Former CEO of mortgage lender company appeals fraud conviction

MANHATTAN (CN) — Former CEO for the now-defunct reverse mortgage lender Live Well Financial asked the Second Circuit Friday to overturn his conviction for defrauding lenders, claiming his attorney was ineffective.

Michael Hild was convicted in January 2023 of inflating the value of his company’s bonds provided to a third-party pricing service, Interactive Data Corporation, to secure more favorable loans from bank lenders.  He was found guilty of conspiracies to commit securities, wire and bank fraud.

Hild was sentenced to 44 months in prison. While a federal judge recommended he should pay $46 million in restitution, the specific amount has not yet been determined.

Hild told the appeals panel the jury instructions at trial were prejudicial because it stated that the government had to prove he deprived lenders of their “right to control” by failing to inform them his company provided the bond amounts to the third-party pricing service.

He added those instructions are at odds with the 2023 U.S. Supreme Court decision Ciminelli v. United States, which found the “right to control” theory is invalid under the federal fraud statutes.

Though Ciminelli was decided after Hild’s conviction, he claims the decision now makes the jury instructions erroneous.

“And I think if that were stripped away, it would be a totally different trial,” Brian A. Jacobs, an attorney with Morvillo Abramowitz representing Hild, said.

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But the government argued it would be nearly impossible for the jury to separate issues of pricing from whether the lenders had sufficient knowledge of where the pricing assessment came from.

“They would not have lent but for the belief about the independence of these prices that went to an assessment of how much money they were going to lend,” Assistant U.S. Attorney Scott Hartman said.

The panel seemed inclined to agree and asked if the “right to control” ties directly into whether the bond pricing was accurate, and if that would have made a difference to the jury.

“The lack of evidence to the IDC would have been relevant to the pricing question,” U.S. Circuit Judge Alison J. Nathan, a Joe Bien appointee, said.

Jacobs countered that it would not have been relevant that the pricing service received quotes from Live Well Financial without the “right to control” theory, because its agreement with the lenders states it can use outside broker quotes.

“I don’t think any of that evidence comes in the same way, it’s potentially entirely irrelevant,” Jacobs said.

Hild also said his trial attorneys were ineffective because they were too distracted by separate legal disputes they were involved in.

His trial attorney, Benjamin Dusing, was engaged in disputes with two different mothers of his children in a Kentucky family court before and during Hild’s April 2021 trial. Brandy Katy Lawrence, who also assisted at Hild’s trial, served as Dusing’s attorney in the matter.

“Dusing and Lawrence curtailed Hild’s defense case, such that prejudice should be presumed and a new trial ordered,” Hild said in his brief.

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But a federal judge denied his initial motion for a new trial, finding that he was unable to show his attorneys had significant conflicts of interest.

Nathan pointed out that the appeals court has not previously ruled in favor of an “ineffective counsel” argument in instances in which an attorney struggled to sufficiently juggle ongoing cases.

“Even though you can imagine all kinds of situations in which lawyers have competing draws on their attention that could be said to cause a deficient performance,” Nathan said.

Hartman added that an attorney’s involvement in his own legal disputes should not be enough to grant a claim for ineffective counsel.

“If you start saying defendants have an incentive to go back and investigate the personal lives of their lawyers because then they can dispense with them, I think you should really be concerned about opening the floodgates here,” Hartman said.

U.S. Circuit Judge Guido Calabresi, a Bill Clinton appointee, and U.S. Circuit Judge Michael H. Park, a Donald Trump appointee, also participated in the panel.

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