September 2009 Beginning in November 2009, the Internal Revenue Service (IRS) will begin audits under its latest National Research Program (NRP). The IRS started the NRP in 2001 to measure the “tax gap.” The tax gap is the difference between taxes that are voluntarily reported, versus the taxes the IRS estimates are actually owed with [...]
September 2012 Chapter 11 is more about negotiation than litigation. For this reason, many bankruptcy lawyers decline to spend resources gathering support for their position in the courtroom. While this works in smaller cases, having expert substantiation in larger matters improves one’s negotiating position. The cost of getting this support is a fraction of the [...]
August 2009 On June 29, 2009, Governor Schwarzenegger signed into law "The Electronic Discovery Act" (California Assembly Bill AB 5). The law took immediate effect as an urgent measure, "in order to eliminate uncertainty and confusion regarding the discovery of electronically stored information" (ESI). Approximately half of the states now have separate statutes that specifically [...]
August 2009 Whistleblowers have had a difficult time obtaining the protection afforded under Sarbanes-Oxley (SOX) Section 806. This is largely because the Department of Labor (DOL), who administers whistleblower complaints, has taken positions hostile to employees seeking protection under SOX’s whistleblower provisions. For example, see DOL Rewrites Sox Whistleblower Provision to a New Employer-Friendly Standard. There is [...]
June 2011 Although the case at issue involves insider trading, the limitations involving disgorgement as a monetary remedy could be applied to other circumstances. The Delaware Supreme Court took little time in reversing a lower court decision that could have had widespread effects. The case is important because of the large number of companies that [...]
As indicated in our recent article, real estate values are dropping materially. With these value drops comes the possibility that you may be entitled to real property tax relief. However, unless the assessor is in a shockingly generous mood, you must specifically ask for the lower taxes. On January 1, 2008, if your home was [...]
June 2009 Existing accounting guidance permits companies to report transfers of portions of financial assets as sales. The off-balance-sheet entities that enabled banks to keep securitized assets and other activities off their financial statements will now need to be included on their sponsor’s consolidated financial statements. An important accounting change which will be finalized this [...]
May 2006 This month, the National Association of Securities Dealers (NASD) filed with the Securities and Exchange Commission (SEC) changes to its Code of Arbitration Procedure. The changes are intended to simplify and reorganize the language/rules. The proposal makes the following changes: Divides the current Code into three separate codes: the Customer Code, the Industry [...]
May 2009 On July 1, 2009, the Financial Accounting Standards Board (FASB) is expected to issue their “Accounting Standards Codification” (ASC) as the sole authoritative accounting guidance for U.S. generally accepted accounting principles (GAAP). The ASC will not change GAAP, but nevertheless represents a major shift in its organization and presentation. It is intended to [...]
April 2013 Troubled company restructurings are complex endeavors. To be successful, a company must fix both the challenges that caused the problem in the first place, and create revisions to the debt that accumulated from past transactions. Most companies are ill-equipped to address even one of these two problems without assistance from financial advisors experienced [...]
December 2006 In the legislative session that just ended, Civil Code 3426.4 was amended to permit recovery of costs by a prevailing party in litigation of claims for trade secret misappropriation when a party acts maliciously or in bad faith. Costs include expert witness fees that are “actually incurred and reasonably necessary”. Costs incurred by [...]
October 2003 A 2002 case, Energy Capital Corp. v. United States (302 F.3d 1314; 2002 U.S. App. LEXIS 16447), provides guidance on three issues that frequently arise in calculating damages. The case provides guidance on the following issues: Can A New Venture be Awarded Lost Profits? What is the Proper Date to Use When Performing [...]
Here are items you need to determine when selecting a financial expert to address your damages calculation:
September 2010 A plaintiff with a large verdict against accounting giant KPMG lost its award because the appellate court could not find evidence that would support the damages. The moral of the story is that one should not take short cuts on damages analysis in substantial commercial cases. While this moral may sound self-evident, we [...]
March 2011 A Lone Pine order is a case management device in which the judge requires the plaintiff to make a prima facie showing of injury, causation, and/or damages. Its purpose is to simplify or eliminate cases to lessen the burdens on the courts and defendants. In a Lone Star order, plaintiffs are required to [...]
March 2009 Last week, the American College of Trial Lawyers (ACTL) and The Institute for the Advancement of the American Legal System at the University of Denver issued a final report that proposes dramatic changes to the federal and state court systems. The report is based on surveys sent to the 3,812 Fellows of the [...]
February 2009 Government resources are usually allocated based on the political sentiment of the day. Those in charge of investigations understandably want to show that they are accomplishing something. Consequently, once resources are allocated to an investigative area, prosecutions invariably follow. White collar defense lawyers face improving business conditions. This is occurring because (i) increased [...]
February 2013 The audit provision within many licensing agreements is nothing more than a short paragraph in what may otherwise be a highly detailed document. We sometimes see audit provisions that are nothing more the following: Licensor, at their own expense, shall have the right to nominate an independent certified public accountant satisfactory to Licensee, [...]
January 2009 In mid-December, Bernard Madoff was arrested for operating a giant ponzi scheme. After his two sons reported him to regulators, Madoff admitted that losses could be as much as $50 billion. Bloomberg tallied around $37 billion that is currently invested with Madoff, but the total numbers will obviously include amounts not subject to [...]
November 2008 Many times discovery is resisted or analyses are not pursued because of a misguided notion that the work would be too difficult or time consuming. The sheer volume of electronic data sometimes makes it appear that the data is too cumbersome to address. However, with the correct skills and tools, this initial perception [...]
September 2008 According to records maintained by the Department of Labor (DOL), the government has ruled in favor of whistleblowers 17 times out of 1,273 complaints filed since 2002. Another 841 cases have been dismissed. This data comes from Richard Moberly, a University of Nebraska law professor who has recently had his statistics reported by [...]
September 2008 One of the differences between the presidential candidates is their tax policies. Current tax rates arise from two pieces of legislation supported by and signed into law by President Bush during his first term, as follows: The Economic Growth and Tax Relief Reconciliation Act of 2001 lowered ordinary income tax rates for individuals. [...]
Updated November 2018 California is facing increasing losses from wildfires, which create special insurance claim issues. Businesses are interrupted because of physical damage to their own facilities, as well as to their surrounding communities, transportation options or the operations of key suppliers and major clients. These insurance claims are often complex, requiring the assistance of [...]
July 2005 In two rulings issued in June 2005, the California Supreme Court interpreted the U.S. Supreme Court guidance on punitive damages. It was the first time in at least two decades that the California Supreme Court addressed punitive damages. The rulings were as follows: Courts could consider the defendant's conduct towards people other than [...]
July 2006 The U.S. Patent and Trademark Office (PTO) has been allowing patents on tax strategies. So far, the PTO lists 43 issued patents, and 62 patent applications that are under examination. Each of these patents and patent applications supposedly provide some unique means of complying with the Internal Revenue Code that no one should [...]
June 2008 Last week, Judge Leslie Tchaikovsky, a bankruptcy judge in the Northern District of California (National City Bank v. Hill, United States Bankruptcy Court, Northern District of California, Case No. A.P. 07-4106 (May 28, 2008)) issued a ruling that could have enormous impact on future lending practices and workouts in the current subprime meltdown. [...]
May 2007 California’s Fourth Appellate District certified for publication a significant decision addressing the constitutionality of punitive damages awards. In a decision that will apply to the majority of business tort cases, the Court ruled when: “… the conduct in question only involves economic damage to a single plaintiff who is not particularly vulnerable, an [...]
May 2008 The prestigious Advanced Practices Council (a unit within the Society of Information Management) recently released a report entitled “Information Lifecycle Management Concepts, Practices and Values". The report is based on a year-long study of 345 IT and storage managers. It provides worthwhile insights for anyone endeavoring to develop better electronic storage practices. Why [...]
April 2005 In enacting its new punitive damages tax, California failed to consider the plaintiff's likely federal income tax impact. As a result, plaintiffs in certain cases are better off not getting any punitive damage award at all. Because of (i) the conflict of interest between the plaintiff lawyer and his client and (ii) the [...]
April 2008 In December 2007, the Financial Accounting Standards Board (FASB) issued SFAS 141R, "Business Combinations". The statement is the first major result of the joint convergence agreement between the FASB and the International Accounting Standards Board (IASB). The IASB’s comparable financial reporting standard (Standard 3) was issued in January 2008. Having a common set [...]
April 2008 Why Electronic Discovery is Expensive Actually, discovery using electronic tools is not expensive at all. The high cost of electronic discovery is instead caused by having to review a large volume of electronic records (largely email) that businesses are creating and keeping. The ever-declining cost of electronic storage is the culprit. Currently, a [...]
March 2008 On February 20, 2007, Philip Morris won a (perhaps temporary) victory when the U.S. Supreme Court reversed a $79.5 million punitive damage verdict award involving the death of a single Oregon smoker. The case is the first since the 2003 ruling in re: State Farm vs. Campbell. The State Farm case specified that punitive damage awards [...]
February 2008 A number of current stalled deals involve material adverse change clauses. Litigation in this area will increase because of uncertainties involving (i) the credit markets and (ii) operating disappointments associated with an economic downturn. Regardless of whether you represent sellers, buyers, or lenders, lawyers are well-advised to pay greater attention to these “standard” [...]
February 2008 The IRS Form 990 calls for significantly expanded corporate governance disclosures. A charity’s Form 990 is publicly available, including most importantly to potential donors and regulators outside of the IRS. For the 2018 tax year (returns filed in 2019), most tax-exempt organizations with gross receipts over $200,000 or total assets over $500,000 will [...]
January 2008 The Delaware Chancery Court issued a ruling in Ryan v. Gifford, C.A. No. 2213-CC (Del. Ch. Nov. 30, 2007) that runs afoul of current common practice in dealing with investigations performed by a Special Committee of the Board of Directors. Although the case involves stock option backdating, the rationale applies equally to any [...]
November 2007 The Delaware Chancery Court issued an opinion (Tele-Communications, Inc. Shareholders Litigation, C.A. No. 16470, December 21, 2005) that questions a number of widely-established procedures used when addressing the fairness of merger transactions. Wise corporate directors and lawyers will need to more closely scrutinize (i) conflicts of interest issues involving investment bankers and (ii) [...]
October 2007 An extraordinary amount of time is incurred in discovery asking for records that may not even exist, or asking for records that do exist, but the other side declines to produce records that were not requested using just the right terms. Once the records are identified, wasteful paper-based productions occur because the requesting [...]
October 2007 The majority of commentators regarding electronic discovery bemoan the high cost of dealing with all the electronic records. This usually misses the point. On a page-for-page basis, electronic records management and related electronic discovery costs a small fraction of what the same effort would be in paper. Why is this such a problem? [...]
September 2007 To maintain accounting records under generally accepted accounting principles, companies need to assess the likelihood of judgmental positions being sustained. The recent tax case United States vs. Textron, No. 06-198T (Aug. 29, 2007), is important in establishing a taxpayer’s right to prevent disclosure of (i) its internal analyses of these controversial tax positions, [...]
September 2007 In Regions Financial Corp. v. United States, (N.D. Ala., No. 2:06-CV-00895-RDP, 5/8/08), the IRS lost another battle in its effort to get information from outside accountants’ tax accrual work papers. This case could be particularly damaging to the IRS’s position because the Court’s rationale arguably would apply regardless of which split in authority [...]
Two recent court cases and related proposed legislation affect publicity rights for some of the more notable entertainment icons. This article also summarizes common questions about valuing publicity and privacy rights. What is a Right of Publicity? Although sometimes blurred by courts and commentators, the right of publicity and the right of privacy are different [...]
June 2011 Based on results of its May 2011 survey, the Associated Press (AP) reported that President Obama hit his highest approval rating in two years, with his approval shooting past 50 percent based on the economy: “President Barack Obama's approval rating has hit its highest point in two years — 60 percent — and [...]
July 2007 Stock option backdating scandals have grabbed headlines for quite some time. These scandals were initially identified by academic research that noted unexplained stock movements relative to option grant dates. A similar issue may exist with 10b5-1 plans. The volume of potential insider trading is substantial. For example, in late July, the former CEO [...]
May 2007 The obligation to retain and produce drafts of expert reports in discovery is becoming a common dispute area. Using current word processing technology, such drafts are often not reduced to paper. Typically, the party seeking additional discovery contends that the expert witness should produce emails and/or report drafts that were provided to employing [...]
Statisticians describe independence as whether the occurrence of one event or characteristic makes it neither more nor less probable that other event(s) or characteristic(s) occur(s). The chi-square test described below is one of the most widely used tests for evaluating independence of variables, particularly when the number of observations and/or variables becomes larger. This article [...]
February 2009 The first piece of legislation signed by President Obama is the Lilly Ledbetter Fair Pay Act of 2009 (“FPA”). This anti-discrimination law overturns a Supreme Court ruling that established a short statute of limitations. Under the new law, employment discrimination claims are certain to increase. The Act takes effect as if enacted on [...]
Fulcrum regularly appraises patents, technology, and other intellectual property. We often encounter resistance from those who are seeking large appraised values to support sales or financing. When the technology has not been successfully exploited, and there are no tangible plans for such exploitation, the clients often exclaim, “How can the value be this low? You [...]
February 2011 Statisticians describe independence as whether the occurrence of one event or characteristic makes it neither more nor less probable that other event(s) or characteristic(s) occur(s). The chi-square and Fisher exact tests described below are the most widely used tests for evaluating independence of variables. The classic tool for teaching probability involves placing different [...]
April 2007 The Supreme Court ruled that a qui tam informant cannot receive compensation if he lacked “direct and independent knowledge of the information upon which his allegations were based.” The Court’s ruling substantially increases the risk faced by a qui tam plaintiff, and therefore lessens the financial incentive for potential whistleblowers to come forward. [...]
March 2009 Unfortunately, current difficult economic times are forcing many employers to lay off employees. Employers considering a reduction in force (RIF) can reduce risk of discrimination allegations through relatively inexpensive pre-RIF statistical testing. When compared to the cost of litigation, testing before final conclusions are reached is an inexpensive check on the proposed actions. [...]
March 2011 Most national polling organizations are independent and do not have an agenda they want to advance. Independent and accurate polling is the basic requirement for trust in the polling organization. Knowing this, those organizations that do have a political agenda are usually good at hiding it. But, bias does exist. The possibility of [...]
A 2006 case from the Delaware Chancery Court (Open MRI vs. Kessler - Case No. C.A. 275-N) addresses several current valuation issues. However, in the process of explaining its rationale, the Court also provides important reminders regarding how (not) to handle expert testimony. Important Valuation Principles Perhaps the most important (and currently the most controversial) [...]
February 2011 U.S. Department of Health and Human Services (HHS) released its required annual Health Care Fraud and Abuse Control Program report. The report showed that the government’s health care fraud prevention and enforcement efforts recovered more than $4 billion in taxpayer dollars in fiscal year 2010. This is the highest annual amount ever recovered. [...]
February 2013 Opinion polls (surveys) are used extensively to understand almost everything that cannot be looked up as a scientific fact. Polls are reported everyday on subjects ranging from what flavor toothpaste kids like most (Colgate probably already funded this poll), to what voters think is the best way to get out of an economic [...]
February 2007 The form in which you receive electronically stored information can make or break a case. The new FRCP rules provide for document production in various forms. Selecting the proper form in your situation can save costs, and/or provide additional information. There are four primary forms of production: Native Semi-native Paper Semi-paper As described [...]
February 2007 A February 2007 study by three professors looks at 230 of the U.S.’s largest public company frauds disclosed between 1996 and 2004. The study, entitled “Who Blows the Whistle on Corporate Fraud?” addresses how each fraud was discovered. Consistent with every other study on the subject, employee whistleblowers are the largest discovery mechanism. [...]
February 2007 The Tax Relief and Health Care Act of 2006, signed into law on December 20, 2006, amended the Internal Revenue Code to provide increased rewards for turning in tax cheats. In February 2007, the IRS named the first director of its new Whistleblower Office. Expect this existing but now expanded IRS program to [...]
Sampling is an accepted way of making estimates at a much lower cost and when done properly, statistics can provide useful information regarding the likelihood that information obtained from the sample is representative of the entire population from which the sample was taken. This article provides a primer of information that the person considering a [...]
November 2006 The Internal Revenue Service (IRS) released Notice 2006-96, which provides guidance regarding the meaning of “qualified appraiser” and “qualified appraisal” contained in Internal Revenue Code (IRC) Section 170(f)(11). This portion of the IRC requires that a taxpayer substantiate the value of non-cash charitable contributions by obtaining an appraisal of the donated property. Appraisals [...]
October 2006 The Financial Accounting Standards Board (FASB) issued Statement 157 entitled "Fair Value Measurements" on September 15, 2006. The statement defines fair value, establishes a framework for measuring fair value in generally accepted account principles (GAAP), and expands disclosure about fair value measurements. The statement does not require new fair value measurements, but it [...]
September 2006 The Pension Protection Act of 2006 is aimed at improving defined benefit plans, but it also contains important unrelated changes affecting charitable contributions. Some of these contribution rules will affect practically everyone. Under current law, taxpayers are not required to obtain a receipt for contributions under $250. Effective January 1, 2007 (for calendar [...]
March 2013 Alter-ego is one of the most commonly alleged equity-based principals. Where the facts warrant, courts will disregard the separate legal existence of corporations (including LLCs) and its shareholders (or members). The purpose of "piercing the corporate veil" is to prevent the abuse of corporations, and thereby protect creditors who might otherwise not be [...]
November 2012 A whistleblower hotline is probably the easiest and least expensive means available to improve corporate governance. Waste, fraud, and the abuse of authority can all be combated by having an independent reporting mechanism that uses employees to report malfeasance. Public companies are required by Section 301(4) of the Sarbanes Oxley Act to have [...]
October 2012 There are hidden complexities in the implementation of a seemingly simple provision of the Sarbanes-Oxley Act ("SOX"). Because of this hidden complexity, many companies have done little to address its provisions. Most of the thousands of law firm articles written about SOX provide nothing more than a brief recital of the law, with [...]
September 2012 Beyond the physical property loss, your business will incur significant additional costs and will not be as profitable as before. Most businesses have business interruption (BI) insurance to address these risks. However, getting a proper claim prepared and paid will likely be a challenge. The tragedy that caused your business interruption may have [...]
June 2005 Lawyers issuing legal confirmation letters to their client's auditor will have one more item to consider. No later than December 31, 2005, companies with future environmental cleanup obligations may (depending upon the practices previously adopted) face a major change. Because the new rule requires complex judgments and estimates, lawyers and their clients should [...]
August 2004 Sarbanes-Oxley Act (SOX) Section 301(4) requires all public companies to establish a means to collect, retain, and resolve claims regarding accounting, internal accounting controls and auditing matters. The system must allow for such concerns to be submitted anonymously. SOX provides significant protections to whistleblowers, and severe penalties to those that retaliate against them. [...]
August 2003 In late July 2003, the Securities and Exchange Commission (SEC) released a staff study required by Section 108(d) of the Sarbanes-Oxley Act. The study strongly recommends that accounting standards be developed using a principles-based approach. In several prior articles, we encouraged this change. Although the full impact will take years to occur, the [...]
July 2003 Wilmer Cutler & Pickering and PriceWaterhouseCoopers recently released a survey that analyzes economic crimes caused by internal corporate fraud. The results should be interesting to lawyers charged with implementing, investigating, or recovering fraud losses. Important findings include: Internal frauds threaten most businesses. Worldwide, 37 percent of the over 3600 companies surveyed reported significant [...]
July 2008 Initial commentators of the U.S. Supreme Court’s ruling on punitive damages involving the Exxon Valdez oil spill (Exxon Shipping v. Baker, No. 07-219) claim that the ruling pertains only to federal maritime law. While the Supreme Court ultimately expressed its conclusion regarding maritime law, most of the ruling was a general discussion of [...]