Bigger than Enron...what about the Tennessee Largest Bankruptcy

Tennessee's Largest Bankruptcy in 1999 held most of NCFE so called purchases.

What about the bankruptcy fraud for the case filed July 29, 1999 in Memphis Bankruptcy Court? All the NCFE Debtor in Posession finance tool used to hide Columbia Homecare Group?

The court room full of lawyers cried FRAUD- the judge forbade the 'F' word in her court.



National Century victims awaiting repayment
Sunday, May 3, 2009 3:22 AM
By John Futty

THE COLUMBUS DISPATCH
When National Century Financial Enterprises collapsed into fraud-fueled bankruptcy, few investors were hit as hard as those in Arizona.

More than 100 of the state's agencies and communities were in an investment pool that held notes worth $131 million in the Dublin-based health-care finance company. Chandler, Ariz., a suburb of Phoenix, took the largest individual hit, losing $13 million.

"There was shock, there was disbelief," said Nachie Marquez, a spokeswoman for the city. "It's taxpayer funds. You put your trust in an investment pool and you think it's safe."

The Arizona investors were among hundreds of institutional victims across the U.S. whose losses totaled $2.38 billion -- the largest known fraud case in the country involving a private company.

The government is "aggressively working" to recover the money from the founders and executives of National Century. They were ordered to pay restitution after they were convicted in federal court in Columbus of conspiracy, securities fraud, mail fraud and money laundering, said Assistant U.S. Attorney Doug Squires.

Last week, U.S. District Judge Algenon L. Marbley issued an order requiring National Century co-founder Lance K. Poulsen, considered the architect of the scheme, and his co-conspirators to forfeit $1.7 billion in assets, the amount prosecutors say represents the proceeds of the conspiracy.

But attorneys for the victims say they are more likely to recover the most significant amounts through lawsuits filed against financial institutions that allegedly are liable for the fraud.

"While we appreciate the government's efforts to squeeze money out of the individual criminal defendants," the financial institutions named in the civil litigation "are able to pay much more than any of these folks have," said Scott Humphries of Houston-based Gibbs & Bruns. The law firm represents investors who lost a total of $1.6 billion.

Investors filed a flurry of lawsuits against National Century, its executives and its financial advisers after the company filed for bankruptcy in 2002. The suits, involving hundreds of plaintiffs in five states, were combined in 2003 and assigned to one federal judge in Columbus.

JPMorgan Chase, a trustee for National Century funds, agreed to pay $425 million to settle its portion of the lawsuit in February 2006, according to an annual report it filed with the Securities and Exchange Commission.

The plaintiffs said JPMorgan Chase was negligent in allowing National Century to make fraudulent transfers among its accounts and for not detecting or revealing the illegal activity to investors.

Settlement money and insurance coverage helped the city of Chandler recoup some of its losses, Marquez said.

"We've recovered about 40 cents on the dollar for our clients," Humphries said.

Civil litigation continues against Credit Suisse, the investment bank that issued National Century's bonds.

Meanwhile, the U.S. attorney's office has collected $2.3 million so far from the criminal defendants, said Fred Alverson, an office spokesman.

The total includes $396,178 that federal agents seized in March from the bank account of Rebecca S. Parrett, a National Century executive who has been a fugitive since shortly after her conviction in March 2008.

The money recovered from the defendants was delivered to the federal clerk's office but has not been distributed to any victims, Alverson said.

National Century purchased the accounts receivable from hospitals, clinics and nursing homes using money obtained by selling asset-backed notes to institutional investors.

Evidence in the criminal trials showed that the company executives diverted money to support their lavish lifestyles and made unsecured loans to the health-care providers, leading to the company's collapse.

The bankruptcy process had begun in 2002 when the FBI obtained a warrant to search the company's Dublin headquarters. Agents collected more than 2,000 boxes of documents and computer files that formed the basis for an investigation involving the FBI, the Internal Revenue Service, U.S. postal inspectors and Immigration and Customs Enforcement.

Institutional investors, which included police and firefighter pension funds, churches, labor unions, cities and counties, and insurance companies, were led to believe the company's bonds were among the safest investments available.

The business model presented to investors was solid but never followed by the company, Squires said.

"(Company executives) did not dip their toes in the pool of fraud, they jumped in from Day One," he said. "From the first investor report, it was fraudulent."

The assets of the conspirators were researched by the federal probation office, but the information is not public record. Defense attorneys have said their clients' assets largely were exhausted while fighting the criminal charges.

Squires said the U.S. attorney's office will attempt to get "every available penny" from those convicted by seizing bank accounts, pensions, 401(k)s and property.

jfutty@dispatch.com


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On the Web • Watch a video of Assistant U.S. Attorney Doug Squires at Dispatch.com/video. For complete coverage of the National Century case, visit Dispatch.com/metro.