Douglas J. Austin Jennifer Utter Heston Jean E. Kordenbrock RetiredFraserTrebilcocK Michael E. Cavanaugh Marlaine C. Teahan Melisa M. W. Mysliwiec Donald A. Hines

LAWYERS Darrell A. Lindman Mark E. Kellogg Emily M. Vanderlaan John J. Loose

Gary C. Rogers Ryan K. Kauffman Amanda S. Wolanin

Michael H. Perry Paula J. Manderfield Archie C. Fraser Thomas J. Waters Paul V. McCord (1902-1998)

124 West Allegan Street, Suite 1000

Lansing, Michigan 48933 Michael S. Ashton

H. Kirby Albright

Brian T. Gallagher

Jonathan T. Walton, Jr. OF COUNSEL

David E. S. Marvin

Everett R. Trebilcock (1918-2002)

James R. Davis T (517) 482-5800 F (517) 482-0887 Graham K. Crabtree Laura S. Faussie Stephen L. Burlingame (1918-2005)

www.fraserlawfirm.com Michael P. Donnelly

Edward J. Castellani

Norbert T. Madison, Jr.

Aaron L. Davis Mark A. Bush

Brandon W. Zuk Ronald R. Pentecost

(1932-2008)

Jonathan E. Raven Peter D. Houk

Paul C. Mallon, Jr. Jared A. Roberts

David S. Fry Thomas L. Sparks

Mark R. Fox (1953-2011)

Elizabeth H. Latchana David J. Houston Max R. Hoffman Peter L Dunlap, P.C. Thaddeus E. Morgan Shaina R. Reed

Brian P, Morley

jraven@fraserlawfirm.com

(517) 377-0816

February 18, 2020

VIA HAND DELIVERY

Clerk of the Court Ingham County Circuit Court 315 S. Jefferson, 3rd Floor Mason,MI 48854

Re: Fox v Pavonia Life Insurance Company of Michigan Case No. 19-504-CR

Dear Clerk:

Enclosed for filing please find an original and Judge's copy of Response of Independent Insurance Group, LLC to Latest Responses, with Certificate of Service affixed thereto.

Thank you for your assistance. Should you have any questions or concerns, please do not hesitate to contact me.

Very truly yours,

JER:enp Enclosures cc w/ enc.: Honorable Wanda M. Stokes

Michigan Department of Attorney General, Attn: Christopher Kerr/ James Long Lori McAllister Stephen W. Schwab Ellen M. Dunn Ryan Shannon

· cock Davis & Dunlap, P.C.

FRASER TREBILCOCK DAVIS & DUNLAP I PC LANSING DETROIT GRAND RAPIDS

STATE OF MICHIGAN CIRCUIT COURT FOR THE 30TH JUDICIAL CIRCUIT

INGHAM COUNTY

ANITA G. FOX, DIRECTOR FOR THE MICHIGAN DEPARTMENT OF INSURANCE AND FINANCIAL SERVICES

Petitioner, Case No. 19-504-CR v.

Hon. Wanda M. Stokes PAVONIA LIFE INSURANCE COMP ANY OF MICHIGAN,

Respondent. ________________/

RESPONSE OF INDEPENDENT INSURANCE GROUP, LLC TO LATEST RESPONSES (AS DEFINED BELOW)

NOW COMES Interested Party Independent Insurance Group, LLC ("Independent"),

through its attorneys Fraser Trebilcock, and Adams and Reese, and hereby submits this response

timely filed in this case. Subsequent to Independent' s filing of the Supplemental Post-hearing

Filing of Independent Insurance Group, LLC on January 30, 2020, three additional documents

have been filed with this Court by other parties to these proceedings:

1. On February 4, 2020, Aspida Holdco LLC ("Aspida") submitted to the Court its

Response of Aspida Holdco to Supplemental Post-hearing Filing by Independent

Insurance Group, LLC ("Aspida Response I");

2. On February 11, 2020, Aspida submitted to the Court its Further Response ofAspida

Holdco to the 1/27/20 Supplemental Post-hearing Filing by Independent Insurance

Group, LLC ("Aspida Response II"); and

3. On February 11, 2020, the Michigan Rehabilitator (the "Rehabilitator") submitted to

the Court the Rehabilitator's Response in Opposition to Independent Insurance Group,

LLC's Supplemental Post-hearing Filing Regarding the Rehabilitator's Plan of

Rehabilitation (the "Rehabilitator's Further Response").

Aspida Response I, Aspida Response II and the Rehabilitator' s Further Response are

collectively referred to as the "Latest Responses".

I. RATIONALE AND INTRODUCTION

In light of the Latest Responses, and certain assertions made therein, many of which are

inaccurate and/or misleading, Independent submits this filing to the Court to correct the record.

In summary, the Latest Responses assert and/or request, as applicable, the following:

1. That certain actions by the managenement team of the NC Insurance Affiliates were

permitted by the regulators. Independent responds in Section II, a below.

2. That Independent lacks standing to object to the Plan. Independent disagrees, for

the reasons reiterated and further set forth in, Section II, b below.

3. That the goal of the Plan is to protect Pavonia's policyholders, creditors and the

public by separating Pavonia and ServiceCo from their ultimate owner, Lindberg,

as well as from the financial troubles of the North Carolina Insurance Companies.

Independent responds in Section II, c below.

4. That DIFS representatives handling the Form A Process have requested an in

camera meeting about the confidential and privileged details of DIFS' ongoing

review. Independent responds in Section II, d below.

Page 2 of26

5. That Independent is causing, and benefitting from, delay in the Pavonia

proceedings. Independent disagrees, for the reasons set forth in Section II, e below.

6. That Pavonia' s costs during these proceedings continue to mount. Independent

responds in Section II, f below.

, 7. That Independent has repeatedly defamed the members of ServiceCo I Global

Bankers Insurance Group LLC' s ("GBIG") Management Team. Independent

disagrees, for the reasons set forth in Section II, g below.

8. That certain confidential and/or highly sensitive information, mistakenly sent to Eli

Global and improperly forwarded to Aspida, should bear upon these proceedings.

Independent responds in Section II, h belqw.

9. That Independent is "off-base" in suggesting that key stakeholders, including the

MI-DIFSMI-DIFS, may not have appreciated the totality of the circumstances

surrounding the Plan. Independent responds in Section II, i below.

10. That Mr. Buttner lacks the expertise and/or standing for his affidavit to carry

evidentiary weight with this Court. Independent responds in Section II, j below.

11. That Independent is somehow at fault for pointing out the existence of a prior $270

million loan from an Ares affiliate to a Lindberg affiliate, and related matters.

Independent responds in Section II, k below.

Page 3 of 26

II. ARGUMENTS

a. Certain actions of the management team of the NC Insurance Affiliates, whether the

regulators approved said actions and related matters.

Aspida argues that the "2-week Investment Surge" was made "with knowledge of the

supervising regulators" while under "extensive confidential regulatory oversight" in "both

Michigan and North Carolina long before" the surge took place, and suggests that, because of this,

the regulators should be construed to have agreed to these actions.

Buyer states in Aspida Response I as follows: "Moreover, many of the bad actions

Objector would lay at management's feet were taken when the various NC Insurer Affiliates were

in supervision, and so all with knowledge of the supervising regulators". Aspida Response I,

page 3. Aspida goes on to state: "Having no visibility into the extensive confidential regulatory

oversight that was triggered in both Michigan and North Carolina long before the so-called '2-

week Investment Surge' of July 2018, Objector has resorted to a smear campaign ... " Aspida

Response I, page 3. [Emphasis added.]

Independent asserts that it has not resorted to any smear campaigns, and requests that

Aspida cease making such incendiary statements. Independent has done nothing more than point

out facts which raise reasonable concerns around questionable activities, including, among other

things, the "2-week Investment Surge" and its curious timing relative to the allegations in the

Lindberg indictment. Aspida specifically makes the following points in support its conclusions

that the regulators in effect approved of management's actions, particularly the 2-week Investment

Surge "long before" it took place, as follows:

• Aspida cites the fact that on December 14, 2017, the MI-DIPS prohibited Pavonia from

investing in non-insurance affiliates without prior approval. Independent points out to

Page 4 of26

the Court that this has nothing to do with the 2-week Investment Surge nor any other

actions that the GBIG management team may or may not have taken when they were

in charge of, and running the day-to-day activities of, the NC Insurance Affiliates.

Aspida Response II, page 6;

• Aspida cites the fact that on October 18, 2018, the NC Insurance Affiliates entered into

a Consent Order for statutorily confidential Administrative Supervision. Independent

points out to the Court that this was months after the 2-week Investment Surge took

place.

While it is not entirely clear, Aspida appears to be implying that the regulators were

accepting of certain GBIG Management actions which appear to be improper, including the 2-

Week Investment Surge, because said regulators knew of said actions Independent suggest it is

difficult to believe that, in executing $900 million in affiliate transactions in a two week period in

July 2018, GBIG management was appropriately taking into consideration the policyholders of the

insurance companies they managed. Independent also suggest it is difficult to believe that the

regulators approved of these activities, as Aspida is implying they did. In this construct as

presented by Aspida, knowledge on the part of the regulators of actions being taken by a

management team during periods of heightened regulatory oversight somehow constitutes

approval. Independent questions whether regulators would agree with Aspida's construct of

approval. Independent would expect that if the regulators agreed to and/or permitted and/or

overlooked management's actions - including in particular the "2-week Investment Surge", the

regulators, not Aspida, would say so.

Independent also takes issue with Aspida' s statement that Independent is laying "bad

actions" at the feet of GBIG management. The facts in this regard are clear: the NC Insurance

Page 5 of 26

Affiliates were explicity placed into rehabilitation due to regulatory concerns over the billions of

loans. these entities made to their non-insurance affiliates and, among other things, GBIG

management was running the day-to-day activities of all of the NC Insurance Affiliates, including

their investment activities. Independent has not laid anything at all at the feet of GBIG

management. This is once again an attempt to distract the Court, and avoid accountability. GBIG

management is responsible for its own actions, not Independent.

While there are many other aspects of Aspida Response I that Independent disagrees with,

Independent does not want to burden the court's time with any additional response to the other

items.

b. Independent has standing to object to the Plan.

The Rehabilitator states that Independent does not have standing to object to the Plan.

Independent prefers not to burden the Court's time with having to re-read previously made

arguments. For the reasons set forth in prior filings, Independent believes it has standing to object

to the Plan. Should the Court decide that Independent does not have standing, it is nonetheless in

the best interests of Pavonia' s policyholders, creditors and the public for this Court to consider the

information contained in this filing, just as the Court has considered the information previously

submitted to it by Indepertdent.

c. The Plan does not separate Pavonia from the NC Insurance Affiliates.

While Independent prefers not to burden the Court's time with having to re-read previously

made arguments, Independent would like to respond to this matter re-raised by the Rehabilitator.

The Rehabilitator states that "the goal of the Plan is to protect Pavonia' s policyholders, creditors

and the public by separating Pavonia and ServiceCo (bold/italics added for emphasis) from their

Page 6 of26

ultimate owner, Lindberg, as well as from the.financial troubles (bold/italics added for emphasis)

of the North Carolina Insurance Companies." Rehabilitator's Further Response, page 4.

Independent asserts that the MI-DIFSMI-DIFS's primary concern should be for the

interests of the policyholders, creditors and the public as it relates to the insurance companies under

its regulatory oversight. The fact that the Rehabilitator states that the goal of the Plan is also to

protect ServiceCo is telling. Without reiterating all of the details on this topic from prior filings,

Independent reminds the Court that ServiceCo was transferred to Pavonia just prior to the filing of

the Plan and that, prior to being intertwined by GBIG into Service Company and vice versa,

Pavonia was able to operate on a stand-alone basis, with far less expenses and far less complexity

than it is today.

Independent agrees that Pavonia should be separated and protected from Greg Lindberg,

its federally indicted ultimate owner. Independent of course agrees that Pavonia should be

separated and protected from the "financial troubles" of the NC Insurance Affiliates. However,

Independent asserts that the Plan has not separated and protected Pavonia from the "financial

troubles" of the NC Insurance Affiliates for the reasons set forth in prior filings. Independent

further asserts that Pavonia should be separated from all of the troubles of the NC Insurance

Affiliates, not solely its "financial troubles", for the reasons and based upon the facts set forth in

prior filings. Independent asserts that in order to achieve separation from the troubles and "risks"

(see Ares initial response) of the NC Insurance Affiliates, it is logical and reasonable to separate

Pavonia from the management team of the NC Insurance Affiliates. Independent, in an effort to

respect the Court's time, will not reiterate here all of the reasons why, and instead respectfully

refers the Court to the prior filings.

Page 7 of26

Independent points out it is possible that, notwithstanding the factual information set forth

in prior filings, there is some reason, as yet unknown to Independent, that the GBIG management

team is not being held accountable for all that transpired with the NC Insurance Affiliates while

indisputably under their direct supervision. However, Independent can only rely upon what it has

been able to find and piece together, on its own and without any investigative authority, from a

variety of public, complicated and often disparate sources involving the numerous interrelated

and/or intertwined processes cited in prior filings and not reiterated here.

d. Independent requests that the Court either deny the Rehabilitator's request for an

in camera meeting, or allow Independent to be present if such meeting is granted.

As mentioned in prior filings and reiterated in Section e immediately below in connection

with the issue of delay, the Court cancelled a pre-hearing that all parties were invited to attend

based on the objection of the Michigan Attorney General ("MI AG") which argued that the Court

must precisely adhere to the schedule in the Order which did not expressly provide for a pre­

hearing. Now, the Rehabilitator, the client of the MI AG, would like a closed-door private meeting

with the Court just prior to the final hearing in these proceedings. As the saying goes, the

Rehabilitator should not be permitted to "have its cake and eat it too". Just as the all-hands

preliminary hearing was cancelled, this closed-door meeting should either (i) not be allowed to

take place because the schedule in the Order does not expressly provide for it, or (ii) be allowed to

take place but with Independent in attendance.

In its Response, DIPS refers generally to the confidentiality afforded to the Form A

process, but neglects to advise the Court of two important facts: (1) that a Form A process and a

Rehabilitation process are two entirely different processes, and by choosing Rehabilitation, the

parties become subject to the Court's rulings and not its own; and (2) that MCL 500.222(7); not

Page 8 of 26

-------------------------····---··---·-·---·---

cited by the AG, addresses examinations (by which term the AG refers to the pending Form A

process), and provides specific exceptions to the general confidentiality afforded Form A

proceedings. In such cases, after issuance of a report following an examination:

"If assurances are provided that the information will be kept confidential, the

director may disclose confidential work papers, correspondence, memoranda,

reports, records, or other information as follows:

(a) To the governor or the attorney general.

(b) To any relevant regulatory agency or authority, including regulatory

agencies or authorities of other states, the federal government, or other

countries.

(c) In connection with an enforcement action brought under this or another

applicable act.

(d) To law enforcement officials.

(e) To persons authorized by the Ingham County circuit court to receive the

information. (bold/italics added for emphasis)

(f) To persons entitled to receive the information in order to discharge duties

specifically provided for in this act."

It, therefore, appears that the Court has the discretion to set terms on which certain

otherwise confidential information may be shared, and the protections that should be required -

be they by way of a non-disclosure agreement, or protective order - and that may be imposed on

Independent in this case.

Page 9 of26

----~--~-------·--------------~---~--·~·~--------

e. Independent is neither causing, nor benetitting from, any delay in the Pavonia

proceedings.

The Buyer once again argues that Independent is causing delay in the Pavonia process, and

that Independent benefits from this delay. As mentioned in prior filings, Independent was not, and

still has not, been given the opportunity to conduct due diligence and submit a proposal for the

acquisition of Pavonia, which it requested to do several months ago. As the MI AG stated in the

last hearing, the DOJ claim needs to be resolved in order to finalize the Plan and the Form A

process. To Independent' s knowledge, the DOJ claim has not been resolved. In addition, the MI­

DIFSMI-DIFS has not yet finished its Form A review. Independent therefore, is not the cause of

any delay. Independent is no way benefitting from any delay. In fact, Independent is incurring

costs as well that it prefers not to incur and Independent unequivocally prefers that these matters

be resolved forthwith.

f. GBIG, not Independent, is responsible for the fact that Pavonia's costs continue to

mount.

The Buyer continually attempts to distract the Court from the Seller's accountability and

responsibility for Pavonia' s costs. Pavonia' s costs continue to mount because of the activities

discussed in detail in prior filings, which indicate that GBIG dramatically, and in some ways

inappropriately, increased Pavonia's costs after acquiring it.

Despite representations to the contrary, Independent believes that Pavonia itself does not

need the massive new business infrastructure created by GBIG in order to satisfy Pavonia' s

obligations to its policyholders. Most of the GBIG infrastructure, it appears from public filings,

relates to new business generated by the NC Insurance Affiliates, mostly CBLIC, and not Pavonia.

Page 10 of 26

It is misleading to assert that Pavonia itself needs the GBIG infrastructure for "new

business". Independent asserts that Pavonia does not, in fact, need most of the GBIG

infrastructure. GBIG and Ares are the parties that need/want most of the GBIG infrastructure for

the new business that they want to generate for their own personal gain. The main reason that they

need Pavonia is because they cannot use any of the NC Insurance Affiliates to generate new

business, because those insurance entities, under the direct watch of the GBIG management team,

were placed into rehabilitation and are statutorily insolvent due to activities for which they are

directly responsible. Pavonia was doing fine before GBIG acquired it. DIPS prohibited Lindberg

from doing the kind of affiliate transactions that caused the insolvency of the NC Insurers. Because

of that foresight Pavonia was saved from enduring the same fate as the NC Insurers. It is because

DIPS acted to prohibit affiliate transactions; it is not because of any actions of GBIG management.

Buyer stated in its prior filings that Pavonia is in healthy financial shape. The fact that

Pavonia' s healthy financial shape is being negatively impacted on an ongoing basis by the

excessive expenses charged to it by GBIG is in no way Independent' s fault. Independent is not

the cause of any delay in these proceedings and Independent is not the cause of the excessive

expenses being charged to Pavonia.

g. Independent has not defamed the members of GBIG's Management Team.

Independent has defamed no one, and the Buyer should cease reaching legal conclusions

and making threats, that are not based on fact, in an attempt to intimidate Independent, whom they

have called an "insubstantial startup". One notes with irony that Aspida, itself, is a startup, created

for the sole purpose of acquiring the stock of Pavonia. And, despite the protests suggesting

otherwise, it does not appear that Ares will become obligated to guarantee Pavonia's obligations

or performance, nor will it put Ares' assets at risk. As Independent has continued to assert,

Page 11 of26

Independent has raised valid concerns about complex, disparate, convoluted and intertwined facts

and circumstances, across multiple inter-related processes taking place, historically and to this day,

in parallel with each other. These processes and their actual, potential or perceived inter­

connections and inter-relationships are worthy of exploration and disclosure, and engaging in an

open and comprehensive dialogue about them is in the interests of policyholders, creditors, the

public and the insurance industry.

h. Clearly confidential and/or highly sensitive information is being improperly and

unethically used by Aspida as a diversion in these proceedings.

i. Confidential and/or highly sensitive information, erroneously sent to a former Eli

Global email address, was improperly and unethically forwarded to GBIG by Eli

Global and to Aspida by GBIG, and is being improperly and unethically used by

Aspida to distract this Court from the subject matter of these proceedings.

In the Aspida Response II, Buyer references, and makes misleading and/or inaccurate

statements in connection with, three categories of confidential and/or highly sensitive emails and

related documents, as follows: (i) documents marked on their face as "Strictly Private and

Confidential" from a commercial transaction between Independent and GBIG attempted in 2016

(the "Aborted GBIG-Envoy Deal"); (ii) an Independent Board of Directors presentation marked

"Proprietary and Confidential" (the "Confidential Independent Board Deck") which was

mistakenly sent by Independent to the prior Eli Global email address of Mr. George Luecke

("Luecke") and (iii) a "form-of' employment agreement also mistakenly sent to Luecke's prior Eli

Global email address (the "Form Employment Agreement"). The confidential emails and

documents related to the Aborted GBIG-Envoy Deal were plainly not intended for Aspida or for

anyone other than GBIG, and the confidential emails and documents related to the Independent

Page 12 of26

Board Deck and the Form-of Employment Agreement were plainly not intended for Eli Global,

GBIG, Aspida or anyone other than Luecke. Nonetheless, it appears that this information was

unethically shared with Aspida and Aspida, in turn, has used it in Aspida Response II for improper

purposes and in violation of ethical and professional norms. Regarding these items, Independent

sets forth below salient facts to clear up Aspida' s misleading and/or inaccurate statements in

connection therewith.

a. The Aborted GBIG-Envoy Deal

In mid-to-late 2016, Upchurch entered into confidential discussions with GBIG regarding

the Aborted GBIG-Envoy Deal, pursuant to which Independent and GBIG shared confidential

information with one another. Since Aspida now uses some of that confidential information in its

Aspida Response II, it stands to reason that Aspida came into possession of it through GBIG.

Disclosure of this information by GBIG and the subsequent use of this information by Aspida in

these proceedings is improper and unethical.

Aspida does not set forth any relevance to these proceedings of the Aborted GBIG-Envoy

Deal. Rather, Aspida appears to raise the information in a manner designed to mislead, divert and

distract the Court from the actual subject matter of these proceedings. While Independent does

not believe any further attention to this irrelevant matter is warranted, Independent offers to the

Court additional facts to clear up the inaccurate and misleading nature of Aspida' s arguments.

Upchurch decided not to pursue the transaction due to his concerns over matters he

discovered in due diligence, including but not limited to: (i) litigation involving Greg Lindberg

and (ii) the suspension of Southland National Insurance Corporation's certificate of authority to

transact insurance in the State of Florida. Upchurch's one time interest in working with GBIG,

Lindberg and Eli Global was put to rest once he learned of these and other issues. In fact, if

Page 13 of 26

anything is be taken away by the Court from Aspida's raising of this issue, it is that Upchurch's

concerns when he decided not to do business with GBIG, Lindberg and Eli Global have been

validated by all that has transpired since that time.

b. The Confidential Independent Board Deck

GBIG also improperly shared with Aspida the Confidential Independent Board Deck,

mistakenly sent to Luecke's prior Eli Global email address approximately one year after Luecke's

separation from GBIG. This information is both plainly confidential and irrelevant to the

proceedings before this Court. Eli Global's transfer of that confidential information to GBIG, and

GBIG' s subsequent transfer of that information to Aspida, and Aspida' s use of that confidential

information in the Aspida Response II, are all problematic and, indeed, unethical. Eli Global had

to know, when it shared the information, that it had been emailed by Independent in error since

Luecke had long left employment with GBIG and Eli Global. Further, Eli Global knew the

information was sensitive and not intended for its use, let alone further improper disclose to others.

Finally, Eli Global, GBIG and Aspida all knew - or should have known - that the Independent

Board Deck included matters completely outside of, and completely irrelevant to, these

proceedings. Following the initial filing of the Aspida Response II, Independent notified Ares

(Aspida' s parent) that Independent would sustain irreparable harm if said Confidential Board Deck

should ever become part of the public record and Ares agreed to retract it as an exhibit to its filing.

Independent demands that Aspida, Eli Global and GBIG cease and desist from any further

disclosure of the contents of the Confidential Independent Board Deck.

c. The Form Employment Agreement

Aspida points to an August 22, 2019 email from Upchurch to Luecke attaching a form

employment agreement and suggests that this email is proof of employment with Independent.

Page 14 of 26

Independent inadvertently emailed this communication to Luecke's former Eli Global email

address and, like the documents referred to in the prior section, it was ultimately delivered to

Aspida for its further improper, inappropriate and unprofessional use in these proceedings.

Independent points out that the Form Employment Agreement is just that, a form, which is full of

blanks, is unsigned, and does not contain Luecke' s name within it. Matters related to Luecke are

further addressed in the next section.

ii. Matters related to Luecke.

a. Matters related to Luecke's prior GBIG Involvement

The Buyer states in Aspida Response II as follows:

"A recent discovery belies Objector's "concerns" about the GBIG Management Team. The Court will be surprised to learn that George Luecke was a chief executive officer and a board chairperson of Global Bankers Insurance Group, LLC ("Global Bankers"). Buyer expects that Seller will confirm that Mr. Luecke was Co-CEO and Vice Chairman of the GBIG Management Team throughout the period when the North Carolina Insurer Affiliates engaged in the same Affiliate Investments that Objector now decries as some kind of evidence of the GBIG Management Team's improper behavior." Aspida Response II, P 3 of 7.

Aspida argues that Luecke's prior role with GBIG is comparable to the prior, and ongoing,

active management of GBIG and the NC Insurance Affiliates by the entire GBIG management

team. Stated simply, Aspida's argument in this regard can be summarized as "if we are bad, so

are they." Not only is this a blatant attempt to distract the Court from the subject matter of these

proceedings, it is a fatally flawed argument because it does not in any way support their cause that

the Plan, which GBIG and Aspida constructed, should be approved.

There are multiple reasons why the prior involvement of a single executiv~ is not, logically

and on its face, equivalent to the prior, and ongoing, involvement of an entire team of executives.

However, Independent assumes that the Court does not seek a lengthy debate on this topic,

Page 15 of 26

primarily because of the lack of relevance to these proceedings and the fact that neither Luecke or

his prior GBIG involvement is related to the Plan, which is the subject matter of these Court

proceedings.

Nonetheless, in an effort to provide the Court with some further clarity in as brief a fashion

as possible, Independent submits as follows: Luecke (i) has not been an employee of GBIG or any

affiliates thereof since October 12, 2018, (ii) spent the majority of 2017 and 2018 in Europe leading

the acquisition and oversight of three European insurance companies, (iii) spent a substantial

portion of 2018 launching a new portfolio, not part of GBIG, called Trifintis Group, (iv) was not

involved in the creation of the Plan, (v) is not a part of the Plan, and (vi) is not part of the Aspida

Form A process.

Since these proceedings, as Aspida well knows, involve the Court's authority to approve,

deny or amend the Plan, Independent will not further respond on this topic unless and until the

Court indicates that it would like Independent to do so. Independent will await the Court's further

instruction, if any, on this topic.

b. Matters related to Private Bankers Life & Annuity Co .• Ltd ("PBLA")

Aspida raises the MOU Amended Complaint and points out that the complaint was served

on Luecke on behalf of PBLA, a Bermuda entity. In this regard, Aspida has either not been

informed or is otherwise unaware of certain facts, principally that Luecke was not on the PBLA

Board at the time he was improperly served or, for that matter, at any time relevant to the claims

in the MOU Amended Complaint. To clear up the confusion created by Aspida on this topic,

Independent provides to the Court the following additional facts.

Luecke was served with the MOU Amended Complaint on or about October 28, 2019,

more than one full year after Luecke had left employment with GBIG and its affiliates on October

Page 16 of 26

12, 2018 (and had simultaneously resigned as a director of PBLA). Furthermore, while the MOU

Amended Complaint alleges actions by Greg Lindberg and his affiliates, including PBLA, all of

those alleged actions took place months after Luecke's resignation of his PBLA directorship. In

fact, the MOU itself, which is the subject matter of the MOU Amended Complaint, was entered

into on June 27, 2019, more than 8 months after Luecke left GBIG. Luecke was not a party to

the MOU, nor was he an employee of GBIG or any affiliate thereof nor a director of PBLA, during

any time relevant to the claims made in MOU Amended Complaint. Notwithstanding Luecke's

resignation of his directorship, unbeknownst to him until he was improperly served, his name

nonetheless continued to be listed in error as a director of PBLA on the Bermuda Registrar of

Companies ("BRoC").

Although Plaintiffs in the MOU Amended Complaint knew that Luecke was not a Director

at the time they filed the action, the Plaintiffs served him nonetheless. Immediately after being

improperly served, Luecke's legal representative communicated with Eli Global and Eli Global

acknowledged that it had taken steps to have his name removed from the BRoC. Since that time,

the Bermuda Monetary Authority has acknowledged that Luecke's directorship was in fact

terminated in early November of 2018, shortly after his GBIG departure date, and further stated

that GBIG and/or Eli Global did not provide the proper documentation and filing fee required to

remove his name from the BRoC.

Notably, not only was Luecke improperly served when Plaintiffs knew that he was no

longer a Director, the Certificate of Service reflects that none of the active directors of PBLA at

the time were served. The fact that the active directors were not served raises questions as to

whether the improper service on Luecke and/or the failure to remove Luecke' s name from the

BRoC was intentional. One of these active directors of PBLA, Mr. Paul Brown, was also (and may

Page 17 of 26

still be) an active executive employee of GBIG and the NC Insurance Affiliates. Because of, once

again, the intertwined nature of all of the parallel and complex processes surrounding the Plan and

the intertwined nature of GBIG and its affiliates with Eli Global and vice versa, Independent

reminds the Court that (i) Service Company is the management entity of the Plaintiffs in the MOU

Amended Complaint and (ii) the Plaintiffs in the MOU Amended Complaint are the same entities

as the NC Insurance Affiliates.

Mr. Brown was both a director of PBLA ( one of the Defendants in the MOU Amended

Complaint), and, it appears from public records, simultaneously an executive level employee of

GBIG and the NC Insurance Affiliates (the Plaintiffs in the MOU Amended Complaint) and

possibly even Eli Global, at the following key times, all of which are relevant to the MOU

Amended Complaint: (i) the date the MOU was entered into, (ii) the date the erroneous service on

Mr. Luecke was made, (iii) the dates that the MOU is alleged to have been breached, and (iv) to

Independent' s know ledge, current! y.

c. Historical relationship between Upchurch and Luecke

Aspida discusses the relationship between Upchurch and Luecke, suggesting that

Upchurch's relationship with Luecke is evidence that if Aspida is tainted, then so tainted is

Independent. In a further effort to distract the Court from the subject matter of these proceedings,

it appears to suggest that Independent had some obligation to disclose Upchurch's relationship

with Luecke and failed to do so. Independent had no such obligation. However, to clear up this

distraction, Independent submits to the Court the following additional background on this

relationship.

Upchurch and Luecke met in the 2013 timeframe, when Upchurch was seeking to launch

a life insurer called Envoy (Independent's predecessor) and Luecke was an executive at a publicly

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---- ----~-----··------

traded re/insurer, whose duties included overseeing strategic investments. After entering into an

evaluation of a potential transaction, they determined there was not a strong enough strategic fit to

proceed. Nonetheless, Luecke strongly supported the unique purpose of Envoy/Upchurch (i.e., a

mission and passion for serving the needs of the seriously injured, placing the interests of this

protected group at the forefront). As a result of his belief in Envoy's/Upchurch' s mission, Luecke

continued to support them by making referrals to potential investors and reinsurers. When Luecke

became employed in May 2016 as CEO of Eli Global's at-the-time fledgling insurance business,

he re-engaged with Upchurch because of the potential asset/liability fit. As the emails in the

Aspida Response II and Section h i. a. I above indicate, the potential deal fell through because of

certain concerns on the part of Mr. Upchurch.

Following Luecke's departure from GBIG in October of 2018, Upchurch reached out to

Luecke to discuss how they might partner. This was well before Independent knew or could have

known that Aspida was pursuing the purchase of Pavonia. At the time, Luecke declined to discuss

partnering with Upchurch as he was under a non-compete. Following the expiration of the

noncompete, Luecke and Upchurch resumed discussions and Independent and Luecke ultimately

entered into a broad consulting arrangement, further described below.

Luecke is not an employee of Independent and his consulting for Independent has not been

principally nor exclusively in connection with Pavonia. Rather, Luecke is an independent

consultant, consulting on all aspects of Independent' s business. From the outset of the consulting

arrangement, leveraging a multi-disciplinary background, his consulting activities have spanned

Independent's overall business including strategy, planning, ratings, capital, operations,

distribution, and corporate development/M&A. Prior to entering into this consulting arrangement,

Independent conducted extensive research on Luecke's background and determined that his prior

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industry experience would help Independent in ways completely unrelated to the Pavonia

transaction. Luecke decided to consult for Independent because of (i) his long-standing

relationship with Upchurch, (ii) his strong personal belief in the causes that both Upchurch and

Independent serve (i.e., exclusively focused on helping the seriously injured, with their interests

at the forefront), and (iii) the chance to utilize his extensive insurance experience to help

Independent progress in its efforts to bring positive, long-awaited and much-needed change to the

structured settlement industry.

Given the above facts, including the broad nature of Luecke's consulting relationship with

Independent, Independent had no prior reason nor obligation to advise the Court about its

relationship with Luecke.

Independent reiterates that the subject matter of these proceedings is the Court's review of

the Plan to determine whether the Plan is the "fair and equitable" to Pavonia' s policyholders,

creditors and the public. To reiterate, Luecke (i) is not an employee of Independent, (i) is not part

of the GBIG management team, (iii) was not involved in the creation of, and is not part of, the

Plan, (iv) is not part of the Aspida Form A and (v) is broadly consulting for Independent across all

aspects of its business.

i. Independent is not "off-base" in suggesting that key stakeholders, including the MI­

DIFSMI-DIFS, may not have appreciated the totality of the circumstances

surrounding the Plan.

Independent points out to the Court that the Rehabilitator has now acknowledged that

Independent has provided information that is outside of the typical scope of the Form A review

requirements. In addition, the Rehabilitator has further acknowledged that this information is

relevant to their Form A Review and that it will review in detail all filings and supporting

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····-······-··--·-·-··-·----···············-·---------·----------------

information provided by Independent. The Rehabilitator specifically lists several such items in

the Rehabilitator's Further Response. In addition, even if the MI-DIPS had a full appreciation for

the totality of the circumstances surrounding the Plan, Independent points out that there are other

key stakeholders who did not, such as this Court.

j. Independent believes that Mr. Buttner has the expertise and standing for his

affidavit to carry evidentiary weight with this Court.

Since the Buttner Affidavit(s) were filed many weeks ago, Independent does not

understand why Buyer is raising this issue now. Mr. Buttner is an insurance industry expert who

provided his affidavits based on observable public facts. Despite not having complete access to

the books and records upon which he was commenting, his conclusions have been validated since

his affidavits were filed and we believe they continue to provide assistance to this Court. If the

Court requires anything further from Mr. Buttner, Independent expects that Mr. Buttner will be

able to provide it.

k. Matters related to the $270 million Loan from an Ares affiliate to a Lindberg

affiliate.

In its initial response, Ares described its lending to Lindberg non-insurance affiliates as

immaterial and comprising less than 1% of its assets under management. Independent' s response

questioned whether this was the case and whether said loans were material to the Lindberg non­

insurance affiliates. Independent' s subsequent research revealed a specific loan from an Ares

affiliate to a Lindberg non-insurance affiliate, the $270 million loan to Academy Holdings, LLC

Independent' s supplemental filing further informed the Court that the loan was one of Ares' top

10 largest loan relationships and comprised over 2% of the portfolio of the Ares affiliate that

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---------- ····---·------··----

provided the loan. These loans also comprised over 30% of the non-insurance company loans then

outstanding to Lindberg's non-insurance affiliates.

In the Aspida Response I, Aspida now touts the "public disclosures" of the loans between

Ares and the Lindberg affiliated companies (page 2). This argument misses the mark because it

was not disclosed in these proceedings to the Court and Ares did not disclose in the public filings

it cites that Academy Holdings was an affiliate of Greg Lindberg and GBIG. The fact that an Ares

affiliate lent substantial funds to an affiliate of Lindberg and GBIG was only learned by

Independent when the MOU Amended Complaint was unsealed, just days before the January 16,

2019 hearing before this Court. Independent pieced together the existence of this loan by

performing research on the Lindberg-affiliated companies detailed in the unsealed MOU Amended

Complaint. At said hearing as well as in its prior filings, one of the concerns raised by Independent

has been the lack of disclosure and transparency and/or the often-opaque nature of disclosures that

are made in various unconnected places. Based on Aspida Response I and the Rehabilitator' s

Further Response, both organizations state that they knew about this $270 million affiliated loan

and elected not to mention it despite the direct questions about disclosure by [Judge] Stokes.

In an effort to minimize the impact of this previously undisclosed loan, Aspida has now

disclosed that these loans were all paid off by an unnamed new lender. This is noteworthy because,

according to the MOU Amended Complaint, the NC Rehabilitator is suing Lindberg alleging that

he has been in default on loans owed to the NC Insurance Affiliates for some time, and Lindberg

has claimed that he cannot find new lenders to replace said loans. Yet, per the new information

provided by Ares, the $270 million loan by the Ares affiliate to the Lindberg affiliate was

apparently re-financed at some point after March 31, 2019 but before the announcement by Ares

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---·-------------·---·---·------ -------------------------------

that Aspida was to be acquiring Pavonia. Additional disclosure on the repayment of these loans is

warranted.

III. CONSIDERATION OF MEDIATION

Since June of 2019, Independent has attempted to engage with MI-DIFS, the NC-DOI,

Ares and Global Bankers Insurance GBIG Holdings to discuss the acquisition of Pavonia. MI­

DIFS, NC-DOI, Ares, and GBIG are referred to collectively as the "Other Parties." The Other

Parties, together with Independent, are referred to as the "Parties."

Independent had made its desires to acquire Pavonia known to each of the Other Parties

before Pavonia was placed into rehabilitation. For all practical purposes, Independent' s many

attempts to proactively engage in constructive dialogue with the Other Parties for the acquisition

of Pavonia have been categorically rejected.

Right after Independent learned Pavonia had been placed in rehabilitation, MI-DIFS

specifically told Independent that if it wanted its interest in Pavonia to be considered by the Other

Parties, it would have to formally object via the Rehabilitation Plan objection process established

by the Ingram county court. As the Court knows, Independent has objected as directed yet

continues to be criticized by the Other Parties for doing so, including by being told in public filings

that Independent is "abusing" the objection process. Independent points out that even after the start

of the objection process, it continued to communicate, or attempt to communicate, with the Other

Parties to explore mutually acceptable solutions. To date, these efforts have been rebuffed by all

parties.

In keeping with the spirit of its ongoing attempts to communicate with the Other Parties

and its willingness to dialogue around mutually acceptable solutions, Independent suggests that

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mediation offers a possible solution the Court may want to recommend and in which Independent

is willing to participate.

The Circuit Court Rehabilitation proceeding is a civil action in Michigan, to which case

code "CR" is assigned, which falls under the Supreme Court ordered case code listing under the

category "Other Civil Matters" as a "Corporate Receivership". Thus, it is clear that this matter is

"civil". See: https://courts.michigan.gov/ Administration/SCAO/Resources/Documents/standards/

cf casetypecodes.pdf.

Michigan Court Rule (MCR) 2.410(A)(l) states flatly:

" (1) All civil cases are subject to alternative dispute resolution processes unless

otherwise provided by statute or court rule."

There are some qualifications within the court rule, including the ability of a party to oppose

mediation:

"Objections to ADR. Within 14 days of after entry of an order referring a case to

an ADR process, a party may move to set aside or modify the order. A timely

motion must be decided before the case is submitted to the ADR process."

2.410(D) See, generally, MCR 2.410 https://michigancourtrules.org/mcr/chapter-

2-civil-procedure/rule-2-410-alternative-dispute-resolution/

MCR 2.411 addresses mediation in specific, noting that a mediator has no power of decision.

Reference to the Michigan Insurance Code discloses no provision that would "otherwise provide"

to overcome the " ( a)ll civil cases" applicability of the MCR 2.410.

Page 24 of 26

----- --·---· ----- ------------------------------·- ----······--·------·-----~-~

IV. INDEPENDENT'S PRAYER FOR RELIEF

WHEREFORE, Independent respectfully prays that this Court enter an Order:

1. Providing Independent with timely access to due diligence information on Pavonia

sufficient to enable Independent to submit its proposal for the acquisition of Pavonia.

2. Allowing Independent to submit a proposal for the acquisition of Pavonia.

3. Scheduling a hearing to determine what, if any, portions of the conference between DIFS

and the Court will be in camera.

4. Allowing Independent, subject to confidentiality, to attend and participate in any judicial

conferences regarding the Rehabilitation of Pavonia.

5. Ordering a mediation to resolve the issue raised with the Plan, with all of the Parties as

participants.

FRASER TREBILCOCK DA VIS & ADAMS AND REESE LLP DUNLAPP. .

__,~-+-\,-,ld4t-2l-By: =.,,,=..-----­Jonat Michi · raven@ serlaw irm.com tim. volpe@arlaw.com 124 W. Alleg treet, Suite 1000 501 Riverside Avenue, Suite 601 Lansing, MI 48933 Jacksonville, FL 32202 Telephone: (517) 377-0816 Telephone: (904) 355-1700 Facsimile: (517) 913-6111 Facsimile: (904) 355-1797

Page 25 of 26

CERTIFICATE OF SERVICE

I hereby certify that on the 18th day of February, 2020, a true and correct copy of the

foregoing was served via hand delivery upon:

Clerk of the Court Ingham County Circuit Court 341 South Jefferson Street Mason, MI 48854

and via e-mail and U.S. First Class Mail upon:

Christopher L. Kerr / James Long Department of Attorney General Corporate Oversight Division P.O. Box 30736 Lansing, MI 48909

Ryan Shannon Dickinson Wright 215 S. Washington Square, Suite 200 Lansing, MI 48933

Lori McAllister Dykema 201 Townsend Street, Suite 900 Lansing, MI 48933

Hon. Wanda M. Stokes Ingham County Circuit Court 341 South Jefferson Street Mason, MI 48854

Ellen M. Dunn Sidley Austin LLP 787 Seventh A venue New York, NY 10019

Stephen Schwab DLA Piper LLP 444 West Lake Street Suite 900 Chicago, IL 60606

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