U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 19634 / March 31, 2006

SEC v. Sherry L. Gibson, Civil Action No. 2:03-CV-0737 (S.D. Ohio)

SEC Obtains Final Judgment Against Former Executive of Dublin, Ohio-Based National Century Financial Enterprise for Role in $1 Billion Fraud

The Securities and Exchange Commission announced it obtained final judgment against Sherry L. Gibson, an Executive Vice President at National Century Financial Enterprises, Inc. (NCFE), for her participation in a scheme to defraud investors in securities issued by subsidiaries of NCFE.

Gibson, age 42, originally a resident of Hilliard, Ohio, consented to the entry of final judgment in the Commission's civil suit against her. The Honorable Gregory Frost of the United States District Court for the Southern District of Ohio entered the final judgment on March 20, 2006. The final judgment permanently enjoins Gibson from future violations of the antifraud provisions of the federal securities laws and bars her from serving as an officer or director of a public company. Gibson consented to the final judgment without admitting or denying the allegations of the complaint.

On August 18, 2003, the Commission filed a civil injunctive action alleging Gibson participated in a scheme to defraud investors in securities issued by subsidiaries of NCFE. See Litigation Release No. 18292 (August 18, 2003). NCFE, a private corporation located in Dublin, Ohio, collapsed suddenly in October 2002 when investors discovered the company and its subsidiaries had hidden massive cash and collateral shortfalls. The collapse caused investor losses exceeding $1 billion.

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 February 1999 through October 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 acted to conceal their fraud by: (1) repeatedly transferring funds between the subsidiaries' bank accounts to mask cash shortfalls of as much as $400 million; (2) recording $1 billion or more in non-existent or ineligible medical accounts receivable on the subsidiaries' books; (3) creating and distributing false offering documents, false monthly investor reports, and false accounting records to trustees, investors, potential investors, and auditors; and (4) misrepresenting the status of the programs' cash accounts and collateral base to trustees, investors, potential investors, and auditors.

Without admitting or denying the allegations in the complaint, Gibson consented to the entry of a final judgment order that permanently enjoins her from violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Exchange Act of 1934 and Rule 10b-5 thereunder, and permanently bars her from serving as an officer or director of a public company.

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. On August 18, 2003, Gibson pled guilty to conspiracy to commit securities fraud and was sentenced to four years in federal prison, followed by three years of supervised release. Gibson is currently serving her prison sentence and is scheduled to be released on March 28, 2008. In addition, as part of her criminal sentence, Gibson surrendered all her assets to the federal government as restitution for her crimes.

In a separate civil action, on December 21, 2005, the Commission filed a complaint against the following principals and/or owners of NCFE for their roles in the fraud: Lance Poulsen, principal and former Chief Executive Officer; Donald S. Ayers, principal and former Chief Operating Officer; Rebecca S. Parrett, principal and former Director of NCFE's Accounts Receivable Servicer Department; and Randolph H. Speer, former Chief Financial Officer. See Litigation Release No. 19509 (December 21, 2005).

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.