DVI says U.S. trustee obtains court approval to hire examiner to investigate accounting

By Carlise Newman

Chicago, Oct. 14 - DVI Inc. said the U.S. Trustee has received court approval to appoint an examiner to investigate financial transactions, accounting practices and any allegations of fraud within the company.

The examiner will also investigate improprieties alluded to in press releases from Aug. 13 and Sept. 26, and potential claims of the company against current and former offices and directors.

On Aug. 13, DVI said in a news release that it had discovered apparent improprieties in its prior dealings with lenders, involving misrepresentations regarding the amount and nature of collateral pledged to lenders. The audit committee has begun an investigation.

On Sept. 26, DVI said that it expected to make a significant upward adjustment to the $20 million held as reserves against its loan portfolio assets. DVI said the expected increase is a result of its quarterly review of reserves.

The $20 million was previously reported in its 10-Q for the quarter ended March 31. DVI also said that it may have used $2.5 to $3.5 million for working capital which should have been sent to the limited liability companies formed in connection with its securitization transactions. The misapplication of funds happened in the two months before its bankruptcy filing on Aug. 25.

The examiner will appear in court Nov. 5 to provide the amount of time he or she will need to complete the investigation and file a report.

The Jamison, Pa. medical finance company filed for Chapter 11 protection in the U.S. Bankruptcy Court for the District of Delaware on Aug. 25.

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