Top Executive for Financier Greg Lindberg Pleads Guilty to Charges Related to Insurance Fraud

Christopher Herwig,

a former chief investment officer for Mr. Lindberg’s conglomerate, appeared in federal court Thursday morning to enter the guilty plea. The criminal information, a legal document similar to a complaint, filed in U.S. District Court in Charlotte, N.C., said Mr. Herwig helped to illegally extract hundreds of millions of dollars from Lindberg-run insurers in various ways. 

The filing said he conspired with Mr. Lindberg and another executive. The document doesn’t name Mr. Lindberg, and instead refers to “the OWNER” of the conglomerate that employed Mr. Herwig, but the numerous details and context clearly show it is referring to Mr. Lindberg. The document says the third executive was charged elsewhere but provides no details.

Mr. Lindberg said in a statement that he had invested substantially in the insurers and didn’t withdraw dividends from them, so “the allegation that I somehow defrauded them while investing $500 million in them and taking no dividends is entirely absurd.” A lawyer for Mr. Herwig declined to comment.

Mr. Lindberg, who owned a modest-sized conglomerate based in Durham, N.C., diversified into the insurance business in 2014, eventually buying insurers in the U.S., Bermuda and Europe. He proceeded to loan at least $2 billion of their assets to other companies he controlled.

Some of the money was extracted from the insurers through loans that personally benefited Mr. Lindberg, according to the criminal information filing. Mr. Lindberg was “living out of the accounts” of some of the entities that borrowed the money, it said, and he signed documents forgiving $125 million in such loans. 

The guilty plea by his lieutenant comes as Mr. Lindberg is scheduled to be retried next year on federal criminal charges stemming from allegations that he tried to bribe North Carolina’s insurance commissioner to get more favorable treatment for his insurers. Mr. Lindberg was released from federal prison earlier this year, after a federal appeals court overturned his March 2020 conviction on the bribery charges, ruling that the trial judge had improperly instructed the jury. 

Prosecutors last month hinted a new indictment could be forthcoming against Mr. Lindberg. They told a federal judge they were concerned Mr. Lindberg might flee, given his “knowledge of an ongoing criminal investigation into his business practices and potential for additional criminal charges.”

The judge overseeing his criminal case subsequently rejected Mr. Lindberg’s request to remove his GPS-monitoring device. 

In Mr. Herwig’s criminal information filing, prosecutors said some of the money extracted from the insurers was used to purchase residential real estate, including a Raleigh, N.C., mansion bought for Mr. Lindberg. 

“This financial fraud scheme ultimately caused substantial financial hardship” to the insurance companies, the criminal information document said. 

In 2019, a North Carolina judge placed four of Mr. Lindberg’s life insurers, with 262,000 customers, under control of the state’s insurance commissioner. State officials limited withdrawals. Another insurer in Bermuda is in liquidation.

Wes Camden, an attorney for the four North Carolina life insurers, said the insurers are “hopeful that these prosecutions will result in the recovery of funds that can be used to repay policyholders. In the meantime, the insurance companies will continue their efforts to ensure that all of the policyholders are paid what they are owed.”

In August, the Securities and Exchange Commission sued Messrs. Lindberg and Herwig, alleging that they defrauded insurers out of more than $75 million through a series of undisclosed related-party transactions and advisory fees paid to a Malta entity.

In response to the SEC civil action, Susan Estrich, a spokeswoman for Mr. Lindberg, called it “piling on,” saying it was evidence of a “weak case.” Mr. Lindberg, she added, “intends to fight the false allegations that have been made against him, and to strengthen and support his insurance companies and the policyholders.” 

At the time of the SEC lawsuit, Claire Rauscher, a lawyer for Mr. Herwig, said, “we will vigorously defend against the allegations.”

Write to Mark Maremont at [email protected] and Leslie Scism at [email protected]

Christopher Herwig,

a former chief investment officer for Mr. Lindberg’s conglomerate, appeared in federal court Thursday morning to enter the guilty plea. The criminal information, a legal document similar to a complaint, filed in U.S. District Court in Charlotte, N.C., said Mr. Herwig helped to illegally extract hundreds of millions of dollars from Lindberg-run insurers in various ways. 

The filing said he conspired with Mr. Lindberg and another executive. The document doesn’t name Mr. Lindberg, and instead refers to “the OWNER” of the conglomerate that employed Mr. Herwig, but the numerous details and context clearly show it is referring to Mr. Lindberg. The document says the third executive was charged elsewhere but provides no details.

Mr. Lindberg said in a statement that he had invested substantially in the insurers and didn’t withdraw dividends from them, so “the allegation that I somehow defrauded them while investing $500 million in them and taking no dividends is entirely absurd.” A lawyer for Mr. Herwig declined to comment.

Mr. Lindberg, who owned a modest-sized conglomerate based in Durham, N.C., diversified into the insurance business in 2014, eventually buying insurers in the U.S., Bermuda and Europe. He proceeded to loan at least $2 billion of their assets to other companies he controlled.

Some of the money was extracted from the insurers through loans that personally benefited Mr. Lindberg, according to the criminal information filing. Mr. Lindberg was “living out of the accounts” of some of the entities that borrowed the money, it said, and he signed documents forgiving $125 million in such loans. 

The guilty plea by his lieutenant comes as Mr. Lindberg is scheduled to be retried next year on federal criminal charges stemming from allegations that he tried to bribe North Carolina’s insurance commissioner to get more favorable treatment for his insurers. Mr. Lindberg was released from federal prison earlier this year, after a federal appeals court overturned his March 2020 conviction on the bribery charges, ruling that the trial judge had improperly instructed the jury. 

Prosecutors last month hinted a new indictment could be forthcoming against Mr. Lindberg. They told a federal judge they were concerned Mr. Lindberg might flee, given his “knowledge of an ongoing criminal investigation into his business practices and potential for additional criminal charges.”

The judge overseeing his criminal case subsequently rejected Mr. Lindberg’s request to remove his GPS-monitoring device. 

In Mr. Herwig’s criminal information filing, prosecutors said some of the money extracted from the insurers was used to purchase residential real estate, including a Raleigh, N.C., mansion bought for Mr. Lindberg. 

“This financial fraud scheme ultimately caused substantial financial hardship” to the insurance companies, the criminal information document said. 

In 2019, a North Carolina judge placed four of Mr. Lindberg’s life insurers, with 262,000 customers, under control of the state’s insurance commissioner. State officials limited withdrawals. Another insurer in Bermuda is in liquidation.

Wes Camden, an attorney for the four North Carolina life insurers, said the insurers are “hopeful that these prosecutions will result in the recovery of funds that can be used to repay policyholders. In the meantime, the insurance companies will continue their efforts to ensure that all of the policyholders are paid what they are owed.”

In August, the Securities and Exchange Commission sued Messrs. Lindberg and Herwig, alleging that they defrauded insurers out of more than $75 million through a series of undisclosed related-party transactions and advisory fees paid to a Malta entity.

In response to the SEC civil action, Susan Estrich, a spokeswoman for Mr. Lindberg, called it “piling on,” saying it was evidence of a “weak case.” Mr. Lindberg, she added, “intends to fight the false allegations that have been made against him, and to strengthen and support his insurance companies and the policyholders.” 

At the time of the SEC lawsuit, Claire Rauscher, a lawyer for Mr. Herwig, said, “we will vigorously defend against the allegations.”

Write to Mark Maremont at [email protected] and Leslie Scism at [email protected]