* More than half of nearly $2 bln lawsuit survives
* Credit Suisse accused of missing giant fraud
* National Century ex-CEO, others get long prison terms
* Credit Suisse believes committed no wrongdoing
By Jonathan Stempel
March 2 A federal judge rejected Credit
Suisse Group Inc's bid to dismiss a lawsuit by
National Century Financial Enterprises bondholders that accused
the Swiss bank of deceiving them about the health care finance
company and missing its vast, roughly $2.9 billion fraud.
U.S. District Judge James Graham in Columbus, Ohio said the
bondholders, who held nearly $2 billion of National Century
debt, "have submitted sufficient evidence in support of their
fraud-based claims" to allow the lawsuit to proceed.
While dismissing part of the case, the judge also rejected
Credit Suisse's request to dismiss several groups of bondholder
claims, including some raised by Lloyds TSB Bank Plc,
MetLife Inc and Allianz SE's Pimco unit.
"This ruling is important because it holds that an
investment bank may be held liable for statements made in an
issuer's offering documents," said Kathy Patrick, a lawyer who
represents about two dozen of the bondholders including Pimco,
Germany's BayernLB and Mutual of Omaha, in an
Patrick said considerably more than half of the bondholder
claims remain in the lawsuit. She expects the case to be sent to
an Arizona federal court for a trial later this year.
Credit Suisse in a statement said it will continue its
defense, and "remains confident that a jury will find based on
all the evidence that it should not be held responsible for
assisting or committing any wrongdoing."
Founded in 1990, privately held National Century provided
financing to hundreds of clinics, hospitals and other services
providers, and buying accounts receivable from such providers by
using money obtained from the sale of notes to investors.
But according to the Justice Department, the Dublin,
Ohio-based company misused investors' money, funneled corporate
funds to company officials including co-founder and Chief
Executive Lance Poulsen, and covered up its fraud by lying to
investors and credit rating agencies.
National Century filed for bankruptcy protection in November
2002. A federal jury convicted Poulsen in October 2008 of fraud,
and he was sentenced five months later to 30 years in prison.
Co-founders and Vice Chairmen Rebecca Parrett and Donald Ayers
were sentenced to a respective 25 years and 15 years in prison.
The bondholders claimed that Credit Suisse sold National
Century notes even though it knew or should have known about the
company's fraud, and relied on offering materials that did not
describe how National Century actually operated.
Graham did not rule on the merits of the case. Nonetheless,
despite calling the noteholders "sophisticated investors," he
found that "a sufficient disparity in access and knowledge
existed to make the noteholders' reliance on Credit Suisse
The case is In re: National Century Financial Enterprises
Inc Investment Litigation, U.S. District Court, Southern
District of Ohio, No. 03-01565.