DAYTON — An attorney for DPL Inc. heaped more allegations of wrongdoing on the utility's ousted top executives Thursday, saying they fattened their bonuses by double-counting some investment gains and by improperly basing bonus calculations on gains of investments they didn't manage.

Also, former DPL President Stephen F. Koziar Jr.'s employment contract was altered in 2003 without board approval to delete language that allowed the company to fire him for cause, DPL attorney Neil Freund said.

Freund produced Koziar's original, board-approved employment contract, which was attached to the company's 2002 annual report in February 2003. Eight days later, Koziar gave directors a packet of documents that included a version of the contract without the firing language, according to testimony.

"I think it's a very serious thing to do, to change a contract," testified Burnell R. Roberts, a former chairman of the DPL board's compensation committee. He said if he had noticed the alteration, "I would have immediately taken it to the board of directors, and I think it would be cause for termination."

Thursday's allegations were the strongest yet in the week-old civil jury trial pitting the parent company of Dayton Power and Light Co. against Koziar, former DPL Chairman Peter H. Forster and former Vice President Caroline E. Muhlenkamp. DPL is trying to recover as much as $150 million in damages, accusing the trio of fraud, conspiracy and breaches of contract and fiduciary duty.

Roberts, a former Mead Corp. chairman, testified that DPL was to pay special bonuses to the three execs for their roles in managing the company's $1 billion private equity investment portfolio. The bonuses were to be based only on the private equity investments' growth, and paid only when the investments matured, he said.

But Freund, during questioning of Roberts, said the execs improperly calculated their bonuses on earnings of other investments, including $149 million in pension funds. And he said the execs took bonuses on the same private-equity gains twice — before and after they were realized.

Roberts said the compensation committee relied upon the calculations of top managers in awarding bonuses.

"We were not auditors," he said. "We assumed it was always done correctly, and the management had an obligation to the compensation committee to calculate it accurately. There's no way directors can go into the bowels of the company and do the accounting on something so complex. It's just not possible."

Forster and Muhlenkamp claim the company continues to owe them compensation, in part because of agreements they say guarantee them bonuses for the life of the portfolio.

During Roberts' cross-examination, Forster-Muhlenkamp attorney Tom Green showed the jury Forster's 1996 consulting agreement with DPL, which says the company is obligated to pay him bonuses on the private equities — even if they were sold and even if Forster died.

Roberts said DPL began investing in large funds that buy and sell private companies in the mid-1990s as a means of parking "excess money" coming in from Dayton Power and Light. He testified DPL injected "hundreds of millions of dollars" into the portfolio, which eventually grew to $1.1 billion. He

said he thinks those funds included $335 million realized after taxes from DPL's late-1990s sale of its natural gas business to Vectren.

Roberts scoffed at Green's claim that Forster's management turned an initial $21 million investment into a $1.1 billion portfolio. "Twenty-one-million to $1 billion? I would love to do it," he testified. "Money was continually being put in as it became available."

The trial, expected to last up to six weeks, continues today in Montgomery County Common Pleas Court before Judge Timothy O'Connell.

 

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tbeyerlein@DaytonDailyNews.com.