The ongoing saga of the closure of Live Well Financial continued this week, as the company’s court-appointed trustee has filed suit against former CEO Michael Hild, Hild’s wife, alleged co-conspirators in a bond fraud scheme and several additional companies Hild founded in Virginia seeking to recover over $100 million in damages allegedly levied against the former reverse mortgage company. This is according to reporting by local Richmond, Va. media as well as court documents obtained by RMD.
David W. Carickhoff – who was named Live Well’s court-appointed trustee overseeing the company’s assets during the bankruptcy process – has been authorized by the bankruptcy code to take action on behalf of Live Well, and has done so on the heels of a jury trial earlier this year in which Hild was found guilty of a bond fraud scheme which allegedly enriched himself and associates by artificially inflating the value of the company’s bonds permitting it to borrow additional cash.
According to the initial complaint filed in the U.S. Bankruptcy Court for the District of Delaware, Carickhoff is seeking to recover “tens of millions of dollars” that resulted from a fraudulent scheme which enriched the case’s defendants at the expense of the Live Well organization, as well as its creditors.
“Defendant Michael C. Hild, with the assistance of his top lieutenants, Eric G. Rohr and C. Darren Stumberger, caused Live Well to falsely inflate the values of its bond portfolio in order to convince third party financial institutions to lend Live Well more and more money,” the court complaint reads. “Michael Hild, Rohr, and Stumberger used the money from these loans to enrich themselves and to cover up, extend, and exacerbate their fraud. And in an attempt to hide the proceeds of his fraud, Michael Hild transferred much of the money he received to the remaining Defendants, including his wife, Laura D. Hild, and businesses that they jointly owned or controlled.”
Hild’s wife Laura is also named as a defendant in the suit, in addition to 14 separate limited liability companies (LLCs) which the Hilds are connected to, and which the complaint refers to as the “Hild entities.” These entities are described as being owned by Laura Hild, and each feature enrichments stemming from 2015 to mid-2019 “traceable to Live Well and the fruits of Michael Hild’s fraud,” the complaint says.
The complaint states that the recent guilty verdict unanimously reached by a jury in the Southern District Court of New York (SDNY) against Hild for the scheme – a trial in which Rohr and Stumberger testified against their former boss – should provide “no doubts about the Defendants’ culpability,” the complaint reads. All three men – Hild, Rohr and Stumberger – are currently awaiting sentencing in SDNY in each of their respective cases related to the alleged scheme for which Hild was convicted, and for which Rohr and Stumberger have pleaded guilty.
“The scheme was straightforward,” the complaint continues. “Hild and Stumberger pressured an outside pricing service to report Live Well’s bond portfolio valuations verbatim, knowing full well that Live Well’s bond lenders would provide additional funding to Live Well so long as the purportedly independent valuations increased over time. Hild, Rohr, and Stumberger caused Live Well to submit valuations to the pricing service that bore no relation to the market value of the bonds. Instead, the valuations were made out of whole cloth so the Defendants could enrich themselves via excessive bonuses, fees, overcompensation, and other unjustified payments totaling not less than $36,280,663.84.”
However, the case is for far more than $36 million. The complaint alleges that Michael and Laura Hild were “the biggest beneficiaries” of the purported plan, causing Live Well to transfer an additional $26 million to either of them in the form of “grossly excessive overcompensation,” the complaint says. An additional $7 million went to Rohr and Stumberger, the suit alleges, in addition to allegations saying Hild “paid off” members of the company’s board of directors.
“As a direct and proximate result of Defendants’ egregious misconduct, more than 200 Live Well employees lost their jobs, Live Well was forced into an involuntary chapter 7 bankruptcy, and the Live Well estate and its creditors were left with more than $110 million in unpaid, non-insider claims,” the suit claims in the complaint. The complaint goes on to list 19 causes of action stemming from the allegations.
A pretrial conference for this case is currently scheduled to take place on August 26 in Wilmington, Del.
Michael Hild was arrested by the Federal Bureau of Investigation (FBI) due to his alleged connections with a bond fraud scheme in the summer of 2019. After enlisting New York-area attorneys initially, Hild dismissed them in favor of attorney Benjamin Dusing, a former friend and classmate, who represented Hild at the trial in April. The trial commenced on April 13, and the jury handed in its verdict on April 30 after four hours of deliberation. Attorneys representing the federal government have requested a delay in sentencing Stumberger, due to his cooperation with government attorneys in the case against Hild.
Stumberger was originally scheduled to be sentenced for his alleged role in the scheme in June, but lawyers representing the government 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) in May 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.
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 previously served as a former federal prosecutor with experience in appeals, according to a biography page on his law firm’s website.
Read the local story about the suit published at RichmondBizSense.