After attorneys made their cases for both the U.S. government and former Live Well Financial CEO Michael Hild regarding a restitution amount owed to the company’s creditors, a magistrate judge overseeing the issue has recommended that Hild pay more than $46 million.

The final amount will be determined by the trial judge. The funds will ultimately go to companies including Mirae Asset Securities, Industrial and Commercial Bank of China Financial Services (ICBC), Flagstar Bank, Customers Bank and the bankruptcy estate of Live Well itself, according to court filings reviewed by RMD.

Restitution amounts

Defense attorneys have argued in court filings — and in a recent hearing — that Hild should not, in some cases, be obligated to pay any restitution. Prosecutors for the government initially argued that he should owe $69 million to the companies that lent to Live Well and the defunct lender’s estate based on — what was determined in court to be — inflated valuations of interest-only bonds backed by Home Equity Conversion Mortgages (HECMs).

Attorneys for Hild and the government have been at odds for the better part of a year over restitution. After a January evidentiary hearing that included testimony from representatives of the impacted companies, the government revised its sought restitution amount to about $46.5 million.

Magistrate Judge Katharine Parker, who has submitted her recommendations to trial judge Ronnie Abrams in the U.S. District Court for the Southern District of New York, recommended that Flagstar receive $13.36 million; Mirae receive $7.4 million; ICBC receive nearly $17.8 million; Customers Bank receive $7.64 million; and the Live Well estate receive $253,850.

Each figure is broadly in line with the government’s revised calculations following January’s evidentiary hearing but are not exact in each case.

Hild objections

Counsel for Hild objected to each of the government’s recommendations for restitution on different grounds while broadly arguing that each of the companies “did not receive a competitive price for the bonds,” according to Parker.

Flagstar contended that it should be compensated for expenses it incurred by enlisting BlackRock to independently value HECM bonds, which Hild challenged, and Parker found Hild’s argument persuasive. That reduced Flagstar’s recommended restitution payment by roughly $102,000.

But most of Hild’s arguments were not persuasive, according to Parker.

“Whether or not the bonds were sold under ideal market conditions for the best possible price is irrelevant to the restitution calculation,” Parker said. “Fluctuations in the market value of the bonds was foreseeable — even if direction and degree of change was not.”

Since the fluctuation was influenced by the scheme for which Hild was convicted, Parker did not seriously entertain an argument for $0 in restitution in her final decision, she said.

Hild argued that in the case of Mirae, the company made “numerous revisions to their restitution submissions” which “renders the final submission not credible.” Parker found the contention out of place and inappropriate considering the types of cases cited to make his argument. His counsel argued based on civil cases, not criminal ones, Parker said.

Hild objected to ICBC’s proposed amount by saying the company did not receive a “fair market value” for the bonds they purchased, which Parker said is “irrelevant for the purposes of restitution.” But Parker agreed with Hild and the government in limiting ICBC’s claim for legal fees.

Impacts on restitution

As for Hild’s objections about restitution for Customers Bank — again based on bond pricing — Parker said his contention “is a slight reworking of Hild’s long-running argument that the victims actually benefited from holding on to the criminally inflated Live Well assets, or that the victims knowingly sold their assets at below market rates in order to ‘lock in’ an eventual award of restitution.” Parker characterized this argument as “based on conjecture and unavailing.”

For the Live Well estate, Hild argued that there is proof it communicated with the government in a manner not previously disclosed, and that it “was a beneficiary of settlement agreements that should have eliminated Hild’s restitution liability.”

Parker explained that any communications between the estate and the government had no bearing on a restitution amount owed, and that for the beneficiary argument, “it was Hild’s burden to provide evidence that those settlements completely offset his restitution obligations. […] He did not provide such evidence and, instead, the Estate provided testimony that the settlements do not offset any portion of the amount sought in restitution.”

Next steps

Final determination on restitution is now awaiting a decision from Abrams, the trial judge. As of March 1, she had not yet ruled on the matter, and it remains to be seen how a final amount will be divided between Hild and co-conspirators who have previously cooperated with the government and have avoided prison time as a result.

Hild remains free pending an appeal of his 44-month prison sentence, which is slated to play out in the Second Circuit Court of Appeals.