UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION

PLAINTIFF SECURITIES AND EXCHANGE COMMISSION'S COMPLAINT
FOR PERMANENT INJUNCTION AND OTHER EQUITABLE RELIEF

Plaintiff, the United States Securities and Exchange Commission ("Commission"), alleges the following:

SUMMARY

1. Beginning in at least 1999 and continuing into 2002, Defendant Sherry L. Gibson ("Gibson") and other senior officials of National Century Financial Enterprises, Inc. ("National Century") defrauded investors who invested billions of dollars in securities issued by wholly owned subsidiaries of National Century. The subsidiaries sold the securities for the stated purpose of purchasing and servicing medical accounts receivable through National Century.

2. Gibson and other senior National Century 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 National Century or its principals. The unsecured advances were inconsistent with representations made by Gibson and other senior National Century officials in offering documents provided to investors.

3. Gibson and other senior National Century officials then concealed the fraud from trustees, investors, potential investors, and auditors by, among other things, repeatedly transferring funds between the subsidiaries' bank accounts to mask shortfalls of as much as $400 million; recording $1 billion or more in non-existent or ineligible medical accounts receivable on the books of National Century's subsidiaries; creating and distributing false offering documents, monthly investor reports, and 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.

4. The Commission brings this action pursuant to Section 20(b) of the Securities Act of 1933 ("Securities Act") [15 U.S.C. § 77t(b)] and Sections 21(d) of the Securities Exchange Act of 1934 ("Exchange Act") [15 U.S.C. §78u(d)] for a judgment permanently restraining and enjoining Defendant Gibson, ordering disgorgement of unlawful profits, imposing a civil penalty, prohibiting Defendant Gibson from acting as an officer or director of any reporting company, and for other relief.

5. Gibson directly and indirectly, has engaged and, unless enjoined, will continue to engage in transactions, acts, practices, and courses of business which constitute violations of Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)], and Section 10(b) of the Exchange Act [15 U.S.C. §78j(b)] and Rule 10b-5 [17 C.F.R. §240.10b-5] promulgated thereunder.

JURISDICTION AND VENUE

6. The Court has jurisdiction over this action pursuant to Section 22(a) of the Securities Act [15 U.S.C. §77v(a)] and Sections 21(e) and 27 of the Exchange Act [15 U.S.C. §§78u(e) and 78aa].

7. Defendant Gibson, directly and indirectly, has made use of the means and instruments of transportation and communication in interstate commerce, of the means and instrumentalities of interstate commerce, and of the mails in connection with the transactions, acts, practices, and courses of business alleged herein, within the jurisdiction of the Southern District of Ohio and elsewhere.

THE DEFENDANT

8. Beginning in 1999 and continuing into 2002 ("relevant period"), Defendant Gibson resided in Hilliard, Ohio and was employed by National Century as its Executive Vice-President for Compliance.

RELEVANT ENTITIES

9. National Century is, and during the relevant period was, a privately held Ohio corporation headquartered in Dublin, Ohio.

10. During the relevant period, National Century organized and owned two subsidiaries, NPF VI, Inc. ("NPF VI") and NPF XII, Inc. ("NPF XII"). Both NPF VI and NPF XII are Ohio corporations, and both are wholly owned subsidiaries of National Century.

BACKGROUND

11. National Century, through NPF VI, NPF XII, and another wholly owned subsidiary, engaged in the business of purchasing and servicing medical accounts receivable from health-care providers.

12. From 1991 through August 2002, National Century utilized NPF VI, NPF XII, and other wholly owned subsidiaries to purchase medical accounts receivable and to issue and sell notes secured by those medical accounts receivable.

13. During the relevant period, Gibson and other senior National Century officials, on behalf of National Century, controlled and directed the activities of NPF VI and NPF XII.

14. NPF VI and NPF XII financed their purchases of medical accounts receivable by selling notes to large institutional investors in several states outside Ohio. The notes were secured by medical accounts receivable owned by NPF VI and NPF XII.

15. During the relevant period, NPF VI and NPF XII financed their purchases of medical accounts receivable by issuing notes totaling at least $3.25 billion in a series of at least sixteen private placements.

16. As of November 2002, approximately $3 billion of notes issued by NPF VI and NPF XII were outstanding and held by investors.

17. The terms of each private placement of notes sold by NPF VI and NPF XII were contained in a set of agreements, including master indenture agreements, supplemental indenture agreements, note purchase agreements, and sales and sub-servicing agreements ("the program agreements").

18. The program agreements prescribed that National Century, through a wholly owned subsidiary, disburse offering proceeds to health-care providers only in return for medical accounts receivable which satisfied certain standards set out in the program agreements ("eligible receivables").

19. The program agreements also required that, through wholly owned subsidiaries, National Century maintain certain prescribed amounts of purchased medical accounts receivable as collateral for the notes; that National Century remove any medical accounts receivable that aged beyond 180 days; and that National Century comply with strict concentration requirements in assembling the pools of medical accounts receivable that secured the notes.

20. In addition, the program agreements required that bank accounts ("reserve accounts") be opened and funded in order to provide for, among other things, defaulted medical accounts receivable and shortfalls caused by Medicare and Medicaid offsets. The program agreements required that NPF VI and NPF XII maintain in the reserve accounts amounts equal to 17% of the purchase prices paid for medical accounts receivable.

21. The program agreements also required, with minor exceptions, that the reserve accounts be fully funded.

22. Under the program agreements, moneys held in the reserve accounts could be used for only certain specified, limited purposes.

23. NPF VI and NPV XII were further required by the program agreements to document the status of the reserve accounts once each month, for the benefit of the investors.

THE SCHEME TO DEFRAUD

24. During the relevant period, National Century personnel systematically defrauded the purchasers of notes issued by NPF VI and NPF XII.

25. First, Gibson and other senior National Century officials created shortfalls in the reserve accounts and collateral base by advancing $1 billion or more in offering proceeds to certain health-care providers without receiving eligible medical accounts receivable in return. Many of these advances were to health-care providers wholly or partly owned by senior officials of National Century.

26. Second, Gibson and other senior National Century officials took deliberate steps to conceal the reserve and collateral shortfalls from trustees, investors, potential investors, and auditors. Among other things, Gibson and others regularly transferred funds between the NPF VI and NPF XII reserve accounts in order to mask reserve-account shortfalls of as much as $400 million.

27. Third, National Century personnel overstated the collateral securing the notes by recording at least $1 billion in non-existent or ineligible medial accounts receivable as collateral, and then falsely reporting that collateral as eligible receivables to trustees, investors, potential investors, and auditors.

28. Fourth, Gibson and others created false offering documents, false monthly investor reports, and false accounting records to conceal their misuse of offering proceeds. The false documents were then provided to trustees, investors, potential investors, and auditors.

29. Finally, Gibson and other senior National Century officials misrepresented the status of the reserve accounts and collateral base in personal contacts with trustees, investors, potential investors, and auditors.

DEFENDANT GIBSON'S ROLE IN THE SCHEME TO DEFRAUD

Uncollateralized Advances

30. During the relevant period, Gibson personally authorized uncollateralized advances of investor funds to health-care providers.

Fraudulent Reserve-Account Transfers

31. During the relevant period, Gibson directed subordinates to mask reserve-account shortfalls from trustees, investors, potential investors, and auditors by improperly transferring funds between the reserve accounts for NPF VI and NPF XII. Many of the transfers exceeded $100 million.

32. Gibson further directed subordinates to create fictitious records to give the false impression that NPF VI and NPF XII were purchasing medical accounts receivable from each other in exchange for the transferred funds.

False Investor Reports

33. During the relevant period, Gibson supervised the drafting of monthly investor reports required of NPF VI and NPF XII under the program agreements.

34. In nearly every month during the relevant period, Gibson knowingly directed subordinates to falsify the monthly investor reports.

35. The monthly investor reports falsely overstated reserve-account balances and collateral. The false information in the investor reports was material to investors and potential investors.

36. In nearly every month during the relevant period, Gibson transmitted or directed subordinates to transmit the false investor reports to program trustees and program investors.

37. Gibson also knew that the false investor reports would be transmitted to potential investors in offerings conducted by NPF VI and NPF XII.

Misrepresentations To Auditors And Investors

38. During the relevant period, Gibson ordered subordinates to provide false data to auditors during random reviews of investor reports.

39. Gibson knew that the auditors' reports would be provided to potential investors in offerings conducted by NPF VI and NPF XII.

40. Gibson made misrepresentations in person to trustees, investors, potential investors, and auditors regarding collateral and reserve-account shortfalls.

COUNT I

Violations of Section 17(a)(1) of the Securities Act
[15 U.S.C. §77q(a)(1)]

41. Paragraphs 1 through 40 are realleged and incorporated by reference herein.

42. By the conduct alleged above, Defendant Gibson, in the offer or sale of securities, by the use of means or instruments of transportation or communication in interstate commerce or by the use of the mails, directly or indirectly, employed devices, schemes, or artifices to defraud.

43. Defendant Gibson acted with scienter when she engaged in the conduct alleged in paragraphs 41 through 42 above.

44. By reason of the activities alleged in paragraphs 41 through 43 above, Defendant Gibson violated Section 17(a)(1) of the Securities Act [15 U.S.C. §77q(a)(1)].

COUNT II

Violations of Sections 17(a)(2) and (3) of the Securities Act
[15 U.S.C. §§77q(a)(2) and (3)]

45. Paragraphs 1 through 40 are realleged and incorporated by reference herein.

46. By the conduct alleged above, Defendant Gibson, in the offer or sale of securities, by the use of means or instruments of transportation or communication in interstate commerce or by the use of the mails, directly or indirectly, obtained money or property by means of untrue statements of material facts and omissions to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading and engaged in transactions, practices or courses of business which would and did operate as a fraud or deceit upon purchasers and prospective purchasers of such securities.

47. By reason of the activities alleged in paragraphs 45 through 47 above, Defendant Gibson violated Sections 17(a)(2) and (3) of the Securities Act [15 U.S.C. §§77q(a)(2) and (3)].

COUNT III

Violations of Section 10(b) of the Exchange Act [15 U.S.C. §78j(b)] and
Rule 10b-5 Thereunder [17 C.F.R. § 240.10b-5]

48. Paragraphs 1 through 40 are realleged and incorporated by reference herein.

49. By the conduct alleged above, Defendant Gibson, in connection with the purchase and sale of securities, by the use of the means and instrumentalities of interstate commerce or by the use of the mails, directly or indirectly, employed devices, schemes, and artifices to defraud, made

untrue statements of material facts and omitted to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, and engaged in acts, practices or courses of business which would and did operate as a fraud and deceit upon the purchasers and sellers of such securities.

50. Defendant Gibson acted with scienter when she engaged in the conduct alleged in paragraphs 48 through 49 above.

51. By reason of the activities alleged in paragraphs 48 through 50 above, Defendant Gibson violated Section 10(b) of the Exchange Act [15 U.S.C. §78j(b)] and Rule 10b-5 promulgated thereunder [17 C.F.R. §240.10b-5].

PRAYER FOR RELIEF

WHEREFORE, the Commission respectfully requests that the Court:

I.

Issue findings of fact and conclusions of law that Defendant Gibson committed the violations charged and alleged herein.

II.

Permanently enjoin Defendant Gibson from violating Sections 17(a)(1), (2) and (3) of the Securities Act [15 U.S.C. §§77q(a)(1), (2) and (3)].

III.

Permanently enjoin Defendant Gibson from violating Section 10(b) of the Exchange Act [15 U.S.C. §78j(b)] and Rule 10b-5 promulgated thereunder [17 C.F.R. §240.10b-5].

IV.

Order Defendant Gibson to pay into the registry of this Court disgorgement of her ill-gotten gains from her illegal conduct, gained directly or indirectly from the conduct complained of herein, together with prejudgment interest thereon.

V.

Order Defendant Gibson to pay to the Commission a civil penalty pursuant to Section 20(d) of the Securities Act [15 U.S.C. §77t(d)] and Section 21(d)(3) of the Exchange Act [15 U.S.C. §78u(d)(3)].

VI.

Order that Defendant Gibson be barred from acting as an officer or director of any issuer whose securities are registered pursuant to Section 12 of the Exchange Act [15 U.S.C. §78l], pursuant to Section 20(e) of the Securities Act [15 U.S.C. §77t(e)] and Section 21(d)(2) of the Exchange Act [15 U.S.C. §78u(d)(2)] as a result of her violation of Section 17(a) of the Securities Act [15 U.S.C. §77q(a)] and Section 10(b) of the Exchange Act [15 U.S.C. §78j(b)] and Rule 10b-5 promulgated thereunder [17 C.F.R. §240.10b-5].

VII.

Retain jurisdiction of this action in accordance with the principles of equity and the Federal Rules of Civil Procedure in order to implement and to carry out the terms of all orders and decrees that may be entered or to entertain any suitable application or motion for additional relief within the jurisdiction of the Court.

VIII.

Grant an Order for such further relief as the Court may deem appropriate.

Local Counsel:
Mark T. D'Alessandro
Ohio Bar No. 0019877
Assistant United States Attorney
303 Marconi Blvd., 2nd Floor
Columbus, Ohio 43215
(614) 469-5715 (phone)
(614) 469-5653 (fax)

Dated: August 18, 2003