U.S. v. Poulsen, s. 08–4218

Citation655 F.3d 492
Decision Date17 October 2011
Docket Number09–3658.,Nos. 08–4218,s. 08–4218
PartiesUNITED STATES of America, Plaintiff–Appellee,v.Lance K. POULSEN, Defendant–Appellant.
CourtUnited States Courts of Appeals. United States Court of Appeals (6th Circuit)

OPINION TEXT STARTS HERE

ARGUED: William R. Terpening, Peter Crane Anderson, Anderson Terpening PLLC, Charlotte, North Carolina, for Appellant. Benjamin C. Glassman, Assistant United States Attorney, Cincinnati, Ohio, for Appellee. ON BRIEF: William R. Terpening, Anderson Terpening PLLC, Charlotte, North Carolina, for Appellant. Benjamin C. Glassman, Assistant United States Attorney, Cincinnati, Ohio, Douglas W. Squires, Assistant United States Attorney, Columbus, Ohio, for Appellee.Before: GIBBONS and WHITE, Circuit Judges; MALONEY, Chief District Judge.**

OPINION

JULIA SMITH GIBBONS, Circuit Judge.

This consolidated case, involving both a securities fraud conviction (the “Securities Case”) and an obstruction of justice conviction (the “Obstruction Case”), chronicles the rise and fall of National Century Financial Enterprises, Inc. (“NCFE”) and, with it, defendant-appellant Lance K. Poulsen (Poulsen).

The cases were tried separately. In the Obstruction Case (2:07–cr–209, No. 08–4218), Poulsen appeals his conviction and sentence for obstruction of justice, witness tampering, and conspiracy. The conduct at issue occurred while the Securities Case was pending, but the Obstruction Case was tried first. In it, the district court sentenced Poulsen to 120 months in prison, three years of supervised release, a $17,500 fine, and special assessments. On appeal, Poulsen argues the district court erred in (1) denying his request to give an entrapment instruction; (2) denying his motion to suppress wiretap evidence; and (3) allowing into evidence the amount of loss for the purpose of Poulsen's sentence. We affirm the district court on each of these issues.

In the Securities Case (2:06–cr–129, No. 09–3658), Poulsen appeals his conviction and sentence for conspiracy to commit securities fraud, wire fraud, and money laundering. In May 2006, Poulsen and a number of co-defendants were indicted, with a superseding indictment returned in July 2007. On Poulsen's motion, the district court severed Poulsen's case from his co-defendants. The district court sentenced Poulsen to 360 months in prison to run concurrently with the sentence in the Obstruction Case. On appeal, Poulsen argues (1) the district court erred in denying his motion to transfer venue; (2) the district court improperly admitted evidence from the Obstruction Case; (3) the district court erred in allowing into evidence the amount of loss without also admitting evidence of other causes of that loss; and (4) his sentence was procedurally and substantively unreasonable. We affirm the district court on each of these issues.

I.

National Century Financial Enterprises, Inc. (“NCFE”), headquartered in Dublin, Ohio, was incorporated at the end of 1990 and became one of the largest healthcare finance companies in the United States. Defendant-appellant, Lance Poulsen was a co-founder of NCFE and served as its owner, chairman, and chief executive officer. Under NCFE's business model, NCFE primarily financed healthcare providers by purchasing their accounts receivable that were payable to private insurers and public healthcare programs. NCFE purchased specific accounts receivable from healthcare providers and issued bonds to investors that were backed by the accounts receivable as collateral. Subsidiaries of NCFE purchased those receivables with borrowed funds, monies obtained through securities that were backed by the receivables. NCFE and its representatives reported that those obligations were supported by adequate reserves and consistently maintained investment grade, primarily triple-A ratings. NCFE and its subsidiaries generated profits from fees charged to the healthcare providers for the advances as well as gains from the spread between the discounted costs of the receivables and the collections on the receivables.

In reality NCFE used investors' money to advance funds to certain providers who did not submit any accounts receivable in return, including those owned in whole or in part by Poulsen and other principals of NCFE. Funds were advanced to providers without acquiring any receivables or in amounts in excess of the receivables purchased, when NCFE was required to purchase solely eligible accounts receivable. Poulsen was involved in advancing funds in this manner that violated the rules of the agreements in place with NCFE's investors; he approved numerous such advances and the majority of advanced funds were to six providers owned by Poulsen through his stakes in NCFE and other entities. Monthly reports were issued to indenture trustees to verify that minimum reserve account balances were met. In order to meet the minimum required reserve balances, NCFE devised a system to transfer funds between the reserve accounts to meet minimum reserve levels. Poulsen was active in the decisions to transfer money between the funding programs, to change the reporting dates, and to falsify figures in investor reports. The Presentence Report (“PSR”) found that [a]s one of the principals, Poulsen possessed the most knowledge of the ongoing criminal activity in this conspiracy.”

In the spring of 2002, NCFE's auditing firm began to question discrepancies in several accounts, so it continued to request documentation and did not complete an audit report. In the fall of 2002, when NCFE attempted to shift funds between the programs, one of the trustee banks denied the transfer. The following week, at a meeting with Poulsen and others, investors first learned that NCFE insiders had been funding certain providers without acquiring accounts receivable in return. NCFE prepared an investor report in late October 2002 disclosing actual balances in its reserve accounts, and NCFE fund ratings for two of its subsidiary programs were downgraded from triple-A ratings to junk-bond status.

On November 8, 2002, Poulsen was forced to resign from his positions as director of NCFE's board and chief executive officer. Days later, the FBI searched NCFE's office, seizing computer and document records. On November 18, 2002, NCFE sought Chapter 11 protection in bankruptcy court.

On May 19, 2006, the first indictment in the Securities Case was returned against Poulsen, Rebecca S. Parrett, Donald H. Ayers, Roger S. Faulkenberry, Randolph H. Speer, James Dierker, and Jon A. Beacham.

After the collapse of NCFE and Poulsen's initial indictment in the Securities Case, conversations between a friend of Poulsen, Karl Demmler, and a former employee of Poulsen, Sherry Gibson, formed the basis of the Obstruction Case. Karl Demmler was a close friend of Poulsen's from the mid–1980s when Poulsen first moved to Dublin, Ohio. Sherry Gibson was one of NCFE's first twelve employees, and she rose in the ranks at NCFE to executive vice president of compliance.

After the collapse of NCFE, in late 2003, Gibson pled guilty to conspiracy charges related to her employment at NCFE and faced an initial sentence of four years' imprisonment and forfeiture of $420,000. Her plea agreement, which listed Poulsen as an unindicted co-conspirator, required her to meet with prosecutors and truthfully answer all questions about her own and others' involvement with NCFE. In light of her cooperation in the investigation, Gibson's sentence was shortened to thirty months.

While Gibson was incarcerated, she and Demmler stayed in contact. After Gibson was released from prison, she contacted Demmler on June 19, 2007, and they met. Demmler informed Gibson that Poulsen intended to make her “whole.” In this conversation, Demmler also suggested that Gibson ask Poulsen to pay her for what she lost while incarcerated; Demmler suggested that they meet on a weekly basis; and Demmler stated that Poulsen asked him to contact Gibson to help him “win his case.”

On June 20, 2007, Gibson contacted the FBI. From this point on, Gibson was working with the FBI. She was “given instructions on a continual basis about when to respond to a voicemail, when to initiate a telephone call, when to arrange a meeting,” and she wore a concealed recording device when meeting with Demmler.

On July 10, 2007, while the FBI was still investigating the Obstruction Case and over a year after the first indictment in the Securities Case, the government obtained the final, operative Superseding Indictment, adding defendant James K. Happ. Poulsen was not yet arrested in either case at this time.

On July 13, 2007, Demmler and Gibson met again, and their conversation was recorded. Demmler suggested that she not “change her story” at trial but rather conveniently forget things and “prevaricate.” On July 18, 2007, Demmler informed Gibson that he had called Poulsen's cellular telephone and indicated that he had informed Poulsen about their conversations. On July 25, 2007, Demmler informed Gibson that Poulsen wanted to “sit down and talk to” her, but he wanted to do so under the right circumstances.

The FBI issued subpoenas for Demmler's telephone records. The telephone records revealed that Demmler and Poulsen had spoken more than thirty times between January and June of 2007. The FBI then obtained a pen register on Demmler's cellular telephone. On August 6, 2007, Special Agent Jeffrey Williams of the FBI submitted an affidavit in support of the application for the interception of wire communications from Demmler's cellular telephone. The wiretap was authorized on that same day.

From August 20, 2007, until October 18, 2007, the government monitored Poulsen's activity through the wiretap on Demmler's telephone, the recorded conversations between Gibson and Demmler, and Gibson's cooperation with the FBI. These conversations provided the following evidence: discussions between Poulsen and Demmler about getting Gibson a new attorney who was...

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