U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19756 / July 7, 2006
SEC v. Rollin M. Dick and James S. Adams, United States District Court for the Southern District of Indiana, Civil Action No. 01:04-CV-0457-SEB-VSS
Accounting and Auditing Enforcement Release No. 2458 / July 7, 2006
Court Enters Final Judgments Against Former Chief Financial Officer and Chief Accounting Officer of Conseco, Inc. and Conseco Finance Corporation
The Securities and Exchange Commission announced that on July 3, 2006, United States District Judge Sarah Evans Barker entered final judgments against Rollin M. Dick and James S. Adams, respectively, the former Chief Financial Officer and Chief Accounting Officer of Carmel, Indiana based Conseco, Inc. and its then wholly owned subsidiary, Conseco Finance Corporation. The judgments imposed permanent injunctions prohibiting Dick and Adams from violating Section 17(a) of the Securities Act of 1933, Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934, and Rules 10b-5, 13b2-1 and 13b2-2 promulgated thereunder, and from aiding and abetting violations of Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act, and Rules 10b-5, 12b-20, and 13a-13 promulgated thereunder. In addition, the judgments barred Dick and Adams for a period of five years from acting as an officer or director of a publicly held company, and imposed a civil penalty against Dick in the amount of $110,000 and a civil penalty against Adams in the amount of $90,000. Dick and Adams consented to the entry of the judgments without admitting or denying the allegations of the compliant filed against them.
In its complaint against Dick and Adams, the Commission alleged that from March 1999 through February 2000, Conseco and Conseco Finance made false and misleading statements about their earnings in filings made with the Commission and in public statements announcing their earnings, overstating their results by hundreds of millions of dollars. The complaint alleged that this massive overstatement occurred because Dick and Adams conducted a fraudulent scheme to avoid huge write downs, and corresponding charges to earnings, of certain assets held by Conseco Finance known as interest-only securities. The complaint alleged that Dick and Adams avoided these write downs through the use of improper accounting techniques in violation of United States Generally Accepted Accounting Principles. In addition, the complaint alleged that Dick and Adams made a number of unsupported and improper adjustments to the books and records of their companies at the end of the first three quarters of 1999 to further inflate Conseco and Conseco Finance's earnings for these quarters in order to meet Wall Street analysts' consensus earnings targets, and that as a result of their activities, Dick and Adams violated the antifraud provisions of the federal securities laws and aided and abetted Conseco and Conseco Finance's violations of the reporting, record keeping and internal controls provisions.
For further information see Litigation Release No. 18621 (March 21, 2004); Matter of Conseco Inc., Release No. 34-49392 (March 10, 2004).