FBI Raids National Century Offices

November 18, 2002
FBI agents raided the offices of National Century Financial Enterprises Saturday, the latest blow to one of the largest funders of last resort to health-care providers. Agents seized books and computer equipment from the company's Dublin, Ohio, offices.

Founder Lance K. Poulsen resigned as CEO last week after a credit agency withdrew its ratings on some of the company's bonds and the company said it was considering filing for bankruptcy protection.

The collapse of National Century has left many health care providers scrambling for cash to meet their obligations. One home health care agency, Tender Loving Care Health Care Services Inc., filed for bankruptcy protection earlier this month.

Tender Loving Care is a subsidiary of a larger home health care provider, Med Diversified Inc. Poulsen and his wife own 43 percent of Med Diversified's stock. The company has filed suit charging that Poulsen, another director, J.P. Morgan Chase and Bank One Corp. used their access to Med Diversified's receivable to put the company in "significant financial risk."

Poulsen, his wife and other National Century investors are also directors of a company that owns a significant portion of Rx Medical Services Corp. of Fort Lauderdale, which has said it may also have to file for bankruptcy.

National Century built itself into a leader in the bond market by lending money to health care providers in exchange for control of their receipts from government and private insurers. It's been reported that National Century was effectively charging 26 percent or more for its loans and other services.

Paulsen has been active in politics in recent years. He recently donated $44,000 to the Florida Republican Party. In the recent gubernatorial election, it was reported that he let Florida Gov. Jeb Bush use the company jet on a campaign swing.

The round of problems began when National Century's audit was delayed because of new accounting rules. The delay prevented it from raising more money in the bond market, which in turn caused its cash reserves to become depleted.

The problem for health care providers now is that as insurance companies and governments pay for services rendered, the money is going to trustees of the bonds, who are not releasing any money to providers.