Another federal investigation into NC's largest political donor
Posted January 19, 2020 5:00 a.m. EST
Updated January 20, 2020 12:26 p.m. EST
Raleigh, N.C. — North Carolina's largest political donor, already indicted on federal bribery charges, faces a second federal investigation into potential financial fraud within his empire of companies, according to recently unsealed court documents.
Greg Lindberg, a wealthy Durham investor, owns hundreds of businesses, including insurance companies that North Carolina regulators took charge of last year over liquidity concerns, and questions are swirling over how Lindberg moved money from these companies into dozens of others that he owns.
Now those insurance companies, with a state-appointed rehabilitator calling the shots, have sued Lindberg, accusing him of funneling money to himself instead of making good on promises to reinvest cash in the struggling insurers. These four companies face a potential shortfall of more than $1 billion, threatening policy holders with "severe losses" and creditors with "total losses," according to a complaint filed in Wake County Superior Court last October and unsealed by a judge this week.
Lindberg has pushed back against allegations in the lawsuit, which accuses him of fraud and breach of contract, saying it's "filled with inaccurate and reckless allegations and disregards the interests of the policyholders." He said in a press release that "the false accusations against me" have hurt the thousands of people his companies employ, cost millions of dollars in "unnecessary legal fees and other expenses," hurting the very policy holders the rehabilitation is supposed to protect.
This will eventually get hashed out in civil court, but October filings in the case seem to confirm a long-rumored federal criminal investigation into Lindberg's companies.
Special Deputy Rehabilitator Mike Dinius, appointed by state Insurance Commissioner Mike Causey last year to oversee the insurance companies, got a subpoena from a federal grand jury in the Western District of North Carolina "regarding the investigation into potential financial fraud," the filings state. Dinius and his team "understand that the United States Department of Justice and Federal Bureau of Investigation are conducting a separate criminal investigation into potential financial fraud within the Lindberg-related entities," the filings state.
That's in addition to the federal trial slated to begin next month for Lindberg and two of his associates accused of trying to bribe Causey with campaign donations in exchange for regulatory changes at the state Department of Insurance. Lindberg has accused Causey, who secretly recorded their conversations for the FBI, of being out to get him because Lindberg supported Causey's opponent in the 2016 election, former insurance commissioner and current North Carolina Democratic Party Chairman Wayne Goodwin.'
Lindberg said in his press release that the unsealed suit is just another politically motivated attack.
"Refinancing efforts have been sidelined and customers have been lost – all because of Mr. Causey's determination to extract retribution on our group of companies because I was not on his team during the 2016 election," he said in the release.
Causey has denied this, and the federal judge in Lindberg's bribery case shot down a subpoena request seeking troves of Department of Insurance documents Lindberg wanted to use as ammunition against Causey, calling it a fishing expedition. Lindberg and his attorneys have filed similar subpoenas in the newer civil case.
There are three insurance companies in the civil suit: Southland National, Bankers Life and Colorado Bankers Life, and one reinsurance company, National Reinsurance. Lindberg owns all four, and he owns a slew of other companies the lawsuit now seeks to wrest control of in an effort to keep the insurers solvent and keep Lindberg from moving money around.
The insurance companies invested premiums and other cash in these other companies, and the insurance companies now depend financially on whether those investments pay off, the companies said in court filings. Some of the arrangements involved are so "complex and circuitous" that the plaintiffs in the case haven't been able to determine their exact value "despite months of work," attorneys said in their initial filings.
Insurance laws in many states limit how much money insurance companies can invest in "affiliated companies" – companies owned by the same person who owns the insurance company. The Wall Street Journal published a deep dive last year on Lindberg's affiliated investments, including a move he made to North Carolina during Goodwin's tenure to take advantage of the state's looser regulations.
Goodwin, who worked at least briefly as a Lindberg consultant after leaving office, has said repeatedly that he has cooperated with federal investigators, that he's not a target of their inquiry and that he never took any action in return for campaign contributions. He's now the sole Democrat running against Causey, a Republican, in this year's insurance commissioner election.
Lindberg would eventually lobby the state legislature in a largely unsuccessful effort to change various insurance regulations, and he showered state politicians with millions in campaign donations. He's given $2.4 million to groups supporting Lt. Gov. Dan Forest's gubernatorial run alone.
He's accused of trying to get Causey to fire or reassign a key regulator, and the state is in the process of forcing Lindberg's insurance companies to lower their investments in affiliated companies.
As part of that, Lindberg agreed in late June to a Memorandum of Understanding that would transfer control of the affiliated companies to a new board that would focus on paying off the debts owed to the insurance companies. The MOU had a Sept. 30 deadline to reorganize the entities, and when that deadline passed, the insurance companies, at the rehabilitator's direction, filed suit.
Without that reorganization, Lindberg and a holding company he created for the affiliated companies, Academy Association Inc., have been "unconstrained in how they choose to manage the affiliated companies, including their ability to dissipate assets," the lawsuit states.
"Plaintiffs also have reason to believe that the operating companies are being mismanaged and that at least some of their operating revenue is being diverted for Lindberg's personal use," attorneys said in their initial complaint.
The MOU included a loan deferral that allowed the companies to avoid $100 million in payments, and Lindberg took "millions of dollars in management fees" from the companies, plus more than $5 million in proceeds from an overseas contract sale, the lawsuit states. He repeatedly demanded money for public relations consultants and airplane leases, it states.
In asking a Wake County Superior Court judge to enforce the MOU and take control from Lindberg, attorneys for the insurance companies say they're worried about assets being diverted to other countries, where Lindberg has substantial holdings, and out of the reach of U.S. courts.
Lindberg's legal team argues that the lawsuit should be dismissed for several reasons, including that "the MOU was an agreement to agree and not an enforceable contract." In several places, the MOU leaves complicated financial arrangements open for future negotiation, they argue.
"Enforceable contracts ... do not leave open ends for future discussion or negotiation," they said in a motion to dismiss.
Lindberg's attorneys also argue that the case shouldn't exist on its own, because any arguments over these issues belong in Causey v. Southland, the legal proceeding that lays out the state's rehabilitation of the four insurance companies, which is also pending in Wake County Superior Court.
The more recent lawsuit, Southland v. Lindberg, says the judge's intervention is critical, in part because of an insurance company in Puerto Rico that may be placed into rehabilitation by the government there. A Bermuda company Lindberg owns is the company's reinsurer, and Lindberg has proposed moving $700 million in cash and loans from the affiliated companies into a trust to shore up the Puerto Rican Insurer.
That would pledge more than half the money that would otherwise be available for Southland and the other North Carolina insurers, the lawsuit states.
Southland's attorneys also say Lindberg is trying to sell a pair of revenue-producing companies, including a medical equipment company based in New Mexico, to executives at his other companies. Lindberg himself would get a $51 million seller's note from the medical equipment deal, the lawsuit states.
Lindberg's pending bribery trial has made it difficult for that company to keep government contracts and generally lowered its resale value, the lawsuit states.
"Lindberg and his affiliates have proposed transactions that do not truly remove Lindberg from control, that sell the companies at a time when their value is necessarily depressed, and that individually profit Lindberg and his business colleagues," it states.