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UPDATED: Live Well Financial CEO arrested and charged in $140 million bond fraud scheme

Michael C. Hild, founder and CEO of the now-defunct Chesterfield County-based Live Well Financial, was arrested by federal officials and charged with five criminal counts in a $140 million bond fraud scheme.

In a separate action, the U.S. Securities and Exchange Commission filed civil charges against Hild.

In addition to criminal charges against Hild, the federal government also charged Eric Rohr, who served as Live Well Financial’s chief financial officer from 2008 to late 2018, and Darren Stumberger, the company’s former head trader from 2014 until March 2019, for their part in the alleged scheme.

Rohr and Stumberger each have pleaded guilty to five criminal counts and are cooperating with the government.

Hild was arrested in Richmond on Thursday morning, federal officials said, in connection with a scheme where they alleged he fraudulently inflated the value of the company’s portfolio of complex reverse-mortgage bonds in order to induce various securities dealers and at least one financial institution into loaning more money to the fast-growing mortgage lender and servicer.

The scheme enabled him to fund lavish compensation packages for himself and to take full control of Live Well Financial, according to the indictment.

“As alleged, Michael Hild orchestrated a scheme to deceive Live Well’s lenders by fraudulently inflating the value of its mortgage-backed bonds by over $140 million,” said Geoffrey S. Berman, the U.S. Attorney for the Southern District of New York

“This allegedly enabled Live Well to borrow money well over the value of the collateral it put up,” he said in a statement. “In turn, Hild used these ill-gotten funds to gain control of the company and increase his own compensation by nearly 700%, while exposing lenders cumulatively to $65 million in unsecured loans to the company, which is now in bankruptcy.”

The alleged scheme, which took place between September 2015 through May of this year, allowed Live Well to grow its bond portfolio from about 20 bonds with a value of $50 million in 2014 to 50 bonds with a value of $500 million by the end of 2016. In May, Live Well wrote down the value of its portfolio by about $141 million.

The government alleges that Hild directed Live Well to submit falsely inflated bond prices to an industry-leading pricing service, which he knew would simply publish the prices Live Well gave it.

“As CEO of Live Well Financial Inc., Hild allegedly inflated the true value of the company’s bond portfolio and used this false information to obtain loans the company otherwise would not have been able to obtain,” FBI Assistant Director William F. Sweeney Jr. said in a statement. “The dealers and financial institution that lent the money are now in the possession of bonds that don’t hold the value promised as collateral.”

***

Hild, 44, is charged with five counts: one count of conspiracy to commit securities fraud; one count of conspiracy to commit wire and bank fraud; one count of securities fraud; one count of wire fraud; and one count of bank fraud.

If convicted on all five counts, he faces a maximum sentence of 115 years in prison. The charges also contain a maximum fine of $5 million.

He was arraigned Thursday afternoon before a magistrate in the U.S. District Court for the Eastern District of Virginia in Richmond. He was released on a $500,000 unsecured bond. He had to surrender his passport and agree not to leave Virginia except for certain reasons.

Hild also must appear before U.S. District Judge Ronnie Abrams at 2:30 p.m. on Sept. 5 in New York City

“Mr. Hild is deeply disappointed that the government has chosen to respond to the business failure of Live Well Financial by alleging corporate fraud,” according to a statement from one of his lawyers, Vernon E. Inge Jr. in Richmond.

“He cooperated fully in the U.S. Securities & Exchange Commission’s investigation and the U.S. Attorney’s Office investigation, met with the SEC and answered its questions, and interacted extensively with the U.S. Attorney’s Office to answer its questions,” according to the statement. “While Live Well unfortunately failed, every business failure is not a corporate crime.”

Hild is being represented in his criminal case by Steven Feldman and Bill Donnelly from the Murphy & McGonigle law firm in New York.

Rohr and Stumberger each face 105 years in prison on the criminal charges and to make restitution.

***

The SEC’s complaint charges Hild, Rohr and Stumberger with violations of the anti-fraud provisions of federal securities laws.

Under the alleged scheme, the SEC claims Live Well Financial was able to borrow tens of millions of dollars more from its lenders through the securities transactions than it could have borrowed had the bonds been priced accurately.

The scheme enabled it to fund lavish compensation packages for Hild and others, the SEC claims.

“Hild’s ‘self-generating money machine’ was a brazen fraud through which Hild enriched himself at the expense of Live Well’s counterparties,” said Daniel Michael, chief of the SEC’s Complex Financial Instruments Unit.

Hild’s salary jumped from about $1.4 million in 2015, to $5 million in 2016, $9.7 million in 2017, and to more than $8 million in 2018, according to the U.S. Attorney’s office.

In 2016, the criminal complaint alleges that Hild used $18 million generated from bond repurchase agreements to buy out the preferred stockholders in Live Well Financial. The elimination of the preferred stockholders gave Hild exclusive control of the company.

***

Hild founded the fast-growing mortgage company in April 2005.

Live Well Financial abruptly shut down on May 3 and laid off its 103 employees, most of whom worked at the company’s corporate offices in the Boulders office complex in Chesterfield. The company provided little details as to why the company had to close, only saying at the time that it was ceasing operations because of what it called “sudden and unexpected developments.”

But according to the SEC complaint, the scheme collapsed this year when Live Well’s lenders sought to sell the bonds back to Live Well and the company did not have the necessary funds to complete the repurchase securities transactions, leaving those lenders exposed to losses in excess of $80 million.

The scheme came to a head in May when the company’s unnamed interim chief financial officer informed Hild that he would not sign the company’s interim financial statements because he believed that the company’s carrying value for bond portfolio was significantly overstated. The interim CFO was handling the company’s finances since Rohr had resigned in late 2018.

After shutting down, Live Well’s interim CFO provided a balance sheet to lenders showing that the company had reduced the value of its bond portfolio by about $141 million.

A judge in U.S. Bankruptcy Court in Delaware on July 1 granted a motion by three creditors of Live Well Financial to put the company into involuntary bankruptcy protection.

The three creditors had claimed in June that the SEC and the bank fraud division of the FBI were investigating Live Well Financial.

***

Federal law enforcement officials on Wednesday obtained a restraining order prohibiting Hild from taking any actions with assets — including various real estate properties and business interests in the Richmond area — owned directly or indirectly by Hild that he allegedly purchased with proceeds from the scheme.

While Hild ran Live Well Financial, he and his wife, Laura Dyer Hild, have in recent years amassed nearly three dozen properties through Church Hill Ventures LLC in Richmond’s Manchester, Blackwell and Swansboro neighborhoods with plans to redevelop those properties.

Church Hill Ventures has opened Hot Diggity Donuts and The Butterbean Market & Café, both on Hull Street. In the same block is the Dogtown Brewing Co. brewery and restaurant that opened this year.

It also bought the former Siegel’s grocery store building off Bainbridge and Hull streets in South Richmond.

The Hilds also own Anderson’s Neck Oysters, an oyster farm along the York River in King and Queen County.

Laura Dyer Hild is listed as the registered agent on the various limited liability corporations for the businesses or real estate, according to records with the State Corporation Commission.

It is not known who actually owns those businesses. Being a registered agent does not mean ownership. A registered agent is simply a person who can receive notices or official government notifications on behalf of the business.

Five of those entities — Church Hill Ventures, Hot Diggity Donuts, The Butterbean, Dogtown Brewing and Anderson’s Neck — initially listed Michael Hild as the registered agent. The registered agent’s name was changed to his wife on Sept. 7, 2018.


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Fifteen years after Gaston inundated Richmond, the figures remain staggering

Friday marks 15 years since a downpour named Gaston wrecked the Richmond region and changed the way we look at our flash flooding risk.

Nearly a foot of rain fell on parts of the metro area during the afternoon and evening of Aug. 30, 2004, as the compact but saturated tropical depression passed over the region.

Unlike most of the tropical systems we encounter, which affect wide swaths of land from the coast to the mountains, Gaston’s deluge was limited almost exclusively to central Virginia, and the very hardest rain fell right on Richmond.

Rapidly rising water cut off numerous roads, including Interstates 64 and 95, which plunged the Monday afternoon commute into unexpected chaos.

The floods resulted in eight direct fatalities in the Richmond area and also indirectly contributed to one death.

The swift inundation of Shockoe Bottom was the most dramatic and high-profile scene of destruction, but floodwaters also left damage and disruption across Amelia, Charles City, Chesterfield, Dinwiddie, Hanover, Henrico, King and Queen, King William, Lunenburg, Mecklenburg, New Kent, Nottoway and Prince George counties.

The downpour caused an 11-acre landslide on the western face of Chimborazo Hill. Flooding and falling trees also cut off power and drinking water for tens of thousands of metro area residents.

Insured losses in Virginia were estimated at $30 million in 2004, or about $41 million adjusted for inflation. Nearly 600 homes and businesses in the region were damaged or destroyed, many in a 20-block portion of Shockoe Bottom where water surged to a depth of 10 feet.

In the five years following the flood, the city installed bigger drains and reconfigured the stormwater retention and drainage system in and around Shockoe Valley at a cost of $20 million.

***

Let’s take a look at the storm by the numbers:

12.6 inches — the highest total from the storm was reported in Richmond’s West End.

A very localized area within Richmond, Henrico and Hanover saw 10 inch-plus totals, but amounts fell off in a sharp gradient just 15 miles to the north and northwest of the maximum rainfall zone.

Rain fell at a rate of 2 to 4 inches per hour during the height of the storm, then dwindled by the evening.

Here are more rain totals in the region, according to original reports from the National Weather Service in Wakefield, the National Hurricane Center, and cooperative observer records.

12.3 inches — MathScience Innovation Center, Richmond

10.7 inches — Mechanicsville, Hanover

10.61 inches — Hanover County Municipal Airport, between Mechanicsville and Ashland

8.1 inches — Sandston, Henrico

6.95 inches — Hopewell

6.68 inches — Richmond International Airport, Henrico

6.56 inches — Science Museum of Virginia, Richmond

6.4 inches — St. Christopher’s School, Richmond

6.2 inches — Chester, Chesterfield

5.8 inches — St. Mary’s School, Henrico

5.69 inches — Winterpock, Chesterfield

5.4 inches — Carter G. Woodson School, Hopewell

5.29 inches — Walkerton, King and Queen

4.82 inches — Petersburg

4.8 inches — NBC12, Richmond

4.63 inches — Ashland, Hanover

4.3 inches — Midlothian, Chesterfield

3.37 inches — West Point, King William

2.7 inches — Amelia

2.51 inches — Wakefield, Sussex

2.12 inches — Williamsburg area

1.74 inches — Powhatan

0.75 inches — Crozier, Goochland

0.72 inches — Montpelier, Hanover

***

9 hours — approximate duration of Gaston’s rain in Richmond, from noon to 9 p.m.

Gaston crossed over Virginia while moving at about 15 mph.

***

1 — the maximum category Gaston reached on the Saffir-Simpson Scale.

Though the name “Gaston” stands alone as an evocative reference for most Richmonders, it’s more complicated to tack on a fitting meteorological label.

Hurricane? Tropical storm? Remnants? It was all of the above during the life of the storm.

Tropical Depression Seven was first designated south of Cape Fear on Aug. 27, 2004, spawned by a stalled cold front. As winds increased beyond 39 mph, it was upgraded to Tropical Storm Gaston the following day as it inched toward South Carolina.

Its maximum sustained winds flirted with the threshold for a Category 1 hurricane by the time it made landfall just north of Charleston, S.C., on Sunday morning, Aug. 29.

Originally, it was still classified as a tropical storm at landfall, but a post-season analysis later confirmed Gaston briefly peaked as a minimal hurricane with 75 mph winds.

In 2004 news reports, it’s “Tropical Storm Gaston.” In the weather archives, it’s “Hurricane Gaston.”

Regardless of that nuance, Gaston was no longer a hurricane by the time it got to Virginia.

Technically, Gaston was a tropical depression when it poured on Richmond — stripped of any destructive winds, but still showing a characteristic swirl on radar as it spun northeastward along the I-95 corridor.

Confusing matters further, Gaston regained tropical storm status that evening as the low pressure center crossed over the Tidewater region, just before its rain tapered off in central Virginia.

Gaston accelerated away from the East Coast that night and lost tropical characteristics near Nova Scotia on Sept. 1, 2004.

***

14 — number of tornadoes spawned by Gaston in Virginia.

Fortunately, all of Gaston’s tornadoes were weak and short-lived, and none caused any injuries or major damage.

The spiral rain bands on the eastern flank of the storm contained rotating cells that produced 14 tornadoes within 13 municipalities that afternoon: Chesterfield, Dinwiddie, Hampton, Hanover, Hopewell, James City County, New Kent, Nottoway, Prince George, Poquoson, Richmond, Surry County and York County.

One tornado downed trees and damaged cars at the University of Richmond. Elsewhere in the region, the tornado damage was mainly to trees and outbuildings.

Though easily forgotten in light of the dramatic flooding, Gaston was one of the most prolific tornado-producing systems in Virginia history.

Only three outbreaks produced a higher tornado count in Virginia: the remnants of Ivan in 2004 (38), April 27-28, 2011 (19) and Aug. 6, 1993 (18). Less than two weeks after Gaston, Frances also spawned 14 tornadoes in the state.

***

2 — number of storms named “Gaston” since 2004.

Most of the time, we talk about our worst hurricanes in the past tense.

Gaston was not retired from the Atlantic naming list after the 2004 season, presumably because its very localized effects here were greatly overshadowed by the major destruction Florida and the U.S. Southeast experienced that year as a result of Charley, Frances, Ivan and Jeanne.

As a result, those four names were stricken by the World Meteorological Organization while Gaston was recycled for storms in the 2010 and 2016 seasons.

In 2010, Gaston briefly existed as a weak tropical storm that dissipated as it approached the Caribbean. The 2016 incarnation was a powerful Category 3 hurricane, but it also charted a mid-ocean course that prevented it from claiming any lives or property.

While each storm is unique, the Atlantic basin ought to see another “Gaston” in 2022 — hopefully in name only.

The threat of dangerous inland flooding, however, can return anytime a tropical system tracks through our region.


Florida potentially facing Category 4 storm as Dorian approaches

In Nation & World | Florida potentially facing Category 4 storm as Dorian approaches | Page B1


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Government-politics
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Dominion claimed excess profits of $277 million in 2018, according to SCC report

Dominion Energy claimed excess profits of $277.3 million in 2018, a return of 13.47%, topping the 9.2% approved by regulators for most of Dominion’s spending, according to an update on the state of electric regulation published Thursday.

The report compiled by the State Corporation Commission also shows that typical residential bills of Dominion Energy customers in Virginia have increased 26% since 2007 — from $90.59 to $113.76 — but are down $2.76 from last year.

The figures, part of an annual review by the commission of Dominion’s earnings to state lawmakers, come as the state monitors the rollout of a contentious law passed in 2018 that reconfigured how Dominion handles overearnings.

As part of the new law, the Richmond-based electric monopoly will be allowed to divert excess earnings into new capital investments that modernize the state’s electric grid and boost renewables, instead of refunding the money to ratepayers or reducing electricity rates.

At the same time, the utility is seeking to up its rate of return to 10.75% in a case pending before the commission.

According to Thursday’s report, the combined overearnings from 2017 and 2018 that would qualify for customer refunds amount to $379.7 million — though that’s not what Dominion is planning to do.

In explaining Thursday’s excess earning figures, Dominion Energy spokeswoman Audrey Cannon said the company has “already identified more than $750 million to spend on our offshore wind pilot and smart meters,” that will improve energy generation and delivery.

Environmental and consumer advocacy groups criticized the regulatory system and business model that they say overcharges ratepayers without hope for a refund.

“Dominion Energy is cheating Virginia customers out of hundreds of millions of dollars in refunds,” said Clean Virginia Executive Director Brennan Gilmore. “It’s time to empower regulators to return Dominion’s excess profits to its customers.”

The office of Attorney General Mark Herring also chided the policy and Dominion’s overearnings.

“These numbers confirm AG Herring was correct when he warned that rates have been locked in at levels that are too high and that significant portions of power companies operations have been removed from adequate oversight,” Herring spokeswoman Charlotte Gomer said.

Last month, Dominion kicked off construction on a 12-megawatt offshore wind pilot project 27 miles off the coast of Virginia Beach. The project, which Gov. Ralph Northam hailed and was reluctantly approved by the SCC, will cost $300 million. Dominion plans to pay for the cost of the project through excess earnings, company officials said.

Dominion has also begun to invest in installing smart meters for 1.4 million customers, which it says will improve the customer experience. Further plans for how it will spend excess earnings on work to modernize Virginia’s electric grid are ongoing, and a proposal on the topic is expected to be filed with the SCC in the fall.

“The SCC has approved our investments in an offshore wind pilot project, and cyber and physical security enhancements to the energy grid,” said Cannon, the Dominion spokeswoman. “Reinvesting the revenue identified by the SCC today will enable us to give our customers what they want while also keeping rates low.”

The report also offers a snapshot into the future that warns of higher bills for customers.

The commission reiterates to lawmakers that plans by Dominion to invest roughly $16 billion in capital projects it plans to recover from ratepayers could lead to typical residential bill increases of $29.37 per month by 2023.

That does not include a $3.23 monthly increase to the typical bill that will pay for the cleanup of the state’s legacy coal ash, nor any costs to be borne by the utility under new carbon regulations approved in the spring.

As it touts regionally low electricity rates, Dominion has argued that factors such as lesser reliance on fuel will lower costs and mitigate bill increases, projections the SCC said Thursday “may be likely to happen, but some are speculative.”

Dominion announces school bus project

Also Thursday, Dominion announced plans to deploy electric school buses across Virginia aimed at reducing emissions. Dominion said the buses will also save school districts on fuel and maintenance expenses.

Dominion is accepting bids from bus manufacturers to deliver 50 buses to school districts by the end of 2020. Dominion will then seek state approval to expand the program to 1,000 buses by 2025. By 2030, Dominion is hoping to replace all operating diesel-powered buses with its electric fleet.

“We’re committed to lowering our carbon emissions, but we can’t do it alone. Transportation is the number one source of carbon emissions in the U.S., and by partnering with this industry, we can expedite the development of innovative, cleaner, more sustainable solutions,” said Dominion Energy CEO Thomas F. Farrell II.

Gov. Ralph Northam praised the program Thursday, saying that his administration is looking forward to “working with Dominion as they bring electric school buses to communities in all corners of our commonwealth.”

The League of Conservation Voters, while supportive of the initiative, took a more skeptical approach.

“Virginia’s children deserve to ride to school without breathing in toxic exhaust fumes, and we support Dominion’s efforts to address that problem,” said Michael Town, executive director of the Virginia organization. “But we shouldn’t lose sight of the fact that this is the same electric monopoly that burns coal and other harmful fossil fuels .”

Town added that the announcement was “suspiciously timed” with the release of Thursday’s SCC report.

“We can only hope that Dominion’s efforts to clean up school buses are earnest and not the latest in a series of ploys to profit more at Virginians’ expense,” he said.

Leaders from school districts can hear more about the program during a tele-town hall on Wednesday.


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Chesterfield creating more precise way to figure out where to build new schools

Chesterfield County officials, eyeing another bond referendum to build new schools in the next couple of years, are working to create a website to help show more precisely where they should go.

The site will track student enrollments, new home construction and other information to better predict when and where school-age children are most likely to live in the county.

Allan Carmody, the county’s finance director, this week unveiled the online forecasting model for the county and school officials that will provide them with a centralized database showing school capacities, facility conditions, home sales and other information.

“We will have a single source of data for county, and [Chesterfield County Public Schools] staff, elected officials and, yes, even the community members,” Carmody told the Board of Supervisors at their Wednesday night meeting. “There is no reason we cannot provide the public with access to key information about their school facilities in a clear, concise and easy to navigate platform.”

New home construction isn’t the only reason that enrollments rise, Carmody said. The finance director pointed to Bon Air Elementary School, which is at 90% capacity but in an area of northern Chesterfield where he said there have not been many new homes built. One driver of rising enrollments can be simple turnover in the current housing stock as residents whose children have already gone through the school system sell their homes to new families with young children, Carmody said.

The new technology is still in the development stage, but county officials said they hope to have it up and running by the time county officials start deliberations in January on upcoming building needs. The county has not yet determined when the public will gain access to the online forecasting tool, Carmody said.

The county finance director said the new tool could be used to help guide proposals to redistrict school attendance zones as well as new school building projects.

Parents in Midlothian have raised concerns that new apartment, town house and condominium developments proposed in the area will overcrowd schools.

Carmody said in his presentation that apartments typically generate fewer students than single-family homes. He also said the county is in the midst of a series of school building projects, costing about $89 million, that is providing updated facilities for an additional 2,200 students. Those projects include the opening of the Old Hundred Elementary School as well as a planned elementary school at the Magnolia Green development in the fast-growing western part of the county.

The new reporting tool provides a function where users can see on a map how school capacity in one elementary school compares to other schools .

Matt Harris, a deputy county administrator, said prior to the Wednesday meeting that the new forecasting tool will allow officials to justify school construction projects that would be included in a bond referendum that’s expected to go to voters in the next year or two.

“Part of that trust with the public is being able to show them your work, how you chose these facilities in these areas for these reasons,” Harris said.