Former Conseco director liable for some unpaid stock loans

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The man who has most successfully fought Conseco Inc. in litigation over unpaid stock loans has suffered a loss — and
a tongue-lashing
— from
federal judges in Indianapolis.

Dennis E. Murray Sr. was declared liable in October by U.S. District Court Judge Larry J. McKinney for at least some of the
millions of dollars he borrowed to buy Conseco stock in the late 1990s.

And this month, the magistrate judge under McKinney recommended a ruling that Murray fraudulently transferred $3.4 million
to his wife in order to shield it from Conseco. McKinney has yet to rule on that recommendation.

The magistrate judge, Jane Magnus-Stinson, also accused Murray of "playing hide-and-seek" with his financial documents.
recommended that Murray, 69, reimburse Conseco for the time its attorneys spent chasing down his financial information.

"The post-hoc rationalizations by Murray, a skilled lawyer and CPA, are unpersuasive, and the court does not credit his
Magnus-Stinson wrote in a ruling issued Nov. 5.

Murray, a Sandusky, Ohio, attorney, is one of 11 former Conseco directors and officers that the Carmel insurance company sued
to recover unpaid stock loans. Conseco claims Murray owes it more than $200 million.

If McKinney accepts Magnus-Stinson’s recommendation, it’s a big win for Conseco. Most of the people it sued transferred assets
to their spouses, but the company never has received a court verdict declaring such transfers illegal.

In the Murray litigation, Conseco also is claiming that he transferred other assets to his wife and children. Those transfer
claims — as well as the exact amount Murray owes Conseco — are set for trial in February.

Murray’s attorneys, Henry Price and Ron Waicukauski, have the right to object to Magnus-Stinson’s ruling. They did not return
phone calls seeking comment.

Conseco is trying to wrap up four years of litigation that has netted settlements with nine of the 11 borrowers, who in total
owed the company nearly $700 million. All the borrowed stock became worthless when Conseco entered bankruptcy reorganization
in December 2002.

After massive legal fees, Conseco’s efforts have yielded a relatively small amount. According to a Nov. 10 securities filing,
Conseco has received $43 million and expects to collect $10 million more.

The other borrower still in court is James D. Massey, a former president of Merchants Bank who was a Conseco director until

Massey, 73, filed for bankruptcy in October after the Indiana Supreme Court refused to hear his appeal of a $9 million judgment
Conseco won against him in 2006. Massey listed assets of less than $1 million and liabilities of more than $20 million.

Earlier this month, U.S. Bankruptcy Judge Basil H. Lorch III said Conseco could pursue its fraudulent transfer claims against
Massey’s wife, Margaret. A trial is set in Hamilton County for Jan. 5.

"We’ve got them on the run," said Scott McMillin, an attorney representing Conseco.

The same attorneys represent both Massey and Murray. They have argued that Massey and Murray were defrauded by Conseco, not
the other way around.

Unlike the nine other borrowers in Conseco’s litigation, neither Murray nor Massey was an employee of the company. Therefore,
the two were forced to rely on financial reports given to them by company executives.

Those reports turned out to be false. In April 2000, Conseco stunned investors by revealing that it had overstated its 1999
profits by $368 million because of an error in projecting the value of financial instruments known as "interest-only

But in Murray’s case, McKinney ruled the original loans required payment without any set-off payments or counterclaims.

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