8/8/08 (10:20 p.m.) Four former National Century Financial Enterprises (NCFE) executives have been sentenced for their roles in a scheme to deceive investors about the financial health of NCFE, Acting Assistant Attorney General Matthew Friedrich and U.S. Attorney Gregory G. Lockhart of the Southern District of Ohio announced today. NCFE, formerly based in Dublin, Ohio, was one of the largest healthcare finance companies in the United States until it filed for bankruptcy in November 2002.
Donald H. Ayers, 72, of Fort Myers, Fla., an NCFE vice chairman, chief operating officer, director and owner of the company, was sentenced on Aug. 6, 2008, to 15 years in prison for conspiracy, securities fraud and money laundering.
Randolph H. Speer, 57, of Peachtree City, Ga., NCFE’s chief financial officer, was sentenced on Aug. 6, 2008, to 12 years in prison for conspiracy, securities fraud, wire fraud and money laundering.
Roger S. Faulkenberry, 47, of Dublin, a senior executive responsible for raising money from investors, was sentenced on Aug. 7, 2008, to ten years in prison for conspiracy, securities fraud, wire fraud and money laundering.
James E. Dierker, 40, of Powell, Ohio, associate director of marketing and vice president of client development, was sentenced on Aug. 7, 2008, to five years in prison for conspiracy and money laundering.
Rebecca S. Parrett, 59, of Carefree, Ariz., an NCFE vice chairman, secretary, treasurer, director and owner of the company, became a fugitive following the March 2008 jury verdict. She faces a maximum penalty of 75 years in prison and $2.5 million in fines.
U.S. District Court Judge Algenon Marbley also ordered the defendants to forfeit $1.7 billion of property representing the proceeds of the conspiracy and to pay restitution of $2.3 billion.
“In a scheme which lasted for years, these defendants purposely misled the investing public about National Century, its financial health, and the way in which it did business,” said Acting Assistant Attorney General Matthew Friedrich. “When the facade collapsed and National Century filed for bankruptcy, investors were left holding the bag for billions of dollars in losses. The sentences handed down in this case justly reflect the gravity of the offenses.”
“These sentences mark the end of a nearly six-year march to justice for the architects of the financial house of cards known as National Century,” said Gregory G. Lockhart, U.S. Attorney for the Southern District of Ohio. “These crimes touched hundreds of thousands of Americans if they participated in a pension that invested in National Century, or had money in any of the financial institutions who bought securities from National Century.”
“Unfortunately today’s sentencing does not immediately restore investor confidence or offer complete financial restitution for the victims of one of the largest corporate fraud investigations,” said Assistant Director Kenneth W. Kaiser of the FBI Criminal Investigative Division. “The FBI and our law enforcement and regulatory partners will do whatever it takes so that no company, in small town America or major metropolitan cities alike, misrepresents their financial health and defrauds investors.”
“The IRS, along with our law enforcement partners, will vigorously pursue corporate officers who victimize their investors and violate the public trust,” said Internal Revenue Service (IRS) Chief of the Criminal Investigation Division Eileen Mayer. “Today's sentence demonstrates the government's determination to restore and ensure that trust.”
Evidence was presented at trial in February 2008 that the defendants engaged in a scheme to deceive investors and rating agencies about the financial health of NCFE and how investor monies would be used. Between May 1998 and May 2001, NCFE sold notes to investors with a combined value of $4.4 billion, which evidence showed were actually worth approximately six cents on the dollar at the time of NCFE’s bankruptcy in November 2002.
Court documents show that NCFE presented a business model to investors and rating agencies that called for NCFE to purchase high-quality accounts receivable from healthcare providers using money NCFE obtained through the sale of asset-backed notes to institutional investors. Evidence at trial showed that the defendants knew that the business model NCFE presented to the investing public differed drastically from the way NCFE did business within its own walls and that NCFE was making up the information contained in monthly investor reports to make it appear as though NCFE was in compliance with its own governing documents.
Ayers, Speer, Faulkenberry, Dierker and Parrett were five of eight individuals indicted in the case in July 2007. Lance K. Poulsen was severed from the other defendants following his arrest on obstruction of justice charges on Oct. 18, 2007. He will be sentenced on the obstruction of justice charges on Aug. 8, 2008. Poulsen’s trial on conspiracy, securities fraud, wire fraud, mail fraud and money laundering charges is scheduled to begin Oct. 1, 2008. James K. Happ, a certified public accountant and former executive vice president for servicer operations will face charges of conspiracy and wire fraud at trial scheduled to begin Dec. 1, 2008. Jon A. Beacham, who was responsible for raising money from investors through the sale of notes, pleaded guilty to conspiracy and securities fraud on July 13, 2007, and awaits sentencing.
The case was prosecuted by Assistant U.S. Attorney Douglas Squires of the Southern District of Ohio, Senior Litigation Counsel Kathleen McGovern and Trial Attorney Wes R. Porter of the Criminal Division's Fraud Section, with assistance from Fraud Section Paralegal Specialists Crystal Curry and Sarah Marberg. The investigation was conducted by FBI agents Matt Daly, Ingrid Schmidt and Tad Morris; IRS Inspectors Greg Ruwe and Mark Bailey; U.S. Postal Inspector Dave Mooney; and U.S. Immigration and Customs Enforcement agent Celeste Koszut.
