Live Well’s bankruptcy trustee sues directors and shareholders in lawsuit
The hunt for assets to pay off the creditors of bankrupt Chesterfield mortgage company Live Well Financial continues, with two other local businessmen in the trustee’s sights.
A lawsuit was filed last week by director David Carickhoff seeking to recover nearly $ 100 million for the assets of the Live Well bankruptcy, claiming that some non-executive directors and shareholders aided in the demise of the company through “continuous and brazen violations of fiduciary duties and self-operations.” “
Stuart Cantor and Jim Karides, along with their affiliated companies, are among those on the trustee’s results list in the June 29 case.
Cantor, who was an early member of Live Well’s board of directors, owns Title Works of Virginia, based in Henrico.
The trustee claims Cantor was blindly loyal to Live Well founder Michael Hild as he plundered his business through a reverse mortgage bond pricing system. The lawsuit alleges that Cantor’s loyalty was fueled in part by millions of dollars paid to Hild’s Title Works related to real estate transactions in Richmond.
Karides is a founding partner and CFO of V-Ten Capital Partners, a local venture capital firm that invested in Live Well through a subsidiary. Karides was director of Live Well until 2016, when it was bought out in a disputed $ 18 million stock purchase agreement, whereby the trustee claims it was illegal and that he was ultimately funded by ill-gotten money resulting from Hild’s “Ponzi-like” program.
Former Live Well director and investor Brett Rome and subsidiaries of his Boston-based investment firm, North Hill Ventures, are also being sued in the case. While Rome is described as one of the few insiders to openly disagree with some of Hild’s practices, he too is said to have turned his back on fraud in exchange for a buyout.
Rather than intervening to protect the company from this obvious and ruinous investment fraud, the directors ignored the many red flags and blindly chose to believe in the convenient fiction that the bond portfolio had a crazy success because it suited their own individual interests to do so. “, alleges the lawsuit.” Their motivation: greed.
The lawsuit was filed a day after the trustee sued Hild, his wife, their various business ventures and others over an additional $ 110 million offer for the estate.
Like the case against the Hilds, Carickhoff in this second lawsuit seeks to blame insiders for the disappearance of Live Well and to seek damages in an attempt to restore the integrity of the company’s creditors after having been left behind to the tune of more than $ 100 million.
A recurring theme in the case against Cantor, Karides and Rome is that they “knew or were willfully blind not knowing” that Hild and two other executives at Live Well were running the bond pricing program that spanned years and years. which left the company insolvent for a long time. as in 2015. The company finally collapsed in 2019 as federal lenders and investigators lobbied.
“The directors not only lined their own pockets and those of their affiliates at the expense of Live Well and its creditors, but also knowingly allowed all of the company’s legitimate business assets to be dissipated by a massive fraud that began under their supervision and which they allowed to continue unabated by the willful breach of their fiduciary obligations, ”alleges the lawsuit.
Relying in part on facts revealed in April during Hild’s criminal trial, the trustee’s lawsuit describes how Live Well’s boardroom became dysfunctional as Hild sought ways to increase her own compensation as the business was faltering financially.
Ultimately, the lawsuit alleges Cantor made Hild’s offer, while Rome and Karides turned a blind eye by stepping down from the board – all in exchange for money.
“Cantor was a longtime confidant of Hild and willingly took whatever Hild wanted, as long as Hild continued to channel money in his own way,” says the case. “Rome and the Karides took a bribe to drop their fiduciary obligations and walk away.”
Carickhoff accuses Rome, Cantor and Karides of breaching their fiduciary duty and demands that they pay their share of the $ 77 million that has been illegally taken from the company as a result of their actions.
The lawsuit wants Rome and Carides to repay nearly $ 19 million they received from the stock purchase agreement, which it claims to be illegal because Live Well was insolvent and their shares were technically worthless.
The trustee is also fighting to recover $ 6.6 million from Title Works. This is money he allegedly received from Hild for completing his personal real estate transactions using money dating back to the Live Well scheme.
The case, as is typically the case in large corporate bankruptcies, will likely seek to trigger insurance policies the company would have had in place to cover directors and officers for the alleged violations.
Cantor and Title Works are represented in this case by McGuireWoods lawyer Dion Hayes. Hayes in a prepared statement said his clients deny the allegations and are prepared to defend themselves.
“Sometimes bankruptcy trustees go too far, and this is one of those cases,” Hayes said. “Title Works of Virginia provided services at market rates. Live Well’s board of directors has received advice from qualified legal and financial professionals on all major decisions. Mr. Cantor has at all times fully complied with his legal obligations as a director of Live Well. Mr. Cantor and Title Works expect to succeed in their defenses against the trustee’s fanciful claims and look forward to bringing those defenses to the Delaware court.
Karides, reached by phone this week, also sought to blame Live Well’s external legal and financial advisers.
“We were long gone when all of this was happening. And when we were there, we relied on experts – the auditors, ”said Karides.
“There were external valuation companies that gave us insight into the financial condition of the business,” he said. “We are very comfortable in our position on this subject and in the trust we place in these experts. As the facts unfold, more will come out. “