After an FBI raid on its Dublin, Ohio, headquarters Saturday, troubled healthcare financier National Century Financial Enterprises today filed for Chapter 11 bankruptcy protection from creditors in U.S. Bankruptcy Court in Columbus, Ohio, the company announced. NCFE attorney Matthew Kairis of the Columbus office of Jones Day Reavis & Pogue said the FBI executed search warrants seeking paper, computer and other records of business transactions among NCFE, its subsidiaries and customers. "We are cooperating with the FBI," Kairis said. "We are working to keep current management able to access documents so the business can continue from an operations standpoint."
But calls to NCFE seeking comment went unanswered Monday.
Kairis said the bankruptcy filing included boxes of documents and a Sept. 30 financial statement listing corporate assets of $3.8 billion and liabilities of $3.6 billion. Sources close to the investigation said the FBI is seeking evidence of alleged criminal manipulation of the assets of two large bond funds backed by healthcare accounts receivable. The two bond funds, NPF XII and NPF VI, were alleged to have more than $3 billion in accounts receivable, but may have far less than that.
NCFE has been plagued in recent weeks by a series of calamities, including bond downgrades by New York credit-rating firms; the resignation of co-founder and primary owner, Chairman and CEO Lance Poulsen; and a severe cash-flow crisis that culminated in its inability to pay its healthcare provider customers.
NCFE finances healthcare providers by purchasing their accounts receivable at a discount, consolidating them with other provider accounts receivable and selling them as bond issues. With those proceeds NCFE fronts cash-strapped providers the money to make payroll and other obligations.
NCFE charges the providers fees, interest and services for collecting those accounts receivable. NCFE has purchased ownership stakes in a number of its customers, including Andover, Mass.-based Med Diversified and Scottsdale, Ariz.-based Doctors Community Healthcare Corp., a five-hospital chain. Med Diversified and Durham, N.C.-based PhyAmerica, a large emergency room physician group practice-management company, filed for bankruptcy protection in the last two weeks. PhyAmerica, Med Diversified and Doctors Community alone owe nearly $700 million to NCFE.
Paul Tuft, founder and chairman of Doctors Community, said the bankruptcy filing was unfortunate. "But given what we know now, it wasn't surprising," said Tuft, who added his company is seeking alternate sources of financing.-- by Mark Taylor