The trial of Michael C. Hild — the former CEO of defunct reverse mortgage lender Live Well Financial — for an alleged bond fraud scheme has concluded in the Southern District Court of New York (SDNY), and the jury has returned a verdict of guilty for each of the five counts against him: of conspiracy to commit securities fraud; of conspiracy to commit wire and bank fraud; of securities fraud; of wire fraud; and of bank fraud.
This is according to a statement released by the U.S. Department of Justice (DOJ) on Friday afternoon, as well as reporting from local Richmond, Va. press.
The verdict was reportedly reached on Friday after less than four hours of jury deliberations, where the 12 assembled New Yorkers – 8 men and 4 women – determined whether or not Hild participated in an effort which fraudulently inflated the value of the company’s bonds by approximately $200 million in order to allow it to borrow more money, and which the government alleged allowed Hild to ultimately personally profit off of the act by increasing his own compensation: from approximately $1.4 million in 2015, to approximately $5 million in 2016, approximately $9.7 million in 2017, and over $8 million in 2018, according to DOJ.
Manhattan U.S. Attorney Audrey Strauss praised the investigative work of the Federal Bureau of Investigation (FBI) while also thanking the Securities and Exchange Commission (SEC), and described the extent of the crimes for which Hild was convicted.
“As a unanimous jury found, Michael Hild obtained millions of dollars in secured loans for Live Well Financial by grossly inflating the value of bonds used as collateral,” Strauss said in a statement shortly after the verdict was handed down on Friday. “Hild deceived a third-party pricing service by providing it with inflated marks, resulting in the pricing service publishing valuations for the bonds far in excess of market value. Lenders were hoodwinked into lending far more than they otherwise would have.”
The downfall of the company exacerbated the unraveling of the entire situation, Strauss said.
“The house of cards came crashing down with the unwinding of Live Well and the revelation to lenders that the bond portfolio had been overvalued by $200 million,” Strauss added. “Now, Michael Hild awaits sentencing for his crimes.”
Trial: final stretch of defense
The trial, which lasted roughly three weeks, came to a head this week as Hild himself took the witness stand in his own defense. While first being cross-examined by his attorney Benjamin Dusing, Hild explained that he never had any intention to defraud anyone, and never knew of any such intent on the part of anyone who was employed at Live Well Financial, according to reporting by the Richmond Times-Dispatch.
Hild instead deflected blame to two prominent witnesses for the prosecution: former Live Well EVP Darren Stumberger, and former Live Well CFO Eric Rohr, who had each testified on behalf of the government in the preceding weeks. Both men “betrayed” him, Hild said according to the reporting, while also blaming market and regulatory factors as playing key roles in Live Well’s ultimate downfall.
One key moment in the trial involved the government playing a recorded phone call from early 2017, in which Rohr suggested they find a dealer “who’d be willing to be slimy for you” by corroborating the inflated bond values, according to Law360.
“I don’t remember that specific call. I was along for the ride,” said Hild based on the reporting.
In his closing statement, Hild’s attorney contended that the jury must acquit the defendant because ill-intent did not exist.
“I respectfully submit to you saying something over and over and over again, does not make it true,” Dusing said according to the Times-Dispatch reporting. “The more times something is said does not make it more true than the first time it was said.”
Dusing also repeated a contention he has previously made about the case, saying that the failure of a business does not equate to a crime having been committed.
Final words from prosecutors, sentencing date
However, prosecutors for the federal government contended that not only did Hild have the intent to defraud as alleged, but he helped to coordinate the effort. Hild made a conscious choice to expose employees of his company and its lenders “to enormous financial risks to make himself rich” through the false inflation of bond values, according to government attorneys as detailed by the Times-Dispatch.
“The consequences of that decision, those choices that he made […] were tragic,” said Assistant U.S. Attorney Scott Hartman to jurors on Thursday according to the reporting. “They were ruinous for the lenders, for the employees, and yes, for the defendant himself. Real people lost their jobs. Hundreds of millions of dollars were lost by these lenders. A company was ruined. But these were the defendant’s choices. And now it’s your job here at this trial to hold him accountable.”
After approximately four hours, that is precisely what the jury did, returning a guilty verdict for each of the five counts against Hild. Presiding Judge Ronnie Abrams set a sentencing date of August 20, according to the Department of Justice. DOJ also detailed the maximum possible sentences for each of the counts Hild has been convicted on.
“Count One carries a maximum sentence of five years in prison, Counts Two, Four, and Five each carry a maximum sentence of 30 years in prison, and Count Three carries a maximum sentence of 20 years in prison,” the DOJ statement said. “The charges also contain a maximum fine of $5 million, or twice the gross gain or loss from the offense. The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.”
This is a developing story. RMD will report new details as they become available.