U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 18975 / November 17, 2004
Securities and Exchange Commission v. John Allen Snoble, Civil Action No. C2:04-1089 (S.D. Ohio) (November 17, 2004)
SEC Sues Third NCFE Executive for Role in $1 Billion Fraud
The Securities and Exchange Commission today filed a civil injunctive action in the United States District Court for the Southern District of Ohio, alleging that John Allen Snoble, a former Vice President and Controller at National Century Financial Enterprises, Inc. (NCFE), participated in a scheme to defraud investors in securities issued by subsidiaries of NCFE. NCFE, a private corporation located in Dublin, Ohio, and its subsidiaries collapsed suddenly in October 2002 when investors discovered that the companies had hidden massive cash and collateral shortfalls from investors and auditors. The collapse caused investor losses exceeding $1 billion.
Snoble, a resident of Columbus, Ohio, consented to a permanent injunction prohibiting him from violating the anti-fraud provisions of the federal securities laws; an order barring him 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.
The complaint alleges that two wholly owned subsidiaries of NCFE purchased medical accounts receivable from health-care providers and issued notes that securitized those receivables. From at least 1999 to 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 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-some of which were partly or wholly owned by NCFE or its principals. The unsecured advances were inconsistent with representations made by senior NCFE officials in offering documents provided to investors.
According to the complaint, Snoble aided other NCFE officials in concealing their fraud from trustees, investors, potential investors, and auditors by executing unsecured advances, by executing fraudulent fund transfers, and by providing independent auditors with materially misleading information in connection with yearly audits of NCFE.
Without admitting or denying the allegations in the complaint, Snoble consented to the entry of an order that: (1) permanently enjoins him from violating the antifraud provisions of the federal securities laws, specifically Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Exchange Act of 1934 and Rule 10b-5 promulgated thereunder; (2) permanently bars him from serving as an officer or director of a public company; and (3) orders him to pay disgorgement, prejudgment interest, and a civil monetary penalty, with those amounts to be determined at a later hearing.
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 Snoble 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.
The Commission is continuing its investigation in this matter as to other parties.