Last week, we learned about the indictment of Durham businessman Greg Lindberg and the $2 million federal prosecutors say he offered the state insurance commissioner to support his reelection. State GOP Chairman Robin Hayes was also indicted. So what could Lindberg have wanted that’s worth that money and risk?
The Wall Street Journal’s Mark Maremont has been reporting on Lindberg’s businesses for months. He found Lindberg loaned at least $2 billion from his group life insurance firms to help buy nearly 100 other companies across a variety of industries. Over a period of five years, the revenue of his conglomerate Eli Global increased as much as 20 times — to about $3 billion.
Mark Maremont joined WFAE’s Lisa Worf to discuss Lindberg’s businesses.
Lisa Worf: How was he able to do this?
Mark Maremont: Maybe we should step back a little bit. People who buy life insurance or its cousin, burial insurance, pay premiums and they expect the money will be there when their heirs need it. And insurers generally invest these funds very conservatively in corporate bonds, municipal bonds — that sort of thing.
So, Greg Lindberg thought he could do it better and he bought these small life insurers that have billions of dollars in assets. And what he did was he loaned a big chunk of that money to himself, something like $2 billion. I mean it's unusual, very unusual. In fact, it's almost unheard of in this industry to do this sort of thing. And there's a sort of general rule of thumb that regulators use that only 10 percent of the assets of one of these insurance companies could be loaned for related party purposes. That's just to protect the policyholders.
But Greg Lindberg somehow got permission — a very unusual permission — from the North Carolina Department of Insurance to loan as much as 40 percent of his initial insurer to himself essentially.
Worf: That was under former State Insurance Commissioner Wayne Goodwin. How was he able to get around some of those regulations?
Maremont: It's actually not clear. You know his argument is that sort of a win-win. He was going to use the money to expand his businesses. He's a great investor and as part of that, his companies that he was using to borrow the money from — insurance firms — were going to pay above market interest and that would do well for policyholders.
So the problem is that it's also kind of a risky strategy. If the companies you buy don't do as well as you think, then they may be unable to pay off these high-interest loans and the policyholders me may suffer in the end.
Worf: So do we know if his companies are actually good for the money they've promised to pay back to his insurance firms?
Maremont: It's very unclear. That's one of the things that we understand that North Carolina regulators have been looking at — and regulators around the country — trying to figure this out, but they're very complicated structures. And Mr. Lindberg has provided them with some statements from third parties saying that they are good for the money, but it's not clear that the regulators are buying that fully.
Worf: What are your questions for Goodwin and how his office dealt with Lindberg's insurance companies?
Maremont: It was so unusual to allow an insurance company to invest even up to 40 percent. You know, more than 10 percent is extremely unusual. The question is why did they allow that? What was in it for the insurance department, if anything? Of course, one of the questions involves whether there was some kind of a quid pro quo and Lindberg later became a huge political backer of Wayne Goodwin's who donated more than $400,000 to a PAC supporting Goodwin's re-election in 2016. Lindberg held a fundraiser at his Durham house. We calculated between that fund raiser, which raised more than $80,000, and other donations by Lindberg associates basically accounted for more than 10 percent of Wayne Goodwin's re-election funds that time.
So Goodwin says that he didn't do any favors for anybody in terms of donations and he doesn't recall taking any unusual action on behalf of Greg Lindberg's insurance companies. So definitely some curious things. You know, we still have a lot of questions.
Worf: Allegations of bribery aside, some of these business practices may be risky but are any of these business practices actually illegal?
Maremont: Well, that's a good question. I think that Mr. Lindberg was very clever at finding loopholes or exceptions in the law. And he also had legions of attorneys and advisers. So all the transactions have a lot of legal paper surrounding them. So it may well be at the end of the day that this whole strategy, you know, will not be found to have been illegal, but it's still unclear at this point.
Worf: How have insurance regulators outside of North Carolina responded to these types of practices?
Maremont: I think that insurance regulators across the country have actually been quite alarmed by this Linberg case. We did an article a couple weeks ago about several moves by national insurance regulators to do away with some of these quote loopholes that Mr. Lindberg was using, some of which are somewhat technical uncomplicated, but they definitely see this as something they’d prefer not to happen on a widespread scale or affect anywhere else because they view it as a somewhat risky use of life insurance assets.
Worf: And as far as is North Carolina, their regulations when it comes to things like that, where do they rate among other states?
Maremont: Generally, I think it's a respected department. One of the things that's unusual here — and the people have pointed out — is that North Carolina is one of eleven states that have elected insurance commissioners. Unfortunately, that has led to questions about whether the former Democratic Insurance Commissioner Wayne Goodwin did any favors for Greg Lindberg who became a political backer.
It also unfortunately, it led to these indictments. In most states in the country, the insurance commissioner was a little bit removed from that whole process and is appointed usually by the governor. But there are many states where the insurance commissioner was elected and they don't seem to be having this sort of an issue, but unfortunately it seems to come home to roost in North Carolina.