Credit Suisse Boston which would help sell the bonds, about his employer:National Century was also out of reserves

National Century bond ratings, reserves topics of morning trial testimony
Former CEO Poulsen accused in company's collapse
Friday, October 3, 2008 12:31 PM
By Jodi Andes

THE COLUMBUS DISPATCH
Business was so dire at Dublin-based National Century Financial Enterprises in the month before its bankruptcy, the company could not issue new bonds to raise money. A rating agency had downgraded the company's ranking, a red flag to investors indicating something was wrong.

Yet, National Century's director of securities, Jon Beacham, went with company Chief Executive Lance K. Poulsen to a conference in the Bahamas, Beacham testified at Poulsen's trial in federal court this morning, where he faces fraud and other charges in the collapse of the health-care financing company in 2002.

At that offshore conference, Beacham said he learned another troubling fact from Credit Suisse Boston, which would help sell the bonds, about his employer: National Century was also out of reserves.

Beacham said he questioned Poulsen about it at a breakfast meeting and Poulsen said he depleted the reserves to generate more business. Beacham said encouraged Poulsen to tell investors. Poulsen did, Beacham testified, sending a letter asking investors to sign a waiver that would have allowed National Century to "cure the default in a timely fashion."

However, Beacham told Department of Justice trial attorney Kathleen McGovern that Poulsen's pledge to investors was false.

National Century had offered so many unsecured loans to health-care providers that the providers couldn't have had sufficient accounts receivables to cover the loans. There was no way investors could get all their money back, Beacham testified.
Within a month, National Century filed for bankruptcy and investors lost more than $1.9 billion. About 350 who worked at the Dublin-company at the time also lost their jobs.

When cross-examined, Poulsen's attorney, Pete Anderson, went over in detail the numerous number of people from rating agencies and banks who were reviewing National Century's books through the years. Poulsen's attorneys are contending that were no criminal violations with the company's business practices, with so many watching.

The trial broke for lunch before Anderson finished his cross-examination. The trial is expected to continue at 1:15 p.m.

Poulsen is currently being tried in U.S. District Court in Columbus before Federal Judge Algenon L. Marbley on fraud charges tied to the collapse of National Century.

Beacham is the second witness in the trial that is expected to last about a month. If convicted, Poulsen, 65, could be sentenced to what would amount to life in prison.

jandes@dispatch.com