Conseco bankruptcy may spur regulatory change.

The bankruptcy of Conseco Inc.--coming on the heels of the high-profile bankruptcies of Enron Corp. and WorldCom Inc. and heightened concern about corporate governance--might be the impetus for legislative and regulatory change, according to a financial expert.

The corporate-governance issue isn't going to come off the front burner, said Morris Reid, managing director with West-in Rinehart, a consultant service to the financial industry.

"There's a lot of thinking in Washington that the worst of the worst is behind us, but with this new bankruptcy, the incoming chairman of the banking committee--Sen. Richard Shelby, R-Alabama--has an opportunity to really focus in on some of the trouble spots," Reid said.

No one really thought that insurance companies would be the next big thing, Reid said. But the real issue is what's going on with Conseco and the fact that it did the same things that the others were doing: made large loans to corporate directors and officers without any real checks and balances, he said.

Conseco, which filed for bankruptcy protection Dec. 17, said the bankruptcy court issued an interim order that helped the company preserve its net operating losses and outlined reporting requirements for equity holders.

The order by the U.S. Bankruptcy Court for the Northern District of Illinois prohibited certain transfers of equity interests in the company without Conseco's consent, Conseco said.

Federal and state legislators must decide what the appropriate transparency and disclosure is going to be and how Washington can force the hand of companies to do something about it, Reid said.

"I think regulators are going to look at this from the Enron standpoint, because Enron was not exactly like this but it was similar to Conseco in that it was one holding company with a lot of moving parts," Reid said. "The issue here is who's really minding the company and who's looking out for the shareholders, and no one's doing that in this case. You're going to see a lot of people losing their jobs, a lot of people getting defrauded and a lot of people flat-out lose their savings because of the people who had this company--like Enron--in their portfolio for retirement savings."

It's going to be incumbent on Congress to look at these things and not gloss over them, Reid said. There's always a tendency before presidential elections not to do too much to businesses, because these are some of the same people candidates go to for contributions, he said.

Conseco's bankruptcy filing lists total assets of about $52.3 billion with total debts of about $51.2 billion--including $481.5 million in directors and officers loans used to purchase Conseco stock--and debt securities of $4.5 billion, according to records in the Illinois bankruptcy court.

The 30 largest unsecured claims against Conseco Inc. total $6.37 billion and include banks in several states, court records show. The largest unsecured creditor is Bank of America National Trust and Savings Association in Chicago, which has outstanding claims of almost $1.5 billion against Conseco, according to court records.

The fact that the life insurance companies aren't included in the filings, and that the statutory capital in most of them is reasonably strong, is a tribute to state regulators, equity analyst Colin Devine of Salomon Smith Barney said.

None of the Conseco insurance companies have filed, or will file, for bankruptcy, said the Indiana Department of Insurance--Conseco's home-state regulator. The department said it would closely monitor the financial condition of Conseco Life Insurance Co.

At the same time Conseco announced the bankruptcy, it also said Conseco Finance Corp. had reached a tentative agreement with CFN Investment Holdings LLC for the sale of all of Conseco Finance's assets and operations. On Jan. 10, the bankruptcy court ruled that Conseco can move ahead with its plans to try to sell off Conseco Finance in February.

RELATED ARTICLE: Conseco Acquisition, Divestitures Timeline

CONSECO ACQUISITIONS

* November 1992--Buys Bankers Life & Casualty Co. and Certified Life Insurance Co. (Calif.), for $600 million.

* March 1993--Takes controlling investment in MDS/Bankmark.

* April 1994--Agrees to buy CalFarm Life Insurance Co. for $120 million (not completed).

* August 1995--Buys rest of CCP Insurance Inc.

* March 1995--Life Partners Group and Conseco merge.

* October 1996--Completes purchase of American Life Holdings Inc. for $165 million.

* December 1995--Buys American Travellers Corp. for $793 million.

* March 1997--Buys Capitol American Financial Corp for $690 million.

* June 1997--Buys Pioneer Financial Services Inc. for $477 million.

* September 1997--To buy Washington National Corp., for $410 million.

* October 1997--Buys Colonial Penn Life Insurance Co. for $460 million.

* April 1998--Buying Green Tree Financial Corp. for $6 billion.

* March 1999--Buys $500,000 block of life insurance from Rushmore Life Insurance Co.

* June 1999--Buys Consolidated Marketing Group of New Port Richey, Fla., and Dallas-based TLC National Marketing Co.

* April 2000--To buy Associated California State Insurance Agencies Inc. and Ardiel Insurance Service Inc. from Fortis Inc.

* April 2001--To buy ExlService, a firm that specializes in customer service and back-office outsourcing to India.

CONSECO DIVESTITURES

* February 1996--Sells 75% stake in Noble Broadcast Group Inc. for $152 million.

* December 1999--Sells a 7% stake in the company to equity firm Thomas H. Lee Co. for $500 million.

* May 2000--Conseco Finance Corp. (formerly Green Tree Financial) sells about $1.3 billion in receivables to Lehman Bros.

* July 2000--Conseco Finance Corp. bankcard portfolio sold to Wells Fargo Financial Bank for about $400 million.

* December 2000--Sells its vendor services business to Wells Fargo Financial Leasing Inc.

* February 2001--Sells its 29% interest in the Argosy Riverboat casino for $260 million.

* April 2002--Protective Life Corp. buys block of business from Conseco Variable Insurance Co.

* July 2002--Great American Financial buys Manhattan National Life Insurance Co. from Conseco for $48.5 million.

* July 2002--Protective Life subsidiary buys a block of life insurance business from Conseco for $49.5 million.

* October 2002--Sells Conseco Variable Insurance Co. to an Inviva Inc. subsidiary.