The former EVP of defunct reverse mortgage lender Live Well Financial was strenuously questioned by a federal government attorney as well as the defense attorney for former company CEO Michael Hild in an ongoing trial over an alleged bond fraud scheme, and Hild himself is preparing to take the stand to offer testimony in his defense. This is according to original reporting by local Richmond, Va. press – where Live Well was formerly headquartered – as well as court documents obtained by RMD.

The trial, which commenced on April 12 after being delayed for six months due to concerns related to the COVID-19 coronavirus pandemic, has prominently featured former Live Well EVP Darren Stumberger as a witness for the prosecution. The government has previously indicated in court filings that both Stumberger and former Live Well CFO Eric Rohr are cooperating with the Justice Department in their own cases, as well as in the case against Hild.

Setting the stage for the prosecution and defense

In the opening statements of both parties, the legal team representing the federal government explained to the jury their contention that Hild aimed to enrich himself through Live Well. The defense for Hild, conversely, argued that Hild never had the intent to defraud anyone in what the government has alleged as a scheme to artificially inflate the value of Live Well bonds.

“You will learn that Michael Hild called this a ‘self-generating money machine,’” said Assistant U.S. Attorney Jordan Estes as the trial began, according to the account of the Richmond Times-Dispatch. “Those were his words. You will hear that on a recorded call. He was using the lenders as an ATM.”

The jury will also listen to directly-recorded conversations at the heart of the matter over the course of the trial, in addition to having access to email correspondence which will be presented to them. These materials are key to understanding the mechanisms by which the resulting alleged fraud operated, Estes said.

“Those calls and emails will make it clear that there was nothing legitimate about what Michael Hild was doing, and they will make it clear that he was the one directing the scheme every step of the way,” she explained according to the Times-Dispatch account. “We’re here to hold him accountable for his crime.”

The defense, however, contended that intent must be considered in light of the charges, and that Hild never intended to do anything fraudulent, and in looking at the specific details of a complex financial situation, the “truth is found within the complexity” of the principles and mechanisms that the jury will be exposed to. This is according to Benjamin Dusing, Hild’s appointed defense attorney according to the account of the Times-Dispatch.

“It will all be reduced to this one very, very simple question: Did Mr. Hild have good intent? Was he acting in good faith? Or, on the other hand, did he intentionally try to defraud people? Was his intent nefarious? Was his intent bad?,” Dusing rhetorically asked the jury in his statement, according to the Times-Dispatch. “That is the issue to be decided in the case.”

Weeks 1-2, Hild will testify

Week one of the trial was largely focused on the testimony of former Live Well EVP Darren Stumberger, who bluntly stated why he was present in the courtroom on the first day when the government first called him to the stand.

“I was involved in an effort to defraud banks and borrow more than we should have,” Stumberger said at the start of his testimony.

Also detailed by Stumberger was the phrase “Scenario 14,” a designation that was allegedly given to Live Well’s fraudulent efforts to inflate the value of its reverse mortgage bonds, according to Stumberger and based on an account made by local media outlet RichmondBizSense. Hild’s attorney Benjamin Dusing argued, however, that Scenario 14 was actually an effort to value bonds “intrinsically,” and in good faith, according to the reporting.

The source of many of the recordings which have appeared in court was apparently Stumberger himself, who said he had become nervous about what was beginning to transpire at the company, according to the reporting.

Much of the testimony in the second week of the trial originated from former Live Well CFO Eric Rohr, who described the original intent of packaging reverse mortgages into bonds as simply finding another revenue stream to assist with the company’s financial standing. However, Live Well strayed from its intent when it began pricing the bonds directly as opposed to relying on a third-party pricing agency, according to RichmondBizSense reporting.

This is when the bonds started to be priced with inflated value, before using those artificially-inflated bonds as collateral for borrowing additional money, according to Rohr based on the reporting. Similarly to Stumberger, Rohr described events taking place which made the working environment difficult, culminating in his leaving Live Well five months before the company abruptly closed its doors.

“It was in that moment I realized he wasn’t going to put the best interests of the company in front of his. At that point I was done,” Rohr said based on the reporting. When asked why he was cooperating with the government, Rohr replied that he did not wish to go to prison.

Hild himself will reportedly testify in the trial himself in the coming days according to his attorney, based on the reporting.

New jury instructions

Attorneys for the government last week submitted a letter to presiding District Judge Ronnie Abrams according to court filings obtained by RMD, requesting additional instructions be given to the jury ahead of a charge conference scheduled for April 26. In its newly-proposed instructions, the government appears to be taking aim at one of the defenses cited by Dusing in terms of the alleged intent of actions made by Hild.

“[A] disclaimer regarding the accuracy of information [does not] render that information immaterial as a matter of law,” the newly-proposed instructions read in part. “Once you find that the offense involved the making of material misrepresentations or omissions of material facts, it does not matter whether any of the victims involved were careless, gullible, or even negligent, or that they might have uncovered the scheme on their own had they probed more deeply.”

In response, Dusing submitted his own letter to Judge Abrams contending that the government’s request “is simply not supported by law,” characterizing the core issue of the case as one that concerns “whether Live Well Financial misrepresented the value of the bonds to IDC (or, indirectly perhaps, its lenders) as an issue of fact,” Dusing writes.

A response by Judge Abrams was not yet filed at the time of publication.

Recent history

These are the latest developments related to the abrupt closure of Live Well Financial, which RMD learned about in May, 2019. Hild also faces civil charges related to the alleged scheme from the Securities and Exchange Commission (SEC), though that proceeding is on hold pending the result of the criminal trial that commenced today, as are individual cases against Rohr and Stumberger to account for their cooperation in the case against Hild.

Live Well also has an ongoing bankruptcy case, which began one month after it was learned that the company had halted funding for new loans. Shortly afterward, three of the company’s former creditors sought to use the court system to force the remains of the company into involuntary bankruptcy, using apparent investigations being made by regulators and federal law enforcement as reasoning for seeking the court-supervised liquidation under Chapter 7 of the bankruptcy code. The court ordered Live Well into Chapter 7 bankruptcy in July, 2019.

Read the stories at the Richmond Times-Dispatch and at RichmondBizSense, the latter of which includes a follow-up.