The inevitable bloodletting has begun at Conseco Inc., the beleaguered insurance and consumer-finance company. CEO Stephen Hilbert and CFO Rollin Dick got the ax, and David Harkins, president of buyout firm Thomas H. Lee Partners, which invested $500 million in Conseco last fall, is taking over as interim CEO. "It became clear that Rollin's and my ability to engender investor confidence was impaired," said Hilbert in a statement. Some of the confidence issues stem from the pair's own investment problems from a company stock purchase plan that has left them owing about $200 million in principal and interest.
Hilbert's and Dick's financial problems reflect a stock collapse. Conseco's price has fallen from $57 to $5 in the past two years. The nosedive began when Hilbert made the controversial $6 billion acquisition of specialty lender Greentree Financial in 1998. Not only did Conseco underestimate the amount of capital needed to fund the business, but it was also forced to write off more than $500 million in earnings at Greentree because of aggressive accounting practices. "They bought something they didn't understand," says Colin Devine, an analyst with Salomon Smith Barney Inc.
On March 31, the company decided it would sell the unit and refocus on its insurance business. The about-face has sparked shareholder lawsuits against the company, and both Moody's and Standard & Poor's have recently lowered their ratings on Conseco senior debt below investment grade.
Meanwhile, Hilbert received a $73 million severance package; Dick should get about five times his salary and bonus, or around $20 million.