New complaint alleges 'massive fraudulent scheme' by NC political donor recently released from federal prison

Greg Lindberg, the North Carolina businessman accused of trying to bribe the state’s insurance commissioner, raided his own insurance companies in a “massive fraudulent scheme,” the U.S. Securities and Exchange Commission said in a complaint filed Tuesday in federal court.

The money flowed through a Malta-based advisory firm through complicated schemes designed to mask the fact that Lindberg treated insurance company money as his own, SEC investigators said in their complaint, which was filed in the U.S. District Court for the Middle District of North Carolina.

Through a spokeswoman, Lindberg denied wrongdoing and said the SEC is “piling on” and “bootstrapping one weak case to another in the hope that their combined weight will count for more than they each do on their own.”

Lindberg, who once lived in Durham, was released this year after the U.S. Court of Appeals for the Fourth Circuit threw out his conviction, saying the judge in his criminal case gave the jury bad instructions on a key element of federal bribery law.

“Mr. Lindberg intends to fight the false allegations that have been made against him, and to strengthen and support his insurance companies and the policyholders here in North Carolina,” Lindberg spokeswoman Susan Estrich said Tuesday in an emailed statement, referring to the new SEC charges.

Insurance companies tend to have strong cash flow thanks to the routine premiums people pay, and Lindberg invested much of that cash in hundreds of other companies he owned, according to court documents. State regulators, and the advisers they’ve hired, have tried to unwind those investments as they rehabilitate Lindberg’s North Carolina-based insurance companies, Southland National Insurance Corp., Bankers Life Insurance Co., Colorado Bankers Life Insurance Co. and Southland National Reinsurance Corp.

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The SEC, which regulates certain investment products, makes similar accusations. It says that from July 2017 through 2018, Lindberg and Christopher Herwig, an executive in one of Lindberg’s companies, “raided their advisory clients’ assets through a series of fraudulent and improper schemes.” The process included “an illogical and complex set of transactions to mask Lindberg’s misappropriation,” the SEC said in its filing.

In one episode, Lindberg had the insurance companies sell their interests in companies Lindberg owned, then repurchase essentially the same investment at a higher price, the regulator said.

“Lindberg pocketed the difference, which was more than $57 million,” the SEC said in its complaint.

Efforts to reach Herwig for comment on the accusations Tuesday were unsuccessful. He and Lindberg declined to testify during the SEC’s investigation, the agency said in its filing, asserting their Fifth Amendment rights.

Lindberg’s spokeswoman said the SEC has been “shown millions of pages of documents” proving their case is wrong.

“We showed them bank records to prove where the money went, and to prove that there was no private ‘piggybank’ and that no policyholder ever lost a dime,” Estrich said in her statement. “We traced the money they couldn't trace. When we showed them everything, they zeroed in on a handful of transactions representing less than 1.5% of that period’s transaction volume across a global organization with $5.5 billion of assets under management.”

The SEC is asking a federal judge to issue a permanent injunction against Lindberg, Herwig and Standard Advisory Services Ltd., which the regulator described as their Malta-based advisory firm. The commission alleges violations of the federal Investment Advisers Act of 1940 and wants a judge to order the two men to give up gains and to pay civil penalties.

"We allege a massive fraudulent scheme, involving unique financial structures and various complex investments, orchestrated by the defendants for their own benefit over their advisory clients’ benefit," Osman Nawaz, chief of the SEC’s Division of Enforcement’s Complex Financial Instruments Unit, said in a statement.