Executives: Don't Try This at Home

What is it called? That thing when you try to persuade a witness in a federal criminal investigation to feign amnesia?

Now I remember! It's called witness tampering.

Former National Century Financial Enterprises C.E.O. Lance K. Poulsen was reminded of the perils of witness tampering today in federal court in Columbus, Ohio. Federal Judge Algenon L. Marbley sentenced him to 10 years in prison for telling a key witness in a fraud investigation not to cooperate with authorities.

Poulsen is a target in that investigation, which has been called the Enron of health care financing. The case has already resulted in the convictions of four other National Century executives. Marbley sentenced them earlier this week to prison terms of 5 to 15 years.

Poulsen is scheduled to be tried on the fraud charges in October; a conviction could earn him an additional decade or more behind bars.

National Century was the nation's largest health-care financing company before its 2002 bankruptcy.

Prosecutors said that between May 1998 and May 2001, the company sold $4.4 billion worth of notes to investors, pledging to use the capital to buy accounts receivable from hospitals and other healthcare providers.

Instead, the authorities said, National Century executives advanced money to healthcare providers -- often companies owned by the defendants themselves -- without requiring the accounts receivable as collateral. The executives then lied to investors and rating agencies in order to cover up their actions.

By the time the house of cards collapsed in bankruptcy court, the company's notes were worth about six cents on the dollar, prosecutors said. Authorities estimate that investors lost about $2 billion in the fraud, which also precipitated the collapse of more than 275 health-care provider clients.

A friend of Poulsen's, Karl A. Demmler, 57, was also scheduled to be sentenced today for having helped Poulsen approach the witness. Demmler's sentencing was postponed pending a psychological evaluation.

The Columbus Dispatch reported today that Demmler has become mentally unstable while in custody. In court filings, his lawyer said Demmler has told jail employees that he has been drinking his urine to help with his problems.

by Mark Stein

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