The Securities and Exchange Commission charged Live Well Financial, Inc. and its CEO [1]Michael Hild for being involved in a multi-million dollar bond mismarking scheme against Live Well’s short-term lenders.
According to the release, the complaint also charged Live Well’s CFO, Eric Rohr, and EVP, Darren Stumberger. Both consented to partial judgements against them.
The SEC alleges that Live Well fraudulently inflated the value of its portfolio of complex reverse-mortgage bonds. The complaint states that Hild directed Live Well to falsely submit inflated bond prices to a pricing service, who Hild knew would publish the prices Live Well submitted.
According to the release, the scheme, which Hild called a “self-generating money machine,” Live Well as able to borrow “tens of millions of dollars or more” from its lenders through the securities transactions than it could have borrowed had the bonds been priced accurately.
The SEC states that Live Well’s bond portfolio rose in value from $71 million to $570 million in the 18 months following the beginning of the scheme. The scheme collapsed in 2019 when Live Well’s lenders sought to sell the bonds back to Live Well, but the company did not have the funds to complete the transactions. According to the SEC, its counterparties were exposed to losses of more than $80 million.
The complaint filed by the SEC charges Live Well, Hild, Rohr, and Stumberger, with violations of anti-fraud provisions of the federal securities laws. It also seeks a permanent injunction, disgorgement of ill-gotten gains, prejudgement interest, financial penalties, and officer and director bars against Hild and Rohr.
Both Rohr and Stumberger have consented to the entry of a partial judgement that enjoins them from future violations of the charged provisions of the law.
Additionally, the U.S. Attorney’s Office for the Southern District of New York announced criminal charges against Hild, Rohr, and Stumberger.
According to the Richmond BizSense [2], Hild has been released on bond.