DamageConseco, which has over 14,000 employees, stands to default on over $4 billion of debt at its holding company. State insurance regulators will now scramble to gauge the health of Conseco's insurance subsidiaries to determine whether bailouts are necessary.
Tale of Two BossesConseco's terrible tale divides into two chapters: the two-year Wendt era and, before that, the 20-year reign of Stephen Hilbert. Wendt took over as CEO in June 2000, soon after the departure of Hilbert, a brash ex-encyclopedia salesman who founded the company in 1979 with, according to company lore, a $10,000 loan from his father. Hilbert took a good idea -- targeting the working class for life insurance products -- and built an industry giant. But he did this chiefly through acquisitions, a strategy that allowed for loose accounting and one that made it easier to disguise operating problems. By continuously buying other insurance companies and, of course, their policies, Conseco was able to show much lower expenses than if it had written the policies itself.
Divorce CourtIn came Wendt, who at that point was a legend in American business. He was credited with building GE Capital into a financial services juggernaut and was seen as one the nation's toughest and most skillful deal-makers. Bowled over by this reputation, Conseco immediately gave Wendt a Hilbertesque $45 million check -- just for signing on.
Pitcher With a FaceThose who did quaff on the Jim Jones Special Brew were soon rudely greeted by even sharper deterioration in credit quality at Green Tree, renamed Conseco Finance. And credit problems were in fact worse than public numbers stated, skeptics surmised. Along those lines, TheStreet.com reported often on tactics Conseco was using to stem bad loan growth. One