Human Capital & Careers

Former Conseco Head Loses Loan Appeal

Hilbert is ordered to return $62.7 million, plus interest, to Conseco
Stephen TaubNovember 11, 2005

Conseco founder Stephen Hilbert has lost another attempt to keep the roughly $72 million he borrowed (including interest) from the insurance company.

The Indiana Court of Appeals upheld a lower court’s decision requiring Hilbert to pay back the money he used to buy Conseco stock during the late 1990s, before the company plunged into bankruptcy, according to The Indianapolis Star.

Hilbert’s spokeswoman told the paper that he plans to appeal the decision to the Indiana Supreme Court. In October 2004, a lower court judge had ordered Hilbert and his family trusts to return $62.7 million, plus interest, to Conseco Services, a Conseco subsidiary.

In 2003, the company filed lawsuits seeking to recover a total of $670 million in stock-related loans from Hilbert, who left the company in 2000, and 10 other former directors and officers. Hilbert has repaid little of the more than $240 million in principal and interest he allegedly owes, according to the Star.

Back in the bubble years of the late 1990s it was not unusual for top executives to borrow money from their companies and use it to invest in their companies’ stock. But Hilbert and others wound up getting burned. The Sarbanes-Oxley Act ultimately disallowed this practice. More than 150 employees participated in Conseco’s program, which began in 1996, according to the Star.

Hilbert had won a stay of the judge’s 2004 decision while he appealed, said the report. But, under that arrangement, he agreed to relinquish his 25,000-square-foot French-style Carmel, Indiana, mansion to Conseco. The company also auctioned off most of his household possessions and has hired real-estate brokers to sell the house. Funds from the auction were placed in an escrow account.

Hilbert has 30 days to ask the Indiana Supreme Court to hear his case, according to the report. He also moved to extend the stay.

Reed Oslan, an attorney for Conseco, told the paper that “the opinion confirms what Conseco has always believed, which is that it is on the right track and that its collection efforts will be successful.”

Meanwhile, another former Conseco executive agreed to settle a similar case two days after the Hilbert ruling. Ngaire E. Cuneo and her husband Richard reached a settlement, but the terms were not disclosed, noted the Star, so it is not known whether the couple can keep their $10.2 million Florida mansion they bought in 2004.

Conseco officials claimed that Ngaire Cuneo, a former director and executive vice president, owed the company more than $65 million in unpaid loans and interest. Working Woman magazine named Cuneo as one of the highest-paid female executives in the United States, reported the Star.