"...illegally funding some firms ..." Which firms were illegally funded?

Which firms were illegally funded without buying eligible accounts receivable. That resulted in more than $1 billion? Which firms were these? Look at James K Happ! The last indicted executive?

Now this is the big news in this testimony:

'Terpening said it was because National Century couldn’t get a clean audit that it collapsed. Gibson answered that National Century fell apart because it had been illegally funding some firms without buying eligible accounts receivable. That resulted in more than $1 billion that couldn’t be accounted for, which is why Deloitte would not give the firm a clean audit, Gibson said. When that happened, she said, National Century went under because it couldn’t raise money from new investors to pay off old investors.

Terpening also asked Gibson about bank trustees who oversaw lock boxes National Century used to collect accounts receivable. After getting Gibson to admit that the trustees were a watchdog of sorts, he asked Gibson if those trustees had a responsibility to double check reports National Century sent to them.'

After telling jurors about her central role in an alleged $2.84 billion fraud and Lance Poulsen’s attempt at bribery in 2007, Sherry Gibson faced questions Tuesday from a defense attorney determined to pick her story apart.

Gibson, the former executive vice president of compliance at National Century Financial Enterprises Inc., sparred with William Terpening over her knowledge of the firm’s governing documents and Poulsen’s intentions when he contacted her through an intermediary in 2007.

Poulsen is the cofounder and former CEO of Dublin-based National Century, a health-care financing firm that collapsed into bankruptcy in 2002. He is standing trial in U.S. District Court in Columbus on charges he ran a fraud that resulted in billions of investor dollars going missing. He is accused of one count each of conspiracy, wire fraud and money laundering conspiracy, four counts of concealment of money laundering and six counts of securities fraud. He has pleaded not guilty to all the charges.

Earlier in the trial, Gibson told jurors that Poulsen had directed her to alter the company’s books and create fraudulent investor reports so National Century could hide the more than $1 billion in advances it had given to companies owned by Poulsen and others without collateral.

But on Tuesday, Terpening did his best to sow doubt in the minds of jurors. In one exchange, Terpening suggested that because Gibson hadn’t read all of National Century’s governing documents, she didn’t know for sure that the advances the company made were illegal. National Century purchased health-care providers’ accounts receivable in exchange for quick cash, then securitized the debt into AAA-rated bonds for investors.

In another exchange, Terpening attempted to pin the blame for National Century’s collapse on auditors who would not give the company a clean report. National Century needed clean audits on an annual basis from accounting firm Deloitte & Touche LLP if it wanted to issue new bonds. In 2002, however, Gibson said Deloitte would not give National Century a clean bill of health, which resulted in the firm’s unwinding.

Terpening said it was because National Century couldn’t get a clean audit that it collapsed. Gibson answered that National Century fell apart because it had been illegally funding some firms without buying eligible accounts receivable. That resulted in more than $1 billion that couldn’t be accounted for, which is why Deloitte would not give the firm a clean audit, Gibson said. When that happened, she said, National Century went under because it couldn’t raise money from new investors to pay off old investors.

Terpening also asked Gibson about bank trustees who oversaw lock boxes National Century used to collect accounts receivable. After getting Gibson to admit that the trustees were a watchdog of sorts, he asked Gibson if those trustees had a responsibility to double check reports National Century sent to them.Earlier in the day, Terpening also attacked Gibson on her contention that Poulsen attempted to bribe her into changing her testimony in the summer of 2007. Typical of the back-and-forth was this:

“It was very easy for you to act naturally while you were lying?” Terpening asked.

“No it was very hard,” Gibson said.

Or this:

“This was sort of joint effort ... to trap Mr. Poulsen, is that right?” Terpening asked.

“No,” Gibson answered.

Under earlier questioning from the government, Gibson told jurors that Poulsen used a mutual friend, Karl Demmler, as an intermediary. Demmler asked Gibson to have “amnesia” about allegedly fraudulent activity that took place at National Century in exchange for $1 million.

After Demmler extended the bribery offer, Gibson decided to work with the government to secretly record the bribery conversations in an effort to convict Poulsen and Demmler.

On cross examination, Terpening focused on the fact that Gibson never spoke with Poulsen or received any money from him.

“As I’ve previously stated, I never spoke with Mr. Poulsen directly,” Gibson said.

Thanks to testimony and cooperation from Gibson, Poulsen and Demmler were convicted in March by a separate jury of attempting to bribe Gibson.

The fraud trial continues Wednesday with the government expected to call its last witness, then rest its case.