A former top compliance officer at National Century Financial Services -- the Dublin, Ohio-based finance company whose 2002 bankruptcy devastated several provider companies -- was sentenced to four years in prison today and ordered to liquidate her assets. The sentencing of Sherry Gibson, former executive vice president for compliance at NCFE, follows her August 2003 agreement to plead guilty to one count of securities fraud. Gibson admitted that beginning in 1995, in a conspiracy with other NCFE officials, she prepared false reports for investors and maintained separate books to conceal the improper movement of funds among related companies and financial shortfalls.
The resulting loss to investors was estimated at $2.1 billion. A number of provider companies, including five-hospital Doctors Community Healthcare Corp., filed for bankruptcy following NCFE's collapse. NCFE bought accounts receivables from cash-short providers at a discount, packaged the accounts as bond securities and gave the providers high-interest-rate loans inadequately backed by the securities. Authorities said Gibson is cooperating in the investigation. Former NCFE Compliance Director Brian Stucke, who pleaded guilty in December 2003 to conspiracy to commit securities fraud and falsifying financial statements, has not been sentenced. Lance Poulsen, NCFE's former chief executive officer, chairman and co-founder, has not been indicted in the case.
In other legal news, the American Hospital Association delivered a 17-page letter to the Federal Trade Commission and the Justice Department's antitrust division rejecting hospital consolidation as a key driver of healthcare costs and pleading for a review of health insurers' conduct. The AHA's letter anticipates the expected release this summer of the FTC and Justice Department's joint report on their two years of hearings on healthcare competition. In its letter, the AHA reiterated points that hospitals raised during the hearings, including a request for comprehensive guidance on clinical integration of hospitals and physicians. The AHA also expressed disappointment at regulators' failure during the hearings to explore the impact of consolidation of health insurers. -- by Mark Taylor