Court Orders New Trial for Insurance Exec Convicted of Bribing NC Commissioner

It may seem a minor point to some, but it’s fundamental to the American system of justice, advocates said: It’s up to a jury – not a judge – to decide what is considered an “official act” by a state insurance commissioner or other elected official who’s been offered an alleged bribe.

“It’s a complete violation of the Constitution. The judge is not the trier of facts,” said attorney Hank Asbill, who helped write an amicus brief in the appeal of Greg Lindberg, a North Carolina insurance entrepreneur who was convicted of attempting to bribe the state’s insurance commissioner in 2018.

The U.S. 4^th Circuit Court of Appeals on Wednesday agreed with Asbill and ordered a new trial for Lindberg and his co-defendant John Gray. The court found that the lower court judge had erred in his instructions to the jury that replacing a deputy insurance commissioner with one more favorable to Lindberg’s business investments was an official act.

The term is considered a key part of the federal law that defines what constitutes bribery and what’s known as honest services fraud.

North Carolina Insurance Commissioner Mike Causey, who triggered the investigation into Lindberg when he reported Lindberg’s offers to the FBI, then recorded conversations with the businessman, declined to talk about the turn of events Thursday.

“Since I anticipate that I would be asked to testify again, I have no comment on the matter at this time other than to say that I look forward to continuing to cooperate with law enforcement,” Causey said in a statement.

Lindberg, once head of several insurance companies, including Southland National Insurance and Southland National Reinsurance, along with investment firms, has served 21 months of a 7-year sentence. His attorneys have asked the court to release him on bond. Federal prosecutors have until mid-July to respond. A date for a new trial has not been set.

Lindberg said in a statement that he could not describe “the challenges of being separated from family and friends, from the work I care about and the communities I work closely with.” He said that he has been teaching other inmates business courses during his sentence, according to state news reports.

The U.S. Attorney’s office for the Western District of North Carolina could not be reached for comment, nor could the former prosecutor in the case, William Stetzer, now a county attorney in Gaston County, near Charlotte.

In ordering a new trial, the appellate court relied on a similar high-profile case, that of former Virginia Gov. Bob McDonnell. McDonnell was convicted in 2014 on charges of illegally accepting gifts and loans from a Virginia company. But the U.S. Supreme Court in 2016 overturned the conviction, deciding that prosecutors had overreached in claiming that the governor had performed official acts in return for the gifts.

“There is no doubt that this case is distasteful; it may be worse than that,” U.S. Chief Justice John Roberts wrote in the McDonnell decision. “But our concern is not with tawdry tales of Ferraris, Rolexes, and ball gowns. It is instead with the broader legal implications of the government’s boundless interpretation of the federal bribery statute. A more limited interpretation of the term ‘official act’ leaves ample room for prosecuting corruption, while comporting with the text of the statute and the precedent of this court.”

The amicus brief in that case, which supported the “official act” argument, was written by Asbill and other attorneys with the National Association of Criminal Defense Lawyers.

The organization may be better known for its pro-bono work in blue-collar criminal cases, in working to overturn erroneous convictions, and in addressing systemic racism in the legal system. But Virginia attorney David Smith, who works with the NACDL, said the group also intervenes on behalf of many white-collar defendants in cases that involve overreach by prosecutors and over-criminalization of defendants’ actions.

The courts in the McDonnell case and in the Lindberg appeal help limit overly broad interpretations of criminal actions and they correctly focused on the importance of what an official act is, Asbill said.

The North Carolina appellate decision “is broader than what happened to Lindberg,” Asbill said Thursday. If the district court’s jury instructions had been allowed to stand, “it would have set a terrible precedent that judges can make decisions for the jury.”

“Without the ‘official act’ requirement, constituents could be prosecuted for small campaign contributions if they expressed opinions to an elected official on any non-trivial project such as a plant closing or the restoration of power after a storm,” reads the Lindberg amicus brief from the NACDL.

The 4^th Circuit’s opinion, nonetheless, laid out a compelling account of Lindberg’s and Gray’s actions that led to the investigation and convictions.

The story began in 2015, just before Causey was elected insurance commissioner. Deputy Commissioner Jacqueline Obusek, a 20-year veteran of the department, had expressed concerns about some of Lindberg’s business practices, noting that Lindberg’s insurance companies had made an inordinate amount of investments in his affiliated companies.

“Insurance regulators monitor affiliated investments because they are seen as illiquid and, therefore, can limit the ability of an insurance company to pay policyholders,” 4^th Circuit Chief Judge Roger Gregory wrote.

Prior to 2019, North Carolina law did not limit the amount of affiliate investments of regulated companies, but the Department of Insurance had the authority to impose such limits on its own. After Causey was elected, he promoted Obusek to a senior deputy commissioner position. Within weeks, Lindberg donated $10,000 to Causey’s campaign, then another $500,000 to the North Carolina Republican Party, with $110,000 of that to be sent to Causey’s campaign treasury.

Related: NC Judge Orders Lindberg to Give Up Control of Firms to Repay Insurers

Causey testified that he would not accept the money, and he reached out to the FBI. The commissioner then recorded subsequent talks with Lindberg and his associates, the court explained. At one point, Lindberg and Gray expressed their dissatisfaction with Obusek and urged Causey to replace her with John Palermo, vice president at Eli Global, one of Lindberg’s companies.

When Causey balked at that, Lindberg requested another employee at the department. Over several meetings, Lindberg discussed donating as much as $2 million to Causey’s reelection campaign. Causey, with recording device rolling, agreed to the staff change. A few months later, Lindberg and Gray were charged with conspiracy to commit honest services fraud and bribery.