Reuters: Bankruptcy News: UPDATE 1-Credit Suisse fails to narrow Nat'l Century fraud trial

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UPDATE 1-Credit Suisse fails to narrow Nat'l Century fraud trial Jan 31st 2013, 17:06 Thu Jan 31, 2013 12:06pm EST * Bank tried to sever claims against ex-National Century CEO * Credit Suisse accused of missing fraud, could owe $2 bln * Ex-National Century chief serving 30-year prison term By Jonathan Stempel Jan 31 (Reuters) - Credit Suisse Group Inc lost its bid to be tried separately from convicted National Century Financial Enterprises Inc co-founder Lance Poulsen in an upcoming $2 billion civil trial over fraud at the healthcare financier a decade ago. The decision released Thursday by U.S. District Judge James Graham means that more evidence harmful to the Swiss bank's defense against bondholders could be introduced at the trial, which is scheduled to begin on April 1. Credit Suisse had contended that it was prejudicial to leave Poulsen as the only other defendant in the case, which it said could allow jurors to associate it with a convicted felon. Jack Grone, a Credit Suisse spokesman, had no immediate comment. Credit Suisse faces fraud and conspiracy claims by the state of Arizona, AllianceBernstein Holding LP, Lloyds TSB Bank Plc, MetLife Inc, Allianz SE's Pimco unit and other investors that bought National Century notes from 1998 to 2002. These investors said Credit Suisse sold the notes and defended their creditworthiness despite knowing that National Century misused investor funds and while missing red flags that Poulsen had been masterminding a $2.9 billion fraud. National Century had helped finance clinics, hospitals and other service providers and bought accounts receivable from them with money it got by selling notes to investors. But the Dublin, Ohio-based company filed for bankruptcy protection in November 2002 and several executives were convicted of crimes. Poulsen, 69, who had been chief executive, was convicted of fraud, conspiracy and money laundering in 2008 and is now serving a 30-year prison term. Graham said Credit Suisse did not show it would be prejudicial to include Poulsen as a co-defendant, given some overlap in the claims against both. He also said a joint trial would save time and make it easier to apportion fault. The judge added that both sides have signaled a willingness to resolve some issues about Poulsen's liability ahead of a trial, and that he is "hopeful" they can do so. Last Friday, Graham ruled that under New York law, a jury could hold Credit Suisse fully responsible for Poulsen's wrongdoing if it found they jointly caused bondholder losses. Poulsen is considered insolvent. Graham normally sits in Columbus, Ohio, but the bondholder litigation is being handled in Manhattan federal court. The cases, all in the U.S. District Court, Southern District of New York, are Crown Cork & Seal Co et al v. Credit Suisse First Boston Corp et al, No. 12-05803; Arizona v. Credit Suisse First Boston Corp et al, No. 12-05804; City of Chandler et al v. Bank One NA et al, No. 12-05805; Lloyds TSB Bank Plc v. Bank One NA et al, No. 12-07263; and Metropolitan Life Insurance Co et al v. Bank One et al, No. 12-07264. Link this Share this Digg this Email Reprints

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