Sherry Gibson, who the FBI has characterized as the architect of the fraud. Well , maybe the FBI should DIG DEEPER!

Monday, March 10, 2008 - 6:20 PM EDT
Attorneys trade claims
Closing arguments in the trial of five executives accused of masterminding one of the nation's largest corporate frauds began Monday with a government prosecutor summarizing six weeks worth of exhibits, evidence and testimony.

Assistant U.S. Attorney Wes Porter began his final argument by laying responsibility for the nearly $3 billion collapse of Dublin-based National Century Financial Enterprises Inc. squarely on the shoulders of the five executives standing trial.

"Every company takes its course because of the actions of people." Porter said. "National Century was not an exception. They (the defendants) turned a good business model ... into a pack of lies."

With pictures of the defendants and those who testified against them flashing on a courtroom wall behind him, Porter reminded the 15 jurors about the reams of evidence the government presented against the defendants since the trial began Feb. 4.

Rebecca Parrett, Donald Ayers, Roger Faulkenberry, Randolph Speer and James Dierker are facing charges of money laundering, conspiracy and fraud in connection with National Century's 2002 collapse and bankruptcy.

All of them have denied the charges.

National Century was a financier for health-care providers, buying medical firms' receivables at a discount and packaging them as asset-backed bonds for sale to investors.

Porter began his closing remarks by recalling 1995, when he said National Century started down a troubled road. Ayers, Parrett and National Century's former CEO Lance Poulsen formed the company, but almost immediately got off on the wrong foot. National Century took on clients that were in dire financial straits, Porter said. The company then gave those clients more money than their accounts receivables were worth, taking future receivables as collateral.

But those future receivables were nearly worthless IOUs, Porter said, because the companies couldn't pay their current bills, much less future bills.

Once National Century started down that path, he said, it couldn't turn back. It had to keep those troubled clients in business, Porter said, because those IOUs would otherwise amount to nothing.

"Everything spiraled out of control," Porter said.

First it was Poulsen, Parrett and Ayers who made the decisions to overfund clients, then they allowed the other defendants to make advances to clients, too, Porter claimed.

When National Century advanced clients hundreds of millions of dollars and ran out of money, Porter pointed to testimony that showed executives just raised more money from investors. Former investors in National Century bond funds testified that they were kept in the dark about the whole thing, Porter reminded the jury.

Former employees, Porter said, testified to doctoring reports to investors and auditors in an effort to hide the fraud. Those same employees also testified that each of the defendants participated in the fraud to some extent, he added.

"It was a way of life at this company," Porter said.

From the other side
When defense attorneys got their chance to give closing arguments, jury members heard much the same from each lawyer - none of the witnesses ever said the executives asked them to commit fraud, and the government didn't give jurors the full story.

Javier Armengau, the attorney for Faulkenberry, said he found it ironic the government was alleging the executives had omitted facts from investors when it was doing the same thing to the jury. None of the government's witnesses, he said, mentioned orders to commit fraud coming from Faulkenberry.

"If you look at whole company, you will never find an intent to defraud," he said.

Frederick Benton, the lawyer for Speer, focused on what he said was the government's lack of proof concerning his client.

"This is the case of the United States government versus Randolph Speer, not the case of the U.S. government versus National Century Financial Enterprises," Benton said, warning the jury that the government tried to cast a "cloak of conspiracy" over all the proceedings.
Benton said the government never proved Speer's intent, and he added that Speer's position at the company or his participation in a meeting proved nothing.

"Mr. Speer does not have to explain anything," Benton said. The burden to prove guilt, he said, is on the government.

Any financial losses at the company were not caused by the executives, Benton argued, but by outside directors who forced National Century into a sudden bankruptcy. And losing money, he said, is not a crime.

Gregory Peterson, the attorney for Parrett, spent much of his time focusing on the government's star witness, Sherry Gibson, who the FBI has characterized as the architect of the fraud.
Gibson, National Century's executive vice president of compliance, testified she routinely falsified company reports to investors and auditors over more than eight years in an effort to hide the financial troubles. Peterson noted that even though Gibson admitted to lying in courtrooms during litigation involving National Century, the government wanted the jurors to believe her now.

Closing arguments from attorneys for Ayers and Dierker are scheduled for Tuesday morning, with the government's rebuttal afterward. Jurors will then receive instructions and begin deliberations.