Trial to Begin for Ohio Exec in $1.9B Fraud Case

October 2, 2008

Entrepreneur Lance Poulsen founded an innovative business helping cash-starved medical providers like nursing homes pay off their bills earlier than slow-moving insurance reimbursements.

Along the way he became a yacht-owning multimillionaire and grew National Century Financial Enterprises into one of the country’s largest health care financing businesses.

Federal prosecutors in a $1.9 billion corporate fraud trial allege Poulsen did something else: perpetrate fraud on the scale of Enron or WorldCom by fabricating company data, misleading investors and covering up shortfalls by moving money between accounts.

Jury selection in Poulsen’s trial was scheduled to start yesterday.

Poulsen, 65, has pleaded not guilty to the charges. He’s characterized himself as a rags-to-riches success story whose legitimate business was destroyed by the government. He’s also complained about not having enough time to prepare for the trial and that his work space in jail is too cramped.

The trial is expected to cover much of the same ground as a similar trial in March, when a jury convicted five of Poulsen’s co-defendants of multiple charges of fraud and money laundering.

One big difference: Shortly after those co-defendants were convicted, Poulsen went on trial on charges of trying to bribe a witness to give favorable testimony during his own corporate fraud trial.

Poulsen was convicted and sentenced to 10 years in prison. Poulsen wanted that fact kept from jurors but U.S. District Judge Algenon Marbley turned him down.

A witness tampering conviction provides proof “of his consciousness of guilt,” Marbley said in a ruling earlier this month.

Prosecutors say the earlier trials bolster the argument they’ll make against Poulsen this time around.

“Based upon the evidence established during the preceding trials, the government has demonstrated previously, by more than a preponderance of the evidence, that a conspiracy existed, that Poulsen was a participant,” Kathleen McGovern, a U.S. trial attorney, said in a court filing last week.

Poulsen grew up in Chicago’s South Side and in suburban Gurnee, Ill. His father was a janitor, his mother a house cleaner, he told jurors at his March witness tampering trial.

He said he was active in Junior Achievement, a youth organization that promotes business skills, and used a Junior Achievement scholarship to attend college in Wisconsin.

Poulsen said he flunked out after one year for having too much fun as a student, then went to night school in Chicago, later graduating from Roosevelt University with a bachelor’s degree in business administration.

Poulsen slowly worked his way up in the business world, from a marketing assistant for a beer company to the owner of an auto parts company, he told jurors. Eventually he formed an insurance company, then created National Century Financial Enterprises in Dublin in suburban Columbus in the early 1990s.

At its height National Century employed more than 300 people. Executives made millions, with Poulsen alone earning more than $9.1 million between 1996 and 2002, according to the government. He also owned a yacht, a private corporate jet and a Florida mansion.

The company’s bubble burst in November 2002. A meeting with angry investors that month deteriorated into a shouting match with Poulsen screaming at investors and threatening to have them thrown off the property.

FBI agents raided National Century the weekend of Nov. 16-17, 2002, carting away boxes of documents and computers.

The business offered financing to small hospitals, nursing homes and other health care providers by purchasing their accounts receivable, usually for 80 or 90 cents on the dollar, so they wouldn’t have to wait for insurance payments. National Century then collected the full amount of the payments.

The company raised the money to fund its business by selling bonds to investors.

Prosecutors argued Poulsen and other executives of the company authorized millions in unsecured loans to the health care providers, then misled investors about the loans. The government says company officials moved money between accounts to cover shortfalls, fabricated data and loaded false information on a company computer system.

Poulsen says the government has misunderstood a complex business model and failed to explain exactly what he did that was illegal.

At least nine former National Century executives have been convicted of corporate fraud related to the case to date.

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