Creditors request examination of DVI

By JOHN WILEN
               The Intelligencer


Creditors for bankrupt Warwick medical finance company
DVI have asked the judge overseeing the company's
bankruptcy case to order an examination of its former
accountants and lawyers.

The requests, filed earlier this month in U.S.
Bankruptcy Court in Wilmington by a committee of DVI's
unsecured creditors, ask Judge Mary Walrath to order
accounting firm Deloitte & Touche and law firm
Clifford Chance to let representatives be questioned
on the record. The creditors also want the
representatives to produce documents relevant to their
work for DVI.

The creditors have failed so far in attempts to
negotiate an agreement with either Deloitte & Touche
or Clifford Chance to question employees and examine
DVI-related documents, according to the requests.

"Although counsel for the parties have engaged in
extensive good-faith negotiations, to date, they have
been unable to agree on the scope of the examination
... as well as the documents to be produced by it."

Deloitte & Touche served as DVI's accountant until the
firm was fired last year in a dispute with the
company's management over the way DVI accounted for
transactions related to a Corpus Christi-based
radiology facility.

Clifford Chance and a predecessor firm served as DVI's
attorneys from 1995 until the company filed for
bankruptcy last year, according to court documents.

DVI was a medical finance company that helped doctors
and small clinics buy expensive equipment like MRI
machines. The company filed for bankruptcy after
defaulting on loans. Its former management team
resigned amid allegations of accounting improprieties,
and was replaced by an interim team from New
York-based distressed company management firm Alix
Partners.
 
Earlier this year, a court-appointed examiner issued a
report alleging "massive fraud" on the part of former
CEO Michael O'Hanlon and a number of other former
executives and directors. O'Hanlon's attorney has
denied the charges.

According to the examiner's report, the company is
also under investigation by the FBI and Securities and
Exchange Commission, among others. The FBI and SEC
have declined comment.

The recent requests for examinations of Deloitte &
Touche and Clifford Chance ask for information related
to both firms' work for DVI that might shed additional
light on the company's accounting practices and
payments. While both requests list the types of
information the creditors are seeking, neither request
specific documents.

Attorneys for the creditors did not respond to
requests for comment or elaboration on the information
they seek. Representatives for Clifford Chance and
Deloitte & Touche declined comment, citing the ongoing
litigation.

A hearing to consider both requests is scheduled for
early next month.

Separately, Alix Partners requested an order extending
its employment with DVI through at least the end of
October. The company had not previously set an end
date for its employment.

Alix Partners' Mark Toney, who is serving as DVI's
interim CEO, has said his role is to wind the
company's operations down and sell off its assets. DVI
once employed as many as 150 in Warwick. Its staff is
now down to about 10.