I hope everybody caught Peter Eavis' recent article on the severance packages awarded to parting Conseco (CNC) - Get Report execs Stephen Hilbert and Rollin Dick. I especially liked the part where Conseco's board decreed that $23 million recently fronted Hilbert to cover margin calls would be "deducted" from his severance package. But a bigger question remains: What about the $162.5 million he still owes on the purchase of Conseco stock over the years?

As it turns out, Hilbert's severance agreement contained a codicil to the effect that Conseco would "continue to treat Mr. Hilbert as though he were an employee/participant for purposes of the Purchase Plans." The result, according to Conseco, is that "all of

Hilbert's loans relating to such plans remain outstanding."

But before you think that justice has been served, realize that while terms like "full recourse" and "fully collateralized" may seem ironclad when applied to you, they can be remarkably ephemeral in the hands of a corporate board of directors. Don't believe me? Consider the $4.2 million loaned by


(MAT) - Get Report

in 1997 to spare then-CEO Jill Barad the temptation of cashing in her just-vested restricted stock. When Barad recently stepped down, that loan was -- you guessed it -- forgiven.

Now, it's difficult to argue against the virtues of executives maintaining ownership stakes in the companies they run. Nor am I implying that most of these loans aren't eventually repaid (though this, too, might make for an interesting study). What I am saying is that I would personally prefer that executives put up their own funds when buying stock. Which brings me to my second warning:

All insider buys are not created equal!

Any investor who bases his decisions on purely quantitative tabulations of insider activity does so at his own peril. Unfortunately, companies with executive-loan programs and/or executive-ownership guidelines invariably float to the top of the lists for insider accumulation. To make matters worse, financial reporters are among the most faithful users of such screens. After all, they're easy to use, and insider-trading data has long been considered a useful tool. I cannot tell you how many calls I have fielded over the years regarding the insider buying "support" at Conseco.

Of course, even as inquiries about Conseco have recently taken a nosedive, others have cropped up in their place, sparked by the recent insider buying (funded in part by company loans) at


(HRC) - Get Report



(AZO) - Get Report

. Sure, the activity at both looks impressive, and who's to say that both stocks don't have brilliant futures. After all, the executives are paying interest, and sooner or later, they'll be required to pay the money back.

Maybe, but I'd still prefer to see the money upfront. If Conseco has taught me anything, it's to wait to believe insider buying until I see executives with their own skin in the game. I'm all for insider ownership, but when it comes to loans, you never know what could happen. Toss in a roughly negotiated severance package, a change of control, or (God forbid) a Chapter 11, and it's amazing how these things slip through your hands. Even with the best of intentions.

Bob Gabele has been tracking and analyzing insider trading since 1978, most recently for First Call/Thomson Financial. This column is not meant as investment advice; it is instead meant to provide insight into the methods of insider trading. At time of publication, Gabele held no position in any of the companies discussed in this column, although holdings can change at any time.

As originally published, this story contained an error. Please see

Corrections and Clarifications. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Gabele appreciates your feedback at