Credit Suisse fails to narrow Nat'l Century fraud trial

Thu Jan 31, 2013 3:25pm EST
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By Jonathan Stempel

(Reuters) - Credit Suisse Group Inc CSGN.VX 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.

The bank was sued for fraud and conspiracy by the state of Arizona, AllianceBernstein Holding LP (AB.N: Quote), Lloyds TSB Bank Plc 48IY.L, MetLife Inc (MET.N: Quote), Allianz SE's (ALVG.DE: Quote) 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.

"U.S. authorities investigated this matter many years ago and brought charges against those responsible," Credit Suisse spokesman Drew Benson said in an email. "Neither Credit Suisse nor any of its employees were accused of any wrongdoing."

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 later convicted of crimes.   Continued...

A logo of Swiss bank Credit Suisse is seen on a building in Zurich, January 15, 2013. REUTERS/Michael Buholzer