The Securities and Exchange Commission said a former CFO and a former chief accounting officer were responsible for a fraudulent scheme to overstate earnings by “hundreds of millions of dollars” at a former subsidiary of Conseco.
The charges came in a settlement announced Wednesday by the SEC. Conseco did not admit or deny the findings and consented to the entry of a cease and desist order.
In a press release announcing the settlement, Conseco made no mention of the two executives, former CFO Rollin Dick and former treasurer and chief accounting officer James Adams, or their role in the scheme.
Throughout fiscal 1999, Conseco and its wholly-owned subsidiary Conseco Finance — formerly called Green Tree Financial — made “materially false and misleading statements” resulting in an overstatement of “hundreds of millions of dollars,” the SEC charged.
The overstatement occurred mainly because former “conducted a fraudulent accounting scheme to avoid writing down the value of certain securities held by Conseco Finance and the resulting charges to earnings,” according to the commission. The SEC is referring to the way the company accounted for its interest-only securities and servicing rights.
Further, in each quarter of 1999, Dick and Adams made a number of unsupported and improper adjustments to the financials of Conseco and Conseco Finance in order to boost earnings, the SEC added.
Dick signed each of Conseco and Conseco Finance’s quarterly reports during 1999, while Adams prepared Conseco and Conseco Finance’s financial statements during the same period, according to the SEC.
As of yesterday, the Associated Press hadn’t received comment it requested from the office of Dick’s attorney. Carmel could not be reached by the news service.
The settlement does not impose any fine or monetary penalty, and does not require any restatement of Conseco’s financial statements.
The alleged incidents took place before Conseco’s 1998 purchase of Green Tree for $6 billion, which was widely cited as the major reason Conseco filed for bankruptcy in December 2002. Conseco sold Conseco Finance early last year and emerged from bankruptcy last September.
These issues were among those addressed in the write-down and restatement by Conseco’s predecessor in the spring of 2000 and were the subject of shareholder class-action litigation, which was settled in the second quarter of 2003.
A separate investigation led by the SEC and New York Attorney General Eliot Spitzer into annuities trading is ongoing, a Conseco spokesman told Reuters Wednesday. Those inquiries, announced in late January, came amid a larger investigation of market-timing issues in the mutual fund industry, the wire service added.