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Healthcare Finance Execs Indicted

May 23, 2006|From Reuters

A federal grand jury has indicted the former chief executive and six other high-ranking executives at National Century Financial Enterprises Inc., a failed healthcare finance company, in connection with a $3-billion fraud, prosecutors said.

The 60-count indictment, unsealed Monday, accuses the defendants, including former Chief Executive Lance Poulsen, of lying to investors about how their funds would be used. The charges include conspiracy, fraud and promotion of money laundering.

"Executives bilked investors by building a financial house of cards with deception, sleight-of-hand financing and accounting misdeeds," said Gregory Lockhart, the U.S. attorney for the Southern District of Ohio.

The indictment is the culmination of a 3 1/2 -year investigation that has resulted in civil lawsuits and guilty pleas by three lower-ranking National Century executives.

In the 1990s, Dublin, Ohio-based National Century grew into a multibillion-dollar business that bought patients' bills from healthcare providers and packaged them into bonds for investors.

But in late 2002, the company filed for Chapter 11 protection from creditors when its auditor refused to sign off on its financial statements, and lenders stopped advancing new funds.

Since then, a tangle of litigation has resulted as creditors tried to track down their money. JPMorgan Chase & Co., a trustee for National Century bonds, settled with creditors for $425 million in February.

According to the indictment, investor funds were often not used to buy patients' bills but were instead diverted to companies owned by National Century or its three former principal shareholders -- Poulsen, Treasurer Rebecca Parrett and Chief Operating Officer Donald Ayers.

The indictment names Poulsen, Parrett and Ayers as defendants.

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