SEC Stays Trial Against Live Well, as Gov’t Requests Sentencing Delay for Alleged Co-conspirator

Attorneys representing the federal government have requested a delay in sentencing Darren Stumberger, an alleged co-conspirator in a bond fraud scheme for which former Live Well Financial CEO Michael Hild was convicted in federal court. The request for a delay is due to his cooperation with government attorneys in the recently-decided case against Hild.

Stumberger, who served as an executive vice president at Live Well prior to its abrupt closure and subsequent bankruptcy, was originally scheduled to be sentenced for his alleged role in the scheme on Friday, June 18. Lawyers representing the government, however, recently requested a delay for a period of six months to account for his continued cooperation through the scheduled sentencing of Hild, which is currently expected to take place on September 10.

Additionally, the Securities and Exchange Commission (SEC) last month requested a stay in its case against Live Well the company, telling a presiding judge that it is believed that the matter can be settled without going to trial and that damages can be determined in part due to the outcome of Hild’s criminal trial. This is according to court documents obtained by RMD.

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SEC civil cases

Attorneys for the SEC described that due to the jury finding Michael Hild guilty of all five counts against him in his criminal trial at the end of April, that decision by the jury provides a substantive basis to establish damages in the civil case, which should no longer require a trial.

“It is the Commission’s view that the factual allegations in this action are nearly identical to those actually litigated and decided adversely to Hild in the Criminal Action,” writes the SEC attorneys in part to presiding Judge John P. Cronan. “The SEC’s view is that that the jury’s verdict is a sufficient basis for seeking summary judgment […] but the parties propose that the case against Defendant Hild remain stayed until Mr. Hild’s sentencing, currently set for August 20, 2021, because the sentence may impact the monetary relief sought by the SEC in this action.”

The SEC reveals that it has also settled with Stumberger and former Live Well CFO Eric Rohr, and that future actions related to monetary damages should remain pending due to the other litigation surrounding the overarching cases against Hild and Live Well.

“The Commission expects to file its motions concerning monetary relief to resolve all outstanding issues as to [Rohr and Stumberger] shortly after sentencing in their respective criminal cases in that their sentences may impact the relief sought by the Commission,” the SEC writes.

Stumberger’s cooperation

Stumberger had already previously pled guilty in the case brought against him by the government, and served as a primary witness for the prosecution in the April trial against his former boss Hild. In part due to his cooperation in that case, attorneys representing the government have requested a delay in Stumberger’s sentencing.

“As Your Honor is aware, the defendant is cooperating with the government. The defendant

recently testified in the trial of United States v. Michael Hild, and the sentencing of Michael Hild is currently scheduled for September 10, 2021,” writes Audrey Strauss, U.S. Attorney for the Southern District Court of New York to presiding Judge J. Paul Oetken. “Because the defendant’s cooperation is expected to continue through the sentencing of Hild, the Government respectfully requests that the defendant’s sentencing be adjourned for six months.”

The trial, which took place in April after being delayed for six months due to concerns related to the COVID-19 coronavirus pandemic, prominently featured Stumberger as a witness for the prosecution. Week one of the trial was largely focused on testimony from Stumberger, who bluntly stated why he was present in the courtroom on the first day when the government first called him to the stand.

“I was involved in an effort to defraud banks and borrow more than we should have,” Stumberger said at the start of his testimony.

Also detailed by Stumberger during his cross-examination was the phrase “Scenario 14,” a designation that was allegedly given to Live Well’s fraudulent efforts to inflate the value of its reverse mortgage bonds, according to Stumberger and based on an account made by local media outlet RichmondBizSense. Benjamin Dusing – Hild’s attorney during the April trial – argued, however, that Scenario 14 was actually an effort to value bonds “intrinsically,” and in good faith, according to the reporting.

The source of many of the recordings which appeared in court during the trial was apparently Stumberger himself, who said he had become nervous about what was beginning to transpire at the company, according to accounts of his testimony at the time.

Next steps

After the guilty verdict was reached by the jury at the end of April, Hild replaced his attorney, and his new representation subsequently requested a delay in his new client’s sentencing to be fully brought up to speed on the details left behind by Hild’s prior counsel, which was granted. Hild’s new attorney, Brian A. Jacobs, is a partner with Morvillo Abramowitz Grand Iason & Anello PC in New York. While a formal appeal of the initial ruling has yet to be filed, Jacobs previously served as a former federal prosecutor with experience in appeals, according to his biography page on his law firm’s website.

Specifically, he was Assistant U.S. Attorney in the U.S. Attorney’s Office for the Southern District of New York, where he served as Deputy Chief of Appeals. He led investigations and prosecutions of federal crimes including bank and wire fraud, and argued ten appeals before the U.S. Court of Appeals for the Second Circuit.

The site also details that Jacobs now “represents individuals and organizations in criminal, civil, and regulatory matters, internal investigations, and appeals,” with prior cases having involved allegations of financial and accounting fraud as well as “insider trading, bribery and corruption, computer hacking, and trade-secrets theft.”

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