Conseco Collapse Deals New Blow to CEO Cult

Big Talk

A good turnaround artist will come clean with investors and recognize reality. Even if the stock tanks, creditors know they are working with a trustworthy person who has a viable recovery plan. It's impossible to say that about Wendt. Soon after joining, he said Conseco would make as much as $3.30 per share by 2004, even though the company ended up reporting a net loss of $3.69 in 2000.

Plus, the earnings releases Conseco published under Wendt were deeply misleading, with all sorts of negative operating items removed from what management considered core earnings. And the practice of lending down the credit ladder meant loans made under Wendt went bad a lot faster than those made by the previous management over equivalent time periods.

This deterioration led Wendt's managers to go to apparently dubious lengths to post improved bad loan numbers. Conseco loan collectors told TheStreet.com that their bosses had pressed them to allow troubled borrowers to skip payments and have their loans restructured. "Our managers were most concerned about reducing loans that were more than 60 to 90 days past due, so that they didn't get into numbers reported to Wall Street," a sickened ex-Conseco employee said at the time.

Finally, there is Wendt's pay. He got $45 million in cash, in addition to options and restricted stock, when he came on board, and an added $8 million bonus this year, when Conseco was breathing its last. That's $53 million that Conseco could've used to pay off its debt. Moreover, a good turnaround artist would eschew large cash payments till the company is on an even keel. Sure, Wendt had a hard job when he came on board, but he himself impeded the recovery. Is it any surprise investors now wonder what skeletons are lurking in GE Capital's closet?