Chimicles & Tikellis LLP served as plaintiffs’ liaison counsel for this securities action brought in 2003 in the United States District Court for the Eastern District of Pennsylvania on behalf of a certified class of purchasers of DVI Securities between August 10, 1999 and August 13, 2003. The Defendants include former officers and directors of DVI, its former auditor Deloitte & Touche LLP, its underwriter Merrill Lynch & Co., members of the Pritzker family who allegedly exercised control over DVI as the largest shareholder of DVI common stock, and DVI’s legal counsel Clifford Chance. Plaintiffs’ allege that DVI’s financial reports violated generally accepted accounting principles by engaging in various deceptive schemes, including the Company’s:
- Refusal to writedown between $58 million and over $100 million of impaired assets, instead, engaging in the deceptive practices of “re-writing”, “quote swapping” and “buying out” impaired loans and leases, with new money or new loans and leases in order to conceal the need for material assets writedowns;
- “Double-pledging” collateral or pledging ineligible collateral on lines of credit and securitization transactions, totaling approximately $78 million;
- Consistently refusing to adhere to numerous recommendations by Deloitte to implement adequate internal controls or to comply with those in place to identify impaired assets and the creditworthiness of borrowers;
- Materially overstating its revenues, cash availability, assets and earnings, and understating liabilities and expenses; and
- Failing to adequately disclose that the Company continually experienced of severe cash shortages.
As a result of these practices, DVI unexpectedly announced in mid-2003 that it would be forced to file for bankruptcy protection. In the related bankruptcy litigation, a court-appointed examiner conducted an extensive investigation and concluded that widespread accounting irregularities occurred at DVI. Class Counsel negotiated a series of settlements that resulted in a recovery of almost $24 million, representing over one third of class members’ provable damages.