The Securities and Exchange Commission has charged that four former executives of National Century Financial Enterprises Inc. (NCFE) participated in a fraudulent scheme that caused investors to lose more than $2.6 billion.

The Dublin, Ohio-based company and its subsidiaries collapsed in October 2002, according to the SEC, when investors discovered that the companies had hidden “massive cash and collateral shortfalls from investors and auditors.” It added that the collapse also forced 275 health-care providers to file for bankruptcy protection.

Named in the suit were principal and former chief executive officer Lance Poulsen; principal and former chief operating officer Donald S. Ayers; Rebecca S. Parrett, principal and former director of NCFE’s accounts receivable servicer department; and former chief financial officer Randolph H. Speer.

The complaint, filed in U.S. District Court for the Southern District of Ohio, alleges that through two wholly owned subsidiaries, NCFE purchased medical accounts receivable from health-care providers and issued notes that securitized those receivables. From at least February 1999 to October 2002, the subsidiaries offered and sold at least $3.25 billion in notes through 15 private placements to institutional investors, added the SEC, which noted that the subsidiaries were required to maintain certain reserve-account balances and medical accounts receivable as collateral to secure the notes.

According to the commission, however, the four individuals depleted the reserve accounts and collateral base by advancing at least $1.2 billion from the subsidiaries’ funds to health-care providers without receiving eligible receivables in return. These advances were essentially unsecured loans to distressed or defunct health-care providers — many of which were wholly or partly owned by NCFE, Poulsen, Ayers, or Parrett — the regulator noted.

The SEC is seeking to permanently enjoin each individual from violating the antifraud provisions of the federal securities laws, permanently bar each individual from serving as an officer or director of a public company, and require each individual to pay disgorgement, prejudgment interest, and a civil monetary penalty, in amounts to be determined in the future.

The commission noted that three other former NCFE executives have already consented to judgments on similar terms: executive vice president of compliance Sherry Gibson; vice president and controller John Snoble; and associate vice president for business services Brian Stucke. In addition, Gibson pleaded guilty to securities fraud and was sentenced to four years in federal prison followed by three years of supervised release; Snoble and Stucke, who pleaded guilty to federal conspiracy charges, are awaiting sentencing.

“Investors in private offerings, just like investors in public companies, must be able to rely on the truthfulness of the information they receive before investing,” said Linda Thomsen, director of the SEC’s Enforcement Division, in a statement. “We continue to actively pursue those who provide false information to investors in both private and public securities.”