National Century
Judge lets one convict out of jail
Wednesday, April 16, 2008 11:06 PM
By Jodi Andes
THE COLUMBUS DISPATCH
An admitted bank robber's story about former National Century executives' plans to escape to Aruba was so detailed that a federal judge said he couldn't risk letting them all go free on bond again.
But James E. Dierker Jr., National Century Financial Enterprise's former marketing director, is different, federal Judge Algenon L. Marbley said.
Dierker wasn't as high-ranking as the other convicts, nor as culpable in the company's fraud, the judge said. And Dierker could prove that he had not talked to the others from the time he left National Century in November 2002 until seeing them again in court.
“I'm also persuaded by the 100 letters sent in (to the court) that show he is tied to the community,” Marbley said after a nine-hour hearing today.
So Dierker will be allowed out. Family, friends and Victoria's Secret co-workers who wrote the letters packed the courtroom and wept and hugged one another at the news.
Meanwhile, former National Century executives Donald H. Ayers, Roger S. Faulkenberry and Randolph Speer will remain in the Franklin County jail. Today, they broke their silence and took the stand for the first time, saying there never was an escape plan.
Company founder Lance K. Poulsen was in a holding cell at the courthouse and could have denied making claims of an escape plan, but he was never called.
Dierker's freedom is temporary.
The Powell man is expected to be incarcerated after sentencing in late spring or early summer.
The whereabouts of another co-defendant, Rebecca S. Parrett, remain unknown. She never showed up in Arizona, where she was allowed to return for house arrest, in late March. That, coupled with claims by Robert Cihy, changed everything for the others, Marbley said.
Cihy, the admitted bank robber and crack-cocaine user, also testified today. In the end, Cihy's testimony proved more credible than Ayers', the judge said.
Cihy said he and Poulsen bonded while they sat in neighboring cells in the Ross County jail. Both were “anti-government,” and Poulsen boasted that Cihy should view him as a hero because National Century's $1.9 billion loss of investors' funds “messed up pension funds of police officers.”
He said Poulsen told him about an escape plan hatched by him and the other defendants, using a cruise ship and getting off in Aruba. Parrett's escape “put a kink in those plans,” Cihy said.
Ayers wasn't as believable because he had lied before, about not having a safe in his home where he had hidden a substantial amount of money, Assistant U.S. Attorney Doug Squires said.
And Ayers also removed $800,000 from a bank account after being convicted, the judge noted. The money was for past and future legal fees, he said.
Monday, April 21, 2008
Friday, April 18, 2008
$1.9 billion fraud ....guess it is not trillion so why pay attention?
Getaway plan
Five executives convicted in a $1.9 billion fraud had planned to flee on a cruise ship to Aruba, an FBI agent testified Wednesday. One of the executives has disappeared, but the judge in the case will decide whether the four executives now in custody should be freed from jail before they are sentenced for their part in the scheme at National Century Financial Enterprises.
Five executives convicted in a $1.9 billion fraud had planned to flee on a cruise ship to Aruba, an FBI agent testified Wednesday. One of the executives has disappeared, but the judge in the case will decide whether the four executives now in custody should be freed from jail before they are sentenced for their part in the scheme at National Century Financial Enterprises.
Plotting to flee the country ... via cruise ship.
April 17, 2008
Fleeing the Country on a Cruise Ship: Not a Good Idea
On April 16, a federal judge ordered three defendants convicted in a corporate fraud case to remain in jail while awaiting sentencing. The reason? They were possibly plotting to flee the country ... via cruise ship.
Five executives of the now-defunct National Century Financial Enterprises, a health care financing company, were convicted March 13 in a scheme to defraud their investors. The judge had originally allowed the group to remain free until sentencing. But one of the executives disappeared last month and has yet to be located. A second was not deemed a flight risk.
However, the other three may have been plotting to escape on a cruise ship. A confidential informant gave testimony about a conversation he had with National Century's founder, Lance Poulsen, when they were both in jail. He claims that Poulsen explained how someone can enter a Caribbean island without a passport if he or she arrives via cruise ship. Given that the three remaining defendants may have been in communication with Paulsen and they did not testify that they weren't part of a conspiracy to flee the country, the judge ordered the men to remain in jail.
It is true that you don't need a passport to go on a Caribbean cruise from a U.S. homeport. However, that doesn't mean the government doesn't know where you are. Ship manifests are given to U.S. Customs and Border Protection, who review the list of passengers and crew and check for outstanding warrants and other red flags. If necessary, the government agency can work with foreign governments to have wanted criminals arrested prior to their return to U.S. shores. And passengers without passports still have to show birth certificates and government-issued ID cards.
Given the recent number of arrests of wanted criminals and drug smugglers onboard cruise ships (in February, a murder suspect was snared on Carnival's Celebration, and just this month there was a drug bust on Royal Caribbean's Brilliance of the Seas), we'd have to say the system is working pretty well.
http://www.cruisecritic.com/news/news.cfm?ID=2521
Fleeing the Country on a Cruise Ship: Not a Good Idea
On April 16, a federal judge ordered three defendants convicted in a corporate fraud case to remain in jail while awaiting sentencing. The reason? They were possibly plotting to flee the country ... via cruise ship.
Five executives of the now-defunct National Century Financial Enterprises, a health care financing company, were convicted March 13 in a scheme to defraud their investors. The judge had originally allowed the group to remain free until sentencing. But one of the executives disappeared last month and has yet to be located. A second was not deemed a flight risk.
However, the other three may have been plotting to escape on a cruise ship. A confidential informant gave testimony about a conversation he had with National Century's founder, Lance Poulsen, when they were both in jail. He claims that Poulsen explained how someone can enter a Caribbean island without a passport if he or she arrives via cruise ship. Given that the three remaining defendants may have been in communication with Paulsen and they did not testify that they weren't part of a conspiracy to flee the country, the judge ordered the men to remain in jail.
It is true that you don't need a passport to go on a Caribbean cruise from a U.S. homeport. However, that doesn't mean the government doesn't know where you are. Ship manifests are given to U.S. Customs and Border Protection, who review the list of passengers and crew and check for outstanding warrants and other red flags. If necessary, the government agency can work with foreign governments to have wanted criminals arrested prior to their return to U.S. shores. And passengers without passports still have to show birth certificates and government-issued ID cards.
Given the recent number of arrests of wanted criminals and drug smugglers onboard cruise ships (in February, a murder suspect was snared on Carnival's Celebration, and just this month there was a drug bust on Royal Caribbean's Brilliance of the Seas), we'd have to say the system is working pretty well.
http://www.cruisecritic.com/news/news.cfm?ID=2521
Sunday, April 13, 2008
“This case is one of the largest corporate fraud investigations
PTC man tagged for $3 billion corporate fraud
Fri, 04/11/2008 - 4:29pmBy: John Munford
Feds: Speer arrested after escape plan to Aruba was hatched
A Peachtree City man convicted of participating in a $3 billion securities fraud scheme has been placed in custody after federal officials learned he and three co-defendants were planning to escape to Aruba, federal officials said.
Randolph H. Speer, 58, was the chief financial officer for National Century Financial Enterprises and he was convicted by a federal jury in Ohio March 13 for conspiracy, securities fraud, wire fraud and money laundering.
The company, based in Dublin, Ohio, was one of the largest healthcare finance companies in the country before it filed for bankruptcy in November 2002.
Speer and four other defendants schemed to deceive investors about the company’s financial health, according to the U.S. Attorney’s Office in Ohio. Their convictions came after a six-week trial on the matter, though the jury deliberated less than two days before finding all five defendants guilty.
While Speer and three other defendants were caught after officials got word of their plans to flee to Aruba, the fifth defendant, Rebecca S. Parent, 59, of Carefree, Ariz. cannot be located, U.S. Attorney’s officials said.
At trial, evidence showed that NCFE concealed shortfalls by moving money back and forth between accounts, fabricating data in investor reports, incorporating false information into the accounting system and making other false statements to investors and rating agencies, officials said.
Between May 1998 and may 2001, NCFE sold notes to investors worth a total of $4.4 billion, but they were worth approximately six cents on the dollar at the time the bankruptcy was filed in November 2002, officials said.
Speer faces up to 140 years in prison and $4.25 million in fines, officials said.
“This case is one of the largest corporate fraud investigations involving a privately held company headquartered in small town America,” said Assistant Director Kenneth W. Kaiser of the FBI Criminal Investigative Division. “The FBI continues to leverage its corporate fraud expertise gained through large-scale investigations such as Enron and WorldCom, to ensure that corporations represent their true health. From Dublin, Ohio, to Houston, Texas to New York, New York, the message is clear that the FBI will not stand by as corporate executives manipulate their financial statements and conceal illegal activities from criminal and regulatory authorities.”The case was prosecuted by the U.S. Attorney’s Office in Ohio with assistance from the Federal Bureau of Investigation, the Internal Revenue Service, U.S. postal inspectors and the U.S. Immigrations and Customs Enforcement agency.
Fri, 04/11/2008 - 4:29pmBy: John Munford
Feds: Speer arrested after escape plan to Aruba was hatched
A Peachtree City man convicted of participating in a $3 billion securities fraud scheme has been placed in custody after federal officials learned he and three co-defendants were planning to escape to Aruba, federal officials said.
Randolph H. Speer, 58, was the chief financial officer for National Century Financial Enterprises and he was convicted by a federal jury in Ohio March 13 for conspiracy, securities fraud, wire fraud and money laundering.
The company, based in Dublin, Ohio, was one of the largest healthcare finance companies in the country before it filed for bankruptcy in November 2002.
Speer and four other defendants schemed to deceive investors about the company’s financial health, according to the U.S. Attorney’s Office in Ohio. Their convictions came after a six-week trial on the matter, though the jury deliberated less than two days before finding all five defendants guilty.
While Speer and three other defendants were caught after officials got word of their plans to flee to Aruba, the fifth defendant, Rebecca S. Parent, 59, of Carefree, Ariz. cannot be located, U.S. Attorney’s officials said.
At trial, evidence showed that NCFE concealed shortfalls by moving money back and forth between accounts, fabricating data in investor reports, incorporating false information into the accounting system and making other false statements to investors and rating agencies, officials said.
Between May 1998 and may 2001, NCFE sold notes to investors worth a total of $4.4 billion, but they were worth approximately six cents on the dollar at the time the bankruptcy was filed in November 2002, officials said.
Speer faces up to 140 years in prison and $4.25 million in fines, officials said.
“This case is one of the largest corporate fraud investigations involving a privately held company headquartered in small town America,” said Assistant Director Kenneth W. Kaiser of the FBI Criminal Investigative Division. “The FBI continues to leverage its corporate fraud expertise gained through large-scale investigations such as Enron and WorldCom, to ensure that corporations represent their true health. From Dublin, Ohio, to Houston, Texas to New York, New York, the message is clear that the FBI will not stand by as corporate executives manipulate their financial statements and conceal illegal activities from criminal and regulatory authorities.”The case was prosecuted by the U.S. Attorney’s Office in Ohio with assistance from the Federal Bureau of Investigation, the Internal Revenue Service, U.S. postal inspectors and the U.S. Immigrations and Customs Enforcement agency.
Friday, April 11, 2008
Interesting perspective on what went wrong.
April 10, 2008
JPMorgan Pays for Fiduciary Obligation Oversights
JPMorgan Chase agreed to pay nearly $2 million in disgorgement and interest to settle SEC charges it and Bank One Corporation (which JPMorgan Chase acquired in 2004), had been negligent in their conduct as asset-backed indenture trustees. They failed to pick up on improprieties carried out by a financing company that subsequently led to its collapse and investor losses of approximately $2.6 billion.
National Century Financial Enterprises was a privately-held Ohio corporation that is now defunct. During the relevant period, from 1999 through 2002, National organized and owned several special-purpose subsidiary programs - and sold nearly $3.5 billion of these programs' asset-backed notes to qualified institutional buyers (QIBs). According to private placement memoranda, National represented to investors that the proceeds of the note offerings would be used primarily for the purchase of health account receivables, and that the programs would maintain specified balances for 2 separate reserve accounts and an Equity Account that would be held by the indenture trustees (JPMorgan and Bank One).
What Went Wrong. National used a substantial portion of the private placement proceeds and Reserve Account funds to make either unsecured loans or loans secured by collateral other than healthcare account receivables, contrary to National's representations and contrary to the requirements of the master trust indentures that governed National's note offerings. A principal feature of the scheme that allow National to hide investor losses was to transfer huge amounts of Reserve Account funds on or around the first and last business day of every month. The indentures required that the programs maintain Specified Balances in the Reserve Accounts totaling about 17% of the value of the outstanding notes issued by the programs.
However, even though the indenture trustees for the programs had the ability to look at the balances in the Reserve Accounts at any time, the indentures only required the program to report on the balances in the Reserve Accounts as of one day of the month, called the "Monthly Payment Date." And JPMorgan Chase, a trustee for one large program, chose to test the balances as of the last business day of the month; Bank One, a trustee for another large program, chose to test as of the first business of the month. As a result of this testing methodology, National was able to "kite" large amounts of funds back and forth between the programs, making it appear that the programs were maintaining the Specified Balances - which they weren't. In fact, National was consistently and severely depleting the balances without telling investors.
At the instruction of National, Bank One and JPMorgan Chase made Reserve Account transfers that contradicted National's representations to investors about how the Reserve Accounts would be used and contravened the requirements of the indentures. [SEC Securities Act of '33 Release 8906, 3/27]
http://complianceinsights.typepad.com/what_went_wrong/2008/04/jpmorgan-pays-f.html
April 10, 2008
JPMorgan Pays for Fiduciary Obligation Oversights
JPMorgan Chase agreed to pay nearly $2 million in disgorgement and interest to settle SEC charges it and Bank One Corporation (which JPMorgan Chase acquired in 2004), had been negligent in their conduct as asset-backed indenture trustees. They failed to pick up on improprieties carried out by a financing company that subsequently led to its collapse and investor losses of approximately $2.6 billion.
National Century Financial Enterprises was a privately-held Ohio corporation that is now defunct. During the relevant period, from 1999 through 2002, National organized and owned several special-purpose subsidiary programs - and sold nearly $3.5 billion of these programs' asset-backed notes to qualified institutional buyers (QIBs). According to private placement memoranda, National represented to investors that the proceeds of the note offerings would be used primarily for the purchase of health account receivables, and that the programs would maintain specified balances for 2 separate reserve accounts and an Equity Account that would be held by the indenture trustees (JPMorgan and Bank One).
What Went Wrong. National used a substantial portion of the private placement proceeds and Reserve Account funds to make either unsecured loans or loans secured by collateral other than healthcare account receivables, contrary to National's representations and contrary to the requirements of the master trust indentures that governed National's note offerings. A principal feature of the scheme that allow National to hide investor losses was to transfer huge amounts of Reserve Account funds on or around the first and last business day of every month. The indentures required that the programs maintain Specified Balances in the Reserve Accounts totaling about 17% of the value of the outstanding notes issued by the programs.
However, even though the indenture trustees for the programs had the ability to look at the balances in the Reserve Accounts at any time, the indentures only required the program to report on the balances in the Reserve Accounts as of one day of the month, called the "Monthly Payment Date." And JPMorgan Chase, a trustee for one large program, chose to test the balances as of the last business day of the month; Bank One, a trustee for another large program, chose to test as of the first business of the month. As a result of this testing methodology, National was able to "kite" large amounts of funds back and forth between the programs, making it appear that the programs were maintaining the Specified Balances - which they weren't. In fact, National was consistently and severely depleting the balances without telling investors.
At the instruction of National, Bank One and JPMorgan Chase made Reserve Account transfers that contradicted National's representations to investors about how the Reserve Accounts would be used and contravened the requirements of the indentures. [SEC Securities Act of '33 Release 8906, 3/27]
http://complianceinsights.typepad.com/what_went_wrong/2008/04/jpmorgan-pays-f.html
Thursday, April 10, 2008
Valley fugitive may be hiding out ......to avoid a hefty prison sentence for fraud
Fugitive businesswoman may head to Aruba
by Melissa Blasius - Apr. 8, 2008 10:43 PM
12 News
A Valley fugitive may be hiding out on a resort island to avoid a hefty prison sentence for fraud. Rebecca Parrett, 59, disappeared while awaiting sentencing on a $2-billion dollar scheme.
She worked for National Century Financial Enterprises, which sold health care bonds to investors including several Arizona cities. Last month, a federal jury in Ohio convicted Parrett on conspiracy, securities and wire fraud, and money laundering.
Parrett, who owned a 6,000-square-foot Carefree mansion and a home in Fountain Hills, returned to Arizona on bond to await sentencing. Deputy U.S. Marshal Matt Hershey says she disappeared before a pretrial services officer went to visit her home at the end of March. Parrett's husband claimed she had gone to Sedona two weeks prior and hasn't been seen since, according to Hershey.
Federal court records indicate a confidential informant told the FBI last week the co-defendants, including Parrett, planned to meet in Aruba after the conviction. Her four co-defendants have since been arrested. If you see Rebecca Parrett, you are urged to call U.S. Marshals.
by Melissa Blasius - Apr. 8, 2008 10:43 PM
12 News
A Valley fugitive may be hiding out on a resort island to avoid a hefty prison sentence for fraud. Rebecca Parrett, 59, disappeared while awaiting sentencing on a $2-billion dollar scheme.
She worked for National Century Financial Enterprises, which sold health care bonds to investors including several Arizona cities. Last month, a federal jury in Ohio convicted Parrett on conspiracy, securities and wire fraud, and money laundering.
Parrett, who owned a 6,000-square-foot Carefree mansion and a home in Fountain Hills, returned to Arizona on bond to await sentencing. Deputy U.S. Marshal Matt Hershey says she disappeared before a pretrial services officer went to visit her home at the end of March. Parrett's husband claimed she had gone to Sedona two weeks prior and hasn't been seen since, according to Hershey.
Federal court records indicate a confidential informant told the FBI last week the co-defendants, including Parrett, planned to meet in Aruba after the conviction. Her four co-defendants have since been arrested. If you see Rebecca Parrett, you are urged to call U.S. Marshals.
Tuesday, April 8, 2008
Which LIAR do you wish to BELIEVE?
Monday, April 7, 2008 - 3:50 PM EDT
Poulsen says informant against National Century execs is lyingBusiness First of Columbus - by Kevin Kemper Business First
An alleged plot hatched by convicted National Century Financial Enterprises Inc. executives to flee the country did not come from Lance Poulsen, the former CEO claims in a new court filing.
Attorneys for Randolph Speer, the former chief financial officer of the defunct, Dublin-based company, charged in a filing in U.S. District Court in Columbus Friday that a government informant made up the story of the escape plot to reduce his time in prison.
"First and foremost, Mr. Speer vehemently and unequivocally denies any knowledge or participation in any such plot," the filing says. "Yet, he has been forcibly removed from his family and deprived of his liberty with the false utterances of an informant who has a clear motive to lie."
Government prosecutors said April 2 that they heard from an informant, who they said heard the tale from Poulsen, that National Century executives were planning to flee to Aruba if they were ever convicted of fraud. That information led U.S. District Court Judge Algenon L. Marbley to issue arrest warrants for the 57-year-old Speer, Donald H. Ayers, 71; James Dierker, 40; and Roger Faulkenberry, 46. The four were out on bail after being convicted of conspiracy and securities fraud March 13. They were all taken into custody.
A letter included in Speer's filing from Peter Anderson, one of Poulsen's attorneys, argues the arrests were unfounded.
"Mr. Poulsen believes that (Robert Cihy) is the 'confidential informant' that the United States referenced in its motion," Anderson said.
Cihy, Anderson said, is an inmate in the Ross County Jail where Poulsen is incarcerated. Cihy allegedly told Poulsen that federal agents asked him to "get close" to Poulsen to find out information. The letter says Cihy was told that the government believes the National Century executives had a plan to flee the country, and the agents wanted Cihy to find out information about the plan.
The government indicted Cihy in March on charges of engaging in a nine-day robbery spree of Central Ohio retail stores. He reached a plea agreement with the government on April 3, a day after Speer, Ayers, Dierker and Faulkenberry were arrested.
Assistant U.S. Attorney Douglas Squires, who ran the prosecutions of all the executives, said he could not comment on Speer's filing because the government's source is confidential.
Attorneys for the convicted executives asked Marbley to compel the government to disclose its source, but Marbley denied the motion Monday.
An arrest warrant for a fifth National Century executive, 58-year-old Rebecca Parrett, remains outstanding. Police are searching for Parrett, the company's former treasurer and co-founder, after she failed to show up for an appointment with a court officer in Arizona where she was to await sentencing. Her whereabouts remain unknown.
A jury found the five executives guilty of running a multiyear fraud at National Century, which collapsed into bankruptcy six years ago, resulting in as much as $3 billion in investor funds going missing. They each face prison sentences of 20 to 55 years.
Marbley allowed the five executives to remain under house arrest until their sentencing on the condition they would be placed on electronic monitoring. Parrett never received a monitoring device.
Poulsen is scheduled to be tried on similar fraud charges this summer. He and a friend, Karl Demmler, were convicted March 26 on witness tampering charges stemming from claims they tried to bribe a key government witness scheduled to testify in Poulsen's trial. The two men are in custody awaiting sentencing.
Poulsen says informant against National Century execs is lyingBusiness First of Columbus - by Kevin Kemper Business First
An alleged plot hatched by convicted National Century Financial Enterprises Inc. executives to flee the country did not come from Lance Poulsen, the former CEO claims in a new court filing.
Attorneys for Randolph Speer, the former chief financial officer of the defunct, Dublin-based company, charged in a filing in U.S. District Court in Columbus Friday that a government informant made up the story of the escape plot to reduce his time in prison.
"First and foremost, Mr. Speer vehemently and unequivocally denies any knowledge or participation in any such plot," the filing says. "Yet, he has been forcibly removed from his family and deprived of his liberty with the false utterances of an informant who has a clear motive to lie."
Government prosecutors said April 2 that they heard from an informant, who they said heard the tale from Poulsen, that National Century executives were planning to flee to Aruba if they were ever convicted of fraud. That information led U.S. District Court Judge Algenon L. Marbley to issue arrest warrants for the 57-year-old Speer, Donald H. Ayers, 71; James Dierker, 40; and Roger Faulkenberry, 46. The four were out on bail after being convicted of conspiracy and securities fraud March 13. They were all taken into custody.
A letter included in Speer's filing from Peter Anderson, one of Poulsen's attorneys, argues the arrests were unfounded.
"Mr. Poulsen believes that (Robert Cihy) is the 'confidential informant' that the United States referenced in its motion," Anderson said.
Cihy, Anderson said, is an inmate in the Ross County Jail where Poulsen is incarcerated. Cihy allegedly told Poulsen that federal agents asked him to "get close" to Poulsen to find out information. The letter says Cihy was told that the government believes the National Century executives had a plan to flee the country, and the agents wanted Cihy to find out information about the plan.
The government indicted Cihy in March on charges of engaging in a nine-day robbery spree of Central Ohio retail stores. He reached a plea agreement with the government on April 3, a day after Speer, Ayers, Dierker and Faulkenberry were arrested.
Assistant U.S. Attorney Douglas Squires, who ran the prosecutions of all the executives, said he could not comment on Speer's filing because the government's source is confidential.
Attorneys for the convicted executives asked Marbley to compel the government to disclose its source, but Marbley denied the motion Monday.
An arrest warrant for a fifth National Century executive, 58-year-old Rebecca Parrett, remains outstanding. Police are searching for Parrett, the company's former treasurer and co-founder, after she failed to show up for an appointment with a court officer in Arizona where she was to await sentencing. Her whereabouts remain unknown.
A jury found the five executives guilty of running a multiyear fraud at National Century, which collapsed into bankruptcy six years ago, resulting in as much as $3 billion in investor funds going missing. They each face prison sentences of 20 to 55 years.
Marbley allowed the five executives to remain under house arrest until their sentencing on the condition they would be placed on electronic monitoring. Parrett never received a monitoring device.
Poulsen is scheduled to be tried on similar fraud charges this summer. He and a friend, Karl Demmler, were convicted March 26 on witness tampering charges stemming from claims they tried to bribe a key government witness scheduled to testify in Poulsen's trial. The two men are in custody awaiting sentencing.
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