Rollin S. Dick and James S. Adams

Securities and Exchange Commission v. Rollin M. Dick and James S. Adams, (United States District Court for the Southern District of Indiana, Case No. 01:04-cv-0457-SEB-VSS, filed March 10, 2004)

The Securities and Exchange Commission announced that on March 10, 2004 it filed civil fraud charges against Rollin S. Dick and James S. Adams, formerly Chief Financial Officer and Chief Accounting Officer of Carmel, Indiana based Conseco, Inc., and its then wholly owned subsidiary, Conseco Finance Corporation. In its complaint, the Commission alleged that throughout 1999 and early 2000, Conseco and Conseco Finance made false and misleading statements about their earnings and income in filings made with the Commission and in public statements announcing their earnings, overstating their results by hundreds of millions of dollars. This massive overstatement occurred because defendants Dick and Adams conducted a fraudulent scheme to avoid huge write downs of certain assets held by Conseco Finance, known as interest-only securities. The complaint alleged that in order to avoid the charges to earnings associated with these write downs, Dick and Adams made improper adjustments to the historical basis of these securities, and also manipulated the valuation equation used to test these securities for impairments. Dick and Adams also made a number of unsupported and improper adjustments to the books and records of these companies to increase earnings. The complaint alleged 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. Specifically, the complaint alleged Dick and Adams violated Section 17(a) of the Securities Act of 1933, Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 (Exchange Act), and Rules 10b-5, 13b2-1 and 13b2-2 thereunder, and that Dick and Adams aided and abetted Conseco and Conseco Finance's violations of Sections 13(a), 13(b)(2)(A), 13(b)(2)(B) and 13(b)(5) of the Exchange Act and Rules 12b-20 and 13a-13 thereunder. The complaint seeks an injunction against further violations of the above provisions of the federal securities laws, disgorgement of the salaries and bonuses earned by Dick and Adams during their fraudulent scheme, civil penalties and officer and director bars.

In separate administrative proceedings, the Commission ordered Conseco, Inc. to cease-and-desist from violating the reporting, record-keeping and internal controls provisions of the federal securities laws described above. Conseco, without admitting or denying the Commission's findings, agreed to the entry of the Commission's order.

SEC Complaint in this matter