DURHAM, N.C. (AP) — Federal securities regulators on Tuesday formally accused a North Carolina-based insurance magnate, an associate and their investment advisory firm of defrauding clients out of over $75 million through complex schemes involving undisclosed transactions.
Attorneys for the U.S. Securities and Exchange Commission filed a civil complaint in Durham federal court against Gregory E. Lindberg of Durham, Christopher Herwig of Raleigh and Standard Advisory Services Limited, based in Malta.
Lindberg was a founder and chairman of what was then called Eli Global, a Durham-based investment company that ultimately owned hundreds of companies, including insurers.
Lindberg has also faced other recent civil and criminal proceedings in North Carolina. A federal corruption case resulted in criminal convictions in 2020 that were recently vacated, letting Lindberg leave a federal prison to await a new trial.
His spokesperson said Tuesday that Lindberg will fight the “false allegations” against him contained in the SEC complaint.
The complaint accuses the two men and Standard Advisory Services with violating antifraud provisions in federal laws regulating investment funds. The government wants them to surrender the money it alleges they fraudulently made, as well as pay penalties and interest. The investment advisory firm had been registered with the SEC until October 2019, the complaint said.
A news release said the alleged fraud ran from mid-2017 through 2018. It involved “unique financial structures and various complex investments, orchestrated by the defendants for their own benefit,” Osman Nawaz, chief of the Complex Financial Instruments Unit within the SEC's Division of Enforcement, said in the release.
Lindberg owned Standard Advisory Services, while Herwig was its portfolio manager, the complaint said. The transactions also involved four North Carolina insurance companies which Lindberg owned, the complaint alleged. The alleged fraud resulted in misappropriated client funds and in advisory fees, according to the SEC.
The complaint came one day after a federal judge in Charlotte set a tentative March start date for a new criminal trial for Lindberg, who was once North Carolina biggest political donor.
He was convicted in 2020 of attempting to bribe North Carolina’s insurance commissioner to secure preferential regulatory treatment for his insurance business, and sentenced to more than seven years in prison. But those convictions were overturned in June by a federal appeals court, which found the judge erred by giving misleading instructions to jurors before deliberations.
Lindberg spokesperson Susan Estrich said Tuesday that the SEC complaint is weak just like the unrelated criminal matter and was filed after the SEC was "shown millions of pages of documents to prove them wrong.”
Messages left Tuesday at phone numbers seeking comment from Herwig weren't immediately returned.
The Associated Press