payments to health care providers weren't always backed with debts the company could collect

However, prosecutors contend that unbeknownst to investors, National Century's payments to health care providers weren't always backed with debts the company could collect.

Witness: Faked numbers hid risky investments on National Century's books
Monday, October 6, 2008 1:19 PM
By Jodi Andes

THE COLUMBUS DISPATCH
Faked numbers hid the way National Century Financial Enterprises actually worked, a former associate vice president for the company testified this morning in the fraud trial of CEO Lance K. Poulsen.

Federal prosecutors called Jessica Bily, their third witness in the trial against Poulsen, to explain the differences between the way the books were supposed to be balanced and the way officials hid high-risk financial transactions. Bily became the company's associate vice president of funding, after starting as a data analyst in 1994.

National Century Financial Enterprises bought debts owed to health care providers and collected them for a fee. The company received financial backing from investors who believed that only debts with a high-likelihood of being repaid would be purchased.

However, prosecutors contend that unbeknownst to investors, National Century's payments to health care providers weren't always backed with debts the company could collect.

Bily said some company officials began giving health care providers loans without there being debts to collect upon. She said their term for that was "regular receivables."

To make the company's books balance, Biley said, National Century employees had to use false or "plugged" numbers.

Earlier in the morning, Pete Anderson, a defense attorney for Poulsen, questioned Jon Beacham, National Century's former director of securitizations, to show that Poulsen was concerned about the company being in compliance.

Anderson contended that advancing money to health care providers without taking over collection of debts owed to them - a practice he called "over-advancing" - helped National Century's investors.

"If health care providers go under, that puts note holders in a worse position?" Anderson asked Beacham, who agreed. "The reserves that he took, he didn't pocket it himself he used the money to help the health care providers."

Department of Justice Trial Attorney Kathleen McGovern was to continue her questioning of Bily when court resumes at 1:15 p.m.

The case is being tried in U.S. District Court in Columbus in front of Judge Algenon L. Marbley.