A judge has ordered former Conseco Inc. chief executive Steve Hilbert and his family trusts to return $62.7 million plus interest to Conseco Services, a Conseco subsidiary, according to the Associated Press.
Last year, 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, according to AP. Such loans are now prohibited under Sarbanes-Oxley, which was passed in 2002.
The refund is reportedly the amount of interest owed on $162 million that the Conseco co-founder and his family trusts borrowed to buy shares of the insurer.
Conseco had filed for Chapter 11 in 2002, crumbling under the weight of some $6.5 billion in debt. Before it emerged from bankruptcy in September 2003, the company said that nearly 300 employees did not need to repay the money they borrowed from it. At that time, however, the company also promised to retrieve the debt owed by Hilbert and the 10 other directors and officers, the AP elaborated.
The court ruling also permits the company to foreclose on Hilbert 25,000-square-foot French-style Carmel, Ind. mansion. If the judge’s ruling stands, the mansion would be auctioned off in a sheriff’s sale, according to the wire service. Conseco Services reportedly holds one of the home’s mortgages for $19.4 million.
“While I am obviously disappointed in the decisions, I remain confident in our arguments as presented in court,” Hilbert said in a press release. “My lawyers are drafting an appeal and will be filing it as soon as possible.”
David Kleiman of Dann Pecar, one of two lead attorneys, added in the press release: “Our case is sound and we believe we have compelling arguments that the loans in question should be drastically reduced, if not eliminated entirely.”
The judge’s ruling seems likely to embolden the growing number of companies, boards, and shareholders currently seeking the refunds of bonuses made to former executives whose companies later were forced to restate their results because accounting irregularities during the executives’ tenure.
One recent example of a company seeking refunds from former officials is Nortel Networks. Other companies, like Coca-Cola and Dynegy, have successfully scaled back severance payments to former executives.