As a group of creditors attempts to force it into bankruptcy, a collapsed local mortgage company also apparently has federal authorities on its back.
Live Well Financial is under investigation by the Securities and Exchange Commission and the FBI, according to claims made in bankruptcy court by three of its creditors.
“Each of the petitioning creditors has been contacted by one or both of the SEC and the FBI regarding Live Well and (CEO Michael Hild), and each is cooperating in those entities’ investigations …” court documents state.
The revelations were made public by Flagstar Bank, Mirae Asset Securities, and Industrial and Commercial Bank of China Financial Services, the trio of creditors that last week began to push Live Well into a court-supervised Chapter 7 liquidation through an involuntary bankruptcy filing.
Flagstar claims that on May 9 it received a subpoena for records from the SEC. It said it then learned that the securities regulator was investigating both Live Well and its representatives, including Hild.
On June 4 the bank fraud division of the FBI contacted Flagstar regarding “a potential investigation into Live Well.”
Filings claim that Hild has retained both civil and criminal counsel, including William Donnelly of law firm Murphy & McGonigle in Washington, D.C., who represents financial firms under agency investigation.
The creditors’ filings also detail their attempts to get information from Live Well, claiming the company has been difficult to deal with and largely unresponsive about its status since it abruptly shut its doors and laid off its entire workforce in early May, with little notice to employees or creditors.
Flagstar said in court documents it went as far as sending some of its executives from its headquarters in Michigan to Live Well’s office in Chesterfield in an attempt to speak to Hild, “who refused to meet with Flagstar and blocked Flagstar from access beyond the lobby.
“Live Well has stonewalled the petitioning creditors’ every attempt to obtain information regarding the repayment of the obligations, the circumstances surrounding the abrupt shut down of Live Well’s business and Live Well’s intentions regarding the preservation of its assets,” the creditors argue in their filings. “This is not merely the failure to return a phone call; this is active concealment …”
The creditors make clear their lack of faith in Hild, who founded Live Well in 2005 and grew it to a sizable mortgage lender, particularly in the reverse mortgage market. They allege that Hild has mismanaged and claim he has been lining his own pockets to the detriment of the company’s creditors.
In arguing for an expedited appointment of an interim bankruptcy trustee, the creditors state they seek to “halt the current implosion” at Live Well and to take control of and preserve what’s left of the company’s assets.
In response, Live Well defended Hild against those claims, arguing the creditors’ filings are “replete” with false and misleading statements, particularly related to their assertions of mismanagement and self-dealing by Hild.
The company admitted in its court response that the SEC is investigating its bond portfolio operations and that it is cooperating in that inquiry. The company did not address the FBI matter.
It said it has hired Getzler Henrich & Associates as a financial advisor and Edward Phillips as a chief restructuring officer “in an effort to help stabilize the business following the turmoil caused by the involuntary Chapter 7 bankruptcy case.”
The creditors sought to expedite the process of appointing an interim bankruptcy trustee.
The company argued that such an accelerated timeline isn’t necessary and said it wants more time – the usual 21 days – to respond to the involuntary petition, after which it will determine if the involuntary process is necessary or to potentially commence its own voluntary Chapter 11 reorganization.
The two sides agreed at a hearing Monday in Delaware to what Live Well described as a “breathing spell,” through which it agrees to preserve documents and not enter into any material transactions in the interim, such as selling assets. A judge signed off on that temporary solution.
Live Well said it has been working “expeditiously” to liquidate its assets, such as mortgage loans and mortgage servicing rights.
It said it does not expect the SEC investigation to affect the company’s ability to sell its remaining marketable assets.