A defunct reverse mortgage company’s former CEO has been recommended by Federal prosecutors for 15 years in prison for masterminding a $200 million bond fraud scheme.
Meanwhile, the CEO’s lawyers are seeking probation.
Live Well Financial Inc. founder and former CEO Michael Hild was convicted of securities fraud, wire fraud, and bank fraud charges in April 2021 for fraudulently inflating the value of the company’s bond portfolio. According to prosecutors, the purpose was to get securities dealers and some financial institutions to loan Live Well more money — through collateralized loans and repurchase agreements — than they would have otherwise if they had known the value of Live Well’s bonds.
A Richmond, Va.-based company, Live Well originated, serviced, and securitized Home Equity Conversion Mortgages (HECMs) which are government-guaranteed reverse mortgages. In July 2019, Flagstar Bank, Mirae Asset Securities, and Industrial and Commercial Bank of China Financial Services, three of the company’s creditors, forced Live Well into Chapter 7 involuntary bankruptcy. Five Elms Capital later joined the three creditors.
Live Well’s bond portfolio grew exponentially with Hild’s scheme. Court documents revealed the growth to approximately 50 bonds with a stated value of over $500 million by the end of 2016 from approximately 20 bonds with a stated value of approximately $50 million in 2014. Live Well wrote down the value of its portfolio by more than $200 million in May 2019, in conjunction with winding down the business.
In September 2019, Hild was accused of orchestrating the scheme and lying to Live Well’s lenders and external auditors to enrich himself and his associates.
Damian Williams, the US Attorney for the Southern District of New York, recommended Hild be sentenced to 180 months in prison in a sentencing memorandum he filed on Friday.