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Does the Sarbanes-Oxley Act deter the determined–or perhaps desperate–executive? An internal memo from the CFO to the CEO of DVI Inc., a Jamison, Penn., company that went belly up a year ago, would indicate that while Sarbanes-Oxley may terrify executives who realize certifying false results could land them in jail, it will not necessarily stop them.

DVI’s became the 13th largest bankruptcy in 2003, a year of big busts. With a reported $1.8 billion in assets, DVI financed medical equipment like MRIs for health clinics and then sold bonds backed by the loans. After expanding rapidly in early 2003, DVI had a hard time selling enough bonds to back its bigger loan portfolio and turned to its own cash for funding, according to a court examiner’s report in DVI’s bankruptcy proceeding. DVI also started replacing bad loans with good, the examiner found, and ultimately began to hide non-performing loans by lending money to delinquent borrowers, so they could make timely payments.

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