Investor Class Representatives To Be Appointed in Northstar and Old Mutual Liquidation

The financial misadventures of billionaire Greg Lindberg, currently serving seven years for wire fraud and bribery-related charges, are probably well known. Most recently, and most prominently, the Lindberg controlled Bankers insurance Group had acquired Northstar Financial Services (Bermuda) and Old Mutual (Bermuda). It is now known that Lindberg regularly followed the practice of siphoning money out of his insurance and annuity companies and moving it to other companies and special purpose vehicles (SPVs), again controlled by him. Northstar and Old Mutual appear to have been similarly treated.

The two Bermuda-based companies that have been bled dry with these tactics, have their investors struggling to recover what they can of their investments, and potentially face huge losses. After his indictment, the control of his insurance companies has been seized by the Department of Insurance of North Carolina. They estimate the value of the illegal transfers of money out of the insurance companies to top $2 billion. By September 2021, Northstar’s Balance Sheet had been reduced to a mere $8 million in assets and is exposed to a deficit of $260 million.

The two entities are undergoing liquidation proceedings, along with yet another Lindberg controlled entity, PB Life and Annuity Co. Ltd. No answers appear to be emerging yet for investors, and indeed it could be quite some time before they do, if at all. A long-drawn judicial process, with hearings scheduled periodically, seems to be the only visibility at this point.

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Update received by investors

Policyholders of Northstar received a notice dated 3rd September from the company about the appointment of ‘representatives’ for each investor class. These representatives would be constituted of creditors and investors from each class. Investors had been waiting for some direction from the courts to figure out where the case is headed.

This letter appears to have come out of the views of Narinder Hargun, the Chief Justice of Bermuda, and the Joint Provisional Liquidators (JPLs), both of whom have favored the appointment of representatives for each asset class for the ongoing liquidation proceedings for both Northstar and Omnia Ltd. which is what Old Mutual is now known as. The selection of an investor as representative of a class will be done by the JPLs along with the Chief Justice.

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JPLs have also apparently received some direction from Bermuda’s apex court that could determine how much each investor class stood to recover from the proceedings. This was pursuant to JPLs having determining issues related to the segregation of assets of the different types of investors.

The letter notwithstanding, the next hearing appears unlikely prior to the 21st of October. Most likely it will be much later in the year. Answers, if any, are not expected before the end of 2022, going by the pace at which developments have taken place so far.

Investor classes and potential issues

The following are the investor classes mentioned in the letter to investors:

  • Omnia/Northstar (Bermuda) investors/policyholders who hold variable investments (non-segregated).
  • Omnia/Northstar (Bermuda) investors/policyholders with fixed and indexed investments (potentially segregated).
  • Omnia/Northstar (Bermuda) creditors (also known as the General Creditor Class) without fixed, variable annuity, or indexed investments.

It is expected that there will be jockeying amongst investors, firstly to be appointed as the representative for their class in order to best protect themselves, and secondly between representatives of the different classes, with the same objective, of best protecting themselves and their class. The infighting could delay proceedings and compromise their interests.

ABS REPORT

Unfortunately, investors do not have a say in the appointment of the representative for their class.

Investor guidance

US-based broker-dealers have been actively selling Northstar investments to residents as well as foreign nationals. In many cases, it appears that these sales have been made overlooking the investment objectives and profile of investors, exposing them to much greater risk than warranted. These firms and their representatives appear to have been driven by the lure of hefty commission earnings offered by Northstar on sales, motivating them to ignore established market practices and even regulations, even after Lindberg was indicted. Many established brokerage firms such as Bankoh Investment Services and Truist Investment Services have been involved in the sales.

Investment products sold to investors included:

  • Global Index Product
  • Global Advantage Series
  • Global Interest Accumulator
  • Global VIP Elite
  • Global Advantage Select

Brokerage firms are supposed to supervise their representatives and ensure that securities sold are suitable for the investor. Failure to do so could open them up for investor claims in case of loss. That seems to be the best case at this point for investors facing steep losses in Northstar, and a low likelihood of any significant recovery from it.

Investors may note that action against a broker-dealer will not impact the realization if any from the liquidation process of Northstar.

Legal help

An experienced legal team taking up cudgels on your behalf in a Financial Industry Regulatory Authority (FINRA) arbitration case is recommended.

Haselkorn & Thibaut, P. A. specializes in fighting for investors in their arbitration cases against the financial firms who sold investment products like Northstar Financial Service (Bermuda) and Old Mutual (Bermuda). If you are one of these investors, you should contact their investment fraud lawyers now at 1 888-628-5590 or visit InvestmentFraudLawyers.com to get a free consultation.

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