Witness says National Century CEO threatened to blame her

Monday, February 25, 2008 - 5:44 PM EST
Business First of Columbus - by Kevin Kemper Business First

The woman at the center of the government's case against several executives of the defunct National Century Financial Enterprises Inc. testified Monday that the company's CEO told her she would be thrown under the bus if fraud at the company ever came public.

Sherry Gibson, the Dublin company's executive vice president of compliance, said under cross-examination Monday afternoon that National Century chief Lance Poulsen told her he would not accept responsibility if the company was accused of fraud and would shift blame to her. Poulsen's attitude was especially hurtful, Gibson said, because she had always been loyal to her boss.

Gibson previously testified the company kept two sets of books, one accurate and another for investors that had been ginned to show National Century in better financial shape. Gibson said Monday it was primarily she and Poulsen who falsified company documents and investor reports.

Gibson said shortly after that conversation with Poulsen she began keeping copies of documents at her home in an effort to protect herself in case the company unraveled.

National Century was a financier of last resort for health-care providers. The firm specialized in buying receivables from medical businesses at a discount, giving them cash up front so they could pay their bills. It then packaged the receivables as asset-backed bonds and sold them to investors.

The government has accused five executives - Rebecca Parrett, Donald Ayers, Roger Faulkenberry, Randolph Speer and James Dierker - of engaging in conspiracy, money laundering and securities fraud in a scheme that led to the company's $3 billion collapse into bankruptcy in 2002. The executives pleaded not guilty to the charges.

Gibson had been indicted as well, but she pleaded guilty in 2003 to a count of conspiracy to commit securities fraud. She spent three years in a federal penitentiary in Lexington, Ky., liquidated her holdings valued at about $420,000 to repay the government, and agreed to cooperate with the Justice Department's investigation.

Poulsen and another executive, James Happ, are scheduled to stand trial on similar charges later in the year.

Gibson testified under cross-examination that throughout her tenure at National Century she reported mostly to Poulsen. Defense attorneys used that admission to suggest their clients weren't involved in the alleged fraud.

Speer's attorney, Frederick Benton, questioned a meeting Gibson claimed took place in which she told Speer about accounting manipulation at National Century. Benton implied the meeting never happened because Gibson, a prolific note-taker, couldn't produce notes from the meeting, nor could she remember the date of the meeting.

Benton suggested Gibson disliked Speer because he took over National Century's information technology department in 1999 and made changes she didn't like.

Earlier on Monday, defense attorneys raised questions about Gibson's use of alcohol, prescription drugs and visits to a psychiatrist.