National Century Financial Enterprises Case (NCFE), a healthcare financing company, collapsed in 2002, resulting in a loss of $2.9 billion to investors, including the world’s largest bond fund manager, Pacific Investment Management Co., Pimco and Credit Suisse Group. The failure also hastened the bankruptcies of some 275 hospitals and healthcare providers. A dozen NCFE executives and employees were indicted in the Southern District of Ohio in 2003 on charges of conspiracy, mail and wire fraud, securities fraud and money laundering, including NCFE’s former Executive Vice President, Mr. James K. Happ. NCFE, which purchased accounts receivables from healthcare providers at a discount, was alleged to have advanced $2.2 billion to six companies in which its Chief Executive, Lance K. Poulsen, owned stakes, and to have charged NCFE’s clients for the advances. NCFE’s fraud is considered the largest by a private company in U.S. history, and case has received nationwide media attention.
Several of the NCFE defendants pled guilty, and the remaining defendants were convicted in three trials on all counts. In particular, Poulsen was convicted in July for obstruction, and in October, on a total of 17 counts. Poulsen has already been sentenced to 10 years imprisonment on four of the counts, and faces a sentence of 30 years to life in prison on the remaining counts. NCFE co-founder Rebecca Parrett was convicted of 9 counts in March, but disappeared in March when she was given leave by the Court to return to Arizona to tend to her personal affairs.
Mr. Happ, who was charged with counts of conspiracy, money laundering conspiracy and three counts of wire fraud, was to be the seventh NCFE executive tried and the fourth and final NCFE trial. The case was presided over by the Honorable Algenon Marbley, United States District Judge. Mr. Happ was represented in the proceedings by the Columbus, Ohio, law firm of Kravitz, Brown & Dortch, LLC, and by the Atlanta, Georgia, law firm of Gillen Withers & Lake, LLC. Eminent attorney Max Kravitz, founding member and managing partner of Kravitz, Brown & Dortch and professor of law since 1976 at Capital University Law School, represented Mr. Happ until Mr. Kravitz’s untimely passing in August 2007. Representing Mr. Happ at trial were founding member and managing partner of Kravitz, Brown & Dortch, attorney Janet Kravitz, and attorney Craig A. Gillen, founding member and managing partner of Gillen Withers & Lake, serving as lead counsel. Mr. Zach Kravitz, Mr. and Mrs. Kravitz’s son, who is a recent graduate of the University of Florida School of Law, also served as counsel.
During the three-week trial, the defense argued that Mr. Happ was not involved in any wrongdoing and never lied to NCFE’s investors. The prosecution attempted to allegedly connect Mr. Happ to the fraud through witness testimony, including from NCFE Executive Vice-President Sherry Gibson and Frank Magliochetti, Jr., Chief Executive Officer of Med Diversified. The defense impeached the witnesses’ statements against Mr. Happ, and argued that while Mr. Happ advanced monies to healthcare companies, he did so merely as part of NCFE’s legitimate business, that the advances to companies had been occurring for eight years prior to Mr. Happ’s joining NCFE in 2000, and that Mr. Happ was not involved in the creation of any false investor reports or financial documents.
At the close of the trial, the prosecution urged the Court to instruct the jury on intent and “deliberate ignorance” or “willful blindness,” the concept that a defendant may still be found guilty of a crime where the defendant deliberately closes his or her eyes to criminal conduct. The defense responded that the jury could not be instructed on both intent and deliberate ignorance/willful blindness, citing an unpublished decision by the Sixth Circuit Court of Appeals, United States v. Ramos, 38 F.3d 1217 (6th Cir.1994) (unpublished per curiam), in which the Court held that “[t]he deliberate ignorance instruction should not be used where the evidence points to ‘either actual knowledge or no knowledge at all of the facts in question.’” Id. at *4 (quoting Sanchez-Robles, 927 F.2d at 1074; quoting United States v. Perez-Padilla, 846 F.2d 1182, 1183 (9th Cir. 1976)). The Judge found that a deliberate ignorance/willful blindness instruction could not be given where the government attempts to prove a defendant’s intent through direct evidence, pursuant to Ramos, and denied the prosecution’s proposed instruction. The jury subsequently found Mr. Happ not guilty on all counts. Jurors who were questioned following the verdict informed the media that they felt that the government did not prove its case. Mr. Happ is the only NCFE defendant to be acquitted. The acquittal has been widely reported in the national media.
Gillen Withers & Lake LLC are white collar and corporate criminal defense attorneys with an outstanding reputation and track record, handling cases throughout Georgia and the nation. Call our Atlanta, Georgia, office at (404) 842-9700 or our Savannah, Georgia, office at (912) 447-8400.
