ABS investors in DVI Inc. may face their worst fears, as allegations of significant instances of fraud have surfaced. Independent examiner R. Todd Neilson, a CPA and partner at Neilson Elggren LLP, alleges that DVI executives knowingly "double-pledged" assets and used "round-trip financing" to manage collateral performance. In addition, DVI repurchased ineligible collateral from its trusts and restructured non-performing loans and leases to appear as current, according to Neilson.
Some of these alleged "performance boosting" strategies have appeared in other notable market failures. Of course, National Century Financial Enterprises takes the proverbial cake, as there seemed no limit to steps taken by certain executives at the company to mask the true performance of the NPF deals. Other less extreme examples include allegations that franchise issuer Enterprise Mortgage Acceptance Corp. was lending to its distressed borrowers so that they could stay current on already securitized loans.