The former compliance director at bankrupt healthcare finance company National Century Financial Enterprises, based in Dublin, Ohio, today became the second person connected with the scandal-ridden firm to plead guilty to federal securities fraud.
Brian Stucke, 33, director of compliance and associate vice president at NCFE from July 15, 1999, to July 26, 2000, entered his plea in federal court in Columbus, Ohio. He is the second person to admit culpability in the ongoing NCFE investigation.
Stucke, of London, Ohio, admits he participated in a scheme to mislead investors and auditors by falsifying documents and transferring hundreds of millions of dollars between NCFE subsidiaries to hide the true financial state of the company, according to the plea agreement.
A single-count information that forms the basis of the guilty plea charges Stucke and at least seven other unnamed defendants with conspiring to commit securities fraud from July 15, 1999, or earlier, until July 26, 2000. Federal officials refer to some of the co-defendants as "executives and/or owners of NCFE."
NCFE founders Lance Poulsen, Barbara Poulsen, Rebecca Parrett and Donald Ayers have not been charged with any crime, though they are defendants in a $1.3 billion civil suit filed in May by NCFE creditors and bondholders.
Also today, the Securities and Exchange Commission filed a civil enforcement action against Stucke alleging he and other NCFE officials improperly provided at least $1 billion in unsecured loans to its customers--hospitals, medical practices, nursing homes and other healthcare providers--from capital raised from outside investors.
"The unsecured advances were inconsistent with representations made by senior NCFE officials in offering documents provided to investors," according to the SEC.
The charges are similar to those contained in an August SEC suit against Sherry Gibson, former NCFE executive vice president for compliance. Gibson pleaded guilty to a conspiracy to charge in the same federal court on Aug. 18.
Cincinnati-based U.S. Attorney Gregory Lockhart charges NCFE insiders with deceiving investors "by building a financial house of cards with deception, sleight-of-hand financing and accounting misdeeds." He calls the scheme "a financial shell game that moved hundreds of millions of dollars back and forth to hide the fact that the company's accounts were at least $511 million below what they were telling investors, trustees and auditors."
NCFE filed for bankruptcy protection Nov. 18, 2002, two days after FBI agents raided company headquarters. The company is in the process of liquidating.
For years, NCFE financed thousands of physician practices, hospitals and other healthcare organizations by purchasing accounts receivable at deep discounts in exchange for operating capital.
But the enterprise came crashing down last fall after two Wall Street ratings firms downgraded $3.35 billion in NCFE debt, causing major trustees and investors to withhold funding, leading to NCFE defaulting on debt repayments. The collapse sent numerous NCFE clients, including PhyAmerica Physician Group and Doctors Community Healthcare Corp., into Chapter 11 bankruptcy protection.