Causey targets Lindberg in latest NC court filing

State Insurance Commissioner Mike Causey seeks to take part in a state Supreme Court dispute involving former top North Carolina political donor Greg Lindberg. Lindberg is scheduled to return to federal court in May on charges that he bribed Causey after the 2016 election.

In a court filing Tuesday, Causey’s lawyers argued that Lindberg “brazenly defrauded” plaintiffs in the case Southland National Insurance Corporation v. Lindberg.

Causey seeks the state Supreme Court’s permission to file a friend-of-the-court brief in the case. It pits Lindberg against four insurance companies he owned.

“The Commissioner has a strong interest in the subject matter of this appeal,” wrote state Justice Department lawyers representing Causey. “The plaintiffs in this lawsuit are four insurers whose owner used their assets to make risky investments that enriched himself, leaving them with insufficient funds to satisfy all their obligations to their policyholders.”

“To address this problem, a superior court ordered the Commissioner to serve as the insurers’ rehabilitator, and the Commissioner as rehabilitator then appointed officials who took control of the insurers,” Causey’s lawyers wrote. “After he did so, the insurers filed this lawsuit because their owner also, before he relinquished control over the insurers, brazenly defrauded the insurers.”

“[T]o remedy the considerable harm caused by their owner’s fraud, the insurers seek damages in this lawsuit. The Commissioner has an interest in supporting this claim for relief,” Causey’s motion added. “The Commissioner regulates insurers in financial distress ‘to protect the interests of policyholders.’ Here, the damages that the insurers seek are critically important for their policyholders.”

The document never mentions Lindberg by name but refers to him as the “owner of the insurers.”

Lindberg argued in his Supreme Court brief “that the insurers’ fraud claim fails because the insurers’ reliance on his representations and warranties was not reasonable,” according to Causey’s court filing. “In doing so, he implies that their reliance was unreasonable because the Commissioner and his designees did not do enough to test the accuracy of the representations.”

Lindberg “is mistaken on this point,” Causey’s lawyers wrote. “The Commissioner and his designees had no duty to test the truth of the representations, which were made to the insurers, not to them.”

Causey argues the relief that the insurance companies seek is “important to policyholders.”

“Policyholders invested billions of dollars in retirement savings with the insurers by purchasing annuities from them,” the commissioner’s lawyers wrote. “Due to the shortfall in the insurers’ assets caused by their owner, however, the insurers have not been able to honor most of these annuities. Obtaining damages in this case, among others, is the only way that the insurers can possibly marshal enough funds to fully repay all that they owe to their policyholders.”

Lindberg seeks to overturn a June 2023 ruling from the state Court of Appeals. A unanimous appellate panel affirmed a May 2022 Wake County Superior Court ruling against Lindberg and multiple associated companies.

“In 2014, Lindberg re-domesticated Plaintiffs to North Carolina in order to take advantage of this State’s favorable regulations,” wrote Appeals Court Judge Julee Flood. “Prior to this re-domestication, acting as owner of Plaintiffs, Lindberg made a special agreement with former Commissioner of Insurance, Wayne Goodwin, allowing Lindberg to invest up to forty percent of Plaintiffs’ assets into affiliated business entities. Lindberg then invested up to forty percent of Plaintiffs’ money into the purchase of other, non-insurance companies, also owned by Lindberg. Simply put, Lindberg created a scheme in which he caused $1.2 billon held for Plaintiffs’ policyholders to be invested into other non-insurance companies that he also owned or controlled.”

“In November 2016, Wayne Goodwin lost his seat as Commissioner of Insurance to Mike Causey (the “Commissioner”), who reduced the cap on affiliated investments from forty percent to ten percent,” Flood wrote. “Lindberg struggled to untangle his affiliated investments and, as the deadline for diversification drew near, the North Carolina Department of Insurance (the “NCDOI”) grew concerned that there would be a ‘mismatch between investments and policyholder liabilities.’”

“In other words, because Lindberg had invested so much of Plaintiffs’ money into affiliated companies, the NCDOI worried that Plaintiffs might experience a shortfall on their obligation to pay individual policyholders,” Flood added.

A 2018 consent order placed the plaintiff businesses under administrative supervision. A 2019 memorandum of understanding linked to restructuring of the businesses prompted the legal dispute addressed in the Southland case.

Lindberg and co-defendant John Gray are scheduled to return to federal court on May 6 to face retrial on bribery and fraud charges. Prosecutors accuse Lindberg of bribing Causey “with more than $2 million” after Causey won the commissioner’s job in the 2016 election.

A jury convicted Lindberg in 2020. He was sentenced to seven years in prison. He spent close to two years behind bars before the 4th US Circuit Court of Appeals tossed out the conviction in 2022.

In the case’s latest development, Gray filed paperwork this week asking to split his retrial from Lindberg’s.

Before the legal action against him, Lindberg had attracted attention as a top donor to political campaigns in North Carolina. He supported Goodwin’s unsuccessful 2016 re-election bid. Goodwin lost to Causey.

Later Lindberg became the largest financial contributor in 2017 to the NC Republican Party and two groups supporting then-Lt. Gov. Dan Forest, a Republican. Forest lost the 2020 governor’s race to the incumbent Democrat, Gov. Roy Cooper.

The post Causey targets Lindberg in latest NC court filing first appeared on Carolina Journal.


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