Fate of chairman, friend up to jury
Defense denies pair swayed main witness in fraud trial
Wednesday, March 26, 2008 3:12 AM
By Jodi Andes
THE COLUMBUS DISPATCH
By the end of the day, the co-founder of National Century Financial Enterprises could be a felon or closer to becoming a free man.
Lance K. Poulsen, who founded the health-care financing company and served as chairman, chief executive and president, and his friend Karl A. Demmler have been on trial for conspiracy, obstruction of justice and two counts of witness tampering.
They're accused of actions aimed at swaying the testimony of Sherry Gibson, a former National Century executive. She is considered a key witness against Poulsen in his upcoming trial in connection with the company's bankruptcy in 2002 and a resulting loss to investors of more than $1.9 billion.
The witness-tampering case, being conducted in U.S. District Court in Columbus, was handed over late yesterday afternoon to the seven-woman, five-man jury. Deliberations are expected to resume this morning.
If convicted in this case, Poulsen, 64, and Demmler, 57, could be sentenced to a maximum of 35 years in prison.
Poulsen is to be tried on the fraud charges in the summer.
Nine other executives have been convicted or pleaded guilty in National Century's collapse. Only Poulsen and executive James Happ still await trial. However, Poulsen was the only defendant that federal Judge Algenon L. Marbley jailed pending trial, and the witness-tampering charges were a major reason, Marbley said last year.
Poulsen is accused of using Demmler as a middleman to encourage Gibson, a former National Century vice president, not to testify against Poulsen. Gibson pleaded guilty in 2003 to falsifying National Century records, went to prison and became the government's key witness in the fraud case.
The government's case against Poulsen and Demmler was based largely on wiretapped conversations between the two and between Demmler and Gibson.
In his closing yesterday, Prosecutor Leo Wise recited from one of the taped conversations in which Demmler told Gibson: "Put it this way: Next time it rains, slip and fall down. You don't remember nothing.' "
"Mr. Poulsen wanted to buy justice, but justice isn't for sale," Wise said.
Poulsen took the stand in his defense Monday, acknowledging that he had agreed when Demmler said he told Gibson to forget.
"He tried to explain it all away," Wise said. "He didn't because he couldn't."
Defense attorneys told the jurors to focus on other facts about the alleged bribes. Peter C. Anderson, one of Poulsen's three attorneys, pointed out that no money ever changed hands, that Poulsen and Gibson did not communicate directly, and that no testimony was ever changed.
Poulsen "was trying to set the record straight," Anderson said. "He was indicted based on suspicious comments."
Poulsen acted on the advice of his attorney and offered money only to help Gibson get a new attorney, Anderson said.
But Thomas Tyack, then Poulsen's attorney, testified that he told Poulsen he shouldn't loan Gibson money, Wise said.
Darryl Harper, Demmler's attorney, said that Gibson misunderstood the discussions with Demmler. "It was a continuation of a conversation she had with Demmler in prison," Harper said.
Demmler visited Gibson in prison and told her he thought she had been railroaded and could have her conviction overturned, Harper said. Demmler, a former owner of the Bogey Inn in Dublin, did not take the stand in his defense.
jandes@dispatch.com
Story tools
Friday, March 28, 2008
Gibson pleaded guilty in 2003
By Andrew Welsh-Huggins
ASSOCIATED PRESS
10:56 a.m. March 24, 2008
COLUMBUS, Ohio – The government's chief target in a $1.9 billion corporate fraud case took the stand Monday to criticize a former employee he is accused of trying to bribe to give favorable testimony.
Former health care executive Lance Poulsen testified that the key prosecution witness – Sherry Gibson, former executive vice president at National Century Financial Enterprises – didn't get along with other employees. He said two employees accused her of being physically and sexually abusive toward them. Poulsen did not give details.
Gibson's attorney, Terry Sherman, said he'd never heard the allegations and would not have his client respond to them.
“It appears to me that Lance Poulsen has every reason to demean Sherry Gibson any way he can ...,” Sherman said by telephone. “It sounds to me like he's trying to get the jury to take the eye off the ball.”
After the witness tampering trial, Poulsen goes on trial in August on multiple charges of conspiracy, securities and wire fraud and money laundering. The government alleges he misled investors about unsecured loans his company was providing health care companies such as hospitals and nursing homes.
Before that trial, he is defending himself against charges that he and longtime acquaintance Karl Demmler, a Columbus bar and restaurant owner, teamed up to persuade the witness to help Poulsen beat the fraud case against him.
Poulsen is founder and former chief executive officer of National Century, once described as the country's biggest health care financing company.
Poulsen testified that two employees slipped him a note accusing Gibson of the alleged abuse. “They just weren't going to work for her anymore,” Poulsen said under questioning by his defense attorney William Terpening.
Poulsen also said he defended Gibson from another employee's request that she be fired because she was difficult to work with.
Gibson had little involvement in the company's day-to-day operations, Poulsen said.
Government attorneys have not questioned Poulsen yet about his testimony.
Defense lawyers began their case Monday after the government spent a week playing taped phone calls and meetings for a federal jury.
Poulsen said on a tape played Friday that Gibson should explain that her previous statements to prosecutors were based on old facts.
Poulsen said on the recording of a conversation with his co-defendant Demmler that Gibson should say, “But now, there is a new set of charges and it's a new indictment and I'm not familiar with it.”
Prosecutors say Gibson was promised $500,000 if she could “have amnesia” when it came time to testify.
Gibson pleaded guilty in 2003 to a lesser charge of securities fraud in exchange for helping prosecutors.
--------------------------------------------------------------------------------
On the Net:
U.S. Attorney's Office, Southern District of Ohio: www.usdoj.gov/usao/ohs/index.html
ASSOCIATED PRESS
10:56 a.m. March 24, 2008
COLUMBUS, Ohio – The government's chief target in a $1.9 billion corporate fraud case took the stand Monday to criticize a former employee he is accused of trying to bribe to give favorable testimony.
Former health care executive Lance Poulsen testified that the key prosecution witness – Sherry Gibson, former executive vice president at National Century Financial Enterprises – didn't get along with other employees. He said two employees accused her of being physically and sexually abusive toward them. Poulsen did not give details.
Gibson's attorney, Terry Sherman, said he'd never heard the allegations and would not have his client respond to them.
“It appears to me that Lance Poulsen has every reason to demean Sherry Gibson any way he can ...,” Sherman said by telephone. “It sounds to me like he's trying to get the jury to take the eye off the ball.”
After the witness tampering trial, Poulsen goes on trial in August on multiple charges of conspiracy, securities and wire fraud and money laundering. The government alleges he misled investors about unsecured loans his company was providing health care companies such as hospitals and nursing homes.
Before that trial, he is defending himself against charges that he and longtime acquaintance Karl Demmler, a Columbus bar and restaurant owner, teamed up to persuade the witness to help Poulsen beat the fraud case against him.
Poulsen is founder and former chief executive officer of National Century, once described as the country's biggest health care financing company.
Poulsen testified that two employees slipped him a note accusing Gibson of the alleged abuse. “They just weren't going to work for her anymore,” Poulsen said under questioning by his defense attorney William Terpening.
Poulsen also said he defended Gibson from another employee's request that she be fired because she was difficult to work with.
Gibson had little involvement in the company's day-to-day operations, Poulsen said.
Government attorneys have not questioned Poulsen yet about his testimony.
Defense lawyers began their case Monday after the government spent a week playing taped phone calls and meetings for a federal jury.
Poulsen said on a tape played Friday that Gibson should explain that her previous statements to prosecutors were based on old facts.
Poulsen said on the recording of a conversation with his co-defendant Demmler that Gibson should say, “But now, there is a new set of charges and it's a new indictment and I'm not familiar with it.”
Prosecutors say Gibson was promised $500,000 if she could “have amnesia” when it came time to testify.
Gibson pleaded guilty in 2003 to a lesser charge of securities fraud in exchange for helping prosecutors.
--------------------------------------------------------------------------------
On the Net:
U.S. Attorney's Office, Southern District of Ohio: www.usdoj.gov/usao/ohs/index.html
JPMorgan to pay $2 mln to settle SEC fraud case
WASHINGTON (Reuters) - JPMorgan Chase & Co (JPM.N: Quote, Profile, Research) has agreed to pay $2 million to settle charges its subsidiaries helped now-bankrupt National Century Financial Enterprises carry out a fraud that resulted in $2.6 billion of investor losses, the U.S. Securities and Exchange Commission said on Thursday.
The SEC said JPMorgan Chase Bank and Bank One served as indenture trustees for National Century, a Dublin, Ohio, healthcare financing company, from 1999 until 2002 when the company collapsed.
The SEC said that JPMorgan helped National Century make large improper transfers among program accounts, which caused collateral shortfalls and contributed to the company's downfall.
JPMorgan settled without admitting or denying the charges. A spokesman from JPMorgan confirmed the settlement but declined to provide additional details.
The SEC said JPMorgan would pay $1.3 million in disgorgement and about $700,000 in prejudgment interest to settle the charges.
On Wednesday, the U.S. Justice Department said a federal jury in Ohio convicted National Century's former chief executive Lance Poulsen of witness tampering in a criminal fraud case.
The witness tampering charge was linked to a key witness who was scheduled to testify in the trial of Poulsen and other executives for an alleged $2 billion fraud at National Century.
The Justice Department said Poulsen would be tried on fraud charges in August. Earlier this month, five other National Century executives were found guilty of scheming to deceive investors and credit rating agencies about the company's financial health.
(Reporting by Karey Wutkowski, Editing by Toni Reinhold)
The SEC said JPMorgan Chase Bank and Bank One served as indenture trustees for National Century, a Dublin, Ohio, healthcare financing company, from 1999 until 2002 when the company collapsed.
The SEC said that JPMorgan helped National Century make large improper transfers among program accounts, which caused collateral shortfalls and contributed to the company's downfall.
JPMorgan settled without admitting or denying the charges. A spokesman from JPMorgan confirmed the settlement but declined to provide additional details.
The SEC said JPMorgan would pay $1.3 million in disgorgement and about $700,000 in prejudgment interest to settle the charges.
On Wednesday, the U.S. Justice Department said a federal jury in Ohio convicted National Century's former chief executive Lance Poulsen of witness tampering in a criminal fraud case.
The witness tampering charge was linked to a key witness who was scheduled to testify in the trial of Poulsen and other executives for an alleged $2 billion fraud at National Century.
The Justice Department said Poulsen would be tried on fraud charges in August. Earlier this month, five other National Century executives were found guilty of scheming to deceive investors and credit rating agencies about the company's financial health.
(Reporting by Karey Wutkowski, Editing by Toni Reinhold)
Convicted!!
National Century case
Prosecutors had experience in notable cases
Thursday, March 27, 2008 4:19 PM
By Jodi Andes
THE COLUMBUS DISPATCH
For nearly two weeks, legal eyes focused on the man who presided over a company involved in the nation’s largest private-sector fraud case.
Lance K. Poulsen, a founder and former president of National Century Financial Enterprises, was convicted Wednesday of trying to intimidate a key witness in the fraud case against him.
Also convicted was Karl A. Demmler, a friend of Poulsen’s who served as a middleman with the witness.
National Century, based in Dublin, provided financing to health-care providers. As a result of its collapse, investors lost $1.9 billion, and 350 local employees lost their jobs.
Two federal prosecutors in the witness-intimidation trial are no strangers to high-profile cases.
Leo Wise, a trial attorney for the Department of Justice, was one of seven prosecutors who tried top Enron Corp. executives during a four-month trial in Houston in 2006.
Enron, an energy trader, was the nation's seventh-largest company. Its collapse in 2001 wiped out more than $60 billion in market value and more than $2 billion in employees’ retirement savings, along with thousands of jobs. Kenneth Lay was Enron’s founder, Jeffrey Skilling its chief executive.
Wise could not comment on the Enron trial, because of Justice Department policy.
But the Enron and National Century cases were similar in that both companies duped auditors and investors in part because their companies were revolutionary: Enron in the energy market, National Century in health-care financing.
Skilling and Lay were convicted on fraud and conspiracy charges. Skilling was sentenced to 24 years and four months in a federal prison; Lay died of heart disease before he could be sentenced.
Assistant U.S. Attorney Doug Squires prosecuted Roger D. Blackwell, a well-known Ohio State University business professor, in 2005.
That case, too, bore similarities to the Poulsen trial.
“Both defendants took the stand, and both lied,” Squires said. Both were “extremely intelligent and sophisticated,” and both had skilled defense attorneys.
Blackwell was a board member of Worthington Foods when it was being purchased by the Kellogg Co. Squires was on the team that proved he had tipped off 14 relatives and friends to the purchase, allowing them to make profits of $890,000 on the stock.
Blackwell was convicted on 19 counts of insider trading and conspiracy, sentenced to six years in prison and ordered to pay a $1 million fine.
Despite the attention granted certain cases, “high-profile fraud is no different than street crime,” Squires said. “At the end of the day, everyone is equal under the law, rich or poor.”
jandes@dispatch.com
Prosecutors had experience in notable cases
Thursday, March 27, 2008 4:19 PM
By Jodi Andes
THE COLUMBUS DISPATCH
For nearly two weeks, legal eyes focused on the man who presided over a company involved in the nation’s largest private-sector fraud case.
Lance K. Poulsen, a founder and former president of National Century Financial Enterprises, was convicted Wednesday of trying to intimidate a key witness in the fraud case against him.
Also convicted was Karl A. Demmler, a friend of Poulsen’s who served as a middleman with the witness.
National Century, based in Dublin, provided financing to health-care providers. As a result of its collapse, investors lost $1.9 billion, and 350 local employees lost their jobs.
Two federal prosecutors in the witness-intimidation trial are no strangers to high-profile cases.
Leo Wise, a trial attorney for the Department of Justice, was one of seven prosecutors who tried top Enron Corp. executives during a four-month trial in Houston in 2006.
Enron, an energy trader, was the nation's seventh-largest company. Its collapse in 2001 wiped out more than $60 billion in market value and more than $2 billion in employees’ retirement savings, along with thousands of jobs. Kenneth Lay was Enron’s founder, Jeffrey Skilling its chief executive.
Wise could not comment on the Enron trial, because of Justice Department policy.
But the Enron and National Century cases were similar in that both companies duped auditors and investors in part because their companies were revolutionary: Enron in the energy market, National Century in health-care financing.
Skilling and Lay were convicted on fraud and conspiracy charges. Skilling was sentenced to 24 years and four months in a federal prison; Lay died of heart disease before he could be sentenced.
Assistant U.S. Attorney Doug Squires prosecuted Roger D. Blackwell, a well-known Ohio State University business professor, in 2005.
That case, too, bore similarities to the Poulsen trial.
“Both defendants took the stand, and both lied,” Squires said. Both were “extremely intelligent and sophisticated,” and both had skilled defense attorneys.
Blackwell was a board member of Worthington Foods when it was being purchased by the Kellogg Co. Squires was on the team that proved he had tipped off 14 relatives and friends to the purchase, allowing them to make profits of $890,000 on the stock.
Blackwell was convicted on 19 counts of insider trading and conspiracy, sentenced to six years in prison and ordered to pay a $1 million fine.
Despite the attention granted certain cases, “high-profile fraud is no different than street crime,” Squires said. “At the end of the day, everyone is equal under the law, rich or poor.”
jandes@dispatch.com
Monday, March 24, 2008
This reporter is on to something....."supposedly went bankrupt after NCFE’s collapse"
One might think that the embarrassing if not ignoble collapse of what was once described as “the country’s largest provider of healthcare accounts-receivable financing” would only be of interest to some affected healthcare providers, accounting nerds and burned Wall Street investors. But the criminal trial of five former executives of National Century Financial Enterprises is actually front-page news in Columbus, Ohio, where the trial got under way last week in a U.S. District courtroom.
In fact, based on a story that ran on the front page of the Columbus Dispatch the Sunday before the trial, defense attorneys motioned last week to conduct individualized and comprehensive voir dire of the dozens if not hundreds of prospective jurors. Without one-on-one questioning to determine otherwise, the attorneys said they were concerned that the prominent media coverage might have contaminated the pool.
For those of you who did not work for one of the 275 healthcare providers that supposedly went bankrupt after NCFE’s collapse, or are not accountants, burned investors or Columbus-area residents, here’s the back story: NCFE purchased medical accounts receivable from providers typically in dire financial straits, raising capital by selling AAA-rated asset-backed bonds or notes to investors. Prosecutors are alleging that it was all a sham that eventually led to the November 2002 collapse of NCFE days after FBI agents raided its Dublin, Ohio, headquarters. They claim that the fraud cost investors more than $1.9 billion.
Fortunately for the court calendar, Judge Algenon Marbley, a folksy man both pragmatic and aware of the legal rules, found a way around the voir dire motion that was amenable to both sides. Even with that, jury selection took three full days, putting the trial, which is expected to last four to six weeks, behind by a full day before it even got started.
The irony here is that jury selection traditionally gives lawyers an opportunity to taint the jury pool by their line of questioning, and this was very much apparent on the third day of questioning. The pool had already been whittled down to a mere courtroom-size group with prospective jurors sitting in every available seat, including the jury box. Marbley started things off that day by asking if a six-week trial would be a hardship for anyone. Several people raised their hands, including a waitress who said she would not get any pay and a young man who informed the judge that he worked for his family’s plumbing business.
“I was informed yesterday by my father that he would not pay me,” the young man said, lightening the mood in the courtroom.
Defense attorneys’ questions to the prospective jurors grew progressively rhetorical in nature after the jurors were first screened on direct questions like whether they had been victims of bankruptcy or whether they had ever been involved in any whistle-blower complaints. (One prospective juror had been employed by WorldCom and another by the now defunct Dublin Securities.)
Questions then seemed to get broader and more tangential as the pool was quizzed on their knowledge of financial concepts; auditors, specifically Deloitte & Touche; credit-rating agencies; trustees; and whether anyone had ever bothered to read their credit-card agreements. They also were asked how they felt about executive compensation—is $500,000 a year too much?—and whether they knew what a “144A offering” was. The pool was casually surveyed as to how many of them held job titles that had anything to do with what they actually did for a living and whether anyone had ever heard of the term “healthcare securitizations.” (No one had, or at least no one admitted they had.) During the course of this line of questioning, one woman in the back of the courtroom revealed that she is a personal friend of the chief executive officer of Deloitte and her husband had been at one time chief financial officer of Ford and Battelle. She was not selected.
Another prospective juror who was not selected was a man who works for Cardinal Health, also headquartered in Dublin, who said he reported directly to a vice president. On the other hand, one of the few people who raised their hands when asked if they actually wanted to serve on this jury was selected. When asked why he wanted to serve, he replied, “I think it’s a duty, and if anyone didn’t know anything (about this case) when they came in, I was him.”
No one connected with the trial has any inflated hopes of swift justice. Each of the five defendants had at least two defense lawyers sitting with him, and there were four lawyers sitting at the U.S. attorney’s table so that whenever there was a request for a sidebar—and there were many—there was a sea of dark suits huddling to the side of the courtroom while Musak played over the courtroom speakers. Yet for all of the dissension in the reams of motions and trial briefs that are accumulating with the case, the prosecutors and defense attorneys actually seemed to get along very well.
But missing from the defense side of the courtroom is perhaps the most contentious principal involved with NCFE: Lance Poulsen, one of NCFE’s founders and its former president, chairman and chief executive officer. Poulsen’s case was severed from the trial earlier this year; he will be tried in August. In the meantime, considered a flight risk, he is sitting in jail outside Columbus, facing separate charges of witness tampering at a trial expected to take place this spring.
Poulsen has fallen far. NCFE and Poulsen were once held in high enough regard in the Columbus area that the Dispatch profiled him in its business section in May 2000. Poulsen noted in the profile that marketing had been his primary focus over the previous 32 years of his career. His first professional position was with Hamm’s Brewery in St. Paul, Minn., according to the profile. He also said that as a result of his first job as a teenager working as a box wrapper and part-time salesman at the Robert Hall clothing store, he had learned, “Selling and marketing is more lucrative than packaging.”
As for his biggest mistake (up until that point in time), he recalled a boating accident that, in hindsight, might have been prophetic. He said: “Once while cruising in the coastal waters of Florida, I inadvertently turned the chart upside down and ran my vessel hard aground at a high speed.” How did he resolve the mistake? “I now make sure I always have the chart right-side up. Much like life, some things appear different than they actually are, and we must take time to examine the facts.”
In fact, based on a story that ran on the front page of the Columbus Dispatch the Sunday before the trial, defense attorneys motioned last week to conduct individualized and comprehensive voir dire of the dozens if not hundreds of prospective jurors. Without one-on-one questioning to determine otherwise, the attorneys said they were concerned that the prominent media coverage might have contaminated the pool.
For those of you who did not work for one of the 275 healthcare providers that supposedly went bankrupt after NCFE’s collapse, or are not accountants, burned investors or Columbus-area residents, here’s the back story: NCFE purchased medical accounts receivable from providers typically in dire financial straits, raising capital by selling AAA-rated asset-backed bonds or notes to investors. Prosecutors are alleging that it was all a sham that eventually led to the November 2002 collapse of NCFE days after FBI agents raided its Dublin, Ohio, headquarters. They claim that the fraud cost investors more than $1.9 billion.
Fortunately for the court calendar, Judge Algenon Marbley, a folksy man both pragmatic and aware of the legal rules, found a way around the voir dire motion that was amenable to both sides. Even with that, jury selection took three full days, putting the trial, which is expected to last four to six weeks, behind by a full day before it even got started.
The irony here is that jury selection traditionally gives lawyers an opportunity to taint the jury pool by their line of questioning, and this was very much apparent on the third day of questioning. The pool had already been whittled down to a mere courtroom-size group with prospective jurors sitting in every available seat, including the jury box. Marbley started things off that day by asking if a six-week trial would be a hardship for anyone. Several people raised their hands, including a waitress who said she would not get any pay and a young man who informed the judge that he worked for his family’s plumbing business.
“I was informed yesterday by my father that he would not pay me,” the young man said, lightening the mood in the courtroom.
Defense attorneys’ questions to the prospective jurors grew progressively rhetorical in nature after the jurors were first screened on direct questions like whether they had been victims of bankruptcy or whether they had ever been involved in any whistle-blower complaints. (One prospective juror had been employed by WorldCom and another by the now defunct Dublin Securities.)
Questions then seemed to get broader and more tangential as the pool was quizzed on their knowledge of financial concepts; auditors, specifically Deloitte & Touche; credit-rating agencies; trustees; and whether anyone had ever bothered to read their credit-card agreements. They also were asked how they felt about executive compensation—is $500,000 a year too much?—and whether they knew what a “144A offering” was. The pool was casually surveyed as to how many of them held job titles that had anything to do with what they actually did for a living and whether anyone had ever heard of the term “healthcare securitizations.” (No one had, or at least no one admitted they had.) During the course of this line of questioning, one woman in the back of the courtroom revealed that she is a personal friend of the chief executive officer of Deloitte and her husband had been at one time chief financial officer of Ford and Battelle. She was not selected.
Another prospective juror who was not selected was a man who works for Cardinal Health, also headquartered in Dublin, who said he reported directly to a vice president. On the other hand, one of the few people who raised their hands when asked if they actually wanted to serve on this jury was selected. When asked why he wanted to serve, he replied, “I think it’s a duty, and if anyone didn’t know anything (about this case) when they came in, I was him.”
No one connected with the trial has any inflated hopes of swift justice. Each of the five defendants had at least two defense lawyers sitting with him, and there were four lawyers sitting at the U.S. attorney’s table so that whenever there was a request for a sidebar—and there were many—there was a sea of dark suits huddling to the side of the courtroom while Musak played over the courtroom speakers. Yet for all of the dissension in the reams of motions and trial briefs that are accumulating with the case, the prosecutors and defense attorneys actually seemed to get along very well.
But missing from the defense side of the courtroom is perhaps the most contentious principal involved with NCFE: Lance Poulsen, one of NCFE’s founders and its former president, chairman and chief executive officer. Poulsen’s case was severed from the trial earlier this year; he will be tried in August. In the meantime, considered a flight risk, he is sitting in jail outside Columbus, facing separate charges of witness tampering at a trial expected to take place this spring.
Poulsen has fallen far. NCFE and Poulsen were once held in high enough regard in the Columbus area that the Dispatch profiled him in its business section in May 2000. Poulsen noted in the profile that marketing had been his primary focus over the previous 32 years of his career. His first professional position was with Hamm’s Brewery in St. Paul, Minn., according to the profile. He also said that as a result of his first job as a teenager working as a box wrapper and part-time salesman at the Robert Hall clothing store, he had learned, “Selling and marketing is more lucrative than packaging.”
As for his biggest mistake (up until that point in time), he recalled a boating accident that, in hindsight, might have been prophetic. He said: “Once while cruising in the coastal waters of Florida, I inadvertently turned the chart upside down and ran my vessel hard aground at a high speed.” How did he resolve the mistake? “I now make sure I always have the chart right-side up. Much like life, some things appear different than they actually are, and we must take time to examine the facts.”
Saturday, March 22, 2008
Gibson had served her prison sentence
Thomson Financial News
Tape played in witness tampering case
03.21.08, 11:54 AM ET
COLUMBUS, Ohio (AP) - A former health care executive accused of witness tampering in a $1.9 billion corporate fraud case suggested that a key witness tell prosecutors that she wasn't familiar with the charges against him, according to a taped phone conversation played in federal court Friday.
Lance Poulsen, founder and former chief executive officer of National Century Financial (other-otc: CYFL.PK - news - people ) Enterprises, said on the tape that the star witness should explain that her previous statements to prosecutors were based on old facts.
Poulsen said the witness should say, 'But now, there is a new set of charges and it's a new indictment and I'm not familiar with it,' Poulsen said on the recording.
Prosecutors say the witness, Sherry Gibson, a former National Century executive vice president, was offered hundreds of thousands of dollars if she could 'have amnesia' when it came time to testify.
Before its 2002 bankruptcy, the suburban Dublin-based company was described as the largest health care financing company in the country.
Poulsen goes on trial in August on multiple charges of conspiracy, securities and wire fraud and money laundering. The government alleges he misled investors about unsecured loans his company was providing health care companies such as hospitals and nursing homes.
Before that trial, he is defending himself against charges that he and longtime acquaintance Karl Demmler, a Columbus bar and restaurant owner, teamed up to persuade the witness to help Poulsen beat the fraud case against him.
Poulsen and Demmler have both pleaded not guilty.
Gibson pleaded guilty in 2003 to a lesser charge of securities fraud in exchange for helping prosecutors.
Gibson had served her prison sentence and was back in Columbus last summer when she had dinner on June 19 with Demmler and he proposed she help Poulsen, Gibson testified this week.
Demmler said, 'that Lance wanted to make me whole,' Gibson said Tuesday under questioning by federal trial attorney Leo Wise.
Gibson said she was under no illusions about what Demmler meant.
'The only thing I had to do with Lance Poulsen was to be a material witness in his trial,' Gibson testified Tuesday.
After that meeting, Gibson contacted the FBI and agreed to help them investigate Poulsen, she said. Over the next several weeks she met with Demmler at area restaurants for hours at a time while investigators recorded their conversations.
'I'm not asking you to lie,' Demmler says in a recording played Tuesday. 'You just got a mental lapse.'
Gibson 'could have amnesia,' Demmler says in another recording played Wednesday.
Prosecutors allege Poulsen promised Gibson $500,000 in monthly payments of $5,000.
National Century offered financing to health care providers by purchasing at a discount the debt owed the companies -- also known as accounts receivable -- so the companies wouldn't have to wait for insurance payments. National Century then collected the full amount of the payments.
The government says company officials moved money between accounts to cover shortfalls, fabricated data and loaded false information on a company computer system.
Earlier this month, a federal jury convicted five former National Century executives of fraud charges stemming from their role in the scheme.
Copyright 2008 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
Tape played in witness tampering case
03.21.08, 11:54 AM ET
COLUMBUS, Ohio (AP) - A former health care executive accused of witness tampering in a $1.9 billion corporate fraud case suggested that a key witness tell prosecutors that she wasn't familiar with the charges against him, according to a taped phone conversation played in federal court Friday.
Lance Poulsen, founder and former chief executive officer of National Century Financial (other-otc: CYFL.PK - news - people ) Enterprises, said on the tape that the star witness should explain that her previous statements to prosecutors were based on old facts.
Poulsen said the witness should say, 'But now, there is a new set of charges and it's a new indictment and I'm not familiar with it,' Poulsen said on the recording.
Prosecutors say the witness, Sherry Gibson, a former National Century executive vice president, was offered hundreds of thousands of dollars if she could 'have amnesia' when it came time to testify.
Before its 2002 bankruptcy, the suburban Dublin-based company was described as the largest health care financing company in the country.
Poulsen goes on trial in August on multiple charges of conspiracy, securities and wire fraud and money laundering. The government alleges he misled investors about unsecured loans his company was providing health care companies such as hospitals and nursing homes.
Before that trial, he is defending himself against charges that he and longtime acquaintance Karl Demmler, a Columbus bar and restaurant owner, teamed up to persuade the witness to help Poulsen beat the fraud case against him.
Poulsen and Demmler have both pleaded not guilty.
Gibson pleaded guilty in 2003 to a lesser charge of securities fraud in exchange for helping prosecutors.
Gibson had served her prison sentence and was back in Columbus last summer when she had dinner on June 19 with Demmler and he proposed she help Poulsen, Gibson testified this week.
Demmler said, 'that Lance wanted to make me whole,' Gibson said Tuesday under questioning by federal trial attorney Leo Wise.
Gibson said she was under no illusions about what Demmler meant.
'The only thing I had to do with Lance Poulsen was to be a material witness in his trial,' Gibson testified Tuesday.
After that meeting, Gibson contacted the FBI and agreed to help them investigate Poulsen, she said. Over the next several weeks she met with Demmler at area restaurants for hours at a time while investigators recorded their conversations.
'I'm not asking you to lie,' Demmler says in a recording played Tuesday. 'You just got a mental lapse.'
Gibson 'could have amnesia,' Demmler says in another recording played Wednesday.
Prosecutors allege Poulsen promised Gibson $500,000 in monthly payments of $5,000.
National Century offered financing to health care providers by purchasing at a discount the debt owed the companies -- also known as accounts receivable -- so the companies wouldn't have to wait for insurance payments. National Century then collected the full amount of the payments.
The government says company officials moved money between accounts to cover shortfalls, fabricated data and loaded false information on a company computer system.
Earlier this month, a federal jury convicted five former National Century executives of fraud charges stemming from their role in the scheme.
Copyright 2008 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
Defense launched in witness tampering trial
The middleman in an alleged witness tampering scheme had a chance to turn on his friend and the former boss of the failed National Century Financial Enterprises Inc. but didn't do it, a federal agent testified Friday afternoon.
FBI Special Agent Jeffrey Williams told a 12-member jury in Columbus that he gave Karl Demmler a chance to turn on ex-CEO Lance Poulsen, but Demmler refused. He added that Demmler may also face money laundering charges in the future.
Williams was testifying in the bribery trial of Poulsen and Demmler, both of whom are facing one count each of conspiracy to obstruct justice, witness tampering and witness tampering by influencing testimony. The government has alleged Demmler, 57, of Columbus, was working with Poulsen, 64, of Port Charlotte, Fla., to bribe former National Century executive Sherry Gibson, who is prepared to testify against Poulsen in a securities fraud trial.
The men have pleaded not guilty to the charges.
Under questioning by defense lawyer Darryl Parker on Friday afternoon, Williams said that when he arrested Demmler at Port Columbus International Airport last October, he offered him a chance to turn on Poulsen.
"I said that this was an opportunity for Demmler to help himself," Williams testified, adding he told Demmler that Poulsen likely wouldn't be his friend in the future.
After the arrest, Williams said he played for Demmler taped conversations Demmler had with Poulsen about bribing Gibson. Williams said he also played conversations of Demmler attempting to persuade Gibson to change her testimony.
Demmler refused to work with the government by taping conversations between himself and Poulsen, Williams said. The FBI agent also noted that when he arrested Demmler, the government found what it alleges were bogus promissory notes for millions of dollars in Demmler's suitcase. Williams alleged Demmler was going to try to sell the notes in Venezuela.
When asked by Demmler's attorney if Demmler has been charged with money laundering, Williams replied, "Not yet."
The government has alleged Demmler was a middleman for Poulsen and tried to bribe Gibson with $500,000 to $1 million.
In addition to the witness tampering charges, Poulsen has been accused by the government of having directed Gibson in a $3 billion fraud at Dublin-based National Century when she was an executive vice president at the firm.
On the defensive
When the government rested its case following Williams' testimony, attorneys for Poulsen and Demmler asked U.S. District Judge Algenon Marbley to order an acquittal, claiming Justice Department lawyers had failed to offer sufficient evidence to warrant a conviction of the men. Marbley denied the motions.
The defense for Poulsen began building its case with Thomas Tyack, a Columbus lawyer who once was the ex-CEO's attorney. He testified Poulsen told him he felt Gibson had been "railroaded" by the government when she pleaded guilty for her hand in the troubles at National Century and that he wanted to help her.
Gibson spent three years in prison after pleading guilty to a count of conspiracy to commit securities fraud. She also gave up her entire net worth - about $420,000 - to the government.
Tyack said he advised Poulsen not to contact Gibson. He also testified he gave a list of defense attorneys to Demmler that Gibson could call if she wanted to try to overturn her guilty plea.
Tyack testified he thought Gibson may have received bad advice from her attorney when she pleaded guilty to the government's charge. Tyack said Poulsen had hoped to help Gibson find a new attorney.
Defense attorneys have argued throughout the trial that Poulsen wasn't attempting to bribe Gibson, but wanted to help her get a new lawyer so that she could sue the government and regain her net worth.
Tyack testified he resigned from representing Poulsen because he felt he would be called to testify in Poulsen's witness tampering trial, and he could not ethically be a witness and represent Poulsen at the same time.
FBI Special Agent Jeffrey Williams told a 12-member jury in Columbus that he gave Karl Demmler a chance to turn on ex-CEO Lance Poulsen, but Demmler refused. He added that Demmler may also face money laundering charges in the future.
Williams was testifying in the bribery trial of Poulsen and Demmler, both of whom are facing one count each of conspiracy to obstruct justice, witness tampering and witness tampering by influencing testimony. The government has alleged Demmler, 57, of Columbus, was working with Poulsen, 64, of Port Charlotte, Fla., to bribe former National Century executive Sherry Gibson, who is prepared to testify against Poulsen in a securities fraud trial.
The men have pleaded not guilty to the charges.
Under questioning by defense lawyer Darryl Parker on Friday afternoon, Williams said that when he arrested Demmler at Port Columbus International Airport last October, he offered him a chance to turn on Poulsen.
"I said that this was an opportunity for Demmler to help himself," Williams testified, adding he told Demmler that Poulsen likely wouldn't be his friend in the future.
After the arrest, Williams said he played for Demmler taped conversations Demmler had with Poulsen about bribing Gibson. Williams said he also played conversations of Demmler attempting to persuade Gibson to change her testimony.
Demmler refused to work with the government by taping conversations between himself and Poulsen, Williams said. The FBI agent also noted that when he arrested Demmler, the government found what it alleges were bogus promissory notes for millions of dollars in Demmler's suitcase. Williams alleged Demmler was going to try to sell the notes in Venezuela.
When asked by Demmler's attorney if Demmler has been charged with money laundering, Williams replied, "Not yet."
The government has alleged Demmler was a middleman for Poulsen and tried to bribe Gibson with $500,000 to $1 million.
In addition to the witness tampering charges, Poulsen has been accused by the government of having directed Gibson in a $3 billion fraud at Dublin-based National Century when she was an executive vice president at the firm.
On the defensive
When the government rested its case following Williams' testimony, attorneys for Poulsen and Demmler asked U.S. District Judge Algenon Marbley to order an acquittal, claiming Justice Department lawyers had failed to offer sufficient evidence to warrant a conviction of the men. Marbley denied the motions.
The defense for Poulsen began building its case with Thomas Tyack, a Columbus lawyer who once was the ex-CEO's attorney. He testified Poulsen told him he felt Gibson had been "railroaded" by the government when she pleaded guilty for her hand in the troubles at National Century and that he wanted to help her.
Gibson spent three years in prison after pleading guilty to a count of conspiracy to commit securities fraud. She also gave up her entire net worth - about $420,000 - to the government.
Tyack said he advised Poulsen not to contact Gibson. He also testified he gave a list of defense attorneys to Demmler that Gibson could call if she wanted to try to overturn her guilty plea.
Tyack testified he thought Gibson may have received bad advice from her attorney when she pleaded guilty to the government's charge. Tyack said Poulsen had hoped to help Gibson find a new attorney.
Defense attorneys have argued throughout the trial that Poulsen wasn't attempting to bribe Gibson, but wanted to help her get a new lawyer so that she could sue the government and regain her net worth.
Tyack testified he resigned from representing Poulsen because he felt he would be called to testify in Poulsen's witness tampering trial, and he could not ethically be a witness and represent Poulsen at the same time.
Friday, March 21, 2008
Poulsen: complained in court documents that he doesn't have proper access to a work room to prepare for his trials.
He does not have adequate space.....wow!! I wonder what type of desk or amount of space Poulsen this guy would like to have or believes he needs for preparation?
Former National Century exec on trial in witness tampering case
COLUMBUS (AP) - Lance Poulsen is eager to fight charges that he was the mastermind behind a $1.9 billion fraud scheme at his failed health care financing company.
First, he must battle allegations that he proposed paying a government witness $500,000 - $5,000 a month - in exchange for her not giving damaging testimony.
The witness tampering trial of the former owner and chief executive officer of National Century Financial Enterprises was scheduled to begin Monday in federal court before U.S. District Judge Algenon Marbley.
Once that trial ends, Poulsen faces an August trial on multiple counts of conspiracy, wire and securities fraud and money laundering.
Five former executives at National Century were convicted Thursday of similar charges in a fraud scheme that prosecutors likened to large white-collar crime cases like Enron or WorldCom.
In the tampering case, prosecutors say Poulsen and acquaintance Karl Demmler, a Columbus bar and restaurant owner, teamed up to persuade the witness to help Poulsen beat the fraud case against him.
"It's not what you make up, it's what you forget," Demmler allegedly told the witness during a meeting on July 13 in Columbus, according to the FBI's criminal complaint.
During a July 18 meeting, also in Columbus, "Demmler suggested Witness A have 'amnesia,"' the complaint said.
During a Sept. 28 phone call, Poulsen told Demmler one of the best things the witness could say was that she was unfamiliar with the indictment and charges against Poulsen, according to the complaint.
Neither the complaint nor the Oct. 23 indictment identify the witness. The government's 162-item exhibit list refers frequently to meetings between Demmler and Sherry Gibson, a former National Century executive vice president who pleaded guilty in 2003 to securities fraud in exchange for helping prosecutors.
Those meetings match the dates of Demmler's meeting with the witness in the criminal complaint. Gibson is expected to testify for the government, said Fred Alverson, a spokesman for the U.S. Attorney's office.
Gibson's attorney, Columbus lawyer Terry Sherman, would not comment except to say he continues to represent Gibson but he is not involved in the witness tampering trial.
Gibson was the prosecution's star witness at the trial of the five former executives that concluded Thursday.
She testified the company kept two sets of books, one for public consumption filled with false information and another that showed the firm's actual shortfalls.
She was not charged in the current witness tampering case.
Federal prosecutor Doug Squires would not comment about Poulsen's Monday trial.
National Century, based in suburban Dublin, offered financing to small hospitals, nursing homes and other health care providers by purchasing their debt - also known as accounts receivable.
The government alleges the company also gave those providers unsecured loans, then lied to investors about those loans.
The government says company officials moved money between accounts to cover shortfalls, fabricated data and loaded false information on a company computer system.
Demmler met with Gibson at restaurants and bars for hours at a time, where investigators recorded their conversations. Demmler also talked with her on the phone and left her voice messages, according to the government's witness list.
Demmler said Witness A "did not need to 'change her story' but should rather have 'mental lapse(s),' keep the jury confused and 'prevaricate,"' according to the FBI's criminal complaint.
Poulsen, of Port Charlotte, Fla., is in a county jail in Chillicothe, about 50 miles south of Columbus, awaiting trial. He has complained in court documents that he doesn't have proper access to a work room to prepare for his trials.
"Mr. Poulsen has lost so much preparation time that his ability to prepare with his attorneys will be gravely jeopardized," his attorneys argued in a March 3 document in U.S. District Court.
The government argues Poulsen has plenty of time and space to prepare under a previous court order
Former National Century exec on trial in witness tampering case
COLUMBUS (AP) - Lance Poulsen is eager to fight charges that he was the mastermind behind a $1.9 billion fraud scheme at his failed health care financing company.
First, he must battle allegations that he proposed paying a government witness $500,000 - $5,000 a month - in exchange for her not giving damaging testimony.
The witness tampering trial of the former owner and chief executive officer of National Century Financial Enterprises was scheduled to begin Monday in federal court before U.S. District Judge Algenon Marbley.
Once that trial ends, Poulsen faces an August trial on multiple counts of conspiracy, wire and securities fraud and money laundering.
Five former executives at National Century were convicted Thursday of similar charges in a fraud scheme that prosecutors likened to large white-collar crime cases like Enron or WorldCom.
In the tampering case, prosecutors say Poulsen and acquaintance Karl Demmler, a Columbus bar and restaurant owner, teamed up to persuade the witness to help Poulsen beat the fraud case against him.
"It's not what you make up, it's what you forget," Demmler allegedly told the witness during a meeting on July 13 in Columbus, according to the FBI's criminal complaint.
During a July 18 meeting, also in Columbus, "Demmler suggested Witness A have 'amnesia,"' the complaint said.
During a Sept. 28 phone call, Poulsen told Demmler one of the best things the witness could say was that she was unfamiliar with the indictment and charges against Poulsen, according to the complaint.
Neither the complaint nor the Oct. 23 indictment identify the witness. The government's 162-item exhibit list refers frequently to meetings between Demmler and Sherry Gibson, a former National Century executive vice president who pleaded guilty in 2003 to securities fraud in exchange for helping prosecutors.
Those meetings match the dates of Demmler's meeting with the witness in the criminal complaint. Gibson is expected to testify for the government, said Fred Alverson, a spokesman for the U.S. Attorney's office.
Gibson's attorney, Columbus lawyer Terry Sherman, would not comment except to say he continues to represent Gibson but he is not involved in the witness tampering trial.
Gibson was the prosecution's star witness at the trial of the five former executives that concluded Thursday.
She testified the company kept two sets of books, one for public consumption filled with false information and another that showed the firm's actual shortfalls.
She was not charged in the current witness tampering case.
Federal prosecutor Doug Squires would not comment about Poulsen's Monday trial.
National Century, based in suburban Dublin, offered financing to small hospitals, nursing homes and other health care providers by purchasing their debt - also known as accounts receivable.
The government alleges the company also gave those providers unsecured loans, then lied to investors about those loans.
The government says company officials moved money between accounts to cover shortfalls, fabricated data and loaded false information on a company computer system.
Demmler met with Gibson at restaurants and bars for hours at a time, where investigators recorded their conversations. Demmler also talked with her on the phone and left her voice messages, according to the government's witness list.
Demmler said Witness A "did not need to 'change her story' but should rather have 'mental lapse(s),' keep the jury confused and 'prevaricate,"' according to the FBI's criminal complaint.
Poulsen, of Port Charlotte, Fla., is in a county jail in Chillicothe, about 50 miles south of Columbus, awaiting trial. He has complained in court documents that he doesn't have proper access to a work room to prepare for his trials.
"Mr. Poulsen has lost so much preparation time that his ability to prepare with his attorneys will be gravely jeopardized," his attorneys argued in a March 3 document in U.S. District Court.
The government argues Poulsen has plenty of time and space to prepare under a previous court order
"...millions of dollars in advances being sent to companies that Poulsen and two other National Century executives owned."
So, who are the "Other" two executives....really???
Monday, March 17, 2008 - 6:23 PM EDT
Jury picked
Seven women and five men have been picked as jurors to decide if a Central Ohio CEO and an associate tried to bribe a government witness in the fraud trial triggered by the collapse of National Century Financial Enterprises Inc.
The federal court trial of Lance Poulsen, once the head of Dublin-based National Century, began Monday in Columbus with jury selection. Attorneys for the U.S. Justice Department and the defendants drained a pool of more than 60 candidates to select 12 jurors and two alternates for what is expected to be a week-and-a-half-long trial.
Poulsen, 64, of Port Charlotte, Fla., was indicted with Karl A. Demmler, 57, of Columbus, last October on charges they attempted to bribe former National Century executive Sherry Gibson with $500,000. The government has alleged Poulsen, a co-founder of the now defunct National Century, expected Gibson's testimony would be so damaging that he planned to pay her to develop a case of "amnesia" when she was called to the witness stand.
Gibson testified in a related trial that ended last week with five former executives at National Century being convicted on conspiracy, wire fraud and securities fraud charges.
National Century's business was financing health-care providers by buying their accounts receivables at a discount and packaging them as asset-backed bonds for sale to investors. But Gibson testified at the recently concluded trial that Poulsen directed her in a scheme that resulted in millions of dollars in advances being sent to companies that Poulsen and two other National Century executives owned. Gibson testified she and others doctored company records to hide a fraud that ended with National Century being put into bankruptcy in 2002 and leaving nearly $3 billion unaccounted.
Gibson pleaded guilty to a count of conspiracy to commit securities fraud and spent three years in a federal penitentiary. She was forced to give up her $420,000 net worth to the government and agreed to cooperate with the Justice Department's investigation.
She is expected to testify in the Poulsen-Demmler trial and likely will tell jurors that Poulsen planned to pay her through a legal services company that Demmler set up.
Poulsen and Demmler face a count each of conspiracy to obstruct justice, witness tampering and witness tampering by influencing testimony. They have denied the charges.
After the jury left Monday, U.S. District Court Judge Algenon Marbley asked Poulsen and Demmler if they were aware of a plea agreement offered to them by the government. Both defendants acknowledged the offer. Demmler went a step further, telling Marbley the government's offer was nothing "substantial."
Opening arguments in the trial are scheduled to begin Tuesday morning.
Monday, March 17, 2008 - 6:23 PM EDT
Jury picked
Seven women and five men have been picked as jurors to decide if a Central Ohio CEO and an associate tried to bribe a government witness in the fraud trial triggered by the collapse of National Century Financial Enterprises Inc.
The federal court trial of Lance Poulsen, once the head of Dublin-based National Century, began Monday in Columbus with jury selection. Attorneys for the U.S. Justice Department and the defendants drained a pool of more than 60 candidates to select 12 jurors and two alternates for what is expected to be a week-and-a-half-long trial.
Poulsen, 64, of Port Charlotte, Fla., was indicted with Karl A. Demmler, 57, of Columbus, last October on charges they attempted to bribe former National Century executive Sherry Gibson with $500,000. The government has alleged Poulsen, a co-founder of the now defunct National Century, expected Gibson's testimony would be so damaging that he planned to pay her to develop a case of "amnesia" when she was called to the witness stand.
Gibson testified in a related trial that ended last week with five former executives at National Century being convicted on conspiracy, wire fraud and securities fraud charges.
National Century's business was financing health-care providers by buying their accounts receivables at a discount and packaging them as asset-backed bonds for sale to investors. But Gibson testified at the recently concluded trial that Poulsen directed her in a scheme that resulted in millions of dollars in advances being sent to companies that Poulsen and two other National Century executives owned. Gibson testified she and others doctored company records to hide a fraud that ended with National Century being put into bankruptcy in 2002 and leaving nearly $3 billion unaccounted.
Gibson pleaded guilty to a count of conspiracy to commit securities fraud and spent three years in a federal penitentiary. She was forced to give up her $420,000 net worth to the government and agreed to cooperate with the Justice Department's investigation.
She is expected to testify in the Poulsen-Demmler trial and likely will tell jurors that Poulsen planned to pay her through a legal services company that Demmler set up.
Poulsen and Demmler face a count each of conspiracy to obstruct justice, witness tampering and witness tampering by influencing testimony. They have denied the charges.
After the jury left Monday, U.S. District Court Judge Algenon Marbley asked Poulsen and Demmler if they were aware of a plea agreement offered to them by the government. Both defendants acknowledged the offer. Demmler went a step further, telling Marbley the government's offer was nothing "substantial."
Opening arguments in the trial are scheduled to begin Tuesday morning.
Thursday, March 20, 2008
BOY, are all these reporters missing the BIG picture.....still haven't connected the dots!
Try turning your attention to the MISSING EXECUTIVE that will not go to trial until October!!!
What are they waiting for? and I am not talking about Lance Poulsen!
ex-National Century exec goes on trial
By ANDREW WELSH-HUGGINS Associated Press Writer
Article Launched: 03/16/2008 12:25:21 PM PDT
COLUMBUS, Ohio—Before Lance Poulsen can fight charges that he was the mastermind behind a $1.9 billion fraud scheme, the former CEO of National Century Financial must first deal with allegations that he proposed paying a government witness $500,000 to lie on the stand.
The federal witness tampering trial of the former owner of National Century, a health care financing company, was scheduled to begin Monday. Once that trial ends, Poulsen faces a second trial in August on multiple counts of conspiracy, wire and securities fraud and money laundering.
Five former executives at National Century were convicted of similar charges on Thursday in a fraud scheme that prosecutors likened to the cases of Enron and WorldCom.
In the tampering case, prosecutors say that Poulsen along with Karl Demmler, the owner of a Columbus bar and restaurant, teamed up to persuade the witness to help Poulsen beat the charges.
"It's not what you make up, it's what you forget," Demmler allegedly told the witness during a meeting on July 13 in Columbus, according to the FBI's criminal complaint.
During a July 18 meeting, "Demmler suggested Witness A have 'amnesia,'" according to the complaint. Poulsen told Demmler during a Sept. 28 phone call that one of the best things the witness could say was that she was unfamiliar with the indictment and charges against Poulsen.
Messages seeking comment were left for attorneys for Poulsen and Demmler.
Neither the complaint nor the Oct. 23 indictment identify the witness, but the government's 162-item exhibit list refers frequently to meetings between Demmler and Sherry Gibson, a former National Century executive vice president who pleaded guilty in 2003 to securities fraud in exchange for helping prosecutors.
Those meetings match the dates of Demmler's meeting with the witness in the criminal complaint. Gibson is expected to testify for the government, U.S. Attorney's office spokesman Fred Alverson said.
Gibson's attorney, Columbus lawyer Terry Sherman, said he continues to represent Gibson and that he is not involved in the witness tampering trial.
Gibson was the prosecution's star witness at the trial of the five former executives that concluded Thursday. She testified the company kept two sets of books, one for public consumption filled with false information and another that showed the firm's actual shortfalls.
She was not charged in the current witness tampering case.
National Century, based in suburban Dublin, offered financing to small hospitals, nursing homes and other health care providers by purchasing their debt. The government alleges the company also gave those providers unsecured loans, then lied to investors about those loans.
The government says company officials moved money between accounts to cover shortfalls, fabricated data and loaded false information on a company computer system.
What are they waiting for? and I am not talking about Lance Poulsen!
ex-National Century exec goes on trial
By ANDREW WELSH-HUGGINS Associated Press Writer
Article Launched: 03/16/2008 12:25:21 PM PDT
COLUMBUS, Ohio—Before Lance Poulsen can fight charges that he was the mastermind behind a $1.9 billion fraud scheme, the former CEO of National Century Financial must first deal with allegations that he proposed paying a government witness $500,000 to lie on the stand.
The federal witness tampering trial of the former owner of National Century, a health care financing company, was scheduled to begin Monday. Once that trial ends, Poulsen faces a second trial in August on multiple counts of conspiracy, wire and securities fraud and money laundering.
Five former executives at National Century were convicted of similar charges on Thursday in a fraud scheme that prosecutors likened to the cases of Enron and WorldCom.
In the tampering case, prosecutors say that Poulsen along with Karl Demmler, the owner of a Columbus bar and restaurant, teamed up to persuade the witness to help Poulsen beat the charges.
"It's not what you make up, it's what you forget," Demmler allegedly told the witness during a meeting on July 13 in Columbus, according to the FBI's criminal complaint.
During a July 18 meeting, "Demmler suggested Witness A have 'amnesia,'" according to the complaint. Poulsen told Demmler during a Sept. 28 phone call that one of the best things the witness could say was that she was unfamiliar with the indictment and charges against Poulsen.
Messages seeking comment were left for attorneys for Poulsen and Demmler.
Neither the complaint nor the Oct. 23 indictment identify the witness, but the government's 162-item exhibit list refers frequently to meetings between Demmler and Sherry Gibson, a former National Century executive vice president who pleaded guilty in 2003 to securities fraud in exchange for helping prosecutors.
Those meetings match the dates of Demmler's meeting with the witness in the criminal complaint. Gibson is expected to testify for the government, U.S. Attorney's office spokesman Fred Alverson said.
Gibson's attorney, Columbus lawyer Terry Sherman, said he continues to represent Gibson and that he is not involved in the witness tampering trial.
Gibson was the prosecution's star witness at the trial of the five former executives that concluded Thursday. She testified the company kept two sets of books, one for public consumption filled with false information and another that showed the firm's actual shortfalls.
She was not charged in the current witness tampering case.
National Century, based in suburban Dublin, offered financing to small hospitals, nursing homes and other health care providers by purchasing their debt. The government alleges the company also gave those providers unsecured loans, then lied to investors about those loans.
The government says company officials moved money between accounts to cover shortfalls, fabricated data and loaded false information on a company computer system.
Government alleges tapes outline National Century bribery plan
Wednesday, March 19, 2008 - 6:18 PM EDT
Attempting to portray the testimony of the government's central witness as unreliable, a defense attorney focused his cross-examination of Sherry Gibson Wednesday afternoon on her history of false testimony and a possible misunderstanding of what Gibson has described as a bribe.
A former National Century Financial Enterprises Inc. executive, Gibson, 43, has been labeled by the government as not only an architect of a nearly $3 billion fraud at her former Dublin company, but also the central target of a witness tampering plot by National Century's former CEO, Lance Poulsen. The alleged fraud ended with the firm falling into bankruptcy in 2002 and leaving almost $3 billion in investor funds lost. Five executives were convicted last week on charges stemming from the company's collapse.
The government has alleged that Poulsen and his associate Karl Demmler, of Columbus, offered Gibson between $500,000 and $1 million to "forget" what she knew about alleged fraud at National Century when she testified at Poulsen's securities fraud trial.
Poulsen, 64, and Demmler, 57, are standing trial in U.S. District Court in Columbus on one count each of conspiracy to obstruct justice, witness tampering and witness tampering by influencing testimony. They have denied the charges.
Gibson testified earlier Wednesday that Demmler acted as an intermediary between her and Poulsen. She said she knew she was being offered a bribe when Demmler told her that Poulsen wanted to "make her whole."
Gibson gave up her entire net worth of $420,000 to the government after pleading guilty in 2003 to one count of conspiracy to commit securities fraud for her actions at National Century. She also spent almost three years in prison and agreed to cooperate in the government's investigation.
Peter Anderson, Poulsen's attorney, suggested that Gibson misinterpreted Demmler's remarks. Gibson had written a letter to Demmler while she was in prison that said, "If there was a way to reclaim my assets ... that would be something to check out." Anderson suggested that the letter was an invitation to Demmler to help her find a way to get her assets back, but Gibson said that was not what she meant. Anderson also suggested that when Demmler said Poulsen wanted to help make Gibson whole, Poulsen was trying to help her recover her assets from the government.
"That's one interpretation," Gibson said, though she added that it wasn't her interpretation. She construed the offer as a bribe, she said.
Anderson also asked Gibson about testimony and depositions she had given in civil litigation in which National Century had been involved. Gibson testified in a separate trial in early March that, over the years, she had given evasive answers to courts when National Century was involved in civil litigation.
"You lied in those depositions" Anderson suggested.
"If not telling the whole truth is a lie, then yes," Gibson said.
Anderson also attempted to ask Gibson about a possible history of depression she may have had, but after a sidebar discussion between the prosecution, defense and Judge Algenon Marbley, Anderson did not continue that line of questioning.
In earlier testimony, jurors heard covertly taped conversations between Gibson and Demmler where Demmler said, "Money laundering is my business," and offered to launder any payments made to Gibson for a 10 percent fee.
Gibson was prepared to testify last November that Poulsen directed her and others to doctor National Century's books and lie to investors to hide the fraud. But in several conversations played for jurors, it appeared Demmler, at the behest of Poulsen, was suggesting Gibson to drop her attorney, hire a replacement picked by Poulsen, then forget about any fraud.
"The most important thing is you gotta get rid of the attorney you had," Demmler said in an Aug. 27 message he left on Gibson's answering machine.
Two days later, Demmler played two messages for Gibson that Poulsen left on Demmler's cell phone.
In the first message, Poulsen told Demmler their "friend" could be made whole through a strategy Poulsen was developing. The strategy involved a civil lawsuit Poulsen had filed that alleges National Century's collapse was the fault of several banks.
Demmler told Gibson that Poulsen was confident the banks would agree to a multimillion-dollar settlement and that Gibson could join the lawsuit as a plaintiff. But Gibson told the jury that she expected Poulsen's civil lawsuits wouldn't pan out because it wasn't the truth.
"I committed the crime. I pled guilty to it. I did it," Gibson told the jury.
In a second message, Poulsen told Demmler that he couldn't talk with Gibson until she dropped her attorney and hired a new one.
Demmler told Gibson during a meeting last October that he and Poulsen had set up a way to get money to Gibson, but that Poulsen was apprehensive about paying it out for fear of being caught.
Gibson's cross examination is expected to continue Thursday morning.
Attempting to portray the testimony of the government's central witness as unreliable, a defense attorney focused his cross-examination of Sherry Gibson Wednesday afternoon on her history of false testimony and a possible misunderstanding of what Gibson has described as a bribe.
A former National Century Financial Enterprises Inc. executive, Gibson, 43, has been labeled by the government as not only an architect of a nearly $3 billion fraud at her former Dublin company, but also the central target of a witness tampering plot by National Century's former CEO, Lance Poulsen. The alleged fraud ended with the firm falling into bankruptcy in 2002 and leaving almost $3 billion in investor funds lost. Five executives were convicted last week on charges stemming from the company's collapse.
The government has alleged that Poulsen and his associate Karl Demmler, of Columbus, offered Gibson between $500,000 and $1 million to "forget" what she knew about alleged fraud at National Century when she testified at Poulsen's securities fraud trial.
Poulsen, 64, and Demmler, 57, are standing trial in U.S. District Court in Columbus on one count each of conspiracy to obstruct justice, witness tampering and witness tampering by influencing testimony. They have denied the charges.
Gibson testified earlier Wednesday that Demmler acted as an intermediary between her and Poulsen. She said she knew she was being offered a bribe when Demmler told her that Poulsen wanted to "make her whole."
Gibson gave up her entire net worth of $420,000 to the government after pleading guilty in 2003 to one count of conspiracy to commit securities fraud for her actions at National Century. She also spent almost three years in prison and agreed to cooperate in the government's investigation.
Peter Anderson, Poulsen's attorney, suggested that Gibson misinterpreted Demmler's remarks. Gibson had written a letter to Demmler while she was in prison that said, "If there was a way to reclaim my assets ... that would be something to check out." Anderson suggested that the letter was an invitation to Demmler to help her find a way to get her assets back, but Gibson said that was not what she meant. Anderson also suggested that when Demmler said Poulsen wanted to help make Gibson whole, Poulsen was trying to help her recover her assets from the government.
"That's one interpretation," Gibson said, though she added that it wasn't her interpretation. She construed the offer as a bribe, she said.
Anderson also asked Gibson about testimony and depositions she had given in civil litigation in which National Century had been involved. Gibson testified in a separate trial in early March that, over the years, she had given evasive answers to courts when National Century was involved in civil litigation.
"You lied in those depositions" Anderson suggested.
"If not telling the whole truth is a lie, then yes," Gibson said.
Anderson also attempted to ask Gibson about a possible history of depression she may have had, but after a sidebar discussion between the prosecution, defense and Judge Algenon Marbley, Anderson did not continue that line of questioning.
In earlier testimony, jurors heard covertly taped conversations between Gibson and Demmler where Demmler said, "Money laundering is my business," and offered to launder any payments made to Gibson for a 10 percent fee.
Gibson was prepared to testify last November that Poulsen directed her and others to doctor National Century's books and lie to investors to hide the fraud. But in several conversations played for jurors, it appeared Demmler, at the behest of Poulsen, was suggesting Gibson to drop her attorney, hire a replacement picked by Poulsen, then forget about any fraud.
"The most important thing is you gotta get rid of the attorney you had," Demmler said in an Aug. 27 message he left on Gibson's answering machine.
Two days later, Demmler played two messages for Gibson that Poulsen left on Demmler's cell phone.
In the first message, Poulsen told Demmler their "friend" could be made whole through a strategy Poulsen was developing. The strategy involved a civil lawsuit Poulsen had filed that alleges National Century's collapse was the fault of several banks.
Demmler told Gibson that Poulsen was confident the banks would agree to a multimillion-dollar settlement and that Gibson could join the lawsuit as a plaintiff. But Gibson told the jury that she expected Poulsen's civil lawsuits wouldn't pan out because it wasn't the truth.
"I committed the crime. I pled guilty to it. I did it," Gibson told the jury.
In a second message, Poulsen told Demmler that he couldn't talk with Gibson until she dropped her attorney and hired a new one.
Demmler told Gibson during a meeting last October that he and Poulsen had set up a way to get money to Gibson, but that Poulsen was apprehensive about paying it out for fear of being caught.
Gibson's cross examination is expected to continue Thursday morning.
Wednesday, March 19, 2008
Plead guilty to ONE COUNT????? OMG!!! What a deal!!
National Century: Poulsen Witness Tampering Trial Opens
A jury was selected Monday in the witness tampering trial of former National Century Financial Enterprises CEO and co-founder Lance Poulsen, and opening arguments are to begin today in Columbus, Ohio before US District Judge Algenon Marbley. Poulsen had been indicted in 2006 on 47 counts including conspiracy, wire fraud, securities fraud and money laundering in connection with the same acts for which five former executives were convicted last week (earlier) and is scheduled for trial on August 4 in that case. But in this case, he and an associate, Karl Demmler were indicted on one count each of conspiracy to obstruct justice, witness tampering and witness tampering by influencing testimony. The indictment alleges that they attempted to bribe Sherry Gibson, National Century’s former Executive VP for compliance, with $500,000 to “develop amnesia” on the witness stand in the fraud case. Gibson pleaded guilty in 2003 to one count of conspiracy to commit securities fraud and agreed to cooperate with prosecutors; she was sentenced to 48 months in prison in June 2004. She was the government’s star witness in the case that concluded last week and is scheduled to testify in this case. Columbus Business First has the story here.
A jury was selected Monday in the witness tampering trial of former National Century Financial Enterprises CEO and co-founder Lance Poulsen, and opening arguments are to begin today in Columbus, Ohio before US District Judge Algenon Marbley. Poulsen had been indicted in 2006 on 47 counts including conspiracy, wire fraud, securities fraud and money laundering in connection with the same acts for which five former executives were convicted last week (earlier) and is scheduled for trial on August 4 in that case. But in this case, he and an associate, Karl Demmler were indicted on one count each of conspiracy to obstruct justice, witness tampering and witness tampering by influencing testimony. The indictment alleges that they attempted to bribe Sherry Gibson, National Century’s former Executive VP for compliance, with $500,000 to “develop amnesia” on the witness stand in the fraud case. Gibson pleaded guilty in 2003 to one count of conspiracy to commit securities fraud and agreed to cooperate with prosecutors; she was sentenced to 48 months in prison in June 2004. She was the government’s star witness in the case that concluded last week and is scheduled to testify in this case. Columbus Business First has the story here.
"It's too easy to say that Enron is an isolated case. It isn't"
This converstion took place in 2002, SIX YEARS AGO!!!!
And let;s remember who voted for THIS CRIMINAL BUSH..."George W. Bush won easily among white males"
We really need to pay attention to the people BEHIND the Curtain.becuae Bush HAS MORE Powerful people PULLING his strings than we will probably ever know.
In the wake of Enron, Andersen, and the wave of other corporate scandals, what really is at stake for Republicans and Democrats in 2002 and beyond? In political terms, what is Enron-Andersen really about, and who stands to come out ahead? FRONTLINE asked David Brooks, a senior editor at The Weekly Standard, and Robert Kuttner, co-founding editor of The American Prospect, to engage in a Web-exclusive e-mail dialogue about the political fallout -- or lack thereof -- from the Enron-Andersen scandal.
June 20, 2002From: David Brooks
To: Robert Kuttner
Dear Bob,
I'm really amazed at how dead economic liberalism is. You've got all the conditions for a really first-class populist revolt. First, you've got widening income inequality. Then you've got the campaign finance system, which transparently provides political access in exchange for huge political contributions. Then you've got an administration made up of former oil executives, with a former aluminum executive thrown in for good measure. And finally, thanks to Ken Lay, the Arthur Andersen folks, and all the rest, you've got a first-class corporate scandal -- a case of big business malfeasance so egregious it makes the pores on your face pant open. And to top it all off, the biggest scumbag in this scandal is not just anyone. He happens to be one of the biggest donors to the president of the United States.
This is incredible! This is the perfect storm. It would take a party of total idiots not to lead a wildly successful anti-corporate popular upsurge in this climate.
Welcome to the Democratic Party. Despite all these events, the Democratic Party, which is supposed to be the party of the average person against the corporate fatcats, hasn't been able to do anything. Democratic fortunes have not risen a bit since Enron broke. Republican fortunes have not dropped an iota. In poll after poll, the two parties are still basically tied, as they were at the last election, and after the one before that and the one before that.
What's more, President Bush's popularity is still phenomenally high. No Enron effect. Not even much of the normal back-to-earth drift one typically sees after a rally-round-the-flag surge in presidential popularity. Moreover, Enron and the other scandals are playing a very limited role in the congressional elections. The big issues that Democrats are raising remain health care, education, and social security.
In short, Enron has been a big financial scandal, but as a political event it's been a complete dud. It has done almost nothing to change the landscape of American politics.
So it could well be that the Democratic Party is a party of complete nincompoops, unable to take advantage of issues that are just lying there on the table.
Or it could be that the Democrats would like to go down that road but they can't because they know the public wouldn't buy it. It could be that economic populism, even in these amazing circumstances, is the road to political failure. The public just doesn't buy attacks on overweening corporate power. They reject any hint of dramatic government intervention into the economy. They agree that Ken Lay and company are dirtballs, but on the whole, they rather admire American business.
My friends on the left and I have this argument: The lefties say that the reason the corporate scandals -- and income inequality, and so on -- have never become big issues is that the Democrats have never really made them such. If only a real liberal would emerge, then the public would respond.
I say that the Democrats may be stupid, but they are not that stupid. They'd love to run against corporate elites. Al Gore did run a presidential campaign on the slogan, "The People versus the Powerful." It flopped. The historical evidence is clear. The Democrats know that American voters reject economic populism and the liberal fiscal policies it implies. Enron doesn't provide a context for a new political platform.
The fundamental fact is that the New Deal era is over. Once upon a time the Democrats were the party of the poor and the Republicans were the party of the rich. But those days are gone forever. Income is now a terrible predictor of how a person votes. Al Gore carried many of the most affluent parts of the country: Westchester County, Connecticut; the Main Line outside of Philadelphia; Montgomery County, Maryland; the North Shore outside of Chicago; the entire West Coast. Al Gore even won among people who consider themselves upper class. Gore won among people with graduate and professional degrees.
Meanwhile, the Republicans are just as likely to be the party of the average person. George W. Bush won easily among white males with no more than high school degrees. These are the people whose incomes have been stagnating. These are the people for whom Gore's "People versus the Powerful" message was tailored. They are not buying it.
When they look at Ken Lay, they are appalled. But there is no sign from any of the polling data to suggest that most Americans have taken the Enron scandals and generalized them into a broad critique of American capitalism or of the American corporate class.
The interesting fact is that economics is playing a diminishing role in shaping American politics. After the last election, the Pew Foundation sponsored a huge survey to probe the differences between red and blue America. They found that economic views were moving toward the center. Liberals were less likely to want to see an expansion of government. Conservatives were less hostile to government. On economic issue after economic issue, there was convergence.
When I do interviews around the country, even in places where people have seen factories disappear, to be replaced by lower-salary service or warehouse jobs, I'm struck by how little class resentment there is. First, people see no alternative to capitalism. Their distrust of government and university elites is far higher than their distrust of business elites. As for anything that resembles socialism -- forget about it. Second, everyone has absorbed the psychology of the market. People figure that if they are not satisfied with their job and they want to get ahead, they just have to go back to school and get some marketable skills. The University of Phoenix, which is the most important educational institution in the country, provides this service to hundreds of thousands over the Internet.
Third, they are satisfied with their own lives. Around 90 percent of Americans tell pollsters they are satisfied with their jobs. Fourth, they overestimate their own income. Most people think they are above average. And finally, when they do see class barriers in society, they tend to resent social inequality more than economic inequality.
If there is resentment, it is directed toward coastal university, PBS/NPR tote-bag types. Business leaders, on the other hand, hunt, love college football and NASCAR, and go to church, just like regular folks. Why should working-class Americans resent people who share their values when there are all these other privileged people around who do not? The best predictor of voting patterns in America today is not income, it's church attendance. If you go to church regularly the odds are good that you vote Republican. If you never go, the odds are good that you vote Democratic.
So while many of my friends are greatly exercised about Enron and see it as a symptom of overweening corporate power, I can't really blame the Democratic Party for not hopping on the bandwagon and riding economic populism. It's the road to permanent minority-party status.
Best,
David
June 20, 2002
From: Robert Kuttner
To: David Brooks
Dear David,
Well, you're certainly right that corporate America is a mess; and we surely agree that Democrats are failing to make the most of a political moment in which corporate capitalism is again disgracing itself. But I disagree with your contention that there is not potentially a majority politics here. It's clear that, once again, it is up to liberals to save capitalism from its own most self-cannibalizing tendencies, as liberals last did in the 1930s. It's evident that Republicans and conservatives clearly won't.
Your thesis seems to be either that Democrats are nincompoops to fail to exploit this moment, or, more likely, that the moment is unexploitable because Americans are basically happy with their lives and confident about the economy. Besides, you say, populism no longer is associated with the Democrats; Gore carried the upscale suburbs.
My own take is that Democrats are seriously compromised because many of them are in bed with the same corrupt corporate interests who are now putting capitalism itself at risk. Joe Lieberman, until he was reborn as the scourge of Enron, was among those leading the charge to hobble the SEC. The Democratic Leadership Conference is one-part principled centrism and one-part corporate money-raising machine. Terry McAuliffe is not a grand strategist with a consistent ideology or message. He's a money guy. So liberal Democrats, who want to rescue our democracy and our economy from corrupt corporate domination are constrained in ways that their Republican opposite numbers are not.
The Republican party and its corporate allies have a consistent ideology and a consistent message. Markets work, government doesn't. Yes there are splits between libertarians and "national greatness" conservatives, and between nativists and internationalists, and between gay conservatives and fundamentalists, but these are minor compared to the corporate neutering of many Democrats.
But the weakness of the Democratic Party in the face of the greatest threat to capitalism since 1929 is by no means proof that the threat isn't real. Look at the stock market. Even though the real economy is in some kind of recovery, investors don't trust corporate balance sheets. This is potentially far more serious than it seems because U.S. capital markets need to import trillions of dollars from foreigners to cover our domestic capital shortfall that is the flipside of our trade deficit. The dollar has begun to fall, and this could feed on itself.
There is a bizarre disconnect between different wings of the American elite. People like Paul Volcker and Warren Buffett are seriously worried, and begging Congress for real reform. But the Bush administration is too busy toadying to its corporate cronies and its giddy libertarian ideologues who think that markets regulate themseves. There is a fairness argument for taming this beast -- the thugs in the suites at Enron should not make off with billions while ordinary employees lose their pensons -- but there is also an argument about the risks to the system. Volcker gets it even if you and Karl Rove don't. And Kevin Phillips, writing in the new issue of The American Prospect, thinks that corporate excess could be to the Republicans in this decade what cultural radicalism was to Democrats in the aftermath of the 1960s.
Volcker, of course, is the absolute antithesis of a populist. There have been times in American history when the populist backlash against the excesses of American capitalism came together with a prudential backlash. The New Deal and Great Society were such eras. At other times, patrician stewards took the play away from populists, as in the progressive era when safe conservatives such as Senator Carter Glass took away the "money issue" and stabilized a rocky financial system with the Federal Reserve, if only for a generation.
Polls are beside the point; leadership occurs not when a politician follows the polls but when he acts to move public opinion in his direction, as Reagan and Roosevelt, not to mention Lincoln did. The trouble with politics today is that it's far too poll-driven.
There are plenty of populist grievances, such as the failure of Americans to have health security, but neither party is currently their champion, so ordinary people are disconnected from politics. Nor is either party currently willing to step up and rescue capitalism from its own excesses. But I hope you are ultmately wrong about the Democrats, for it is clear that the right is not about to clean up the abuses of capitalism; once again, only the liberals can, one hopes before the rot deepens.
Bob
June 21, 2002
From: David Brooks
To: Robert Kuttner
Dear Bob,
Actually, I don't think corporate America is a mess. I think there are several companies that behaved scandalously, and that there should be tighter regulation to help investors get honest information so they can invest well. But to say this is the biggest threat to capitalism since 1929 is a gross exaggeration.
In the first place, even today, the stock markets work pretty well. If you invest in good companies and are patient, I guarantee you will do better than if you invest in bad companies, no matter what games people play with numbers. Over the medium run, substance matters. You argue that the flat stock market is a sign of how bad things are, but I really wouldn't stick to that argument because when the market rises again you'll be left without a case.
Second, one of the amazing features of the Enron scandal is that the country's leading energy market maker basically disappeared and nobody actually lost power. Capitalism has an amazing ability to adapt. That's another sign the system is healthy.
The true measure of this scandal was summarized by the sainted Teddy Roosevelt, who in his 1909 message to Congress said, "Every new social relation begets a new type of wrongdoing -- of sin, to use an old-fashioned word -- and many years always elapse before society is able to turn this sin into crime which can be effectively punished at law." What we have in the information age are new social relations begetting new sins, and so we need a few new laws. This is not a crisis of capitalism.
I'm interested by your discussion of the disconnect between different wings of the American elite, because this is the stuff of history. It's true, as you say, that an opposition is emerging between the prestige plutocrats and the southwestern corporatists. We see it not only in the response to Enron, by the way, but in the fight over the estate tax. There it is Bill Gates and Ted Turner and Warren Buffett defending the estate tax, and the southern and western small business people opposing it.
A fight between the billionaires and the millionaires is really something to relish. That, alas, is where the action is in politics today.
Best,
David
June 21, 2002
From: Robert Kuttner
To: David Brooks
Ah, David--
This is the kind of free-market generalization that is the road to real trouble: "markets work," "stick to it for the long term," "substance matters," etc. All true by definition, and therefore not a falsifiable hypothesis. You know, when the market was absurdly overvalued, the bulls kept saying, "no problem -- the money has to go somewhere." But in fact, the U.S. has to import trillions from Europe for its capital needs, and if the U.S. ceases looking like the ultimate safe haven then the money doesn't have to keep coming here.
The dollar is falling because there is less trust in the U.S. by global capital markets than there was only a few years ago. Some of this reflects the market having been so badly overvalued in the late 1990s. Some of it reflects 9/11. And some of it reflects the fact that investors are just skeptical of company claims about earnings. And, to coin a phrase, this is a lot "Bigger than Enron." It's a way of life. And at some point, it scares off even the small fry, and the whole system suffers. In my view, we are dangerously near that point.
So it isn't just a joust between millionaires and billionaires, chuckle, chuckle; this is serious stuff.
As for the fact that nobody lost power in the Enron mess, that reality is thanks to -- who else? -- the government. You don't think that Ken Lay and his ilk give a rip about whether anybody lost power. And taxpayers and rate payers had to pay through the nose. If some remnant of government regulation of electricity had not been in place, Enron and the others would have done even more damage.
So, yes, capitalism has an amazing ability to adapt, but sometimes that adaptation comes in the wake of a lot of unnecessary pain wrought by smarmy people. And often what you are crediting (too generously) as the adaptability of "capitalism" is in truth the fruit of the mixed economy -- democratically accountable regulators, changes in public policy -- forcing capitalism to be housebroken in spite of itself. I often think that if the private sector were ever held to the same standards on transparency and conflicts of interest that we demand of governments, the actual practices of few corporations could withstand the light of day.
I liked your T.R. quote. It was T.R., of course, that Bolshevik, who gave us the estate tax, not to mention antitrust and a lot of other regulatory intrusions that were ultimately pro-capitalist, even though the robber barons hated it. Where is the next T.R. in the Republican Party?
Bob
June 24, 2002
From: David Brooks
To: Robert Kuttner
Bob,
I've lost track of what the hell we're arguing about, so let me step back. Capitalism is a system of creative destruction that unleashes tremendous creativity but requires regulation to minimize the pain caused by the smarmy people and its inevitable dislocations. All this is obvious. We both agree. Everybody in America agrees except a few socialists and libertarians.
Many of the people who ran Enron are scumbags. They screwed their own employees and investors. The crimes they committed, and similar crimes committed by auditors, along with the cozy and contradictory arrangements that many accounting, investment and consulting firms had, have weakened investor confidence in the market. Something must be done to restore average investors' sense that the information they get is straight. Again, we don't disagree.
We don't even disagree about what should be done, at least not passionately. To me, frankly, that's a technical question, and whatever Arthur Levitt or some body of experts comes up with is fine by me. I don't regard this as an ideological matter, turning on fundamental matters of principle.
What we're really arguing about -- isn't it? -- is how we should feel about Enron, et al. Many of my liberal friends love the Enron scandal, because they want all of America to hate the corporate elite. Their reaction, reminds me a bit of the way many conservatives reacted to the Lewinsky scandal. Finally! A discreet instance that vindicates our pre-existing worldview! Now all America will hate our enemy!
What we're arguing about is how much and how broadly people should be outraged.
But where's the outrage? My conservative friends felt outrage about Clinton. They thought his sins were symptomatic of the entire 1960's self-indulgent culture. They argued that the entire structure of law was being undermined by lies and evasions. My liberal friends feel outrage over Enron. They, and you, I think, see it as symptomatic of a system in which corporations possess overweening power, in which the health of the nation is in peril.
Yet the public remains unmoved. It seems to me the public has entered a period of crisis cynicism. So many false crises have been foisted upon them, so many ruinations of the Republic, that they remain resolutely unmoved by conservative cries over Clintonism or liberal cries over Enron.
Is this wisdom? Maybe. Commentators tend to hype and over-react for obvious self-interested reasons. In the war for attention the angry Cassandra at least gets heard. Intellectuals like the frisson of cultural and economic crisis.
On the other hand, maybe the public has entered a period of such passivity that even real crises do not stir it. This is disengagement to the max. Even the war on terror seems to pass over people now as just another bit of the background noise. When I interview people around the country I'm struck by how removed they are even from the war on terror, and the likely war with Iraq that looms in our future.
Forgive me for trying to turn the discussion back to subjects of political psychology, but after you claimed to know why the dollar is falling I got intimidated. I've never met anyone who could understand such things. You must make billions trading currencies.
I recently wrote an editorial for my magazine on the perils of K Street Conservatism, that is to say, on the undue influence of business on American conservatism. That influence, by the way, is not to pump the party full of free-market or pro-capitalist ideas. It is to drain all ideas from politics. To make everything deals and short-term fixes. Corporations want safety, they want moderation, they want compromises.
You and I are the ones who are out of touch. We want brave ideas (albeit of different sorts). We see dangers. We want change. The public, by and large, refuses to share our respective outrages, refuses to see a future that is dramatically different from the present.
They certainly are conservative these days -- in the original sense of the word.
David
June 26, 2002
From: Robert Kuttner
To: David Brooks
David,
Well, I haven't lost track of what we're arguing about. We're arguing about whether capitalism is on the edge of another periodic precipice. You conservatives disparage the role of government on many grounds, one of which is that markets are marvelously self-regulating. But history tells us that they're not.
It's too easy to say that Enron is an isolated case. It isn't. Since your last posting, WorldCom admitted to overstating its profits by several billion, and the market tanked again.
The fact that the public is not in a state of outrage (yet) is neither here nor there. Wait until all of this has more spillover effects, on incomes and jobs. Or start preventive medicine now.
These details of how capitalism is governed is anything but the purely technical question you suggest. It is profoundly political. That's why Wall Street firms spend such effort lobbying both parties; the fact that they clipped Levitt's wings is testament to their power. Contrary to what you wrote, I'm sure we passionately disagree on what is to be done. We have to re-regulate all of this -- the self-dealing, the conflicts of interest -- so that it doesn't bring the whole system down. Want to support that, or don't you have time for the oh-so-tedious details?
I've been saying for months that the dollar was likely to fall. But as a career choice, I've decided to be a journalist, not a currency trader. George Soros can have the billion.
We agree that the public is in a state of high cynicism. Bill Clinton can share the blame for that, for disgracing himself with Monica. Ronald Reagan and both Bushes can share the blame, for relentlessly disparaging what can be done by Americans in common through their government. Depending on how cynical you feel and how cynically you write on any given day, you may share the blame, too. A lot of people in our trade surely do.
Cultural frissons, indeed. Count me out of that club. I actually care about this stuff.
Bob
And let;s remember who voted for THIS CRIMINAL BUSH..."George W. Bush won easily among white males"
We really need to pay attention to the people BEHIND the Curtain.becuae Bush HAS MORE Powerful people PULLING his strings than we will probably ever know.
In the wake of Enron, Andersen, and the wave of other corporate scandals, what really is at stake for Republicans and Democrats in 2002 and beyond? In political terms, what is Enron-Andersen really about, and who stands to come out ahead? FRONTLINE asked David Brooks, a senior editor at The Weekly Standard, and Robert Kuttner, co-founding editor of The American Prospect, to engage in a Web-exclusive e-mail dialogue about the political fallout -- or lack thereof -- from the Enron-Andersen scandal.
June 20, 2002From: David Brooks
To: Robert Kuttner
Dear Bob,
I'm really amazed at how dead economic liberalism is. You've got all the conditions for a really first-class populist revolt. First, you've got widening income inequality. Then you've got the campaign finance system, which transparently provides political access in exchange for huge political contributions. Then you've got an administration made up of former oil executives, with a former aluminum executive thrown in for good measure. And finally, thanks to Ken Lay, the Arthur Andersen folks, and all the rest, you've got a first-class corporate scandal -- a case of big business malfeasance so egregious it makes the pores on your face pant open. And to top it all off, the biggest scumbag in this scandal is not just anyone. He happens to be one of the biggest donors to the president of the United States.
This is incredible! This is the perfect storm. It would take a party of total idiots not to lead a wildly successful anti-corporate popular upsurge in this climate.
Welcome to the Democratic Party. Despite all these events, the Democratic Party, which is supposed to be the party of the average person against the corporate fatcats, hasn't been able to do anything. Democratic fortunes have not risen a bit since Enron broke. Republican fortunes have not dropped an iota. In poll after poll, the two parties are still basically tied, as they were at the last election, and after the one before that and the one before that.
What's more, President Bush's popularity is still phenomenally high. No Enron effect. Not even much of the normal back-to-earth drift one typically sees after a rally-round-the-flag surge in presidential popularity. Moreover, Enron and the other scandals are playing a very limited role in the congressional elections. The big issues that Democrats are raising remain health care, education, and social security.
In short, Enron has been a big financial scandal, but as a political event it's been a complete dud. It has done almost nothing to change the landscape of American politics.
So it could well be that the Democratic Party is a party of complete nincompoops, unable to take advantage of issues that are just lying there on the table.
Or it could be that the Democrats would like to go down that road but they can't because they know the public wouldn't buy it. It could be that economic populism, even in these amazing circumstances, is the road to political failure. The public just doesn't buy attacks on overweening corporate power. They reject any hint of dramatic government intervention into the economy. They agree that Ken Lay and company are dirtballs, but on the whole, they rather admire American business.
My friends on the left and I have this argument: The lefties say that the reason the corporate scandals -- and income inequality, and so on -- have never become big issues is that the Democrats have never really made them such. If only a real liberal would emerge, then the public would respond.
I say that the Democrats may be stupid, but they are not that stupid. They'd love to run against corporate elites. Al Gore did run a presidential campaign on the slogan, "The People versus the Powerful." It flopped. The historical evidence is clear. The Democrats know that American voters reject economic populism and the liberal fiscal policies it implies. Enron doesn't provide a context for a new political platform.
The fundamental fact is that the New Deal era is over. Once upon a time the Democrats were the party of the poor and the Republicans were the party of the rich. But those days are gone forever. Income is now a terrible predictor of how a person votes. Al Gore carried many of the most affluent parts of the country: Westchester County, Connecticut; the Main Line outside of Philadelphia; Montgomery County, Maryland; the North Shore outside of Chicago; the entire West Coast. Al Gore even won among people who consider themselves upper class. Gore won among people with graduate and professional degrees.
Meanwhile, the Republicans are just as likely to be the party of the average person. George W. Bush won easily among white males with no more than high school degrees. These are the people whose incomes have been stagnating. These are the people for whom Gore's "People versus the Powerful" message was tailored. They are not buying it.
When they look at Ken Lay, they are appalled. But there is no sign from any of the polling data to suggest that most Americans have taken the Enron scandals and generalized them into a broad critique of American capitalism or of the American corporate class.
The interesting fact is that economics is playing a diminishing role in shaping American politics. After the last election, the Pew Foundation sponsored a huge survey to probe the differences between red and blue America. They found that economic views were moving toward the center. Liberals were less likely to want to see an expansion of government. Conservatives were less hostile to government. On economic issue after economic issue, there was convergence.
When I do interviews around the country, even in places where people have seen factories disappear, to be replaced by lower-salary service or warehouse jobs, I'm struck by how little class resentment there is. First, people see no alternative to capitalism. Their distrust of government and university elites is far higher than their distrust of business elites. As for anything that resembles socialism -- forget about it. Second, everyone has absorbed the psychology of the market. People figure that if they are not satisfied with their job and they want to get ahead, they just have to go back to school and get some marketable skills. The University of Phoenix, which is the most important educational institution in the country, provides this service to hundreds of thousands over the Internet.
Third, they are satisfied with their own lives. Around 90 percent of Americans tell pollsters they are satisfied with their jobs. Fourth, they overestimate their own income. Most people think they are above average. And finally, when they do see class barriers in society, they tend to resent social inequality more than economic inequality.
If there is resentment, it is directed toward coastal university, PBS/NPR tote-bag types. Business leaders, on the other hand, hunt, love college football and NASCAR, and go to church, just like regular folks. Why should working-class Americans resent people who share their values when there are all these other privileged people around who do not? The best predictor of voting patterns in America today is not income, it's church attendance. If you go to church regularly the odds are good that you vote Republican. If you never go, the odds are good that you vote Democratic.
So while many of my friends are greatly exercised about Enron and see it as a symptom of overweening corporate power, I can't really blame the Democratic Party for not hopping on the bandwagon and riding economic populism. It's the road to permanent minority-party status.
Best,
David
June 20, 2002
From: Robert Kuttner
To: David Brooks
Dear David,
Well, you're certainly right that corporate America is a mess; and we surely agree that Democrats are failing to make the most of a political moment in which corporate capitalism is again disgracing itself. But I disagree with your contention that there is not potentially a majority politics here. It's clear that, once again, it is up to liberals to save capitalism from its own most self-cannibalizing tendencies, as liberals last did in the 1930s. It's evident that Republicans and conservatives clearly won't.
Your thesis seems to be either that Democrats are nincompoops to fail to exploit this moment, or, more likely, that the moment is unexploitable because Americans are basically happy with their lives and confident about the economy. Besides, you say, populism no longer is associated with the Democrats; Gore carried the upscale suburbs.
My own take is that Democrats are seriously compromised because many of them are in bed with the same corrupt corporate interests who are now putting capitalism itself at risk. Joe Lieberman, until he was reborn as the scourge of Enron, was among those leading the charge to hobble the SEC. The Democratic Leadership Conference is one-part principled centrism and one-part corporate money-raising machine. Terry McAuliffe is not a grand strategist with a consistent ideology or message. He's a money guy. So liberal Democrats, who want to rescue our democracy and our economy from corrupt corporate domination are constrained in ways that their Republican opposite numbers are not.
The Republican party and its corporate allies have a consistent ideology and a consistent message. Markets work, government doesn't. Yes there are splits between libertarians and "national greatness" conservatives, and between nativists and internationalists, and between gay conservatives and fundamentalists, but these are minor compared to the corporate neutering of many Democrats.
But the weakness of the Democratic Party in the face of the greatest threat to capitalism since 1929 is by no means proof that the threat isn't real. Look at the stock market. Even though the real economy is in some kind of recovery, investors don't trust corporate balance sheets. This is potentially far more serious than it seems because U.S. capital markets need to import trillions of dollars from foreigners to cover our domestic capital shortfall that is the flipside of our trade deficit. The dollar has begun to fall, and this could feed on itself.
There is a bizarre disconnect between different wings of the American elite. People like Paul Volcker and Warren Buffett are seriously worried, and begging Congress for real reform. But the Bush administration is too busy toadying to its corporate cronies and its giddy libertarian ideologues who think that markets regulate themseves. There is a fairness argument for taming this beast -- the thugs in the suites at Enron should not make off with billions while ordinary employees lose their pensons -- but there is also an argument about the risks to the system. Volcker gets it even if you and Karl Rove don't. And Kevin Phillips, writing in the new issue of The American Prospect, thinks that corporate excess could be to the Republicans in this decade what cultural radicalism was to Democrats in the aftermath of the 1960s.
Volcker, of course, is the absolute antithesis of a populist. There have been times in American history when the populist backlash against the excesses of American capitalism came together with a prudential backlash. The New Deal and Great Society were such eras. At other times, patrician stewards took the play away from populists, as in the progressive era when safe conservatives such as Senator Carter Glass took away the "money issue" and stabilized a rocky financial system with the Federal Reserve, if only for a generation.
Polls are beside the point; leadership occurs not when a politician follows the polls but when he acts to move public opinion in his direction, as Reagan and Roosevelt, not to mention Lincoln did. The trouble with politics today is that it's far too poll-driven.
There are plenty of populist grievances, such as the failure of Americans to have health security, but neither party is currently their champion, so ordinary people are disconnected from politics. Nor is either party currently willing to step up and rescue capitalism from its own excesses. But I hope you are ultmately wrong about the Democrats, for it is clear that the right is not about to clean up the abuses of capitalism; once again, only the liberals can, one hopes before the rot deepens.
Bob
June 21, 2002
From: David Brooks
To: Robert Kuttner
Dear Bob,
Actually, I don't think corporate America is a mess. I think there are several companies that behaved scandalously, and that there should be tighter regulation to help investors get honest information so they can invest well. But to say this is the biggest threat to capitalism since 1929 is a gross exaggeration.
In the first place, even today, the stock markets work pretty well. If you invest in good companies and are patient, I guarantee you will do better than if you invest in bad companies, no matter what games people play with numbers. Over the medium run, substance matters. You argue that the flat stock market is a sign of how bad things are, but I really wouldn't stick to that argument because when the market rises again you'll be left without a case.
Second, one of the amazing features of the Enron scandal is that the country's leading energy market maker basically disappeared and nobody actually lost power. Capitalism has an amazing ability to adapt. That's another sign the system is healthy.
The true measure of this scandal was summarized by the sainted Teddy Roosevelt, who in his 1909 message to Congress said, "Every new social relation begets a new type of wrongdoing -- of sin, to use an old-fashioned word -- and many years always elapse before society is able to turn this sin into crime which can be effectively punished at law." What we have in the information age are new social relations begetting new sins, and so we need a few new laws. This is not a crisis of capitalism.
I'm interested by your discussion of the disconnect between different wings of the American elite, because this is the stuff of history. It's true, as you say, that an opposition is emerging between the prestige plutocrats and the southwestern corporatists. We see it not only in the response to Enron, by the way, but in the fight over the estate tax. There it is Bill Gates and Ted Turner and Warren Buffett defending the estate tax, and the southern and western small business people opposing it.
A fight between the billionaires and the millionaires is really something to relish. That, alas, is where the action is in politics today.
Best,
David
June 21, 2002
From: Robert Kuttner
To: David Brooks
Ah, David--
This is the kind of free-market generalization that is the road to real trouble: "markets work," "stick to it for the long term," "substance matters," etc. All true by definition, and therefore not a falsifiable hypothesis. You know, when the market was absurdly overvalued, the bulls kept saying, "no problem -- the money has to go somewhere." But in fact, the U.S. has to import trillions from Europe for its capital needs, and if the U.S. ceases looking like the ultimate safe haven then the money doesn't have to keep coming here.
The dollar is falling because there is less trust in the U.S. by global capital markets than there was only a few years ago. Some of this reflects the market having been so badly overvalued in the late 1990s. Some of it reflects 9/11. And some of it reflects the fact that investors are just skeptical of company claims about earnings. And, to coin a phrase, this is a lot "Bigger than Enron." It's a way of life. And at some point, it scares off even the small fry, and the whole system suffers. In my view, we are dangerously near that point.
So it isn't just a joust between millionaires and billionaires, chuckle, chuckle; this is serious stuff.
As for the fact that nobody lost power in the Enron mess, that reality is thanks to -- who else? -- the government. You don't think that Ken Lay and his ilk give a rip about whether anybody lost power. And taxpayers and rate payers had to pay through the nose. If some remnant of government regulation of electricity had not been in place, Enron and the others would have done even more damage.
So, yes, capitalism has an amazing ability to adapt, but sometimes that adaptation comes in the wake of a lot of unnecessary pain wrought by smarmy people. And often what you are crediting (too generously) as the adaptability of "capitalism" is in truth the fruit of the mixed economy -- democratically accountable regulators, changes in public policy -- forcing capitalism to be housebroken in spite of itself. I often think that if the private sector were ever held to the same standards on transparency and conflicts of interest that we demand of governments, the actual practices of few corporations could withstand the light of day.
I liked your T.R. quote. It was T.R., of course, that Bolshevik, who gave us the estate tax, not to mention antitrust and a lot of other regulatory intrusions that were ultimately pro-capitalist, even though the robber barons hated it. Where is the next T.R. in the Republican Party?
Bob
June 24, 2002
From: David Brooks
To: Robert Kuttner
Bob,
I've lost track of what the hell we're arguing about, so let me step back. Capitalism is a system of creative destruction that unleashes tremendous creativity but requires regulation to minimize the pain caused by the smarmy people and its inevitable dislocations. All this is obvious. We both agree. Everybody in America agrees except a few socialists and libertarians.
Many of the people who ran Enron are scumbags. They screwed their own employees and investors. The crimes they committed, and similar crimes committed by auditors, along with the cozy and contradictory arrangements that many accounting, investment and consulting firms had, have weakened investor confidence in the market. Something must be done to restore average investors' sense that the information they get is straight. Again, we don't disagree.
We don't even disagree about what should be done, at least not passionately. To me, frankly, that's a technical question, and whatever Arthur Levitt or some body of experts comes up with is fine by me. I don't regard this as an ideological matter, turning on fundamental matters of principle.
What we're really arguing about -- isn't it? -- is how we should feel about Enron, et al. Many of my liberal friends love the Enron scandal, because they want all of America to hate the corporate elite. Their reaction, reminds me a bit of the way many conservatives reacted to the Lewinsky scandal. Finally! A discreet instance that vindicates our pre-existing worldview! Now all America will hate our enemy!
What we're arguing about is how much and how broadly people should be outraged.
But where's the outrage? My conservative friends felt outrage about Clinton. They thought his sins were symptomatic of the entire 1960's self-indulgent culture. They argued that the entire structure of law was being undermined by lies and evasions. My liberal friends feel outrage over Enron. They, and you, I think, see it as symptomatic of a system in which corporations possess overweening power, in which the health of the nation is in peril.
Yet the public remains unmoved. It seems to me the public has entered a period of crisis cynicism. So many false crises have been foisted upon them, so many ruinations of the Republic, that they remain resolutely unmoved by conservative cries over Clintonism or liberal cries over Enron.
Is this wisdom? Maybe. Commentators tend to hype and over-react for obvious self-interested reasons. In the war for attention the angry Cassandra at least gets heard. Intellectuals like the frisson of cultural and economic crisis.
On the other hand, maybe the public has entered a period of such passivity that even real crises do not stir it. This is disengagement to the max. Even the war on terror seems to pass over people now as just another bit of the background noise. When I interview people around the country I'm struck by how removed they are even from the war on terror, and the likely war with Iraq that looms in our future.
Forgive me for trying to turn the discussion back to subjects of political psychology, but after you claimed to know why the dollar is falling I got intimidated. I've never met anyone who could understand such things. You must make billions trading currencies.
I recently wrote an editorial for my magazine on the perils of K Street Conservatism, that is to say, on the undue influence of business on American conservatism. That influence, by the way, is not to pump the party full of free-market or pro-capitalist ideas. It is to drain all ideas from politics. To make everything deals and short-term fixes. Corporations want safety, they want moderation, they want compromises.
You and I are the ones who are out of touch. We want brave ideas (albeit of different sorts). We see dangers. We want change. The public, by and large, refuses to share our respective outrages, refuses to see a future that is dramatically different from the present.
They certainly are conservative these days -- in the original sense of the word.
David
June 26, 2002
From: Robert Kuttner
To: David Brooks
David,
Well, I haven't lost track of what we're arguing about. We're arguing about whether capitalism is on the edge of another periodic precipice. You conservatives disparage the role of government on many grounds, one of which is that markets are marvelously self-regulating. But history tells us that they're not.
It's too easy to say that Enron is an isolated case. It isn't. Since your last posting, WorldCom admitted to overstating its profits by several billion, and the market tanked again.
The fact that the public is not in a state of outrage (yet) is neither here nor there. Wait until all of this has more spillover effects, on incomes and jobs. Or start preventive medicine now.
These details of how capitalism is governed is anything but the purely technical question you suggest. It is profoundly political. That's why Wall Street firms spend such effort lobbying both parties; the fact that they clipped Levitt's wings is testament to their power. Contrary to what you wrote, I'm sure we passionately disagree on what is to be done. We have to re-regulate all of this -- the self-dealing, the conflicts of interest -- so that it doesn't bring the whole system down. Want to support that, or don't you have time for the oh-so-tedious details?
I've been saying for months that the dollar was likely to fall. But as a career choice, I've decided to be a journalist, not a currency trader. George Soros can have the billion.
We agree that the public is in a state of high cynicism. Bill Clinton can share the blame for that, for disgracing himself with Monica. Ronald Reagan and both Bushes can share the blame, for relentlessly disparaging what can be done by Americans in common through their government. Depending on how cynical you feel and how cynically you write on any given day, you may share the blame, too. A lot of people in our trade surely do.
Cultural frissons, indeed. Count me out of that club. I actually care about this stuff.
Bob
"Money laundering is my business..."
With her former employer staring at her in a Columbus courtroom, the government's star witness in an earlier fraud trial recounted how she was approached to change testimony against her ex-boss for a $1 million dollar payoff.
Sherry Gibson, former executive vice president of compliance at National Century Financial Enterprises Inc., took the stand Tuesday afternoon in the federal witness tampering trial of her former boss, Lance Poulsen. The Justice Department has alleged Poulsen tried to bribe Gibson to forget testimony she was asked to give against him in a securities fraud trial stemming from the collapse of National Century.
Poulsen, 64, of Port Charlotte, Fla., was a co-founder and the former chief executive of National Century, a Dublin company that provided financing to health-care providers by buying their accounts receivable at a discount and packaging them as asset-backed bonds for sale to investors.
National Century fell into bankruptcy in 2002 after what the government said was years-long fraud that ended with $3 billion unaccounted. Gibson told jurors Tuesday she was at the center of that fraud and spent almost three years in prison for her crime, as well as giving up her entire net worth of $420,000 to the government.
After she completed her sentence in 2007, Gibson said she was contacted last June by Karl Demmler, a longtime friend of hers and Poulsen's. Demmler, Gibson told the jury, wanted her to know Poulsen knew she was out of prison and wanted "to make her whole."
Gibson said she construed the offer as a bribe, so she contacted her attorney and the government, which asked her to cooperate in an investigation. After refusing, Gibson relented and agreed to wear a hidden microphone to record meetings with Demmler. Jury members Tuesday heard excerpts from one of those meetings.
During a get-together last June 29 at an east Columbus Don Pablo's restaurant, Demmler told Gibson that Poulsen would make her whole if she would forget during her testimony about any fraud that took place at National Century.
Later in the conversation, Demmler said that if Poulsen paid Gibson $1 million, Demmler could set her up with an offshore account for a 10 percent fee.
"Money laundering is my business on private contracts," he said. "It's nobody's business but mine."
When Gibson raised concerns she would violate her plea agreement with the government by lying, Demmler told her that wouldn't be necessary.
"Don't remember," Demmler said. "You don't have to lie. You're not lying. He's not asking you to lie."
Demmler also suggested Gibson watch "The Godfather," a reference to scene in "The Godfather Part II" where a witness forgets testimony he was expected to give.
The government has accused Poulsen and Demmler of one count each of conspiracy to obstruct justice, witness tampering and witness tampering by influencing testimony. They have denied the charges.
In a recently completed trial, Gibson testified that Poulsen directed a scheme to advance millions of dollars to companies in which he and two other National Century executives had ownership stakes, often without obtaining accounts receivable as collateral. She also testified Poulsen directed her and others to doctor company records to hide funding shortfalls.
Sherry Gibson, former executive vice president of compliance at National Century Financial Enterprises Inc., took the stand Tuesday afternoon in the federal witness tampering trial of her former boss, Lance Poulsen. The Justice Department has alleged Poulsen tried to bribe Gibson to forget testimony she was asked to give against him in a securities fraud trial stemming from the collapse of National Century.
Poulsen, 64, of Port Charlotte, Fla., was a co-founder and the former chief executive of National Century, a Dublin company that provided financing to health-care providers by buying their accounts receivable at a discount and packaging them as asset-backed bonds for sale to investors.
National Century fell into bankruptcy in 2002 after what the government said was years-long fraud that ended with $3 billion unaccounted. Gibson told jurors Tuesday she was at the center of that fraud and spent almost three years in prison for her crime, as well as giving up her entire net worth of $420,000 to the government.
After she completed her sentence in 2007, Gibson said she was contacted last June by Karl Demmler, a longtime friend of hers and Poulsen's. Demmler, Gibson told the jury, wanted her to know Poulsen knew she was out of prison and wanted "to make her whole."
Gibson said she construed the offer as a bribe, so she contacted her attorney and the government, which asked her to cooperate in an investigation. After refusing, Gibson relented and agreed to wear a hidden microphone to record meetings with Demmler. Jury members Tuesday heard excerpts from one of those meetings.
During a get-together last June 29 at an east Columbus Don Pablo's restaurant, Demmler told Gibson that Poulsen would make her whole if she would forget during her testimony about any fraud that took place at National Century.
Later in the conversation, Demmler said that if Poulsen paid Gibson $1 million, Demmler could set her up with an offshore account for a 10 percent fee.
"Money laundering is my business on private contracts," he said. "It's nobody's business but mine."
When Gibson raised concerns she would violate her plea agreement with the government by lying, Demmler told her that wouldn't be necessary.
"Don't remember," Demmler said. "You don't have to lie. You're not lying. He's not asking you to lie."
Demmler also suggested Gibson watch "The Godfather," a reference to scene in "The Godfather Part II" where a witness forgets testimony he was expected to give.
The government has accused Poulsen and Demmler of one count each of conspiracy to obstruct justice, witness tampering and witness tampering by influencing testimony. They have denied the charges.
In a recently completed trial, Gibson testified that Poulsen directed a scheme to advance millions of dollars to companies in which he and two other National Century executives had ownership stakes, often without obtaining accounts receivable as collateral. She also testified Poulsen directed her and others to doctor company records to hide funding shortfalls.
Tuesday, March 18, 2008
There is one Executive that does not go on trial until October? Why is that?
Federal jury convicts Ohio executives charged in $1.9 billion fraudCOLUMBUS, Ohio (AP) -- A federal court verdict that convicted five health care executives of defrauding investors of $1.9 billion falls hard on a man who wasn't even in the courtroom.
Lance Poulsen, founder and former chief executive officer of National Century Financial Enterprises, goes on trial Monday in the first of two trials stemming from indictments in what prosecutors liken to other big white collar crime cases like Enron or WorldCom.
At least nine former executives of Poulsen's company, once described as the nation's largest health care financing firm, have now been convicted of numerous charges, including securities and wire fraud and money laundering.
The Justice Department said the five defendants convicted by a jury Thursday could each face several dozen years in prison with exact amounts varying based on the individual counts they were convicted of.
Actual sentences are usually much lower than the maximum penalties. In court, U.S. District Judge Algenon Marbley described a statutory guideline of 20 years.
The defendants and their attorneys listened without emotion as Marbley read the verdicts from a 27-count indictment one by one. Some of the defendants' family members appeared stunned and wept in the courtroom after the jury left.
Convicted of all counts against them were: Donald Ayers, the company's former chief operating officer; James Dierker, the company's former vice president of client development; Roger Faulkenberry, a former executive vice president who raised money from investors; Rebecca Parrett, the company's former vice chairman; and Randy Speer, National Century's former chief financial officer.
Judge Marbley, over the objections of government prosecutors, allowed the defendants to remain free while they await sentencing but required them wear an electronic monitoring devices. Sentencing was expected in two to three months.
Defense attorneys said the jury's verdicts were hard to believe.
"I'm still in shock, to be honest with you," said Javier Armengau, who represents Faulkenberry. Armengau said he'd presented ample evidence that other defendants had hidden fraud from Faulkenberry.
Lawyers said they would appeal.
The government's lead prosecutor said the defendants lied and covered up wrongdoing for years.
The defendants "secured hundreds of millions of dollars of ill-gotten gains, and through those lies concealed those lies and engaged in a massive cover-up," said assistant U.S. attorney Doug Squires.
"Everyone's hurt when an investor's lied to in this country."
Next, the government will ask Marbley to hold the five responsible for the $1.9 billion lost by investors. Marbley scheduled hearings on that request next month.
Prosecutors compared National Century to Enron Corp., an energy trading company, and WorldCom Inc., a telecommunications company, which were both engulfed in corporate fraud scandals that cost investors billions and brought down both public companies.
National Century offered financing to small hospitals, nursing homes and other health care providers by purchasing their accounts receivable, usually for 80 or 90 cents on the dollar, so they wouldn't have to wait for insurance payments. National Century then collected the full amount of the payments.
The company, based in suburban Dublin, raised the money to fund its business by selling bonds to investors.
Prosecutors argued executives of the company authorized millions in unsecured loans to those health care providers, then misled investors about the loans.
Attorneys for the five defendants said prosecutors took the company's activities out of context by showing jurors only a tiny slice of National Century's operations.
The government said the unsecured loans caused shortfalls that the executives covered up by moving money between accounts. The government alleged the executives fabricated data and lied to investors about the shortfalls and loaded false information on a company computer system.
The government's star witness, former executive vice president Sherry Gibson, testified last month that the company kept two sets of books, one for public consumption filled with false information and another that showed the firm's actual shortfalls. Gibson is one of four former National Century executives who previously pleaded guilty to fraud charges and have cooperated with the government.
Missing from the trial was Poulsen, a chief target of the government's allegations.
Before his own trial on similar fraud charges in August, Poulsen is scheduled for trial Monday before Marbley on charges of witness tampering.
Prosecutors say Poulsen and an acquaintance teamed up in an attempt to persuade a government witness to help Poulsen beat the fraud case against him.
Squires, who is prosecuting that trial, would not comment.
"That's a trial for another day," he said.
Lance Poulsen, founder and former chief executive officer of National Century Financial Enterprises, goes on trial Monday in the first of two trials stemming from indictments in what prosecutors liken to other big white collar crime cases like Enron or WorldCom.
At least nine former executives of Poulsen's company, once described as the nation's largest health care financing firm, have now been convicted of numerous charges, including securities and wire fraud and money laundering.
The Justice Department said the five defendants convicted by a jury Thursday could each face several dozen years in prison with exact amounts varying based on the individual counts they were convicted of.
Actual sentences are usually much lower than the maximum penalties. In court, U.S. District Judge Algenon Marbley described a statutory guideline of 20 years.
The defendants and their attorneys listened without emotion as Marbley read the verdicts from a 27-count indictment one by one. Some of the defendants' family members appeared stunned and wept in the courtroom after the jury left.
Convicted of all counts against them were: Donald Ayers, the company's former chief operating officer; James Dierker, the company's former vice president of client development; Roger Faulkenberry, a former executive vice president who raised money from investors; Rebecca Parrett, the company's former vice chairman; and Randy Speer, National Century's former chief financial officer.
Judge Marbley, over the objections of government prosecutors, allowed the defendants to remain free while they await sentencing but required them wear an electronic monitoring devices. Sentencing was expected in two to three months.
Defense attorneys said the jury's verdicts were hard to believe.
"I'm still in shock, to be honest with you," said Javier Armengau, who represents Faulkenberry. Armengau said he'd presented ample evidence that other defendants had hidden fraud from Faulkenberry.
Lawyers said they would appeal.
The government's lead prosecutor said the defendants lied and covered up wrongdoing for years.
The defendants "secured hundreds of millions of dollars of ill-gotten gains, and through those lies concealed those lies and engaged in a massive cover-up," said assistant U.S. attorney Doug Squires.
"Everyone's hurt when an investor's lied to in this country."
Next, the government will ask Marbley to hold the five responsible for the $1.9 billion lost by investors. Marbley scheduled hearings on that request next month.
Prosecutors compared National Century to Enron Corp., an energy trading company, and WorldCom Inc., a telecommunications company, which were both engulfed in corporate fraud scandals that cost investors billions and brought down both public companies.
National Century offered financing to small hospitals, nursing homes and other health care providers by purchasing their accounts receivable, usually for 80 or 90 cents on the dollar, so they wouldn't have to wait for insurance payments. National Century then collected the full amount of the payments.
The company, based in suburban Dublin, raised the money to fund its business by selling bonds to investors.
Prosecutors argued executives of the company authorized millions in unsecured loans to those health care providers, then misled investors about the loans.
Attorneys for the five defendants said prosecutors took the company's activities out of context by showing jurors only a tiny slice of National Century's operations.
The government said the unsecured loans caused shortfalls that the executives covered up by moving money between accounts. The government alleged the executives fabricated data and lied to investors about the shortfalls and loaded false information on a company computer system.
The government's star witness, former executive vice president Sherry Gibson, testified last month that the company kept two sets of books, one for public consumption filled with false information and another that showed the firm's actual shortfalls. Gibson is one of four former National Century executives who previously pleaded guilty to fraud charges and have cooperated with the government.
Missing from the trial was Poulsen, a chief target of the government's allegations.
Before his own trial on similar fraud charges in August, Poulsen is scheduled for trial Monday before Marbley on charges of witness tampering.
Prosecutors say Poulsen and an acquaintance teamed up in an attempt to persuade a government witness to help Poulsen beat the fraud case against him.
Squires, who is prosecuting that trial, would not comment.
"That's a trial for another day," he said.
Monday, March 17, 2008
Five other former executives at National Century were convicted
Associated Press - March 16, 2008 12:24 PM ET
COLUMBUS, Ohio (AP) - A Port Charlotte man who once headed a failed health care financing company is heading to court this week to face charges of witness tampering.
Prosecutors say Lance Poulsen proposed paying a government witness a half million dollars if she forgot details of their interaction at National Century. Poulsen also is accused of masterminding a $1.9 billion accounting scheme at his former company.
Five other former executives at National Century were convicted last week on fraud charges. Poulsen's federal witness tampering case begins Monday. His conspiracy, fraud and money laundering trail is in August.
Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
COLUMBUS, Ohio (AP) - A Port Charlotte man who once headed a failed health care financing company is heading to court this week to face charges of witness tampering.
Prosecutors say Lance Poulsen proposed paying a government witness a half million dollars if she forgot details of their interaction at National Century. Poulsen also is accused of masterminding a $1.9 billion accounting scheme at his former company.
Five other former executives at National Century were convicted last week on fraud charges. Poulsen's federal witness tampering case begins Monday. His conspiracy, fraud and money laundering trail is in August.
Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Exec goes on trial in tampering case
Exec goes on trial in tampering case
By ANDREW WELSH-HUGGINS
COLUMBUS, Ohio
Before Lance Poulsen can fight charges that he was the mastermind behind a $1.9 billion fraud scheme, the former CEO of National Century Financial must first deal with allegations that he proposed paying a government witness $500,000 to lie on the stand.
The federal witness tampering trial of the former owner of National Century, a health care financing company, was scheduled to begin Monday. Once that trial ends, Poulsen faces a second trial in August on multiple counts of conspiracy, wire and securities fraud and money laundering.
Five former executives at National Century were convicted of similar charges on Thursday in a fraud scheme that prosecutors likened to the cases of Enron and WorldCom.
In the tampering case, prosecutors say that Poulsen along with Karl Demmler, the owner of a Columbus bar and restaurant, teamed up to persuade the witness to help Poulsen beat the charges.
"It's not what you make up, it's what you forget," Demmler allegedly told the witness during a meeting on July 13 in Columbus, according to the FBI's criminal complaint.
During a July 18 meeting, "Demmler suggested Witness A have 'amnesia,'" according to the complaint. Poulsen told Demmler during a Sept. 28 phone call that one of the best things the witness could say was that she was unfamiliar with the indictment and charges against Poulsen.
Messages seeking comment were left for attorneys for Poulsen and Demmler.
Neither the complaint nor the Oct. 23 indictment identify the witness, but the government's 162-item exhibit list refers frequently to meetings between Demmler and Sherry Gibson, a former National Century executive vice president who pleaded guilty in 2003 to securities fraud in exchange for helping prosecutors.
Those meetings match the dates of Demmler's meeting with the witness in the criminal complaint. Gibson is expected to testify for the government, U.S. Attorney's office spokesman Fred Alverson said.
Gibson's attorney, Columbus lawyer Terry Sherman, said he continues to represent Gibson and that he is not involved in the witness tampering trial.
Gibson was the prosecution's star witness at the trial of the five former executives that concluded Thursday. She testified the company kept two sets of books, one for public consumption filled with false information and another that showed the firm's actual shortfalls.
She was not charged in the current witness tampering case.
National Century, based in suburban Dublin, offered financing to small hospitals, nursing homes and other health care providers by purchasing their debt. The government alleges the company also gave those providers unsecured loans, then lied to investors about those loans.
The government says company officials moved money between accounts to cover shortfalls, fabricated data and loaded false information on a company computer system.
By ANDREW WELSH-HUGGINS
COLUMBUS, Ohio
Before Lance Poulsen can fight charges that he was the mastermind behind a $1.9 billion fraud scheme, the former CEO of National Century Financial must first deal with allegations that he proposed paying a government witness $500,000 to lie on the stand.
The federal witness tampering trial of the former owner of National Century, a health care financing company, was scheduled to begin Monday. Once that trial ends, Poulsen faces a second trial in August on multiple counts of conspiracy, wire and securities fraud and money laundering.
Five former executives at National Century were convicted of similar charges on Thursday in a fraud scheme that prosecutors likened to the cases of Enron and WorldCom.
In the tampering case, prosecutors say that Poulsen along with Karl Demmler, the owner of a Columbus bar and restaurant, teamed up to persuade the witness to help Poulsen beat the charges.
"It's not what you make up, it's what you forget," Demmler allegedly told the witness during a meeting on July 13 in Columbus, according to the FBI's criminal complaint.
During a July 18 meeting, "Demmler suggested Witness A have 'amnesia,'" according to the complaint. Poulsen told Demmler during a Sept. 28 phone call that one of the best things the witness could say was that she was unfamiliar with the indictment and charges against Poulsen.
Messages seeking comment were left for attorneys for Poulsen and Demmler.
Neither the complaint nor the Oct. 23 indictment identify the witness, but the government's 162-item exhibit list refers frequently to meetings between Demmler and Sherry Gibson, a former National Century executive vice president who pleaded guilty in 2003 to securities fraud in exchange for helping prosecutors.
Those meetings match the dates of Demmler's meeting with the witness in the criminal complaint. Gibson is expected to testify for the government, U.S. Attorney's office spokesman Fred Alverson said.
Gibson's attorney, Columbus lawyer Terry Sherman, said he continues to represent Gibson and that he is not involved in the witness tampering trial.
Gibson was the prosecution's star witness at the trial of the five former executives that concluded Thursday. She testified the company kept two sets of books, one for public consumption filled with false information and another that showed the firm's actual shortfalls.
She was not charged in the current witness tampering case.
National Century, based in suburban Dublin, offered financing to small hospitals, nursing homes and other health care providers by purchasing their debt. The government alleges the company also gave those providers unsecured loans, then lied to investors about those loans.
The government says company officials moved money between accounts to cover shortfalls, fabricated data and loaded false information on a company computer system.
told investors "absolutely nothing" about National Century's practices of advancing cash to Memphis, Tenn.-based Medshares, a home-health care provide
Associated Press - February 21, 2008 12:05 PM ET
COLUMBUS, Ohio (AP) - A former executive of a failed health care finance company says the company withheld financial information from its investors.
Sherry Gibson testified Thursday in federal court in the government's securities fraud case against five former owners and executives of National Century Financial Enterprises.
The government alleges the five schemed to defraud investors of $1.9 billion.
Gibson told jurors she told investors "absolutely nothing" about National Century's practices of advancing cash to Memphis, Tenn.-based Medshares, a home-health care provider.
She said other top officials, including those on trial or facing similar charges, also misled investors.
Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
COLUMBUS, Ohio (AP) - A former executive of a failed health care finance company says the company withheld financial information from its investors.
Sherry Gibson testified Thursday in federal court in the government's securities fraud case against five former owners and executives of National Century Financial Enterprises.
The government alleges the five schemed to defraud investors of $1.9 billion.
Gibson told jurors she told investors "absolutely nothing" about National Century's practices of advancing cash to Memphis, Tenn.-based Medshares, a home-health care provider.
She said other top officials, including those on trial or facing similar charges, also misled investors.
Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Sunday, March 16, 2008
NATIONAL CENTURY: Trust Wants HCA Claim Reduced to $1,992,756
NATIONAL CENTURY: Trust Wants HCA Claim Reduced to $1,992,756
INTEGRATED HEALTH: Wants Approval of Medshares Settlement Pact
NAT'L CENTURY: Restructuring Transactions Under Liquidation Plan
INTEGRATED HEALTH: Wants Approval of Medshares Settlement Pact
--------------------------------------------------------------
Integrated Health Services, Inc., and its debtor-affiliates ask
the Court to approve their settlement agreement with Meridian
Corporation, also known as Medshares, Inc.
Alfred Villoch, III, Esq., at Young, Conaway, Stargatt & Taylor,
LLP, in Wilmington, Delaware, informs the Court that Integrated
Health Services Inc. and Medshares are both debtors in their own
Chapter 11 cases and each has filed a series of claims in the
other's cases.
The Medshares Claims
The Medshares Debtors timely filed 51 proofs of claim in the IHS
cases. Eleven of these claims where expunged by two Court orders
on February 22, 2001, leaving these 40 Claims pending -- 07256,
08174, 08175, 08176, 08177, 08178, 08179, 08180, 08184, 08185,
08186, 18187, 08188, 08189, 08191, 08192, 08193, 08194, 08196,
08197, 08199, 08201, 08203, 08204, 08205, 08206, 08223, 08399,
08400, 08401, 08402, 08403, 08404, 08405, 08406, 08407, 08408,
08409, 10965, 11287 amounting to $270,584,165. These Claim were
listed in the claims register as priority claims.
The Medshares Claims arose from IHS's sale of its home healthcare
nursing services business, IHS Home Care Inc., to Medshares/IHS
Acquisition, Inc. for $21,625,000, subject to certain potential
adjustments, pursuant to a December 19, 1998 Stock Purchase
Agreement. Each of the Medshares Claims asserts a right to
indemnification or an adjustment to the purchase price under the
Stock Purchase Agreement or other relief arising from it.
On February 10, 2003, the IHS Debtors sought for the disallowance
of the Medshares Claims or, in the alternative, for the
reduction, reclassification and estimation of the Claims.
Thereafter, the Medshares Claim were reclassified as non-priority
unsecured claims and collectively capped at $25,000,000.
The IHS Claims
On April 28, 2000, IHS timely filed proofs of claim in the
Medshares' cases also arising from the sale of its healthcare
nursing services business to Medshares. The IHS Claims set forth
administrative claims amounting to:
(1) $156,463 for Medicare overpayment reimbursed in error to
Medshares rather than IHS;
(2) $1,773,021 owing on equipment leases transferred from IHS
to Medshares in connection with the sale; and
(3) $1,870,135 arising from IHS's indemnification rights with
respect to its obligations under real property leases
rejected by Medshares.
Medshares disputed these three administrative claims. On
October 16, 2000, IHS asked the Tennessee Court to allow the
claims for $3,799,619. IHS's request remains pending.
Claims Settlement
The Settlement Agreement provides that:
(a) Medshares will withdraw their $270,584,165 claim filed in
the IHS case;
(b) the IHS Debtors will withdraw their $3,799,619 claim filed
in the Medshares cases; and
(c) the parties will exchange releases.
Mr. Villoch asserts that the Settlement Agreement provides
substantial and quantifiable economic benefits to the Debtors'
estates and their unsecured creditors. While the Debtors dispute
the amounts of the Medshares Claims, the outcome of the objection
is far from assured. The Settlement eliminates tens of millions
of dollars of potential prepetition liability.
In addition to the quantifiable benefits, the Settlement
Agreement also allows the Debtors to:
(a) avoid the disruption and distraction of prosecuting and
defending complex litigation in the Delaware and Tennessee
bankruptcy courts;
(b) avoid the substantial administrative costs and the
uncertain outcomes of these litigations; and
(c) maintain their focus on reorganization issues and their
core businesses.
Although the value of these additional benefits cannot be
precisely calculated, they translate to a substantial financial
benefit to the Debtors' estate and their reorganization, Mr.
Villoch says. (Integrated Health Bankruptcy News, Issue No. 64;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
INTERNET SERVICES: Case Summary & 20 Largest Unsecured Creditors
----------------------------------------------------------------
Lead Debtor: Internet Services of Michigan, Inc.
3625 Park Place
Suite 150
Mishawaka, Indiana 46545
Bankruptcy Case No.: 03-12921
Debtor affiliates filing separate chapter 11 petitions:
Entity Case No.
------ --------
Internet Services Management Group, Inc. 03-12922
Internet Direct Communications, Inc. 03-12923
Skye Internet Holdings, Inc. 03-12924
Type of Business: The Debtor is an Internet service provider.
Chapter 11 Petition Date: September 23, 2003
INTEGRATED HEALTH: Wants Approval of Medshares Settlement Pact
NAT'L CENTURY: Restructuring Transactions Under Liquidation Plan
INTEGRATED HEALTH: Wants Approval of Medshares Settlement Pact
--------------------------------------------------------------
Integrated Health Services, Inc., and its debtor-affiliates ask
the Court to approve their settlement agreement with Meridian
Corporation, also known as Medshares, Inc.
Alfred Villoch, III, Esq., at Young, Conaway, Stargatt & Taylor,
LLP, in Wilmington, Delaware, informs the Court that Integrated
Health Services Inc. and Medshares are both debtors in their own
Chapter 11 cases and each has filed a series of claims in the
other's cases.
The Medshares Claims
The Medshares Debtors timely filed 51 proofs of claim in the IHS
cases. Eleven of these claims where expunged by two Court orders
on February 22, 2001, leaving these 40 Claims pending -- 07256,
08174, 08175, 08176, 08177, 08178, 08179, 08180, 08184, 08185,
08186, 18187, 08188, 08189, 08191, 08192, 08193, 08194, 08196,
08197, 08199, 08201, 08203, 08204, 08205, 08206, 08223, 08399,
08400, 08401, 08402, 08403, 08404, 08405, 08406, 08407, 08408,
08409, 10965, 11287 amounting to $270,584,165. These Claim were
listed in the claims register as priority claims.
The Medshares Claims arose from IHS's sale of its home healthcare
nursing services business, IHS Home Care Inc., to Medshares/IHS
Acquisition, Inc. for $21,625,000, subject to certain potential
adjustments, pursuant to a December 19, 1998 Stock Purchase
Agreement. Each of the Medshares Claims asserts a right to
indemnification or an adjustment to the purchase price under the
Stock Purchase Agreement or other relief arising from it.
On February 10, 2003, the IHS Debtors sought for the disallowance
of the Medshares Claims or, in the alternative, for the
reduction, reclassification and estimation of the Claims.
Thereafter, the Medshares Claim were reclassified as non-priority
unsecured claims and collectively capped at $25,000,000.
The IHS Claims
On April 28, 2000, IHS timely filed proofs of claim in the
Medshares' cases also arising from the sale of its healthcare
nursing services business to Medshares. The IHS Claims set forth
administrative claims amounting to:
(1) $156,463 for Medicare overpayment reimbursed in error to
Medshares rather than IHS;
(2) $1,773,021 owing on equipment leases transferred from IHS
to Medshares in connection with the sale; and
(3) $1,870,135 arising from IHS's indemnification rights with
respect to its obligations under real property leases
rejected by Medshares.
Medshares disputed these three administrative claims. On
October 16, 2000, IHS asked the Tennessee Court to allow the
claims for $3,799,619. IHS's request remains pending.
Claims Settlement
The Settlement Agreement provides that:
(a) Medshares will withdraw their $270,584,165 claim filed in
the IHS case;
(b) the IHS Debtors will withdraw their $3,799,619 claim filed
in the Medshares cases; and
(c) the parties will exchange releases.
Mr. Villoch asserts that the Settlement Agreement provides
substantial and quantifiable economic benefits to the Debtors'
estates and their unsecured creditors. While the Debtors dispute
the amounts of the Medshares Claims, the outcome of the objection
is far from assured. The Settlement eliminates tens of millions
of dollars of potential prepetition liability.
In addition to the quantifiable benefits, the Settlement
Agreement also allows the Debtors to:
(a) avoid the disruption and distraction of prosecuting and
defending complex litigation in the Delaware and Tennessee
bankruptcy courts;
(b) avoid the substantial administrative costs and the
uncertain outcomes of these litigations; and
(c) maintain their focus on reorganization issues and their
core businesses.
Although the value of these additional benefits cannot be
precisely calculated, they translate to a substantial financial
benefit to the Debtors' estate and their reorganization, Mr.
Villoch says. (Integrated Health Bankruptcy News, Issue No. 64;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
INTERNET SERVICES: Case Summary & 20 Largest Unsecured Creditors
----------------------------------------------------------------
Lead Debtor: Internet Services of Michigan, Inc.
3625 Park Place
Suite 150
Mishawaka, Indiana 46545
Bankruptcy Case No.: 03-12921
Debtor affiliates filing separate chapter 11 petitions:
Entity Case No.
------ --------
Internet Services Management Group, Inc. 03-12922
Internet Direct Communications, Inc. 03-12923
Skye Internet Holdings, Inc. 03-12924
Type of Business: The Debtor is an Internet service provider.
Chapter 11 Petition Date: September 23, 2003
Investors were told the company only bought accounts receivable, not future accounts receivable, a risky proposition ....
Investors were told the company only bought accounts receivable, not future accounts receivable, a risky proposition ....
THAT IS THE QUESTION. WHY WOULD ONE PURCHASE SUCH A RISKY PROPOSITION? WHO WAS REALLY BEHIND HE 'PURCHASE' OF TEH FUTURE RECEIVABLES? JAMES HAPP PERHAPS!
Analysis
Questions linger after executives' fraud trial
National Century jury's swift verdict surprising
Sunday, March 16, 2008 3:43 AM
By Jodi Andes
THE COLUMBUS DISPATCH
It was the verdict some say the investment world needed: National Century Financial Enterprises executives found guilty on all counts in what is now the nation's largest fraud involving a privately held company.
A company can't lose $1.9 billion of investors' money and prompt 275 health-care business bankruptcies without fallout.
The case has taken years for the government to develop, starting with a 2002 raid on the company's Dublin headquarters.
But it didn't take long for the verdicts to be rendered.
The jury decided the fates of five former executives -- the first group to go to trial -- after less than 12 hours of deliberation. And that includes the time it took to pick a foreperson and get answers from federal Judge Algenon L. Marbley on two questions.
Put another way, jurors spent less than 18 minutes on average for each of the 40 counts brought against company founders Rebecca S. Parrett and Donald H. Ayers and former executives James E. Dierker Jr., Roger S. Faulkenberry and Randolph H. Speer.
The speed is even more surprising because this was no straightforward theft case.
National Century was a business that financed health-care providers. So explaining the business -- and what went wrong -- meant jurors got a crash course in health care and finance. Terms such as asset-backed securitizations and capitation aren't ones that most minds easily process.
It was so complex that even witnesses often gave different definitions of industry terms.
Defense attorneys were of one mind on the verdict.
"In any trial, you hope for a jury that will consider all the facts and evidence. Clearly that did not occur in this case, and the jury based their decision solely on emotion," Ayers' attorney, Brian Dickerson, said Friday.
Immediately after the verdicts, defense attorneys began talking about appeals. Sentencing is expected in about three months.
What the jurors considered in reaching the verdicts is not known. None would comment Thursday as they left U.S. District Court in Columbus.
Jurors don't have to comment. But with a case this complex, where five people face sentences that could equate to life in prison, such a swift, unexplained decision left many observers with questions.
The next trial associated with National Century starts Monday when founder Lance K. Poulsen and his friend Karl A. Demmler face witness-tampering counts tied to Poulsen's fraud charges.
Poulsen faces trial in the summer on fraud and other charges related to National Century's demise and the losses suffered by investors. Another former National Century executive, James K. Happ, is scheduled for trial in the fall.
The jury evidently bought the prosecution's version of what happened.
The company offered financing to often-struggling small hospitals, clinics and nursing homes in exchange for their accounts receivable -- basically, the payments that those health-care providers were owed. Investors, including public pension plans, provided National Century's financial backing.
Assistant U.S. Attorney Doug Squires and his team made several points clear about what they say went wrong. Among them:
• Investors were told that National Century kept cash reserves far in excess of what it needed.
• Investors were told the company only bought accounts receivable, not future accounts receivable, a risky proposition given that the health-care providers were having financial difficulty to begin with.
National Century earned an AAA bond rating -- the highest available -- based on those guarantees. The problem was, National Century didn't stick with either pledge, prosecutors said, and nobody told investors that things had changed.
The particulars of the case -- who knew what and when -- is something that is likely to be debated for some time. More trials are ahead.
Those convicted last week were not the ones who literally falsified the books. But the jury evidently believed what memos and e-mails said about some of the defendants and suggested about others: They were too high up not to know what was going on.
Realistically, no jury can be expected to act in a vacuum. Memories of the Enron and WorldCom scandals -- and all the people who lost money as a result -- remain fresh. And headlines remind us that the U.S. economy is facing trouble on a broader scale.
Professor W.C. Benton of Ohio State University's Fisher College of Business might have it right.
He watched the trial from a distance and was left thinking: "It seems like the people who were on trial didn't understand business at all. I think they got in too deep and they didn't know what to do."
That's fine, if you're playing with your own money.
"You can't do that with investor money," Benton said.
jandes@dispatch.com
The jury spent less than 18 minutes on average for each of the 40 counts in a case so complex that even witnesses often gave different definitions of industry terms.
THAT IS THE QUESTION. WHY WOULD ONE PURCHASE SUCH A RISKY PROPOSITION? WHO WAS REALLY BEHIND HE 'PURCHASE' OF TEH FUTURE RECEIVABLES? JAMES HAPP PERHAPS!
Analysis
Questions linger after executives' fraud trial
National Century jury's swift verdict surprising
Sunday, March 16, 2008 3:43 AM
By Jodi Andes
THE COLUMBUS DISPATCH
It was the verdict some say the investment world needed: National Century Financial Enterprises executives found guilty on all counts in what is now the nation's largest fraud involving a privately held company.
A company can't lose $1.9 billion of investors' money and prompt 275 health-care business bankruptcies without fallout.
The case has taken years for the government to develop, starting with a 2002 raid on the company's Dublin headquarters.
But it didn't take long for the verdicts to be rendered.
The jury decided the fates of five former executives -- the first group to go to trial -- after less than 12 hours of deliberation. And that includes the time it took to pick a foreperson and get answers from federal Judge Algenon L. Marbley on two questions.
Put another way, jurors spent less than 18 minutes on average for each of the 40 counts brought against company founders Rebecca S. Parrett and Donald H. Ayers and former executives James E. Dierker Jr., Roger S. Faulkenberry and Randolph H. Speer.
The speed is even more surprising because this was no straightforward theft case.
National Century was a business that financed health-care providers. So explaining the business -- and what went wrong -- meant jurors got a crash course in health care and finance. Terms such as asset-backed securitizations and capitation aren't ones that most minds easily process.
It was so complex that even witnesses often gave different definitions of industry terms.
Defense attorneys were of one mind on the verdict.
"In any trial, you hope for a jury that will consider all the facts and evidence. Clearly that did not occur in this case, and the jury based their decision solely on emotion," Ayers' attorney, Brian Dickerson, said Friday.
Immediately after the verdicts, defense attorneys began talking about appeals. Sentencing is expected in about three months.
What the jurors considered in reaching the verdicts is not known. None would comment Thursday as they left U.S. District Court in Columbus.
Jurors don't have to comment. But with a case this complex, where five people face sentences that could equate to life in prison, such a swift, unexplained decision left many observers with questions.
The next trial associated with National Century starts Monday when founder Lance K. Poulsen and his friend Karl A. Demmler face witness-tampering counts tied to Poulsen's fraud charges.
Poulsen faces trial in the summer on fraud and other charges related to National Century's demise and the losses suffered by investors. Another former National Century executive, James K. Happ, is scheduled for trial in the fall.
The jury evidently bought the prosecution's version of what happened.
The company offered financing to often-struggling small hospitals, clinics and nursing homes in exchange for their accounts receivable -- basically, the payments that those health-care providers were owed. Investors, including public pension plans, provided National Century's financial backing.
Assistant U.S. Attorney Doug Squires and his team made several points clear about what they say went wrong. Among them:
• Investors were told that National Century kept cash reserves far in excess of what it needed.
• Investors were told the company only bought accounts receivable, not future accounts receivable, a risky proposition given that the health-care providers were having financial difficulty to begin with.
National Century earned an AAA bond rating -- the highest available -- based on those guarantees. The problem was, National Century didn't stick with either pledge, prosecutors said, and nobody told investors that things had changed.
The particulars of the case -- who knew what and when -- is something that is likely to be debated for some time. More trials are ahead.
Those convicted last week were not the ones who literally falsified the books. But the jury evidently believed what memos and e-mails said about some of the defendants and suggested about others: They were too high up not to know what was going on.
Realistically, no jury can be expected to act in a vacuum. Memories of the Enron and WorldCom scandals -- and all the people who lost money as a result -- remain fresh. And headlines remind us that the U.S. economy is facing trouble on a broader scale.
Professor W.C. Benton of Ohio State University's Fisher College of Business might have it right.
He watched the trial from a distance and was left thinking: "It seems like the people who were on trial didn't understand business at all. I think they got in too deep and they didn't know what to do."
That's fine, if you're playing with your own money.
"You can't do that with investor money," Benton said.
jandes@dispatch.com
The jury spent less than 18 minutes on average for each of the 40 counts in a case so complex that even witnesses often gave different definitions of industry terms.
Saturday, March 15, 2008
Keep missing the BIG EXEC who was missing......JAMES HAPP....ex HCA Employee
Former health care execs convicted of conspiracy
Defendents could face minimum of 20 years in prison, maximum of 30
By: THE ASSOCIATED PRESS
Issue date: 3/14/08 Section: Nation
PrintEmail Article Tools Page 1 of 2 next > COLUMBUS, Ohio - A federal jury yesterday convicted five former executives of a health care company in a $1.9 billion fraud scheme. The officials worked with National Century Financial Enterprises, described as the nation's largest health care financing firm before its 2002 bankruptcy.
The five - some of the company's highest ranking executives - were convicted of conspiracy to commit wire and securities fraud.
The defendants and their attorneys listened without emotion as U.S. District Judge Algenon Marbley read the verdicts one by one. Some of the defendants' family members sitting in the courtroom appeared stunned.
Those convicted were: Donald Ayers, the company's former chief operating officer; James Dierker, the company's former vice president of client development; Roger Faulkenberry, a former executive vice president who raised money from investors; Rebecca Parrett, the company's former vice chairman; and Randy Speer, National Century's former chief financial officer.
The defendants face a minimum of 20 years in prison, and prison terms could go as high as 30 years behind bars depending on the number of counts they were convicted of.
Judge Marbley, over the objections of government prosecutors, allowed the defendants to remain free while they await sentencing but required them all to wear an electronic monitoring device. Sentencing was expected in two to three months.
The company offered financing to small hospitals, nursing homes and other health care providers by purchasing their debt - also known as accounts receivable - and giving them cash to cover expenses.
Prosecutors argued executives of the company, based in suburban Dublin, authorized millions in unsecured loans to those health care providers, then misled investors about the loans.
Attorneys for the five defendants said prosecutors took the company's activities out of context by showing jurors only a tiny slice of National Century's operations.
The government said the unsecured loans caused shortfalls that the executives covered up by moving money between accounts. The government alleged the executives fabricated data and lied to investors about the shortfalls and loaded false information on a company computer system.
"If they did nothing wrong, then why did they have to lie and cheat and cover it up month after month, year after year?" federal trial attorney Kathleen McGovern said to jurors.
The government's star witness, former executive vice president Sherry Gibson, testified last month that the company kept two sets of books, one for public consumption filled with false information, the other that showed the firm's actual shortfalls. Gibson is one of four former National Century executives who previously pleaded guilty to fraud charges and have cooperated with the government.
Over a day and a half of closing arguments, defense attorneys attacked the government's case on the grounds that the evidence was thin and the witnesses unreliable.
"The deeper we look at this, the more flimsy the government's case becomes," Leonard Yelsky, who represented Dierker, told jurors.
Missing from the trial has been National Century's former president and chief executive, Lance Poulsen, a chief target of the government's allegations.
Before his own trial on the fraud charges in August, Poulsen is scheduled for a trial Monday before Marbley on charges of witness tampering.
Defendents could face minimum of 20 years in prison, maximum of 30
By: THE ASSOCIATED PRESS
Issue date: 3/14/08 Section: Nation
PrintEmail Article Tools Page 1 of 2 next > COLUMBUS, Ohio - A federal jury yesterday convicted five former executives of a health care company in a $1.9 billion fraud scheme. The officials worked with National Century Financial Enterprises, described as the nation's largest health care financing firm before its 2002 bankruptcy.
The five - some of the company's highest ranking executives - were convicted of conspiracy to commit wire and securities fraud.
The defendants and their attorneys listened without emotion as U.S. District Judge Algenon Marbley read the verdicts one by one. Some of the defendants' family members sitting in the courtroom appeared stunned.
Those convicted were: Donald Ayers, the company's former chief operating officer; James Dierker, the company's former vice president of client development; Roger Faulkenberry, a former executive vice president who raised money from investors; Rebecca Parrett, the company's former vice chairman; and Randy Speer, National Century's former chief financial officer.
The defendants face a minimum of 20 years in prison, and prison terms could go as high as 30 years behind bars depending on the number of counts they were convicted of.
Judge Marbley, over the objections of government prosecutors, allowed the defendants to remain free while they await sentencing but required them all to wear an electronic monitoring device. Sentencing was expected in two to three months.
The company offered financing to small hospitals, nursing homes and other health care providers by purchasing their debt - also known as accounts receivable - and giving them cash to cover expenses.
Prosecutors argued executives of the company, based in suburban Dublin, authorized millions in unsecured loans to those health care providers, then misled investors about the loans.
Attorneys for the five defendants said prosecutors took the company's activities out of context by showing jurors only a tiny slice of National Century's operations.
The government said the unsecured loans caused shortfalls that the executives covered up by moving money between accounts. The government alleged the executives fabricated data and lied to investors about the shortfalls and loaded false information on a company computer system.
"If they did nothing wrong, then why did they have to lie and cheat and cover it up month after month, year after year?" federal trial attorney Kathleen McGovern said to jurors.
The government's star witness, former executive vice president Sherry Gibson, testified last month that the company kept two sets of books, one for public consumption filled with false information, the other that showed the firm's actual shortfalls. Gibson is one of four former National Century executives who previously pleaded guilty to fraud charges and have cooperated with the government.
Over a day and a half of closing arguments, defense attorneys attacked the government's case on the grounds that the evidence was thin and the witnesses unreliable.
"The deeper we look at this, the more flimsy the government's case becomes," Leonard Yelsky, who represented Dierker, told jurors.
Missing from the trial has been National Century's former president and chief executive, Lance Poulsen, a chief target of the government's allegations.
Before his own trial on the fraud charges in August, Poulsen is scheduled for a trial Monday before Marbley on charges of witness tampering.
WHERE IS JAMES HAPP? The EX-HCA Employee?
National Century Trial: All Defendants Convicted
March 14, 2008 in Health Fraud, Securities Fraud by Dave Westheimer | No comments
After two days of deliberations following the five week trial of five former executives of National Century Financial Enterprises, a federal jury in Columbus, Ohio on Thursday convicted all five defendants on all charges, which included conspiracy, wire fraud, securities fraud and money laundering. The defendants were National Century co-founders Rebecca Parrett and Donald Ayers and former executives Randolph Speer, Roger Faulkenberry and James Dierker. The Columbus Business First story here details the specific counts against each defendant. Investors, including many institutions and government bodies, lost $1.9 billion in the 2002 collapse of the health care provider financing company. US District Judge Algenon Marbley allowed the defendants to remain free but subject to electronic monitoring pending sentencing, which is expected in 60 to 90 days.
Former CEO and co-founder Lance Poulsen is scheduled for trial on
August 4, 2008 on the same charges but he first faces a March 17 trial for witness tampering in the case. The witness is said to be Sherry Gibson, National Century’s former Executive VP for compliance, who was the star prosecution witness in this case (earlier).
March 14, 2008 in Health Fraud, Securities Fraud by Dave Westheimer | No comments
After two days of deliberations following the five week trial of five former executives of National Century Financial Enterprises, a federal jury in Columbus, Ohio on Thursday convicted all five defendants on all charges, which included conspiracy, wire fraud, securities fraud and money laundering. The defendants were National Century co-founders Rebecca Parrett and Donald Ayers and former executives Randolph Speer, Roger Faulkenberry and James Dierker. The Columbus Business First story here details the specific counts against each defendant. Investors, including many institutions and government bodies, lost $1.9 billion in the 2002 collapse of the health care provider financing company. US District Judge Algenon Marbley allowed the defendants to remain free but subject to electronic monitoring pending sentencing, which is expected in 60 to 90 days.
Former CEO and co-founder Lance Poulsen is scheduled for trial on
August 4, 2008 on the same charges but he first faces a March 17 trial for witness tampering in the case. The witness is said to be Sherry Gibson, National Century’s former Executive VP for compliance, who was the star prosecution witness in this case (earlier).
WHERE IS JAMES HAPP? The EX-HCA Employee?
National Century Trial: All Defendants Convicted
March 14, 2008 in Health Fraud, Securities Fraud by Dave Westheimer | No comments
After two days of deliberations following the five week trial of five former executives of National Century Financial Enterprises, a federal jury in Columbus, Ohio on Thursday convicted all five defendants on all charges, which included conspiracy, wire fraud, securities fraud and money laundering. The defendants were National Century co-founders Rebecca Parrett and Donald Ayers and former executives Randolph Speer, Roger Faulkenberry and James Dierker. The Columbus Business First story here details the specific counts against each defendant. Investors, including many institutions and government bodies, lost $1.9 billion in the 2002 collapse of the health care provider financing company. US District Judge Algenon Marbley allowed the defendants to remain free but subject to electronic monitoring pending sentencing, which is expected in 60 to 90 days.
Former CEO and co-founder Lance Poulsen is scheduled for trial on
August 4, 2008 on the same charges but he first faces a March 17 trial for witness tampering in the case. The witness is said to be Sherry Gibson, National Century’s former Executive VP for compliance, who was the star prosecution witness in this case (earlier).
March 14, 2008 in Health Fraud, Securities Fraud by Dave Westheimer | No comments
After two days of deliberations following the five week trial of five former executives of National Century Financial Enterprises, a federal jury in Columbus, Ohio on Thursday convicted all five defendants on all charges, which included conspiracy, wire fraud, securities fraud and money laundering. The defendants were National Century co-founders Rebecca Parrett and Donald Ayers and former executives Randolph Speer, Roger Faulkenberry and James Dierker. The Columbus Business First story here details the specific counts against each defendant. Investors, including many institutions and government bodies, lost $1.9 billion in the 2002 collapse of the health care provider financing company. US District Judge Algenon Marbley allowed the defendants to remain free but subject to electronic monitoring pending sentencing, which is expected in 60 to 90 days.
Former CEO and co-founder Lance Poulsen is scheduled for trial on
August 4, 2008 on the same charges but he first faces a March 17 trial for witness tampering in the case. The witness is said to be Sherry Gibson, National Century’s former Executive VP for compliance, who was the star prosecution witness in this case (earlier).
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