Gibson, a resident of Hilliard, Ohio, consented to a permanent injunction prohibiting her from violating the federal securities laws; an order barring her from serving as an officer or director of a public company; and disgorgement, prejudgment interest, and a civil penalty, with those amounts to be determined at a later hearing.
Stephen M. Cutler, Director of the SEC's Enforcement Division, said, "Investors in private offerings are entitled to the same accurate, timely information that investors in public companies should receive. We continue to actively pursue those who provide false information to investors in both private and public securities."
Mary E. Keefe, Regional Director of the Commission's Midwest Regional Office added, "The Commission's complaint and the guilty plea announced today describe an elaborate fraud that cheated sophisticated investors out of more than $1 billion. We are determined to use the full force of the Commission's enforcement powers, and to work closely with criminal prosecutors, to combat this unconscionable conduct."
The complaint, which was filed in the United States District Court for the Southern District of Ohio, alleges that two wholly owned subsidiaries of NCFE purchased medical accounts receivable from health-care providers and issued notes that securitized those receivables. Between 1999 and 2002, the subsidiaries offered and sold at least $3.25 billion in total notes through private placements to institutional investors.
The complaint further alleges that Gibson and other senior NCFE officials improperly "advanced" to health-care providers $1 billion or more of the capital raised from investors without receiving required medical accounts receivable in return. These advances were essentially unauthorized, unsecured loans to distressed or defunct health-care providers-many of which were partly or wholly owned by NCFE or its principals. The unsecured advances were inconsistent with representations made by Gibson and other senior NCFE officials in offering documents provided to investors.
According to the complaint, Gibson and other senior NCFE officials concealed their fraud from trustees, investors, potential investors, and auditors by
- repeatedly transferring funds between the subsidiaries' bank accounts to mask cash shortfalls of as much as $400 million;
- recording $1 billion or more in non-existent or ineligible medical accounts receivable on the subsidiaries' books;
- creating and distributing false offering documents, false monthly investor reports, and false accounting records to trustees, investors, potential investors, and auditors; and
- misrepresenting the status of the programs' cash accounts and collateral base to trustees, investors, potential investors, and auditors.
The Commission filed its action at the same time that the U.S. Attorney's Office for the Southern District of Ohio unsealed a criminal information against Gibson for the conduct that is the subject of the Commission's complaint. The Commission thanks the United States Attorney's Office and the Federal Bureau of Investigation for their assistance in this investigation.
