HeadlinersWhy care about how much Wendt is to blame? Because so often investors hitch their wagons to star CEOs conducting turnarounds, only to see their investments wilt when the corporate messiah fails to follow through. Take a look at what's going on right now at Tyco ( TYC). There, ex- Motorola executive Ed Breen is trying to rescue the wheezing debt-laden conglomerate, but many skeptics don't believe he can do it, despite a sharp run-up in the stock. The hopes built into Wendt were similarly ardent. Conseco's stock soared to over $20 from under $5 in the months after the executive came on board. It now trades for pennies.
Great ExpectationsSo what should Wendt have done? Seeing as a burdensome debt level was the main problem for Conseco, surely Wendt would've got leverage down a lot. But he didn't. While he did manage to get Conseco's bank creditors to cut some slack, the debt and debt-like securities held at the Conseco parent barely dropped. (Conseco also has debt and other liabilities in its lending and insurance subsidiaries, but because these are tied to assets, it is assumed that holders of this credit are likely to get their money back.) In June 2000, just as Wendt joined, Conseco had debt of $3.63 billion and debt-like securities of $2.4 billion, for a total of $6.03 billion. In June 2002, it had debt of $4.01 billion and debt-like holdings of $1.92 billion, for a total of $5.93 billion. If you add in investment borrowings to this calculation, the 2002 total is actually slightly higher. And if "other liabilities" are included, the 2002 amount is way in excess of the two-years-earlier figure. Whichever way you slice it, Wendt did not oversee a big drop in liabilities. Wouldn't Wendt have restructured Conseco by sharply cutting back in troubled businesses? One would think. But its bad-debt-ridden mobile-home loan business hardly shrunk. At the end of June 2002, it had average loans of $24.8 billion, only 3% below the June 2000 total. In fact, under Wendt, Conseco actually increased lending to people of rock-bottom creditworthiness by writing loans on repossessed mobile homes.