The Associated Press

DAYTON, Ohio - DPL Inc., the utility company that owns Dayton Power and Light Co., has sued three former executives, alleging they defrauded the company of $33 million in deferred pay last year.

DPL and MVE Inc., which oversees DPL's $1 billion investment portfolio, filed the suit Tuesday in Montgomery County Common Pleas Court.

The suit claims former chairman Peter H. Forster, former interim chief financial officer Caroline Muhlenkamp and former president and chief executive Stephen Koziar Jr. "engaged in a multistep scheme" to gain quick payment of millions of dollars.

The lawsuit asks that the former executives return the money and pay at least $75,000 apiece in damages.

Dayton Power and Light serves about 500,000 customers, including some in Butler and Warren counties. DPL had 2003 sales of $1.19 billion. Shares in DPL closed at $19.91, up 11 cents.

Stanley Arkin, a New York lawyer who represents Forster and Muhlenkamp, called the legal action "a big fat phony lawsuit." A message seeking comment was left Wednesday for Koziar.

Forster, Muhlenkamp and Koziar stepped aside in May, days after an outside law firm hired to investigate the company's accounting and governance filed a report critical of top management.

The lawsuit said the executives deceived the compensation committee to receive approval to amend two compensation plans.

Taking out the money early cost the company major tax deductions. The utility could have deducted 75 percent of the $33 million from corporate taxes, according to the lawsuit. As a result, the company's net income was cut by more than $9 million.

The defendants also avoided paying the 10 percent early withdrawal penalty, which cost the company another $3.3 million, the lawsuit said.

The actions also crippled DPL's ability to prepare a timely annual report and audit of the companies' finances, the lawsuit said. DPL has yet to file its annual report and its first- and second-quarter earnings.

Forster and Muhlenkamp filed a lawsuit against DPL, Dayton Power and Light, and MVE last month, saying they were denied compensation and benefits they were entitled to after they resigned. That suit was filed in Duval County, Fla., near where Forster and Muhlenkamp live.

"We think (DPL is) trying to see if they can pre-empt jurisdiction in some way," Arkin said. "We filed in Florida because Pete and Caroline live there. And they feel they can get a fair trial in the jurisdiction in which they live."

Asked if Forster, Muhlenkamp and Koziar would give back the $33 million, the attorney said: "I don't think so. In fact, we are suing them for about $50 million more."