Real Estate & Retail

BEHIND THE NEWS: Conseco cloud follows Cuneo to Duke Realty J&J dangles big dollars

April 4, 2005

Conseco Inc. is suing former executive Ngaire Cuneo to try to collect $65 million it says she owes under the company's disastrous loan program. Worse, a federal judge last summer said the explanation she gave in court for buying a $10 million home in the debtor's haven of Florida was "not at all credible."

"It appears to the court that the transactions were carried out primarily for the purpose of defeating a creditor," federal Judge David Hamilton said last June, shooting down Cuneo's assertion that she bought the home to be closer to her ailing mother.

So is this the kind of person Duke Realty Corp. should renominate to serve another year on its 13-person board? A high-profile union that owns a small stake in Duke says the answer is an obvious no.

"We certainly have questions about what value she is bringing to the board right now," said Chris Schwartz of the Chicago office of the Service Employees International Union. "We certainly don't think she sets a good example of the type of leadership boards of major publicly traded companies like Duke should have."

After Duke in mid-March issued its proxy statement showing that Cuneo was up for re-election at the company's April 27 annual meeting, the SEIU issued a statement headlined "Duke poised to retain controversial board member."

Schwartz said SEIU doesn't expect to derail Cuneo's re-election this year-shareholders of public companies almost always rubber-stamp the lists of nominees-but it hopes the company will "strongly reconsider" before nominating her again in 2006.

Attorneys for Cuneo, 54, could not be reached for comment. Duke spokeswoman Shona Bedwell said: "Our board has been aware of her civil matter and has been monitoring her situation. Our board also has been monitoring her contributions to our board."

The Duke board's corporate governance committee recommends nominees to the full board, the proxy statement says. Factors the committee considers include "age, expertise, business experience, character and other board memberships."

Cuneo has served on the board of Duke, an Indianapolis-based real estate company, since 1995. She served as an executive vice president of Conseco from 1992 until 2001, and now is a venture capitalist.

Cuneo was the fourth-largest borrower under Conseco's loan program, which allowed executives to buy company stock entirely with borrowed money. The stock became worthless after the company slid into bankruptcy court in December 2002, leaving large borrowers with debts far exceeding their net worths.

Four of the 11 largest borrowers have reached confidential settlements with Conseco. Others, including Cuneo and former CEO Stephen Hilbert, have raised a range of legal defenses they think should get them off the hook.

According to Conseco, what sets Cuneo apart from other borrowers was her blatant effort to avoid her obligations by taking advantage of Florida's homestead exemption.

The exemption protects residences on less than half an acre from creditors. The 12,300-square-foot Florida home, on Sunset Island in Miami Beach, sits on .49 acres. Cuneo and her husband paid cash to buy it in late May of last year, just two days after signing the purchase agreement.

There was minimal haggling over price, Judge Hamilton noted, even though the property cost three times as much as their previous home in Connecticut, and the price represented 75 percent of their net worth.

Hamilton said he did not believe the Cuneos' position that they bought the home primarily to be closer to her ailing 82-year-old mother. He noted that their home was on the East Coast while her mother lived in Port Charlotte, more than 180 miles to the west.

"The Cuneos were obviously in a huge hurry to make this happen," Hamilton said last June. The judge cited "circumstantial evidence that this was a desperate transaction ... to seek protection of assets."

Even so, Hamilton ruled he didn't have legal jurisdiction over the Sunset Island home. As a result, he turned down Conseco's request for an injunction blocking the Cuneos from using the homestead exemption. Undeterred, Conseco now is pursuing its claims through a Florida lawsuit.

Johnson & Johnson wants to be sure six top Guidant Corp. executives stick around, and the New Jersey company is dangling a big incentive to boost the odds.

J&J, which is in the process of buying Indianapolis-based Guidant for $25 billion, says in a new regulatory filing that it will pay the six a total of $9.3 million in retention bonuses if they stay for three years after the deal closes.

If the six stay just two years, they'd be eligible for half that amount. The six include R. Frederick McCoy Jr., president of the company's cardiac rhythm management division, and Dana Mead Jr., president of its vascular intervention business.

Each is entitled to $1.9 million in retention bonuses if they stay through the third year.


Cuneo
Source: XMLAr00400.xml
ADVERTISEMENT

Recent Articles by Greg Andrews

Comments powered by Disqus