Testimony began Thursday in federal court in Columbus in the fraud trial of five former executives of National Century Financial Enterprises. The defendants are accused of multiple counts of fraud that cost investors nearly $2 billion.
Prosecuting attorney Doug Squire calls it the biggest corporate fraud case since Enron and WorldCom. He says executives of the Dublin-based company duped investors out of $1.9 billion.
From 1991 to 2002 National Century funded hundreds of small hospitals and nursing homes with cash it received from bond sales. Purchasing those bonds were companies like JPMorgan Chase, BankOne and Payne Webber. Federal indictments accuse executives of defrauding investors by illegally funneling money to health care providers, including some in which the executives themselves held a major stake.
National Century declared bankruptcy in 2002. Prosecuting attorney Squire says the company's failure forced hundreds of medical providers to close their doors, resulting in the loss of thousands of jobs. Many investors also lost money. A group in Arizona has filed a 1.6 billion dollar lawsuit, claiming National Century lied to investors. Kathy Patrick is an attorney representing the group.
"These types of bonds, asset backed securities, are held in pension funds and mutual funds. They are supposed to be held in cash equivalent and are supposed to be very, very safe," Patrick says. "They are very safe if the structures are observed, but when they're not observed billions of dollars can be lost in an instant."
All five former executives on trial have pleaded not guilty. Defense attorneys Brian Dickerson says National Century had a perfectly legal business model. He says the FBI forced National Century's closure by seizing crucial equipment and paperwork during a November 2002 raid of the Dublin campus. Dickerson says he'll prove that by calling witnesses from the same companies prosecutors claim were defrauded. The trial is expected to last up to eight weeks.
