Retirees bet on a Durham investment firm. Will they die before realizing returns?

A fight between an insurance group and state regulators is grinding through its fourth year, leaving investors wondering if they'll die before realizing returns.

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Shelby and Howard Martin. Photo contributed by the Martins.
Travis Fain
, WRAL state government reporter

A fight between an indicted billionaire’s insurance companies and the state regulator that took control of them is grinding through its fourth year as the two sides battle over $1.2 billion amid allegations of bribery and fraud.

As the dispute drags on, people who staked their retirements on those companies — buying what they believed were safe investments — wonder if they’ll die before getting their money back.

“It has just about ruined us financially,” said Howard Martin, who says he and his wife are owed $180,000. “My wife and I are both in our 80s and we need our money to do some final things in life.”

“I had planned to cash that thing in and buy a car,” said Judy Smith, a retiree who says she’s owed $30,000 on an annuity she bought in 2014. “I was a teacher, you know? I had to be very frugal with my money.”

Martin and Smith are among the roughly 262,000 policyholders in varying degrees of limbo as the North Carolina Department of Insurance, and its team of lawyers and consultants, tries to untangle a complex investment strategy that federal investigators say ties into “a massive fraudulent scheme” involving North Carolina insurance companies. The mastermind of that scheme, according to a U.S. Securities and Exchange Commission complaint filed last month, is Greg Lindberg, a business mogul who faces that SEC complaint, a federal trial on bribery charges and dozens of civil lawsuits.
The SEC says Lindberg treated insurance company money as his own, sending it through “an illogical and complex set of transactions” to mask the fraud, which the commission says included a $3 million home he purchased for himself in Wake County.

Lindberg denies these accusations, saying through a spokesperson that he’s shown the SEC proof of his innocence with volumes of documentation that “traced the money they couldn't trace.” Lindberg’s three insurance companies, and one reinsurer, are now tied up in a process called “rehabilitation” — the state’s attempt to track and recover investments Lindberg made using insurance company money to bolster other companies he owned. State regulators say they’re trying to refill a $1.2 billion hole so that people who bought annuities, life insurance policies and other products can be paid.

Until that’s complete, annuity payments are largely frozen, meaning investors who thought they had a safe port for their life savings can’t access that money unless they’re at least 95 years old or meet a hardship criteria that requires them to have $50,000 or less in liquid assets, a threshold recently raised from $25,000.

“I don’t understand why we are out in the cold,” said Smith, an 80-year-old who lives in Thomasville. “It’s not fair.”

Timeline unknown

State regulators say Lindberg is blocking the rehabilitation process by refusing, for years, to abide by a 2019 agreement to cede control of the businesses he loaned the insurance companies’ money to. A North Carolina judge overseeing the rehabilitation agreed with that analysis earlier this year, ruling that Lindberg defrauded his own insurance companies and ordering him to abide by the agreement.

Lindberg is appealing the judge's decision. Aaron Tobin, a lawyer representing Lindberg, said implementing the judge's order "would hurt — not help — policyholders." He also said Lindberg "did not defraud or mislead anyone."

No one knows how long the rehabilitation process will take, though the 2019 agreement contemplated as long as 10 years. The holding company for Lindberg’s insurers, Global Growth, says the state Department of Insurance, helmed by elected Insurance Commissioner Mike Causey, has drawn things out unnecessarily. The companies can pay policyholders faster if Causey approves a series of transactions its executives have proposed, according to Global Growth’s chief executive, Justin Holbrook.

“A number of transactions that, if they’ll work with us cooperatively and approve, can help policyholders get access to their benefits next year,” Holbrook said.

Next year brings a key threshold. Many of the annuities sold by these insurers hit their surrender period in 2023, meaning policyholders would be paid if not for the freeze.

Causey was the key witness against Lindberg two years ago, when a federal jury convicted Lindberg of trying to bribe the commissioner with as much as $2 million in campaign donations.

The U.S. Court of Appeals for the Fourth Circuit threw out that conviction this year, saying the judge gave the jury bad instructions on a key element of federal bribery law. Lindberg was released from federal prison and is scheduled for retrial in March. Causey is expected to testify again.

Through a spokesman, Causey’s department said Global Growth “has not made good on its promises” and “has not brought forth workable alternatives.”

“Mr. Lindberg is trying to litigate the rehabilitation in the press, because his litigation in the courts has failed time and again,” Department of Insurance spokesman Jason Tyson said in an email. “It is an attempt at distraction.”

As part of its public relations campaign on the matter, Global Growth recently ran full-page ads in The Wall Street Journal and The News & Observer newspapers. The ads highlighted the plight of several policyholders in an open letter to Causey that Holbrook signed.

“Global Growth is proud of our work to secure the financing needed to serve the best interest of North Carolina policyholders,” Holbrook said in his open letter. “Can you say the same?”

The policyholders featured in the ad weren’t identified by name, but a public relations consultant working with Global Growth provided WRAL News with letters written by policyholders in similar situations as those described by the ad. Those included letters from Smith and Martin, as well as Mark Zintel of St. Petersburg, Florida, who says he’s owed $700,000.

Jerry and Judy Smith, of Thomasville, who own annuites from one of Greg Lindberg's insurance companies and say they were expecting on this money, now hung up in court proceedings, in their retirement. Photo courtesy the Smiths.

None of these people were told their situations would be part of the advertising campaign. A Global Growth spokeswoman said that, as part of the rehabilitation, Global Growth is prohibited from contacting policyholders directly. She declined to say how much the public relations campaign has cost.

Zintel and Smith blamed Lindberg — Global Growth’s sole shareholder — in their letters, which were written or copied to the judge overseeing the rehabilitation, then forwarded by the court to legal teams for both sides in the case.

Zintel was shocked to find his situation used against Causey.

“I wrote that letter for the benefit of policyholders — victims,” he said. “Not for the benefit of Global Growth or Greg Lindberg. I wanted the judge, or the court, to know that there are victims out here.”

‘They appear to have the money’

The four companies in rehabilitation are Southland National Insurance Corp., Bankers Life Insurance Co., Colorado Bankers Life Insurance Co. and Southland National Reinsurance Corp. When the state took control it brought in Noble Consulting, headquartered in Indiana, to oversee day-to-day operations. Noble hired lawyers from the Williams Mullen law firm to litigate the rehabilitation case in Wake County Superior Court.

Williams Mullen attorney Wes Camden said he wants to see policyholders paid “tomorrow.” But Global Growth has “always been quick to make a promise, but extremely reluctant to keep it,” he said.

Camden said that if Lindberg had abided by the agreement struck in 2019 – the memorandum of understanding that has been key to the rehabilitation litigation that has played out since then – it’s possible the rehabilitation would already be complete.

“They appear to have the money to repay the insurance companies and are simply not doing it,” Camden said.

Holbrook didn’t want to talk about the memorandum or about Lindberg’s various legal challenges, including the accusation that he tried to bribe Causey in exchange for a lighter regulatory touch on these same insurance companies.

“I wasn’t here when everything that happened in 2017 or ’18 and ’19 occurred,” he said. “I didn’t know Mr. Lindberg. … In fact I only met him the night before he went to prison. So my job as CEO is to bring a fresh team, a fresh perspective and a fresh way of working with the North Carolina regulators to help policyholders.”

Lindberg remains Global Growth’s sole shareholder, and he named Holbrook CEO, but Holbrook said Lindberg is “not involved in the details of the operation.”

“[Lindberg’s] mandate is: Make sure that not a single policyholder suffers a loss and make sure that we rehabilitate the insurance companies as quickly as possible,” Holbrook said. “Now, how that’s done, that’s my job as CEO. And the buck stops with me.”

After Lindberg was indicted, much of Global Growth was reorganized to be governed by trustees and independent boards, Tobin said. A restraining order in place since 2019 prevents Lindberg from taking distributions from the company.

The 2019 Memorandum of Understanding called for restructuring the businesses Lindberg had loaned insurance company money to, putting them under control of an appointed board that would work to return money to the insurers, and ultimately policyholders.

This is what Wake County Superior Court Judge Graham Shirley ordered Lindberg to do in May. Tobin, who is also outside counsel for Global Growth, said that order is stayed pending appeal.

Enforcing the memorandum is a top priority for the state’s rehabilitation team. Tobin told WRAL News that the state has focused too much on litigation and not enough on “productively solving problems.”

“For this to work, all parties are going to have to have a little faith that everyone is committed to working for the benefit of the policy holders, and they’re going to have to put past differences aside,” he said.

Money guaranteed, but not yet

Martin, an 84-year-old annuity holder in South Carolina, said he “can’t imagine Greg Lindberg being interested in me getting my money back.” But he also expressed frustration with Causey, the Department of Insurance and a system that says Lindberg has his money but can’t seem to get it.

“It sounds like [Lindberg’s] still in control,” Martin said. “And I thought he was in jail.”

Martin’s investment is actually protected through a guaranty association. Such associations operate around the country under state laws that protect annuity investments up to $250,000 in most states, up to $300,000 in North Carolina and up to $500,000 in some states.

But for these guarantees —a selling point for annuities — to kick in, rehabilitation has to fail, sending the company that sold the policy into liquidation.

If that happens, larger investments wouldn’t be fully covered. The state’s rehabilitation team analyzed this about a year ago and identified 1,645 policyholders with investments beyond the guarantee limits, with an excess value of nearly $265 million.

“They’re waiting to try to recoup all the money,” Martin said. “And I don’t think that will ever happen.”