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Supplemental Post-Hearing Filing of Independent Insurance Group

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Supplemental Post-Hearing Filing of Independent Insurance Group 00\;g!as J . Austin Jenrufer Utter Hes:on .:ea"I E Korder:orock Re::ted l.'<:hael E. Cavanaugh \larla:,c C. Teahan We!:.saM.W W.ysh•i.ec ~a!o A. Hi~es Darre:1 A. LJncman Mar-<.E Keiaog Emily M. VandMaan Jcr-,n J Loose GaryC Rogers f'.yan K '<a"flman Ao-:anda S. Wolar,n Mct)at.'>I H ?err:,' Pavla J. Mandan eld Ncn,aC F·ase" Tho-nas J Waters Pa...,1 v. McCo·o (1!JC',; .. 1!lJ,,!Q 124 West Allegan Street, Suite 1000 Michael S. Ashion Bnan T. Gai!agher OFCOU'<Sa Evao:t R Treb1ICOC< (1918-2001) Lansing, Michigan 48933 H. Krby Albngrt Jonaihan T Wa!to:"I. Jr. Dav;d E Ma:vin s James R. OaV:s T (517) 482-5800 F (517) 482-0887 G·aham K C!aotree L8'Jf8 S . FaUS$:C Stephen L Burti-,aa.me (19!B-~:)"J[v www.fraserlawfirm.com M1c"lael P Conr:eu,. No·be-t 7 . Madison. Jr Maik A Stash Rcr.alo R Pen1ecos: i::owa·d J. Castelam Aaror- L. ~ev,s 8-a-rjcnW. Zc~ ;19..'v. ?:X~ Me•-< R =:)1(' ..;ona~E Ra121"1 ?aJ ::; Ma~o:-;, Jr. Dav,o S Fry 110:\3-),';\1) Pe:er D. Hew.< Ja-ed A. Rober~s Thomas L Sparks Elzaoeth H. Latcnana Da,nc J i-!O:JS!On Max R. Hoffman Pete< L Oun:ap, P C Tnacce:.:s E MOfgal"! St-a,r.aR Rae<l Bnar: P Morley [email protected] (51 7) 377-081 6 January 27, 2020 DEPT OF ATTORNEY GENERAL JAN 2 8 2020 VIA HAND DELIVERY Clerk of the Court CORPORATE OVERSIGHT DIVISION Ingham County Circuit Court 315 S. Jefferson, 3rd Floor Mason, Ml 48854 Re: Fox v Pavonia Life Insurance Company of Michigan Case No. 19-504-CR Dear Clerk: Enclosed for fi ling please fi nd an original and Judge's copy of Supplemental Post­ Hearing Filing oflndependent Insurance Group, LLC, together with Exhibits. Thank you for your assistance. Should you have any questions or concerns, please do not hesitate to contact me. Very truly yours, Fraser Tre ·1cock Davis & Dunlap, P.C. JER:enp Enclosures cc w/ enc.: Honorable Wanda M. Stokes M ichigan Department of Attorney General Attn: Christopher Kerr, Esq./James Long, Esq. (via e-mail) FRASER TREBILCOCK DAVIS & DUNLAP I PC L."-.NSiNG DETROIT GRAND H.t\P!DS January 27, 2020 Page2 cc w/ enc.: Lori McAllister Stephen W. Schwab STATE OF MICIDGAN CIRCUIT COURT FOR THE 30TH JUDICIAL CIRCUIT INGHAM COUNTY ANITA G. FOX, DIRECTOR FOR THE MICIDGAN DEPARTMENT OF INSURANCE AND FINANCIAL SERVICES, Petitioner, Case No. 19-504-CR v. Hon. WandaM. Stokes PAVONIA LIFE INSURANCE CO:tv.lPANY OF MICHIGAN, Respondent. ----------------' SUPPLEMENTAL POST-HEARING FILING OF INDEPENDENT INSURANCE GROUP NOW CO:MES Independent Insurance Group ("Independent''), through its attorneys Fraser Trebilcock, and Adams and Reese, and. hereby makes this supplemental filing ("Second Supplement'') to its previously filed Objection ("Objection") to the Pavonia Life Insurance Company ofMichigan ("Pavonia") Plan ofRehabilitation ("Plan") filed with this Court on October 4, 2019, its previously filed supplement to the Objection ("First Supplement'') and its recent in­ person appearance, on January 16, 2020, ata hearing (the "Hearing'') related thereto before this Honorable Court. I. RATIONALE FOR SECOND SUPPLEMENT Independent is filing this Second Supplement with the Court because, once again, new information became publicly available on the morning of the Hearing (''New Information"), and Independent believes it is in the best interests of Pavonia's policyholders, creditors and the public for the Court to be informed of and consider this New Information in these proceedings. , This New Information is as follows: 1. During the Hearing, reference was made to a Wall Street Journal article (the "1/16/20 WSJ Article") that became available the day of the Hearing regarding a recently-unsealed Verified Amended Complaint (hereinafter "Amended Complaint") filed by the North Carolina Insurance Companies (i.e., Southland National, Bankers Life, Colorado Bankers Life and Southland National Reinsurance (hereafter the ''NC Insurance Companies") acting through their Rehabilitator ("the ''NC Rehabilitator''), which brought suit against Greg Lindberg and several of his affiliate companies. The action was filed under seal, and was, at the time unbelmownst to Independent, made public on or about January 13, 2020. A copy of the Amended Complaint and its exhibits are attached hereto as Exhibit A. 2. Based upon the 1/16/20 WSJ Article and the Amended Complaint, Independent conducted further reseat-ch and discovered additional items of information that it believes are relevant to ~ese proceedings. After the Hearing, Independent requested a meeting with Michigan Assistant Attorney General, Mr. Christopher L. Kerr ("Mr. Kerr") and the Attorney General's office to discuss the New Information as well as potentially mutually acceptable solutions. Mr. Kerr has so far declined to meet with us. Independent respectfully requests that the Court review this Supplement and supporting documentation, which, among other things, describes the relevance of this New Information and discusses actual or potential inter-relationships between and among aspects of the New Information and information previously provided to this Court. Il. ARGUMENT Independent asserts that the New Information confirms and validates key aspects of, and provides further insights into, Independent's concerns, as previously expressed in the Objection, the First Supplement and the Hearing. 2 · 1. The New Information confirms the complex, interwoven nature of the various processes and parties involved in and/or related to these Court proceedings. As stated in the First Supplement, Independent believes that the complex, interwoven nature of the various processes and parties involved in and/or related to these Court proceedings has created challenges in the ability of key stakeholders - most importantly the DIFS - to fully appreciate the totality ofthe facts and circumstances that resul~ in the Plan of Rehabilitation for Pavonia. The Amended Complaint provides heretofore unavailable details of the activities of Lindberg, the NC Insurance Companies, other Lindberg insurance affiliates and the non-insurance '! .. affiliates ofthem all, during the time period leading up to the filing of the Plan. Key aspects of the Amended Complaint are summarized as follows: (i) The Rehabilitator, on behalf of the NC Insurance Companies, is suing Greg Lindberg and certain of his affiliates, including a company called Academy Association, Inc. ("Academy Association''), for violating the terms of a Memorandum of Understanding entered into on June 27, 2019 among Mr. Lindberg, the Rehabilitator and the NC Insurance Companies (the ''MOU"); (ii) Academy Association is one ofthe many non-insurance affiliates of Greg Lindberg, the NC Insurance Companies, Pavonia and GBIG and is listed as a defendant; (iii) The NC Insurance Companies lent $1.3 billion to their non-insurance affiliates, almost all of which occurred in the 2-week Investment Surge discussed in the First Supplement; (iv) As discussed in the Amended Complaint, many of the non-insurance affiliates are in financial distress and interest payments to the NC Insurance Companies were put on hold; and 3 (v) Ares, the parent company ofAspida which entered into the SPA to acquire Pavonia, is also a significant lender to Lindberg through a company named American Academy Holdings, LLC, which is an affiliate of Academy Association.1 2. The Amended Complaint confirms the extensive concerns with the $1.3 billion of loans granted to the non-insurance affiliates of Lindberg by the NC Insurance Companies, as. mentioned in the Objection and. the First Supplement, and provides additional facts related to these loans and the circumstances surrounding these loans that were not previously available to Independent or this Court. The Amended Complaint also confirmed the complexity of the facts and circumstances comprising the period of time leading up to the filing ofthe Plan, including the complexities ofthe nearly $1.3 billion in.loans by the NC Insurance Companies to ~eir non-insurance affiliates, with respect to which the NC Rehabilitator stated: "Loans to operating companies run through multiple intermediary borrowers puisuant to a number of diffe~nt forms of :financing transactions, including direct loans, preferred equity deals, special purpose vehicles, principal protected notes and :financing companies. The transactions involved are so complex that no one, with the possible exception of Lindberg, has been able to untangle fully the underlying economic realities at this point." Exhibit A at p. 27, :fn. 4 Lindberg is the architect of and signatory to the Stock Purchase Agreement to sell Pavonia (the "SPA'') that is at the heart of the Plan, cU1Tently under examination by this Court, and at the heart of the related Aspida Form A (the "Form A"), currently under review by the DIFS. The NC Rehabilitator's allegations against Lindberg reveal that he has breached a key agreement with the NC Rehabilitator and made intentional misrepresentations to the NC Rehabilitator. That the SP A under consideration before this Court was done at the same time with Lindberg makes the entire transaction suspect and deserving of great scrutiny. Mr. Lindberg, however, did not make this 1 Based upon the Amended Complaint, Exhibit C, Listing of Other Affiliates on Page 93 4 exorbitant amount of loans from the NC Insurance Companies. to his/their non-insurance affiliates on his own. As mentioned in the Objection and the First Supplement, the same team of executives that managed GBIG, the NC Insurers and Pavonia - i.e., the same management team proposed by Ares to run Pavonia as part of Aspida going forward - authorized these affiliated loans. From the NC Rehabilitator' s review of the affiliate transactions, the Lind~rg affiliates have both long-term liquidity and significant current cash flow issues.
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