Gary Wendt's office boasts marble columns, antique furniture, and a vast picture window, but he takes greatest delight in the empty space where a leopard-print chair once stood. Since June 28 of last year, when Mr. Wendt became chief executive of Conseco Inc., he has instituted a raft of changes at the troubled insurance company, including selling off many works of art and other collectibles.
"Doesn't it look a little bare in here?" Mr. Wendt smiles. "The ambiance that the previous management had utilized here is, in my opinion, not appropriate for a midwestern-based, midsize insurance company."
To Mr. Wendt, selling off the decor symbolizes the larger makeover he has undertaken. In casting out elements of the "old" Conseco, Mr. Wendt emphasizes the new, capitalizing that word in his periodic letters to shareholders in which he discusses efforts to overcome the credit problems that are the legacy of his predecessor - and seeks to rebuild credibility with investors.
Few companies emerge from the kind of trouble Conseco was in when Mr. Wendt joined the company.
On June 27, 2000, the day before news broke that Mr. Wendt would be the Carmel, Ind., company's next CEO, the common stock closed at $6.125, down from $57.75 on April 6, 1998. Conseco's balance sheet was highly leveraged. It faced a credit quality crisis at Green Tree Financial, the loan company it bought three years ago for $7.6 billion, and it had guaranteed bank loans for roughly 170 senior executives and directors who bought company stock valued at far less than the original purchase price.
Mr. Wendt quickly got to work. He stopped the cash-flow problem on Conseco's consumer finance side (five business lines were sold); formulated a strategy to raise capital by selling $2 billion worth of noncore assets over the next three years; approached the banks with a debt repayment and marketing plan; and helped the company restore its A. M. Best rating.
Joan Zief, managing director and life insurance analyst at Goldman Sachs, says Mr. Wendt's reputation also impressed Conseco's bankers; they let him renegotiate crucial repayment deadlines that kept the company afloat. "He was given a window that was not available to the previous management," Ms Zief says. "He was given a window to take a look, sell assets, and restructure, so that he could begin to pay down the debt and deleverage the balance sheet."
The CEO then turned his attention to strengthening Conseco's operations. To this end he asked eight of Conseco's 11 board members to either repay banks loans guaranteed by Conseco or to resign; three paid off their loans, three resigned, and two were dismissed.
Next he restructured the organization so that all the business units report directly to him. And he hired Ruth Fattori, another GE veteran and now a Conesco executive vice president, to build a "Six Sigma" program - the popular management system designed to continuously improve productivity -just as she'd done at GE Capital. Stewart Stockdale, chief marketing officer, says the program is changing the corporate mindset at Conseco; instead of concentrating on acquisitions it is focusing on performing internal operations more efficiently.
GE Capital's business lines resemble Conseco's enough that Mr. Wendt could transfer processes and pay-for-performance goals he'd already tested to his new corporate home. Yet Conseco and GE Capital are different in one key respect: Conseco is roughly one-tenth the size of GE Capital.
GE Capital "just got to be a monster," Mr. Wendt recalls. "I was spending all my time telling Jack Welch what I was doing. I now can have some fun running the business." The reference is to General Electric chief executive John F. Welch Jr.
Mr. Wendt's overriding long-term plan is simple: "All we have to do is run. Go to it."
Among other things, running means continuing to increase Conseco's brand recognition and relentlessly targeting people in the $25,000-$50,000 income bracket. A series of witty television commercials have helped Conseco's name recognition soar to 65% from a low of 8% two years ago. Not only is the middle-income demographic growing, the CEO says, but its lack of sexiness may be its greatest strength: "We have a market that's not coveted by all others."
The same might be said of Mr. Wendt's job. Instead of building up a business as he did at GE Capital, he's in charge of rescuing one that is riddled with debt and credit problems, that has already gone through a lot of pain under Mr. Wendt including the layoff of 2,000 employees or about one-seventh of its workforce.
Charles B. Chokel, Conseco's recently hired CFO, is blunt about the severity of Conseco's problems: "The company lost $1.2 billion in income last year. It's a leveraged company and with leverage comes risk. The market correctly perceives a lot of risk."
Some outside observers are harsher. Colin Devine, a Salomon Smith Barney life insurance analyst, says Conseco still has serious credit problems at Conseco Financial, formerly Green Tree, the mobile home lender, and reserve issues in its life insurance business.
"Things didn't get the way they did overnight and they're not going to be fixed overnight," Mr. Devine says. He also says that management's earnings projections are unjustifiably optimistic and that a bad earnings surprise later this year would hurt the stock price.
Mr. Devine's criticism has spurred a very public spat.
On May 14, Irwin Jacobs, an outspoken Conseco investor nicknamed "Irv the Liquidator" ran an ad in The Wall Street Journal calling the analyst's work "ridiculous." In an open letter signed by executive vice president R. Mark Lubbers and posted to Conseco's Web site. Mr. Lubbers called Mr. Devine's research "inflammatory and inaccurate."
Asked to respond to these charges, Mr. Devine would only say, "When people are under a lot of stress, sometimes they lash out." Some of Mr. Devine's assertions were seconded by Carl Icahn - who had shorted Conseco's shares - in the June 25 issue of Fortune.
What would make a retiree - whom GE was paying handsomely - decide to take on a job so fraught with risk and controversy?
Reason one: After 18 months away from General Electric, "I wasn't retiring very well," Mr. Wendt says. "My wife was encouraging me to try and find something."
Reason two: He was appalled that Conseco "had been brought down to the level it had both in terms of respect and stock price." Given its strengths, he was convinced, the company deserved better.
And reason three: The stock options.
But what about moving from Greenwich, Conn., to Indiana? "Indiana's Indiana," Mr. Wendt says. "Remember the old Henny Youngman saying? 'Everybody's got to be someplace.' "
Many observers continue to be surprised by the latest twist in Wendt's career. Says general counsel David Herzog, another Wendt hire: "If I were 58 years old, living in Greenwich, financially comfortable, I might have been inclined to do something other than take on the enormous challenge he took on."
On the day American Banker visited Mr. Wendt at Conseco's sprawling, multibuilding campus, the red-haired executive wore a crisply starched blue shirt and khakis in a strictly gray-suit crowd. Seemingly everyone uses the same adjective to describe Wendt - demanding- but employees don't seem to fear him.
"He's not personable in the way you'd usually define a personable person," says Mr. Stockdale, who has been at Conseco for three years. "He's personable in his own way. Gary has unique style that works for him incredibly well."
Ms. Fattori remarks that her boss "has a wonderful spirit, and he always has had that spirit. Is there more glow to it now? Maybe. He has a huge challenge."
Mr. Wendt grew up in Rio, Wis., and still has the flattened vowels to prove that he spent his formative years in the Midwest. After graduating from the University of Wisconsin in 1965 and receiving an MBA from Harvard two years later, he struggled to carve out a career in real estate. In fact, after just two years in the business he nearly went bankrupt when the firm he was working for and had invested in went under. That he emerged relatively unscathed by liquidating the firm's assets helped turn his career around.
Six years later he parlayed his real estate expertise into a job as manager of real estate financing with GE Credit Corp. In 1986, he became chief executive of the GE division, now known as GE Capital Services. After a 32-year marriage, Wendt divorced in 1997 and found himself trapped in the high beams of public scrutiny. The split, some speculate, cost him the top slot at GE.
Lorna Jorgenson Wendt contested the $10 million in the settlement offer, arguing that she was entitled to 50% of the couple's estimated $100 million net worth.
The dispute was front-page tabloid news. Lorna Wendt appeared on "Oprah." An article in Business Week compared the divorce to the ugly battle over the nomination of Supreme Court Justice Clarence Thomas. A sample from the story: "Lorna's battle for half their estate raised consciousness, much as the Anita Hill case had for victims of sex harassment."
Lorna Wendt eventually received $20 million, but the matter didn't end there. In 1998 she founded a nonprofit organization called the Institute for Equality in Marriage. Enter "Gary Wendt" in a Web search engine, and the name Lorna Wendt floods the screen.
When asked whether the divorce affected his career, she points to how well he's done, but then remarks: "Probably, the general public believed that marriage was a partnership and that he was not doing what he should have done as a husband who was about to divorce."
Mr. Wendt declined to discuss his divorce, calling it old news. A year after the splitup he married RoseMarie Adams, whom he'd met while she working as a conference planner at GE. And last December he defeated Lorna Wendt's final appeal of their settlement.
Mr. Wendt's crowning achievement, the building of GE Capital, also had a messy ending. He says he never thought he'd be top dog at General Electric, nor did he want to be. ("But you expect me to say that, I'm sure," he then adds.)
"I was too old," he says. "They always like to have someone that can stay a minimum of 10 years and a maximum of 20 years before they get to age 65. I was only seven years younger than Jack. So I never had a chance."
Age may have kept Mr. Wendt from the most powerful job in corporate America, but Mr. Welch didn't simply pass him over; he showed him the door, Mr. Wendt says. "Jack asked me to step aside because he was concerned that somebody might be afraid to take the job because I was sitting there. He was afraid that I'd be the tail that was wagging the dog." Mr. Welch could not be reached for comment.
Things didn't start out swimmingly at Conseco. Some groused about Mr. Wendt's $45 million signing bonus, stock options, and shares of restricted stock. Without disclosing the terms of his noncompete contract at General Electric, Wendt says that the $45 million was considerably less than what General Electric would have paid him never to work again.
Some of the bitterness was a hangover from the days of founder Stephen Hilbert, who earned a reputation for personal flamboyance.
Mr. Hilbert drove a black Ferrari, hobnobbed with the equestrian set, and got more than $25 million in total compensation in 1999, a year when Conseco's stock price foundered. He also got a severance package valued at around $72 million. In 2001, the AFL-CIO's Executive PayWatch named Conseco one of the three worst corporate offenders in runaway executive pay.
Mr. Wendt waves away most of that with matter-of-fact assurance. His self-confidence is particularly apparent when he talks about what's ahead for Conseco. Without cheerleading, he offers earnings projections and doesn't toss in any of the obligatory qualifiers (Conseco, he says, will achieve earnings per share of 90 cents to $1.00 this year).
Mr. Chokel, the CFO, says he won't consider the recovery complete until Conseco's debt again receives an investment-grade rating. "You can hit certain numbers, but you still need the outside agencies to bless it," Mr. Chokel says. He wouldn't hazard a guess as to when Conseco's debt rating will be restored.
Mr. Wendt isn't the equivocating type, but he did waver when the conversation turned to specific dates for Conseco's recovery. "Conseco," he says, "has turned around; the rescue is complete."
But after a pause he added: "Well, not complete, but the pieces are all in position for it to be complete over a period of time.
"And these things take time."