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A federal judge has rejected Credit Suisse First Boston’s motion to dismiss fraud allegations brought by investors who purchased $1.6 billion “AAA” rated notes supposedly backed by healthcare receivables issued by now-defunct National Century Financial Enterprises of Columbus, Ohio. In re National Century : Financial Enterprises, Inc., Investment Litigation Case No. 2:03-md-1565, U.S. District Court for the Southern District of Ohio, Eastern Division. Credit Suisse argued that it made no misrepresentations in offering materials, which is claimed were prepared by National Century. Judge James Graham, noting that Credit Suisse’s name was on the cover and the firm’s internal documents detailed how it helped draft and review the offering materials, called the argument “unpersuasive.” His ruling was issued Dec. 20. The relationship between Credit Suisse and National Century, which filed for bankruptcy in November 2002, dates to 1995. According to plaintiffs, Credits Suisse netted millions of dollars in investment banking and placement fees. Investors reportedly lost $2.6 billion when National Century collapsed. The civil case parallels federal criminal prosecution of top National Century executives on charges of securities fraud, money laundering and wire fraud. The former president of the company, Lance K. Poulsen, and an associate, Karl A. Demmler, were additionally indicted in October on charges of conspiracy to obstruct justice and witness tampering based on FBI wiretaps that allegedly overhead them plotting to bride a top prosecution witness.

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