For a case involving both federal and state claims, Cornerstone Research supported Professor J. Richard Dietrich of The Ohio State University to review how DPL, a large Ohio electric utility, accounted for its investments in financial assets, including a large portfolio of private equity and venture capital investments.
Retained by Kirkland & Ellis
For a case involving both federal and state claims, Cornerstone Research supported Professor J. Richard Dietrich of The Ohio State University to review how DPL, a large Ohio electric utility, accounted for its investments in financial assets, including a large portfolio of private equity and venture capital investments.
Professor Dietrich examined DPL’s change in the method it used to recognize its investment results and valuation of its financial asset portfolio and the resulting restatement of its financial statements. Prior to the restatement, DPL’s investments were reported at fair value, with unrealized gains and losses resulting from changes in fair value reflected on DPL’s balance sheet. As a result of the restatement, certain investment results and changes in the fair value of DPL’s investments were included in income. Professor Dietrich demonstrated that if DPL had always used the new accounting method rather than the original accounting methods to account for the financial assets, DPL would have reported higher net income, higher asset balances, and higher shareholder equity than it actually reported over the time that it held the financial assets.
Based on an analysis of the nature of the non-audit services provided, Professor Dietrich concluded that there was no evidence to support a lack of independence.
Professor Dietrich also examined DPL’s announcement of a write-down of its financial asset portfolio related to an other-than-temporary decline in the value of its assets. He found that management’s review and evaluation of conditions that would indicate whether the investments had experienced an other-than-temporary decline in value were consistent with guidance in GAAP and securities regulations. Rebutting the plaintiffs’ assertions, Professor Dietrich demonstrated that the judgments made by DPL management regarding the timing and amount of the write-down were reasonable.
Professor Dietrich also reviewed plaintiffs’ allegation that DPL’s auditor, PricewaterhouseCoopers, provided significant non-audit services to DPL and, as a result, lacked independence. Based on an analysis of the nature of the non-audit services provided, Professor Dietrich concluded that there was no evidence to support a lack of independence.
