Where is James K Happ? The ex-employee of Richard Rainwater?

Letters support ex-CEO, his attorneys say
Saturday, October 4, 2008 8:01 AM
By Jodi Andes

THE COLUMBUS DISPATCH
Anonymous letters alleging corruption at National Century Financial Enterprises didn't sound any alarms with a credit-rating agency, banks or auditors, so the fraud charges against the company's founder are bogus, the defense argued in court yesterday.

Attorneys for former Chief Executive Lance K. Poulsen said the letters bolster their theory that there was no fraud in National Century's business practices if respected banks, auditors and rating agencies knew of and approved the business practices.

Poulsen, 65, is on trial in U.S. District Court in Columbus, accused of money laundering, conspiracy and securities and wire-fraud charges.

The first letter was sent in April 1999, more than three years before National Century collapsed, costing investors more than $1.9 billion. It went to a credit-rating agency, which became part of Fitch Ratings, and suggested that it have a third party go over National Century's books.

A second letter followed four months later. It questioned whether the rating agency didn't take the first letter seriously, or if its personnel "are in on it" or "just not that bright."

The letter said that National Century was "a fraudulent organization" that compiled "misleading and fraudulent documents to fool you fools."

"It is estimated that approximately 50% or more of the $2 billion portfolio is either worthless or nonexistent. And, you continue to place investment-grade ratings on this crap."

A third letter gave more-specific tips, adding, "follow the money dummy."

Jon Beacham, the former National Century director of securitizations, testified that the rating agency did inquire but determined that "no actions were warranted."

The Securities and Exchange Commission has since found Bank One and JPMorgan Chase, which now owns Bank One, culpable for negligent conduct while serving as National Century's bank trustees.

The commission has made similar findings with accounting firms PricewaterhouseCoopers and Deloitte &

Touche that audited National Century.

Also yesterday, Poulsen attorney Pete Anderson asked U.S. District Judge Algenon L. Marbley to give Poulsen new jail accommodations.

Housed in a pod of the Franklin County jail with young criminals who are not as concerned about sleep, Poulsen has been getting little more than an hour of rest a night, Anderson said.

"Soon, he will be useless to participate in his own defense," Anderson said.

Marbley suggested isolation, but Poulsen declined, saying through his attorney that there is no heat or air conditioning in isolation and that it still is noisy. Marbley replied that he will see what, if anything, can be done.

jandes@dispatch.com