DPL, Inc. Settles with Three Former Execs in Fiduciary Breach Case

May 31, 2007 (PLANSPONSOR.com) - The parent company of Dayton Power and Light Co., has agreed to a settlement with three former executives over claims that the trio breached fiduciary duties by withdrawing $33 million from a deferred compensation plan before 2003, CFO.com reported.

According to the news report, the initial suit was filed by DPL, Inc. in 2004 in Ohio’s Montgomery County Court of Common Pleas and said that the “multi-step scheme” to withdraw the money from the plan caused the company to forfeit the ability to deduct a compensation expense on its federal income tax, costing it more than $9 million in net income.

The claim also said that the executives’ actions resulted in “hundreds of thousands of dollars in tax penalties” for late payment.

The company said that former group vice president and interim CFO Caroline Muhlenkamp, former chairman Peter Forster, and former president and chief executive officer Stephen F. Koziar Jr. should give up their own deferred compensation as well as their vested stock-based compensation.

The three then filed counterclaims that amounted to $134 million based on their employment and consulting contracts and various compensation plans.

The settlement between the three executives and DPL means that both parties dropped their claims.

According to the news report, the settlement amounts given up by the executives include:  

  • Deferred compensation worth about $43 million,
  • 4.8 million stock options estimated to be worth $52 million,
  • Claimed bonuses and compensation amounting to $21 million, and
  • A claim for attorneys’ fees of about $18 million.

DPL expects to recover $14.5 million in legal fees and the former executives will receive $25 million and will be responsible for paying all of their attorneys’ fees.