019, The Wall Street Journal (WSJ) carried a 2,480-word story entitled "Insurance Tycoon Diverts $2 Billion—Greg Lindberg's business practices have little precedent and are under investigation." The reporters were Mark Maremont and Leslie Scism. Here are the opening sentences:
Soon after Greg Lindberg moved into the insurance business, the North Carolina entrepreneur went on a spending spree. He bought nearly 100 companies around the globe, an estate in the Florida Keys, an Idaho lakeside retreat, a Gulfstream jet and the most expensive mansion ever sold in Raleigh, N.C. In September 2018 he added a 214-foot yacht with room for a dozen overnight guests. He also became the largest political donor in North Carolina and lavished money on other races around the country. The cash came, at least in part, from huge sums Mr. Lindberg diverted from the group of life insurance firms he began assembling in 2014, a Wall Street Journal investigation found.
On March 3, Lindberg spokespersons responded to the WSJ story. They said the story omitted key facts and contained numerous inaccuracies.

On April 3, WSJ carried a 591-word story entitled "Financier, State GOP Chairman Indicted," by the same reporters. Here are the opening sentences:
Greg Lindberg, a North Carolina entrepreneur who lent at least $2 billion from insurers he controlled to his own enterprises, was indicted on federal criminal charges of conspiring to bribe the state regulator overseeing his insurers. The indictment rocked North Carolina's Republican Party. One of Mr. Lindberg's three co-defendants in the case is party Chairman and former Congressman Robert "Robin" Cannon Hayes, who allegedly agreed to direct $250,000 from state party coffers to the state insurance commissioner on Mr. Lindberg's behalf. Mr. Hayes, 73 years old, is also alleged to have lied about the scheme to the Federal Bureau of Investigation.
On April 5, WSJ carried an 869-word story entitled "Commissioner Helped Spot Alleged Bribery," by the same reporters. Here are a few of the opening sentences:
In the fall of 2017, Mike Causey, a Republican who had been elected North Carolina's insurance commissioner the year before, was trying to get up to speed on medical-insurance scams. He attended a seminar on the issue in Charlotte, N.C., organized by federal prosecutors. As the event was ending, Mr. Causey said in an interview Wednesday, he mentioned to one of the prosecutors that his department was struggling to understand complex transactions at a couple of life insurers. The prosecutor followed up, requesting more information on the matter. By early 2018, Mr. Causey was secretly recording conversations for the Federal Bureau of Investigation, The Wall Street Journal previously reported, citing people familiar with the matter.
On April 5, The New York Times carried a 1,468-word story entitled "G.O.P. Agenda in North Carolina Is Bruised by a Bout With Scandal." The reporters were Alan Blinder and Richard Fausset. The story included discussions of major political missteps by both political parties, but mostly by Republicans. The story referred to such scandals as the Republican-backed bill limiting the bathroom choices of transgender people, the court-rejected gerrymandering plan, and the recent harvesting of absentee ballots. The story also mentioned that the Republican National Convention in 2020 is scheduled for Charlotte.

General Observations
This is a disturbing case. The details on how the defendants are alleged to have tried to bribe Causey are presented in clinical detail in the indictment. I plan to follow the case, but it is likely to take a long time unless the defendants reach a plea agreement with the federal prosecutors.

The hero in the case is Causey, who tipped off the prosecutors about what was going on, and later cooperated in building the case. It remains to be seen what happens in the case and to Causey's political career.

Available Material
I am offering a complimentary 47-page PDF consisting of the arrest warrant for Lindberg (1 page), the indictment (24 pages), and the examination report on Colorado Bankers Life (22 pages). Email and ask for the April 2019 Lindberg package.