Important information on a National Century Financial Enterprises Inc. computer system was either lost or tampered with

Wednesday, March 5, 2008
IT expert: National Century computer system unreliable
Business First of Columbus - by Kevin Kemper Business First

Important information on a National Century Financial Enterprises Inc. computer system was either lost or tampered with, a computer expert testified for the defense, however the government did its best to call the witness's testimony into question.

Jon Bryant, an information technology computer consultant that used to work at National Century, told jury members on Tuesday and Wednesday that the AS/400 mainframe computer used by National Century to track accounts receivable was missing information after a crash that left nine of its hard drives inoperable.

The crash occurred, Bryant said, sometime after he stopped working for National Century in 2001, possibly when the government gained control of the system during its investigation.

Defense attorneys hired Bryant as an expert witness in 2007 to conduct an analysis of the information contained on National Century's AS/400 system. When Bryant conducted his analysis, he found that there was $300 million in accounts receivable missing from the system due to the crash.

The government has used information from the AS/400 to allege to the jury that millions of dollars went missing from the National Century's accounts.

Dublin-based National Century was a financier of last resort for health-care providers. The firm specialized in buying receivables from medical businesses at a discount, giving them cash up front so they could pay their bills. It then packaged the receivables as asset-backed bonds and sold them to investors.

Five of the company's former executives - Rebecca Parrett, Donald Ayers, Roger Faulkenberry, Randolph Speer and James Dierker - are facing charges of fraud, conspiracy and money laundering for their alleged involvement in National Century's nearly $3 billion collapse and bankruptcy in 2002.

They have all pleaded not guilty to the charges.

When the government got its chance to cross-examine Bryant, Assistant U.S. Attorney Douglas Squires did his best to call Bryant's word into question.

Squires first attempted to show that Bryant was not an information technology expert.

Squires asked Bryant about memos that circulated among National Century executives that suggested computer programs Bryant wrote did not work properly.

Bryant said he was not familiar with those memos.

Squires then asked Bryant about his relationship with Parrett. When Bryant admitted the two are friends, Squires suggested Bryant might lie for her. Bryant said he would not.

Squires also asked Bryant about statements Bryant made to the FBI in 2002. Bryant admitted he told the FBI that the company tried to deceive auditors and that funds were moved among accounts to hide shortfalls.

Squires also suggested that Bryant was disgruntled when he worked for National Century and that he volunteered to be a government witness in the case.

Bryant said neither was true.

Defense attorneys called their third witness after Bryant, a securitizations expert named Gregory Gac.

Gac, owner of Shorewood, Minn.-based Quadrant Financial Group LLC, was hired by the defense at a rate of $450 an hour to analyze the documents that governed National Century's bond funds.

The government has alleged that because the defendants allowed reserve funds for National Century bonds to be depleted, they had committed securities fraud. But Gac said National Century's bond reserve funds were allowed to fluctuate.

Under cross-examination, he admitted that he had sat in on earlier testimony in the trial when the government's star witness said she was behind a massive and ongoing fraud at the company. Gac said he found her testimony, "appalling," and that her behavior gives everyone in the finance industry a black eye.

The defense also called two character witnesses on behalf of Dierker, in advance of his expected testimony on Thursday. Barry Salmons, a friend and vice president of marketing at Huntington National Bank, testified that Dierker was a man of character, integrity and honesty. Susan Horn, a former executive vice president of marketing at Victoria's Secret, said that when Dierker worked for her, he was an outstanding employee with great morals and if she heard him testify she would believe what he said.