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.