decade-long fraud at National Century

"Bily said she knew of nearly $1 billion that had been illegally advanced to clients by August 2002, six of which were owned by Poulsen."

nearly decade-long fraud at National Century that resulted in more than $2.84 billion in investor funds going missing when the company collapsed into bankruptcy in 2002.

Monday, October 6, 2008 - 5:38 PM EDT |
Modified: Tuesday, October 7, 2008 - 8:00 AM
National Century exec kept documents detailing alleged fraud
Business First of Columbus - by Kevin Kemper

Worried about the exposure of those in her department to criminal charges, a National Century Financial Enterprises Inc. finance executive kept copies of company documents in her basement to share with investigators if they ever came calling.

Jessica Bily, the former associate vice president of funding at National Century, told jurors who will decide the fate of her former boss Lance Poulsen that she decided to copy documents that detailed allegedly illegal payments to clients so she and her employees would be protected in case a criminal probe was ever launched.

From her vantage point at the center of National Century’s finance department, testified she watched as superiors directed employees to shift funds among accounts to hide shortfalls, make Bily multimillion-dollar advances to some clients in violation of its agreements with investors, and change data in investor reports to avoid raising red flags.

Bily testified Thursday at the criminal fraud trial of Poulsen, the 65-year-old founder and former CEO of Dublin-based National Century. The government has accused Poulsen of running a nearly decade-long fraud at National Century that resulted in more than $2.84 billion in investor funds going missing when the company collapsed into bankruptcy in 2002.

Poulsen is standing trial in U.S. District Court in Columbus on securities fraud, wire fraud and money laundering charges. He has pleaded not guilty to all charges.

Bily, who began at National Century after college and rose to become a senior executive, testified that advances approved by Poulsen concerned her so much that she kept her own set of records on the advances at home. She guided the jury through several documents she had created to track the funding. She showed jurors how one company, owned in part by Poulsen and National Century cofounders Donald Ayers and Rebecca Parrett, received more than $7.8 million for operating expenses and more than $7.8 million for its real estate investment trust in the span of less than a week.

Those transactions, Bily said, were not allowed under National Century’s master indenture agreement, a governing document that defined for investors how the company operated.

Bily said she knew of nearly $1 billion that had been illegally advanced to clients by August 2002, six of which were owned by Poulsen.On cross-examination, William Terpening, Poulsen’s attorney, attempted to draw doubt in jurors’ minds by asking Bily about her education and her contact with Poulsen.

Bily graduated from Wright State University in Dayton in 1994 with degree in English. Until she worked at National Century, she had no training in finance.

Terpening also asked Bily if she had ever read National Century’s governing documents, such as its master indenture agreement, sale and subservicing agreement and private placement memorandum. Bily admitted she had only read a sample sale and subservicing agreement, a document that governed how National Century worked with the health-care providers it financed. When she had questions about other aspects of the business, Bily said she would turn to her superiors for answers.

Bily said she was too intimidated to express her opinions on National Century’s allegedly illegal actions to Poulsen. Instead, Bily said she would relay her concerns to her immediate supervisors.

Terpening also questioned Bily about her cooperation with the government. She admitted that she reached out to help investigators in early 2003, but at the behest of her attorney. Bily also said she went through National Century’s computer network to find documents that would be helpful to the government. On some of those documents, Bily attached explanations of what Poulsen was trying to accomplish.

But Terpening reminded Bily that she and Poulsen didn’t talk together about strategy, and asked why she thought she knew what Poulsen’s intentions were. Bily said she thought it was obvious what Poulsen was trying to do.