WASHINGTON, D.C. – A federal grand jury in Columbus, Ohio, has indicted seven former executives of National Century Financial Enterprises (NCFE) on charges of conspiring to defraud investors by lying to them and others about how the investors’ funds would be used, diverting the funds, then hiding the shortfall by moving money back and forth between subsidiaries’ bank accounts and creating phony reports and records to cover up the scheme, the Department of Justice announced today.
The 60-count indictment charges conspiracy, securities fraud, wire fraud, mail fraud and money laundering. The indictment seeks approximately $2 billion in forfeiture of property involved in the money laundering conspiracy.
The indictment alleges that instead of using the investors’ funds as they promised, the defendants diverted funds to, among other purposes, make unsecured advances and loans to healthcare companies owned by NCFE or its principal shareholders, Lance Poulsen, Rebecca Parrett and Don Ayers.
Named in the indictment are:
Lance K. Poulsen, the president, chairman and a director of NCFE since its inception in 1991. Poulsen was responsible for the overall marketing, funding and operation of NCFE and its subsidiaries. In addition, he was an officer, director and owner of at least six related entities. He is charged with conspiracy, securities fraud, wire fraud, mail fraud and money laundering charges.
Rebecca S. Parrett, a vice chairman, secretary, treasurer and an officer, director and owner of NCFE and certain of its affiliates. Parrett was responsible for providing instruction on disbursing funds, preparing reports for NCFE and other duties. She is charged with conspiracy, securities fraud, mail fraud, wire fraud and money laundering charges.
Donald H. Ayers, a vice chairman and chief operating officer for NCFE. Ayers is charged with conspiracy, securities fraud, mail fraud, wire fraud and money laundering charges.
Roger Faulkenberry, director of securitizations for NCFE from 1994 until December 2000. Faulkenberry served as the point of contact with the rating agencies responsible for evaluating the soundness of NCFE’s investments. He is charged with conspiracy, securities fraud, wire fraud, mail fraud and money laundering charges.
Randolph H. Speer, chief financial officer and executive vice president for NCFE at various times. Speer is charged with conspiracy, securities fraud, wire fraud, mail fraud and money laundering charges.
James Dierker, vice president in charge of client development for NCFE from January 1999 until January 2001. Dierker is charged with conspiracy, mail fraud, wire fraud and money laundering charges.
Jon Beacham, director and vice president of securitizations from about January 2001 until November 2002. Beacham is charged with conspiracy, securities fraud, wire fraud, mail fraud and money laundering conspiracy.
“An exhaustive investigation by the FBI, IRS, Postal Inspectors and Immigration and Customs Enforcement agents found evidence that the company executives bilked investors by building a financial house of cards with deception, sleight-of-hand financing, and accounting misdeeds,” said U.S. Attorney Lockhart.
“Friday’s indictment reinforces IRS Criminal Investigation’s commitment to aggressively pursue corporations and their officers who use their positions of trust to carry out illegal activities,” said Acting Chief John H. Imhoff Jr. of Internal Revenue Service Criminal Investigation.
“Since the formation of the President's Corporate Fraud Task Force, FBI investigative efforts have helped score 402 convictions. The National Century Financial Enterprises indictment represents the continuing commitment of the FBI in combating corporate fraud matters,” said Acting Assistant Director Chip Burrus, Criminal Investigative Division. “This is a classic case of corrupt corporate insiders creating false accounting records to hide their dishonest actions from investors.”
NCFE, based in Dublin, Ohio, bought medical accounts receivable from health care providers around the country, then financed the purchases by selling securities in the form of notes to large institutional investors outside Ohio. In their promotional materials, NCFE billed themselves as the “nation’s leading supplier of working capital to the medical industry.” The company collapsed in November 2002.
According to the indictment, NCFE operated as a financial services holding company. Through its subsidiary corporations, such as NPF VI and NPF XII, the company bought accounts receivable from hospitals, nursing homes and other health care providers and medical concerns. The subsidiaries would issue health care receivables securitization program notes. NCFE employees would sell these securities in private placements, promoting them as conservative and safe investments.
According to the indictment, NCFE executives diverted the money into other companies they owned, used some of the money for operating expenses for NCFE, and provided unsecured advances and loans to clients, third parties and others.
The indictment alleges that the defendants conspired to conceal cash shortages from trustees by moving funds into an account the day before a report was due, then moving the cash back into another account the day it was to be examined. In one such instance, on Jan. 2, 2002, the defendants ordered $148 million moved from one investment portfolio to another so that it would appear to be in compliance. The next day, they moved the $148 million back to the other portfolio so that it too would appear to be in compliance.
According to the indictment, the defendants prepared and distributed false financial reports to hide their actions from investors and trustees. Investigators found reports marked “NPF VI – Reported” and “NPF VI – Actual” and other similar documents when analyzing company records seized by FBI agents from NCFE’s headquarters in November 2002.
The maximum penalty for each count of money laundering and money laundering conspiracy is 20 years imprisonment and a $500,000 fine. The conspiracy to violate statutes of the United States, and each count of wire fraud and securities fraud carries a penalty of five years imprisonment and a $250,000 fine.
This case was investigated by the agents and inspectors of the FBI, IRS Criminal Investigation, U.S. Immigration and Customs Enforcement and the U.S. Postal Inspection Service, with assistance from the Dublin (Ohio) Police Department and Franklin County (Ohio) Sheriff’s Department. It is being prosecuted by Assistant U.S. Attorney Dale E. Williams Jr. of the Southern District of Ohio and Criminal Division Trial Attorneys Mark Yost and Patrick Murphy of the Asset Forfeiture and Money Laundering Section and Colleen Conry and Jeffrey Neiman of the Fraud Section.
An indictment is merely an accusation. All defendants are presumed innocent of the charges and it is the government’s burden to prove a defendant’s guilt beyond a reasonable doubt at trial.