275 healthcare providers that SUPPOSEDLY went bankrupt

One might think that the embarrassing if not ignoble collapse of what was once described as “the country’s largest provider of healthcare accounts-receivable financing” would only be of interest to some affected healthcare providers, accounting nerds and burned Wall Street investors. But the criminal trial of five former executives of National Century Financial Enterprises is actually front-page news in Columbus, Ohio, where the trial got under way last week in a U.S. District courtroom.

In fact, based on a story that ran on the front page of the Columbus Dispatch the Sunday before the trial, defense attorneys motioned last week to conduct individualized and comprehensive voir dire of the dozens if not hundreds of prospective jurors. Without one-on-one questioning to determine otherwise, the attorneys said they were concerned that the prominent media coverage might have contaminated the pool.

For those of you who did not work for one of the 275 healthcare providers that supposedly went bankrupt after NCFE’s collapse, or are not accountants, burned investors or Columbus-area residents, here’s the back story: NCFE purchased medical accounts receivable from providers typically in dire financial straits, raising capital by selling AAA-rated asset-backed bonds or notes to investors. Prosecutors are alleging that it was all a sham that eventually led to the November 2002 collapse of NCFE days after FBI agents raided its Dublin, Ohio, headquarters. They claim that the fraud cost investors more than $1.9 billion.

Fortunately for the court calendar, Judge Algenon Marbley, a folksy man both pragmatic and aware of the legal rules, found a way around the voir dire motion that was amenable to both sides. Even with that, jury selection took three full days, putting the trial, which is expected to last four to six weeks, behind by a full day before it even got started.

The irony here is that jury selection traditionally gives lawyers an opportunity to taint the jury pool by their line of questioning, and this was very much apparent on the third day of questioning. The pool had already been whittled down to a mere courtroom-size group with prospective jurors sitting in every available seat, including the jury box. Marbley started things off that day by asking if a six-week trial would be a hardship for anyone. Several people raised their hands, including a waitress who said she would not get any pay and a young man who informed the judge that he worked for his family’s plumbing business.

“I was informed yesterday by my father that he would not pay me,” the young man said, lightening the mood in the courtroom.

Defense attorneys’ questions to the prospective jurors grew progressively rhetorical in nature after the jurors were first screened on direct questions like whether they had been victims of bankruptcy or whether they had ever been involved in any whistle-blower complaints. (One prospective juror had been employed by WorldCom and another by the now defunct Dublin Securities.)

Questions then seemed to get broader and more tangential as the pool was quizzed on their knowledge of financial concepts; auditors, specifically Deloitte & Touche; credit-rating agencies; trustees; and whether anyone had ever bothered to read their credit-card agreements. They also were asked how they felt about executive compensation—is $500,000 a year too much?—and whether they knew what a “144A offering” was. The pool was casually surveyed as to how many of them held job titles that had anything to do with what they actually did for a living and whether anyone had ever heard of the term “healthcare securitizations.” (No one had, or at least no one admitted they had.) During the course of this line of questioning, one woman in the back of the courtroom revealed that she is a personal friend of the chief executive officer of Deloitte and her husband had been at one time chief financial officer of Ford and Battelle. She was not selected.

Another prospective juror who was not selected was a man who works for Cardinal Health, also headquartered in Dublin, who said he reported directly to a vice president. On the other hand, one of the few people who raised their hands when asked if they actually wanted to serve on this jury was selected. When asked why he wanted to serve, he replied, “I think it’s a duty, and if anyone didn’t know anything (about this case) when they came in, I was him.”

No one connected with the trial has any inflated hopes of swift justice. Each of the five defendants had at least two defense lawyers sitting with him, and there were four lawyers sitting at the U.S. attorney’s table so that whenever there was a request for a sidebar—and there were many—there was a sea of dark suits huddling to the side of the courtroom while Musak played over the courtroom speakers. Yet for all of the dissension in the reams of motions and trial briefs that are accumulating with the case, the prosecutors and defense attorneys actually seemed to get along very well.

But missing from the defense side of the courtroom is perhaps the most contentious principal involved with NCFE: Lance Poulsen, one of NCFE’s founders and its former president, chairman and chief executive officer. Poulsen’s case was severed from the trial earlier this year; he will be tried in August. In the meantime, considered a flight risk, he is sitting in jail outside Columbus, facing separate charges of witness tampering at a trial expected to take place this spring.

Poulsen has fallen far. NCFE and Poulsen were once held in high enough regard in the Columbus area that the Dispatch profiled him in its business section in May 2000. Poulsen noted in the profile that marketing had been his primary focus over the previous 32 years of his career. His first professional position was with Hamm’s Brewery in St. Paul, Minn., according to the profile. He also said that as a result of his first job as a teenager working as a box wrapper and part-time salesman at the Robert Hall clothing store, he had learned, “Selling and marketing is more lucrative than packaging.”

As for his biggest mistake (up until that point in time), he recalled a boating accident that, in hindsight, might have been prophetic. He said: “Once while cruising in the coastal waters of Florida, I inadvertently turned the chart upside down and ran my vessel hard aground at a high speed.” How did he resolve the mistake? “I now make sure I always have the chart right-side up. Much like life, some things appear different than they actually are, and we must take time to examine the facts.”