Two pension funds have filed a lawsuit
accusing Conseco Inc. of falsifying financial records to inflate
The lawsuit, which seeks class-action status, claims investors
lost millions of dollars because of the alleged scheme, whereby the
company manipulated loan records to lower its loan delinquency
rates. They scheme, the lawsuit says, was orchestrated by Steve
Hilbert, Conseco's former chief executive officer.
Conseco's new CEO said the allegations, made against former
executives, are "wild" and unsupported by the facts.
The lawsuit, originally filed last year, was amended last week.
It was filed by the Anchorage Police and Fire Retirement System and
the State of Louisiana Firefighters' Retirement System.
Because of that manipulation, the lawsuit alleges, investors
were mislead by false company information into buying Conseco
securities at "artificially inflated prices."
Conseco offered investors $2.3 billion in securities between
April 1999 and April 2000 that were derived from loans made to U.S.
consumers by Conseco Finance. The Conseco unit consists largely of
the former Green Tree Financial Corp., a lender Conseco bought for
The lawsuit says that during 1999 and early 2000 executives
directed collection officers at Conseco Finance's Tempe, Ariz.,
office to change the delinquencies on accounts a process called
"re-aging" in order to reach a predetermined percentage.
Hilbert traveled to Tempe to "oversee the doctoring of accounts
as they were being changed on Conseco's computer screens. ... The
're-aging' process would take place during the last seven days of
each month and often become around-the-clock efforts during the
final two days," the lawsuit states.
Hilbert and chief financial officer Rollin M. Dick, who also is
named in the lawsuit, resigned in April after consistent financial
troubles at Conseco, whose stock dropped to less than one-tenth of
its high in 1998.
A statement Wednesday from Conseco Chief Executive Officer Gary
Wendt, a former GE executive who was named in June to succeed
Hilbert, said the lawsuit was one of the last legacy issues from
Wendt said the allegations "are so wild as to be, literally,
The lawsuit claims Hilbert personally directed the alleged
manipulation, but Conseco spokesman Mark Lubbers said the company's
collections manager in Tempe denies ever meeting Hilbert.
The lawsuit alleges investors suffered loses in five securities,
only one of which trades regularly. That trust-preferred security
closed Wednesday at $19.65. Its 52-week high is $22.25.
The lawsuit does not specify a damage amount. Daniel Berger, the
lead lawyer for the plaintiffs, did not return a phone message to
his New York office Wednesday.
Hilbert did not return a message seeking comment.
Conseco's stock fell as low as $4.50 per share last year. The
stock price has since rebounded, reaching $18.60 last month and
closing Wednesday at $14.20.
The company has sold five of Conseco Finance's eight units in
recent months to restructure the troubled division, Lubbers said.
"We now have a company that produces cash for the parent and
with much slower growth produces very handsome earnings growth,"