Monday, February 18, 2008

National Century investors lost more than $1.9 billion

Former National Century exec grilled about what he said, when he said it
Monday, February 11, 2008 9:38 PM
By Jodi Andes

The truthfulness of testimony by a former executive of National Century Financial Enterprises, considered a key witness for the prosecution, became an issue today in a trial of five other former company leaders accused of contributing to the downfall of the company.

Attorneys for some of those defendants talked today in U.S. District Court of seeking a mistrial.

National Century investors lost more than $1.9 billion when the company, which loaned money to health-care companies, collapsed in 2002. More than 275 health-care companies failed as a result, affecting thousands of workers and patients. The case is considered the largest case of fraud involving a private company.

Jon A. Beacham testified that he didn’t try to defraud investors while he was National Century’s vice president of securitizations. The division he led cultivated investors so that the company could loan money to health-care providers, such as hospitals and nursing homes, for a fee.

Beacham already has pleaded guilty to fraud and conspiracy to commit fraud, and is awaiting sentencing.

He and three other former executive, who also have admitted guilt, are key witnesses against Rebecca S. Parrett, Donald H. Ayers, Roger S. Faulkenberry, Randolph H. Speer and James E. Dierker. The five are charged with securities fraud, conspiracy and other counts. Each has pleaded not guilty.

On Friday, Beacham testified that the five executives on trial misled investors about the security of their investments.
That, though, is not what Beacham told FBI agents after his plea last year. At that time, Beacham never alleged the executives did anything wrong, defense attorneys said, pointing to a transcription of the interview.

And today, as defense attorney Javier Armengau questioned Beacham about the facts surrounding his own case, Beacham, on each point, said he did nothing wrong.

Assistant U.S. attorneys have agreed to recommend that Beacham’s prison term be cut in half as long as he proves to be of “substantial assistance.”

Four other defense attorneys took turns dissecting Beacham’s testimony and actions on the stand.

Beacham testified that he didn’t think he did anything wrong until 2006. From 2002 to 2006, he was occupied with his family, including the birth of his fourth child, he said.

However in 2006, a consultant hired by his attorney told him that securities law has a “strict liability,” which could hold him accountable if he knew investors were misled.

It was then, Beacham said, he decided to plead guilty.

By day’s end, three defense attorneys told District Judge Algenon L. Marbley they were looking into having Beacham’s testimony removed from the record or asking for a mistrial.

“Based upon his testimony that he didn’t commit a crime, how could there be a conspiracy,” asked attorney Fred Benton.

Marbley seemed to disagree.
“(Beacham) said he knowing gave false information and that he later learned that was criminal activity,” Marbley said.

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