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Univ. of Toledo College of Law

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Thursday, June 25, 2009

SEC Settles Fraud Charges Against Former DVI Officers

The SEC announced that it settled a civil action in the United States District Court for the Eastern District of Pennsylvania against Steven R. Garfinkel (Garfinkel) and Michael O’Hanlon (O’Hanlon) for their participation in a financial fraud that caused the collapse of DVI, Inc. (DVI), a specialty finance company that loaned money to small healthcare service providers for the purchase of high-end medical equipment. The Commission’s complaint alleges that over a period of four years, Garfinkel, DVI’s former Chief Financial Officer, and O’Hanlon, DVI’s former Chief Executive Officer and President, used fraudulent means to conceal the company’s liquidity crisis from investors and to fraudulently obtain additional funding from its commercial lenders. Without admitting or denying the Commission’s allegations, Garfinkel and O’Hanlon consented to settle the action.

According to the Commission’s complaint, Garfinkel and O’Hanlon engaged in a fraudulent scheme to obtain additional funding from DVI’s commercial lenders by pledging collateral that did not meet the quality-related criteria specified in the loan covenants. In addition, Garfinkel and O’Hanlon manipulated paperwork to enable DVI to double pledge collateral and sent DVI’s commercial lenders false monthly reports to make it appear that there was adequate and appropriate collateral securing DVI’s lines-of-credit. Garfinkel and O’Hanlon concealed the fraudulent scheme from investors by knowingly filing false and materially misleading Commission reports and issuing false and materially misleading press releases. In furtherance of their scheme, Garfinkel and O’Hanlon also aided and abetted DVI’s filing violations by knowingly falsifying or causing others to falsify certain books and records, circumventing internal controls and misleading DVI’s auditors.

Garfinkel and O’Hanlon have agreed to the entry of a Final Judgment that permanently enjoins them from further violations of the relevant provisions of the Exchange Act and prohibits them from acting as officers or directors of a public company.  Garfinkel is currently incarcerated on related criminal charges. 

http://lawprofessors.typepad.com/securities/2009/06/sec-settles-fraud-charges-against-former-dvi-officers.html

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