Power Company's Troubles Rank as Top Story in Dayton, Ohio.

Dec. 31--What began as an earnings revision quickly snowballed into Dayton's business story of the year.

DPL Inc., the parent of the Dayton Power and Light Co. said it was lowering its earnings estimate for 2002 by nearly 20 cents because of the slow economic recovery, depressed wholesale energy margins and plant maintenance costs. But the company also said that "current economic forecasts and political uncertainty" in Latin America prompted the company to write down its financial assets by $110 million, after taxes, to $1 billion.

DPL's stock plunged 29 percent in the next 10 days to around $19. And analysts started asking questions about the company's investments.

The first in a string of class-action lawsuits was filed July 15 by Cincinnati attorneys Stanley Chesley and James Cummins on behalf of an employee pension fund. That lawsuit, along with nine others that followed, alleged that DPL management misled shareholders about the risky nature of its investment portfolio.

DPL stock continued its fall, to about $15 by the end of July, when the company reported a $71.4 million second-quarter loss. It was the company's first quarterly loss in at least a decade. In a conference call with investors, DPL refused to give more details to analysts about its investments.

But the pressure on DPL continued to build, leading to Aug. 14, the federal government deadline for certifying financial results. On that day, DPL restated its earnings for 2001 and the first half of 2002, saying that the company's independent auditor, PricewaterhouseCoopers, insisted that DPL change the accounting method for its portfolio.

At the same time, DPL officials for the first time disclosed the portfolio's contents. They revealed an investment portfolio that resembles a mutual fund, with DPL providing capital that it invested by 27 investment firms. The company's investments, controlled primarily by DPL Chairman Peter Forster, are spread among more than 500 companies in 30 countries. …