In April 2003, Steven Garfinkel, the chief financial officer of DVI Inc., wrote a memo to Chief Executive Officer Michael O’Hanlon about the crushing liquidity crisis facing the health care finance company and its implications for a pending stock float. The CFO urged his boss to talk as soon as possible to the company’s main outside lawyer, John Healy, a partner in the New York office of Clifford Chance.

“John will tell you that the plans to go ahead with the exchange offer and raise capital without solving the cash problem will represent serious securities fraud,” Garfinkel wrote in the memo. “Our issues now are defrauding an FDIC-insured bank, which has federal law implications as well as serious civil liability issues. The board will become enormously exposed to the securities fraud implications. In John’s own words — ‘We all go to jail’ — in my words, ‘This is serious shit.’”

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