Legal•Info

Executive Receives 30-Year Sentence in Fraud Case

Posted: Wednesday, May 6th, 2009 at 3:53 pm

In one of the stiffest punishments ever to be handed down in a white-collar criminal case, Lance K. Poulsen of National Century Financial Enterprises was sentenced last week to 30 years in prison.

Poulsen, 65, founded National Century, a Dublin, OH-based business which provided loans to health-care facilities. He was convicted in October 2008 on charges of fraud, after perpetrating an elaborate scheme in which he repackaged the health-care loans into bonds and sold them to institutional investors as well as Wall Street firms. In 2002, some investors began to question the value of the loans, leading to a liquidity crisis at National Century, which then filed for bankruptcy.

Some 275 health-care facilities, such as clinics and hospitals, also went bankrupt as a result of the crisis. It also cost Credit Suisse, and the Pacific Investment Management Company, which is the nation’s biggest bond fund investor, more than $540 million.

Said Judge Algenon Marbley, who handed down the ruling, “Mr. Poulsen is an architect of a fraud of such magnitude that it would make sophisticated financial analysts shudder.” His decision is being viewed as a signal that crackdowns on white-collar crime could be increasing. This sentence is greater than either the 24 years given to former Enron head Jeffrey Skilling or the 25 years give to Bernard Ebbers, the former chief executive at WorldCom. In the wake of Bernard Madoff’s multi-billion dollar Ponzi scheme conviction, and the public outcry inspired by that scandal, corporate criminals are being punished harshly by the courts.

The fraud at National Century, estimated at $2.9 billion, is considered the largest fraud at a private United States company. Continued Judge Marbley, “Mr. Poulsen perpetrated this fraud over a seven-year period and went to enormous lengths to conceal it.”

Poulsen is already serving a 10-year sentence for trying to bribe the prosecution’s main witness. His new sentence will be added to the witness-tampering sentence. Rebecca Parrett, a former executive at National Century who became a fugitive after her conviction last year, was also sentenced to 25 years in prison. Parrett and Poulsen were also ordered to pay $2.38 billion in restitution.

 

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