SEC charges two North Carolina advisers with $75 million fraud

The Securities and Exchange Commission has charged two North Carolina-based advisers, Gregory E. Lindberg and Christopher Herwig, and their Malta-based registered investment adviser, Standard Advisory Services Limited, with defrauding clients out of more than $75 million through undisclosed transactions that benefited themselves and their companies.

According to the SEC’s complaint, from July 2017 through 2018, Lindberg and Herwig, through their firm, breached their fiduciary duties to their advisory clients by fraudulently causing them to engage in undisclosed related-party transactions that were not in the best interest of their clients.

The SEC’s complaint alleges that the defendants misappropriated more than $57 million in client funds and that Standard Advisory collected more than $21.4 million in advisory fees generated in connection with these schemes.

The SEC charged that Lindberg orchestrated the schemes using complex investment structures and a web of affiliate companies to conceal the fraud.

The SEC’s complaint seeks disgorgement plus prejudgment interest, penalties and permanent injunctions.

“Mr. Herwig intends to vigorously defend himself against these allegations,” said his lawyer, Claire Rauscher, a partner at Womble Bond Dickinson in Charlotte.

Separately, the Associated Press and The Charlotte Observer reported that a federal judge ruled on Monday that Lindberg, who had been sentenced to more than seven years in prison after being convicted in March 2020 of attempting to bribe North Carolina’s insurance commissioner, will face a new trial. Lindberg was released from a minimum security prison in Alabama last month after a federal appeals court vacated his conviction on the grounds that the trial judge gave jurors misleading instructions before they began deliberations.

In an emailed statement, Susan Estrich, a spokesperson for Lindberg, accused the SEC of “piling on.”

“The SEC is bootstrapping one weak case to another, in the hope that their combined weight will count for more than they each do on their own,” Estrich said. “Mr. Lindberg intends to fight the false allegations that have been made against him, and to strengthen and support his insurance companies and the policy holders here in North Carolina.”

[More: Kovack Advisors pays $900,000 to settle SEC charges over wrap program]