Banks sued over healthcare 'fraud'
A group of 184 plaintiffs is suing JP Morgan Chase and Credit Suisse First Boston to recover losses of more than $1.3bn (£800m) relating to the collapse of a US healthcare financier.
The lawsuit is the latest evidence of growing dissent among investors struggling with massive losses after the end of the 1990s boom.
The plaintiffs allege "massive fraud" at National Century Financial Enterprises. It filed for bankruptcy in November, two days after its headquarters in Dublin, Ohio, were raided by the FBI.
National Century provided cash to hospitals by buying their outstanding medical bills and submitting the claims to insurance companies and the federal Medicare and Medicaid systems. It raised about $3.4bn in bonds through the banks to finance the purchases.
The lawsuit, made up of in surance companies, pension funds and other investment groups who bought the bonds, described the securities as "nothing more than a ponzi scheme" - an illegal pyramid scheme - kept afloat through "repeated issuances of worthless notes".
Others named as defendants in the suit included accounting firms PricewaterhouseCoopers and Deloitte & Touche, and individuals including Harold Pote, head of JP Morgan's regional banking group, and the former chief of National Century, Lance Poulson.
There have been allegations that National Century misused the funds raised in the bond issues. Bank One has separately sued the company. The bank was a trustee of a special purpose vehicle that held the cash raised in the bond issues and accused National Century of violating the terms of the venture.
JP Morgan and CSFB declined to comment.
The lawsuit is the latest evidence of growing dissent among investors struggling with massive losses after the end of the 1990s boom.
The plaintiffs allege "massive fraud" at National Century Financial Enterprises. It filed for bankruptcy in November, two days after its headquarters in Dublin, Ohio, were raided by the FBI.
National Century provided cash to hospitals by buying their outstanding medical bills and submitting the claims to insurance companies and the federal Medicare and Medicaid systems. It raised about $3.4bn in bonds through the banks to finance the purchases.
The lawsuit, made up of in surance companies, pension funds and other investment groups who bought the bonds, described the securities as "nothing more than a ponzi scheme" - an illegal pyramid scheme - kept afloat through "repeated issuances of worthless notes".
Others named as defendants in the suit included accounting firms PricewaterhouseCoopers and Deloitte & Touche, and individuals including Harold Pote, head of JP Morgan's regional banking group, and the former chief of National Century, Lance Poulson.
There have been allegations that National Century misused the funds raised in the bond issues. Bank One has separately sued the company. The bank was a trustee of a special purpose vehicle that held the cash raised in the bond issues and accused National Century of violating the terms of the venture.
JP Morgan and CSFB declined to comment.
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