New criminal investigation accuses NC billionaire of massive financial fraud
Federal prosecutors are mounting a new criminal offensive against embattled N.C. billionaire Greg Lindberg, accusing him and top associates of mishandling massive amounts of money, then lying to regulators to hide their scheme.
Recently unsealed legal filings in the federal courts of Charlotte accuse the Durham businessman, his chief investment officer Christopher Herwig, and another employee of using a series of complex and overlapping investment vehicles to illegally move hundreds of millions of dollars through Lindberg’s multi-national maze of business holdings, including several N.C. insurance companies.
The defendants then produced fraudulent reports and records to hide the transactions from the North Carolina Department of Insurance and other regulators, prosecutors claim.
Lindberg, once the state’s largest political donor, has not been charged in connection with the new filings. But the investigation outlined in the documents adds to the list of significant legal problems already putting his freedom and fortune at risk.
In March, Lindberg goes back on trial in Charlotte on charges that he attempted to bribe state Insurance Commissioner Mike Causey. Prosecutors say Lindberg and his conspirators funneled some of the money through the state Republican Party and its then-chairman, former U.S. Rep. Robin Hayes of Concord. Hayes pleaded guilty to avoid jail time and was later pardoned by then-President Donald Trump.
Lindberg was convicted of the bribery charge in 2020 following a two-week trial. In June, he was freed from prison after serving two years of a more than seven-year sentence following an appeals court decision to throw out the guilty verdict. The higher court ruled that U.S. District Judge Max Cogburn had given improper instructions to Lindberg’s jury.
Two months after Lindberg’s release, he and Herwig were accused in a civil complaint filed by the Securities and Exchange Commission of gaming customers of Lindberg’s N.C. insurance companies out of tens of millions of dollars.
The latest criminal investigation against Lindberg, which is being run out of Washington and Charlotte, has been operating behind the scenes for months.
It quietly surfaced before Christmas, when Herwig, chief investment officer of Eli Global, Lindberg’s Durham-based investment firm, accepted a deal from prosecutors and pleaded guilty in Charlotte to a felony charge of conspiracy to defraud the United States.
The terms of the plea agreement remain sealed, but defendants in such cases routinely agree to cooperate with prosecutors in return for the possibility of a lighter sentence. Many testify against former co-conspirators.
Herwig’s attorney, Claire Rauscher of Charlotte, declined comment to The Charlotte Observer on Wednesday.
In a statement released in response to Herwig’s guilty plea on Dec. 22, Lindberg said the federal allegations against him range from false to “entirely absurd.”
Rather than milk his insurance companies, which prosecutors allege, Lindberg said he invested hundreds of millions of dollars in them to maintain adequate staffing and the required financial reserves.
“I invested over $500 million in my insurance companies. I never took a penny of dividends,” Lindberg said. “The allegation that I somehow defrauded them ... is entirely absurd.”
Lindberg and his spokeswoman, Susan Estrich, also said the transactions outlined in the new federal documents were not hidden from regulators or the insurance companies, as alleged by prosecutors.
“This case is simply to attempt to pressure Greg Lindberg and paint a negative picture of him in the press,” Estrich said. “There was no loss to anyone.”
‘The OWNER’
Lindberg is not named in the newly unsealed court documents related to Herwig’s prosecution and plea agreement. Instead he is referred to as “the OWNER” of a conglomerate that operated “a family of companies.”
Lindberg, Herwig and a third man, identified in court documents as Devin Solow, a mergers and acquisitions associate hired by Lindberg in 2013, are accused of conspiring to “deceive and defraud” the N.C. Department of Insurance, rating agencies, a life insurance company and policyholders, in part, by evading regulatory requirements designed to protect consumers.
Prosecutors also claim Lindberg and his associates took elaborate steps to conceal Lindberg’s use of insurance company money for his personal benefit, including his lavish lifestyle.
Prosecutors say Lindberg and his co-conspirators used insurance company money in 2018 to buy up property around Lindberg’s home in Chapel Hill. Later that year, they used more of the same to cover the purchase of a mansion for Lindberg on Morning Mountain Road in Raleigh, documents claim.
In one example cited in Herwig’s plea documents, Lindberg and his co-conspirators forced some of Lindberg’s insurance companies to invest more than $2 billion in loans and other securities affiliated with Lindberg.
As of June 22, Lindberg’s insurance companies in North Carolina still held more than $1 billion of those investments.
Prosecutors say the fraud “caused substantial financial hardship” to Lindberg’s insurance companies. One was liquidated.
As of June 30, 50,000 policy-holders were owed more than $643 million in principal and interest on annuities, documents claim.
That same month, three of Lindberg’s insurance companies agreed to an “Order of Rehabilitation” under the N.C. Department of Insurance, which took action after determining that the investment portfolios of the company “had deteriorated to the point that (state regulators) needed to act to protect the policyholders.”
This story was originally published January 5, 2023 at 10:39 AM with the headline "New criminal investigation accuses NC billionaire of massive financial fraud."
