A Dublin-based health-care lender with a good business model was left in ruins -- and owing billions of dollars -- as a result of greed and a shell game played unknowingly by investors.
It's a game that ended only after greed consumed company reserves and investor money dried up. That's the history of National Century Financial Enterprises, federal prosecutor Leo Wise told jurors in closing arguments yesterday in the trial of Lance K. Poulsen, 65, the company's founder and chief executive.
Poulsen has been on trial since Oct. 1 on 13 counts of fraud tied to the company's collapse. Jury deliberations are expected to begin today.
"Ladies and gentlemen, this is a case of staggering fraud," Wise said. "It is one of the largest frauds the FBI has ever investigated. The total is over $2 billion."
Poulsen's attorneys countered yesterday that the existence of losses doesn't mean Poulsen was responsible for them.
Defense attorney Peter Anderson said fingers should be pointed at Sherry Gibson, the government's key witness. A former company vice president, she admitted having falsified the company's books.
In addition, Gibson had access to all the company's computers and files during the period when a management company was winding down National Century's business, following an FBI raid of company offices in November 2002. She could have signed the false investor reports, defense attorneys suggested.
"She had access to documents long after Mr. Poulsen was gone -- and had incentive," said another defense attorney, Will Terpening. By helping the government prosecute Poulsen and others, Gibson got reduced prison time, he said.
Furthermore, Terpening said it's inconceivable that the fraud at National Century could have gone so long with banks, rating agencies and auditors looking in.
"It's not plausible that if this stuff were true, it wouldn't be detected," he said.
National Century bought accounts receivable from health-care providers, using secured notes purchased by investors to do so.
Although business dealings and paperwork were complex, the fraud really wasn't, Wise said.
National Century "shows money going out the door and no receivables being purchased," he told jurors. "There is nothing complicated about zero, and there was zero accounts receivable being purchased."
There was just "an ever-growing stack of worthless IOUs piling up behind closed doors at NCFE."
Although reserves needed to pay back investors were shrinking, Poulsen always made sure he was paid, Wise added.
"In this three-year period alone, he made almost $8 million," Wise said.
When National Century filed for bankruptcy, 350 employees lost their jobs and 275 health-care providers filed for bankruptcy.
Wise asked jurors to remember the private investors were "real people who had given their savings, their pensions to invest on their behalf." he said. Those investors named during the trial included the Sisters of Mercy, the United Methodist Church, Nationwide and the General Motors pension fund.