|In April of 2000, Stephen Hilbert was forced out as CEO of manufactured housing lender Conseco Inc. after the company ran up staggering debts of $8.2 billion.
Conseco is now trying to get some of that money back.
The Indianapolis-based financial firm, which only recently emerged from the third largest corporate bankruptcy in U.S. history, has gone to Indiana state court in an attempt to recover nearly $220 million the company says Hilbert owes.
Conseco has filed two suits against Hilbert, said Chicago lawyer Reed S. Oslan, who is representing the company.
In one suit, Conseco is seeking to foreclose on Hilbert's 23,000-square foot mansion in the affluent Indianapolis suburb of Carmel.
In an interview, Oslan said Conseco holds the $19.4 million mortgage on the home and is foreclosing in an attempt to collect $62 million in loans and interest Hilbert borrowed to buy Conseco stock.
Hilbert missed a $10 million interest payment due last year, opening the door for the foreclosure, Oslan said.
The lawsuits also accuse Hilbert of trying to hide assets by transferring cash to his wife and others, Oslan said.
Conseco is also pursuing the alleged fraudulent "transfer of money to his wife and a bunch of other people," he said. "He put a bunch of money in her name. We ask the court for an injunction to preclude him from transferring" more assets.
"We know exactly where everything is right now so we can snag it," he said.
In a separate suit, Conseco is going after another $155 million Hilbert borrowed.
Of money he borrowed, Hilbert has only paid back about $7 million in principal, Oslan said.
Hilbert's lawyer, David H. Kleiman of Indianapolis, said in a statement that the lawsuits are "nothing more than a far-reaching attempt by Conseco to use intimidation as a means to obfuscate what remains very clear and unequivocal language contained in agreements between Mr. Hilbert and Conseco."
Oslan said Conseco did try to negotiate a settlement with Hilbert, but the offers he made were not even close to what the company is seeking.
"He gave us no choice," Oslan said. "He owes us close to $218 million. Apparently he wants to go the litigation route."
Hilbert actually sued Conseco Sept. 15, claiming he didn't owe the entire amount because the company has a new board of directors and management.
Conseco fired back with the two suits aimed at Hilbert.
Conseco is trying to recover more than $500 million in lent to Hilbert and other officers under a corporate loan program that has since been banned by federal legislation, Oslan said.
Conseco, one of the largest originators of manufactured housing loans and a major home equity and home mortgage lender, had assets of $52.2 billion when it filed chapter 11 bankruptcy in December of 2002. Only WorldCom ($107 billion) and Enron Corp. ($63.4 billion) had more assets than Conseco at the time of their bankruptcy filings.
According to a story posted in September of 2001 by TheStreet.com, a financial news Web site, Conseco was also hiding bad loans.
Quoting former Conseco employees, TheStreet.com reported that the company held down loan losses by allowing delinquent borrowers to defer mobile-home loan repayments. The skipped payments were added to the principal and then booked as current, the web site reported.
Conseco called the charges "tiresome and wrong" and issued a lengthy response to the TheStreet.com's article.
Conseco got into financial trouble in 1998 when, under Hilbert's leadership, it purchased Green Tree Financial Corp. for a staggering $6.4 billion. The purchase came at about the same time as trouble in the subprime market hurt Conseco's operations, helping to eventually send the company into bankruptcy.