According to an Associated Press news report, the Chapter 11 US bankruptcy filing came two days after FBI agents staged a search at the Dublin, Ohio offices of National Century Financial Enterprises.
Financial problems have prevented National Century, which purchases receivables from health-care companies, from paying its clients for weeks, the AP reported. That, in turn, forced at least two companies into bankruptcy threatening the financial stability of some health care providers, according to the AP report.
The AP reported that two dozen agents from the FBI’s white-collar crime unit in Columbus spent several hours Saturday searching through documents and computer files at the company’s offices. The search continued on Sunday.
The Columbus Dispatch reported Sunday that the action may be related to the depletion of as much as $500 million in reserves. Company founder Lance Poulsen recently resigned as chairman and chief executive. . (See National Century Founder and CEO Resigns ).
The company has not made payments to its 60 client health providers in weeks, the AP said. Some of the company’s customers have hundreds of locations across the country.
One of those providers, Med Diversified, announced it intended to sue JP Morgan Chase and Bank One, alleging the two banks breached their fiduciary duties with respect to National Century by knowing about possible misuse of funds. (See Lawsuit Against Banks Expected over National Century Woes).
The AP said National Century’s problems began with a delay in getting an audit completed because of new accounting rules. The delay prevented it from raising more money from bonds, which, in turn, forced the company to dig too heavily into its reserves, according to the AP.
Hospitals, doctors, nursing homes and other providers use National Century as a middleman to avoid waiting months for payments from insurance companies and government programs such as Medicare and Medicaid.
National Century buys medical bills at a discount and packages them into bonds. Its customers end up with $0.80 to $0.90 cents on the dollar for its bills while National Century and bondholders take the rest as fees and interest payments.