The Securities and Exchange Commission sued former top executives at National Century Financial Enterprises, alleging that they schemed to defraud investors through securities issued by subsidiaries of the failed private corporation. NCFE, Dublin, Ohio, collapsed in October 2002 after investors discovered that the companies had hidden "massive cash and collateral shortfalls from investors and auditors," according to the SEC. The collapse sent approximately 275 healthcare providers into bankruptcy and caused losses to investors of more than $2.6 billion, the SEC charged. The lawsuit named Lance Poulsen, principal and former chief executive officer at NCFE; Donald Ayers, principal and former chief operating officer; Rebecca Parrett, principal and former director of NCFE's accounts receivable servicer department; and Randolph Speer, former chief financial officer.
According to the complaint, filed in federal court in Ohio, two wholly owned subsidiaries of NCFE purchased accounts receivable from healthcare providers and issued notes to secure the receivables. From at least February 1999 to October 2002, the companies offered and sold at least $3.25 billion in notes through 15 private placements to institutional investors. The complaint alleged that the defendants depleted the required reserve accounts and collateral base by "advancing" at least $1.2 billion to healthcare providers without obtaining eligible receivables in return. The advances were in actuality unsecured loans to distressed healthcare providers, many of them wholly or partly owned by NCFE and the principals, the SEC charged. The agency already has prevailed in civil judgments against three other former NCFE executives, who also have pleaded guilty to criminal charges in federal court.
An attorney for Ayers said the former COO has cooperated with the SEC and looks forward to "aggressively defending" his actions. "Now we can actually see the type of evidence the SEC claims to have possessed," said the attorney, Brian Dickerson, a partner at Maguire & Schneider in Columbus, Ohio, and Naples, Fla. Dickerson described the complaint as full of "general and vague assertions." At deadline, efforts to contact the remaining defendants or their attorneys were unsuccessful.