The hunt for assets to repay creditors of bankrupt Chesterfield mortgage company Live Well Financial continues, with two more local businessmen in the trustee’s crosshairs.
A lawsuit was filed last week by trustee David Carickhoff seeking to recover nearly $100 million for the Live Well bankruptcy estate, claiming certain non-executive directors and shareholders aided in the company’s demise through “continuous and brazen breaches of fiduciary duties and self-dealing.”
Among those on the trustee’s hit list in the June 29 filing are Stuart Cantor and Jim Karides, along with their affiliated businesses.
Cantor, who was one of the earlier board members of Live Well, is owner of Henrico-based Title Works of Virginia.
The trustee claims Cantor was blindly loyal to Live Well founder Michael Hild as he pillaged his company through a reverse mortgage bond pricing scheme. The suit alleges that Cantor’s loyalty was fueled in part by millions of dollars that flowed to Title Works from Hild related to real estate deals 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 an affiliate. Karides served as a Live Well director until 2016, when he was bought out in a disputed $18 million stock purchase agreement that the trustee claims was illegal and ultimately was funded by ill-gotten money resulting from Hild’s “Ponzi-like” scheme.
Also sued in the case are former Live Well director and investor Brett Rome and affiliates of his Boston-based investment firm North Hill Ventures. While Rome is described as one of the few insiders to openly disagree with some of Hild’s practices, he too allegedly turned his back to the fraud in exchange for a buyout.
“Rather than step in to protect the company from this obvious and ruinous investment fraud, the directors ignored the numerous red flags and blindly chose to believe in the convenient fiction that the bond portfolio was wildly successful because it suited their own individual interests to do so,” the lawsuit alleges. “Their motivation: greed.”
The suit was filed a day after the trustee sued Hild, his wife, their various business ventures and others, in a bid for an additional $110 million for the estate.
Like the case against the Hilds, Carickhoff in this second suit seeks to place blame on the insiders for Live Well’s demise and to extract monetary damages to try to make the company’s creditors whole after being left hanging to the tune of more than $100 million.
A repeated theme in the case against Cantor, Karides and Rome is that they “knew or were willfully blind in not knowing” that Hild and two other Live Well executives were running the years-long bond pricing scheme that left the company insolvent as far back as in 2015. The company ultimately collapsed in 2019 as lenders and federal investigators applied pressure.
“The directors not only lined their own pockets and the pockets of their affiliates at the expense of Live Well and its creditors, but also knowingly permitted all of the company’s legitimate business assets to be dissipated through a massive fraud that began on their watch and that they permitted to continue unabated through the deliberate dereliction of their fiduciary duties,” the suit alleges.
Leaning in part on facts brought out in April during Hild’s criminal trial, the trustee’s suit describes how the Live Well board room turned dysfunctional as Hild looked for ways to increase his own compensation as the company teetered financially.
Ultimately, the suit alleges that Cantor did Hild’s bidding, while Rome and Karides turned a blind eye by resigning from the board — all in exchange for money.
“Cantor was a longtime confidant of Hild and willingly went along with whatever Hild wanted, so long as Hild continued to funnel money his way,” the case claims. “Rome and Karides took a bribe to abandon their fiduciary duties and walk away.”
Carickhoff accuses Rome, Cantor and Karides of breach of fiduciary duty and demands they pay their share of $77 million that was wrongfully extracted from the company as a result of their actions.
The suit wants Rome and Carides to repay nearly $19 million they received from the stock purchase deal, which he claims was illegal because Live Well was insolvent and their shares were technically worthless.
The trustee also is fighting to recover $6.6 million from Title Works. That’s money it allegedly received from Hild for closing his personal real estate deals funded by money that traced back to the scheme at Live Well.
The case, as is typical in large corporate bankruptcies, will likely look to trigger insurance policies the company would have had in place to cover directors and officers for alleged breaches.
Cantor and Title Works are represented in the case by McGuireWoods attorney Dion Hayes. Hayes in a prepared statement said his clients deny the allegations and are prepared to defend themselves.
“Sometimes bankruptcy trustees overreach, and this is one of those cases,” Hayes said. “Title Works of Virginia provided services at market rates. The board of Live Well received advice from qualified legal and financial professionals with respect to all major decisions. Mr. Cantor at all times complied fully with his legal obligations as a director of Live Well. Mr. Cantor and Title Works expect to prevail on their defenses to the trustee’s fanciful claims and look forward to presenting those defenses to the court in Delaware.”
Karides, reached by phone this week, also looked to place blame on Live Well’s outside advisers.
“We were long gone when all this was going on. And when we were there, we were relying on experts — the auditors,” Karides said.
“There were outside valuation companies that were giving us guidance on the financial state of the company,” he said. “We’re very comfortable in our position on this and the reliance on those experts. As the facts unfold some more of that will come out.”