JPMorgan Chase "...some of the nation's largest banks, rating agencies and auditors knew of and approved of National Century's business practices."

In 1999, company officials realized that bank trustees at JPMorgan Chase and Bank One were verifying how much money was in National Century's reserve accounts based on what was being reported in investor reports.

Former worker: I faked figures for National Century's CEO: Chief Executive Lance K. Poulsen on trial for fraud in $1.9 billion collapse [The Columbus Dispatch, Ohio]

Oct. 10--Few figures in National Century Financial Enterprise's investor reports were not falsified, the government's key witness testified today in the fraud trial of the company's chief executive.

Report by report, and sometimes line by line, former company Vice President Sherry Gibson testified in U.S. District Court in Columbus how she falsified information at Lance K. Poulsen's request. The numbers were "made up," "manipulated," "changed," "shuffled," "falsified" and "inflated," Gibson said.

"It was always to make the data look proper and to keep rating agencies and investment agencies from asking questions," she said.

Asked by a prosecutor what years the reports were falsified, Gibson said, "practically all of them."

She said she can recall falsifications back to the early 1990s when she started with the company, including one in 1994.

"The reason I remember that one so clearly," she said, "the reserves were zero, but I was told to make the reserves to look like they were 17 percent."

Assistant U.S. Attorney Leo Wise showed several memos written by Brian J. Stucke, the company's former director of compliance, who had documented how National Century was trying to keep outsiders from learning about the shortages.

In 1999, company officials realized that bank trustees at JPMorgan Chase and Bank One were verifying how much money was in National Century's reserve accounts based on what was being reported in investor reports.
So National Century had the auditing date of one program moved so it would fall on a different date from other programs. Then executives moved money among the various programs so it would "fill the shortfalls," Stucke wrote.

His subsequent memos showed how the reserve accounts continued to shrink. In early 2000, the accounts were losing about $11 million a week because of loans given with no collateral and poor performance of accounts receivable, a memo stated.

The Dublin-based company was bankrupt in November 2002, costing investors $1.9 billion.

Poulsen's defense attorneys have argued that some of the nation's largest banks, rating agencies and auditors knew of and approved of National Century's business practices.Questioned by Wise, Gibson disagreed that agencies that rated the company's bonds for investors or agencies such as Credit Suisse of Boston that sold the notes to investors could have known the numbers had been falsified.

The only source of National Century financial data was National Century, she said.

Poulsen is being tried on securities fraud, wire fraud, conspiracy and money-laundering charges. If convicted, he faces a sentence that could amount to life in prison.

Judge Algenon L. Marbley said the trial will resume Oct. 20 because of the Columbus Day holiday on Monday and other business he must handle next week.

jandes@dispatch.com

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