The U.S. Securities & Exchange Commission (SEC) charged Live Well Financial Inc.
of Richmond, Va., and CEO Michael Hild with coordinating a multimillion-dollar fraud that involved the mismarking of reverse mortgage bonds. The SEC complaint also charged Live Well's Chief Financial Officer Eric Rohr, and Executive Vice President Darren Stumberger, both of whom consented to partial judgments against them.
The SEC accused Hild of directing Live Well to fraudulently inflated the value of its reverse mortgage bond portfolio and then submit the false data to an industry pricing service. As a result, Live Well borrowed tens of millions of dollars more from its lenders through the securities transactions than it could have borrowed had the bonds been priced accurately, with much of the money going into compensation packages for company executives.
The SEC added that Live Well's bond portfolio increased in value from $71 million to $570 million due to this scheme, which was exposed earlier this year Live Well's lenders sought to sell the bonds back to Live Well. The company lacked the requisite funds to complete the repurchase securities transactions, leaving its counterparties carrying more than $80 million in losses.
"Hild's 'self-generating money machine' was a brazen fraud through which Hild enriched himself at the expense of Live Well's counterparties," said Daniel Michael, Chief of the SEC's Complex Financial Instruments Unit. "This case starkly underscores the risks of improperly valuing assets, and we will remain focused on pursuing those who misrepresent the value of their securities."
The SEC's complaint charges Live Well, Hild, Rohr and Stumberger, with violations of the anti-fraud provisions of the federal securities laws. The complaint seeks a permanent injunction, disgorgement of ill-gotten gains along with prejudgment interest, financial penalties, and officer and director bars against Hild and Rohr. Stumberger and Rohr have consented to the entry of a partial judgment that permanently enjoins them from future violations of the charged provisions of the federal securities laws.
Separately, the U.S. Attorney's Office for the Southern District of New York today announced criminal charges against Hild, Rohr and Stumberger.