SERVICES

Consulting is our third pillar, and it is an integral part of what all Gettry Marcus partners and staff do every day. Through our collabrative process, coupled with our diversified knowledge, we add value to our clients' business. Our experience covers a wide range of services in a multitude of industries.

BUSINESS VALUATION & LITIGATION

Gettry Marcus’ Business Valuation & Litigation Services Group offers sophisticated business valuation, forensic accounting and litigation support services. We have broad experience identifying relevant evidence and analyzing financial information in a variety of complex circumstances. Our analytical strengths bring clarity to complex financial transactions, focusing only on the applicable issues. More [+]

 

FORENSIC ACCOUNTING & LITIGATION Case Studies

Arbitration [+]

Assignment :

We were retained as a court appointed arbitrator, as part of a tribunal, in a commercial litigation case to hear the business complaint of a shareholder/president of a company, who was abruptly terminated by the respondent shareholders. The proceedings included several hearings with attorneys from both sides to set the ground rules regarding discovery procedures. The Gettry Marcus partner was the sole forensic accountant presiding on the panel with two veteran arbitration attorneys.

Result :

We were able to explain to the legal arbitrators why the respondent needed to produce certain company financial documents to allow the claimant’s expert to perform the required forensic review and subsequent business valuation. As a result of Gettry Marcus’s guidance, the tribunal ruled to release certain documents to the claimant, which forced the respondent to settle the case rather than release the documents.

Bankruptcy [+]

Assignment :

We were retained by counsel to assist the unsecured creditor’s committee of a well-known department store chain, to strategize and prepare claims against the corporate controlling shareholder for the return of $500 million through equitable subordination and the reclassification of debt to equity. We analyzed the ramifications of the shareholder’s liquidation scenarios for counsel and prepared for and participated in the depositions of the top-level executives and court ordered mediations.

Result :

Our work for the creditor’s committee was instrumental in its receipt of a significant settlement from the parent shareholder, which was substantially in excess of amounts traditionally received in department store industry bankruptcy settlements.

Bankruptcy-Forensic Accounting [+]

Assignment :

We were engaged by an international financial institution, which was the main secured creditor in a Chapter 11 proceeding, to verify the accuracy of the debtor’s collateral reports, review monthly bankruptcy report filings and prepare an analysis of potential preferential payments.

Result :

During our analysis of the accounts receivable, we uncovered major defalcations in the aging schedule and a lack of disclosure that the two largest customer receivable balances were being disputed in litigations. Our physical examination and review of the accounting records of the inventory revealed that a large percentage of the company’s inventory was obsolete. Our preference analysis concluded that a majority of the preferential payments were to insiders. As the result of our findings, the financial institution was able to minimize further exposure of its loan and have a receiver appointed.

Buy/Sell Agreement [+]

Assignment :

The owners of an established, successful business needed to determine the fair market value of their company. They wanted to incorporate this value into their shareholder’s agreement relating to the dissociation clauses which may affect either owner in the future. Their existing agreement had a value definition and formula which failed to properly represent the true value of the company.

Result :

Through our application of the appropriate methods and value calculations, we were able to provide the owners and their families with the future protection they needed by establishing the entity’s fair market value, which was almost twice the amount calculated under the original shareholder’s agreement value formula.

Civil Suit Defense [+]

Assignment :

We were retained to assist the attorneys defending the CEO and CFO, minority shareholders of a large private company, against accusations concerning theft of funds and disbursements for personal use. These accusations were a result of the minority shareholders’ dispute over the contract to purchase the remaining shares of stock from the majority shareholder.

Result :

Through interviews with company personnel and analyses of the information gathered by our team, we were able to prove that all the alleged improper expenditures were for bonafide business purposes. We developed charts and graphs used by our clients’ counsel that clearly explained our position to the jury. Through Gettry Marcus’s forensic efforts and effective presentation, we were able to assist our clients in receiving a favorable settlement with regard to the unfounded accusations and their purchase of the stock.

Collateral Audit [+]

Assignment :

We were retained by a major financial institution to examine the accounting books and records of a $100 million food distributor with outstanding credit obligations of $10 million.

Result :

Gettry Marcus uncovered $3 million of food products that were past the expiration date. This expired inventory was included in the collateral base calculation at full value. Based upon our findings, the financial institution revised its borrowing base formula providing itself with additional loan protection.

Estate Litigation [+]

Assignment :

On behalf of the beneficiaries of an estate, we were engaged to perform investigative procedures related to the sale of real estate owned by 13 different family partnerships, managed by a single family member who unilaterally decided to sell the properties valued at approximately $90 million. We examined the management and partnership agreements to verify the accuracy of the management fees and distributions of the sales proceeds to each of the family partners. It was also necessary to perform a detailed review of the accounting records to assure that there were no improper disbursements.

Result :

Our investigation disclosed that the single family member had overpaid himself $500,000 of management fees prior to the sale of the properties and that he initially received sales proceeds of $1 million in excess of his rightful ownership percentage.

Estate Tax [+]

Assignment :

We were engaged to value a decedent’s 50% interest in a wholesale distributorship in order to establish the value to be reported on the estate tax return.

Result :

Based on our research and interviews with the company’s personnel, we determined the decedent was the key person in the company, responsible for managing all relationships with their major customer and overseas manufacturing contractor. We applied a significant key-man discount to the fair market value of the company and reduced the taxable estate by $1.4 million. Upon subsequent challenge by the Internal Revenue Service, our key-man discount was accepted without change.

Fraud Investigation - Case Study [+]

Assignment :

A rapidly growing healthcare facility with over 200 employees retained us to review its existing internal controls. We interviewed key personnel; examined the company’s cash disbursements, cash receipts, payroll records, and purchasing policies; and designed and performed analytical procedures based on our research.

Result :

Through the use of state-of-the-art forensic software, we discovered several hundred thousand dollars per year of fraudulent activity relating to questionable purchase transactions. Our client replaced certain vendors and implemented our recommended internal control procedures, particularly, the proper segregation of duties related to purchasing and cash disbursements. As a result, our client is experiencing substantial savings on its purchases.

Gifting [+]

Assignment :

As part of his overall estate plan, our client wished to gift limited interests in the family limited partnership to his children and grandchildren. The partnership’s assets included residential buildings in New York City and a portfolio of marketable securities valued in total at $6.5 million. In addition, appraisals of the real estate were obtained and incorporated in our overall valuation.

Result :

Through our research and experience we valued the gifted interests applying an appropriate minority discount which will provide future tax savings to our client’s estate.

Insurance Claim [+]

Assignment :

As the basis for an insurance claim, we performed a business valuation of a restaurant that was destroyed by a fire. The restaurant was located in lower Manhattan and had been adversely affected by the events of September 11, 2001.

Result :

By using normalization and weighting techniques, we were able to increase the value of the restaurant and our client’s settlement.

Internal Control Review [+]

Assignment :

We performed a quality assessment review of the internal audit functions of a $500 million not-for-profit organization under contract with New York City and also reviewed their accounting systems and existing internal controls with various members of their management team.

Result :

We presented to their audit committee our findings and recommendations for additional procedures and controls, which are in the process of being adopted. An important procedure being implemented is the use of computerized data mining techniques which will help them uncover potential discrepancies and defalcations.

Lost Profit Claim [+]

Assignment :

We were retained to calculate the economic loss suffered by a corporation from a breach of a non-compete clause in an employment contract. A senior executive left the company to work for a competitor. In violation of the non-compete clause, he began soliciting our client’s customers causing a significant loss of customers and revenue.

Result :

In preparing the lost profit analysis, Gettry Marcus developed a loss calculation formula based on the longevity of the company’s customers. The court adopted our method and cited it in its decision in favor of our client.

Matrimonial-Litigation [+]

Assignment :

This litigation engagement involved an individual whose spouse died during the course of the matrimonial action, leaving this individual in charge of the family business. Our investigation surrounded the alleged theft of business assets and the unauthorized use of corporate funds by a key financial employee of the deceased spouse’s business. We traced the movement of monies through dozens of personal and business accounts controlled by the deceased, in an attempt to recover diverted marital assets.

Result :

Our investigation revealed that the key employee had signed checks from several business accounts totaling hundreds of thousands of dollars to pay personal expenses. We provided counsel with the supporting documentation necessary to recover the diverted assets.

Matrimonial-Valuation [+]

Assignment :

We were retained by a non-owner spouse to perform a forensic accounting investigation and business valuation of the other spouse’s business in a marital dissolution case. Historically, the business reported minimal net income resulting in nominal value.

Result :

While performing our forensic accounting review we uncovered sizeable undocumented disbursements, which resulted in a reduction of the company’s net income. By adding back these disbursements to net income, the value of the company was increased by approximately $1 million and our client’s equitable distribution by approximately $500,000.

Mergers And Acquisitions [+]

Assignment :

On behalf of the buyer, we performed due diligence on the financial operations of a large retail store to determine its fair market value for a potential acquisition. Working with the client, we prepared projections of the company’s future earnings, including appropriate adjustments.

Result :

Based on our findings, we determined the seller’s asking price was 40% greater than the fair market value of the company, leading our client to withdraw from the transaction.

Partnership Appreciation Rights [+]

Assignment :

We were retained by a well-known weekly New York entertainment magazine publisher to value both the 100% interest and a 1% limited partnership interest for the purpose of determining the amount to be paid to a departing executive.

Result :

Working with the company’s CFO and the treasurer from its controlling foreign partner, we calculated a range of values based on different terminal value scenarios, which offered our client the needed flexibility to negotiate the executive’s payout.

Royalty Dispute [+]

Assignment :

A public company allegedly breached its royalty agreement with one of its licensees. As the defendant, the public company was sued for $1.6 million and retained us to provide expert testimony as to any damages incurred by the plaintiff.

Result :

Through our research and forensic accounting procedures, we uncovered critical defects in the concepts applied by the opposing expert. Based on these findings and our expert testimony, the case was settled to our client’s benefit.

Shareholder Dispute [+]

Assignment :

We were retained, in an arbitration case, by a dissenting minority shareholder of a fitness club who was being forced out by the majority shareholders. The majority shareholders were intentionally not soliciting new members in order to reduce the value of the business until the minority shareholder’s interest was purchased. The majority shareholders’ expert valued the business at zero based strictly on the book value from historical financial statements.

Result :

We were able to obtain operating information of fitness clubs similar in size and geographic location to the subject club and prepared pro-forma income statements based on member- ship levels of comparable facilities. In addition, we prepared our report according to New York State’s standard of fair value which does not recognize discounts for minority interests in dissenting shareholder actions. From this, the arbitrator determined that if the company was managed properly it would have significant value, and ruled in favor of our client.

All Case Studies

Business Valuation & Litigation Case Studies

Arbitration [+]

Assignment :

We were retained as a court appointed arbitrator, as part of a tribunal, in a commercial litigation case to hear the business complaint of a shareholder/president of a company, who was abruptly terminated by the respondent shareholders. The proceedings included several hearings with attorneys from both sides to set the ground rules regarding discovery procedures. The Gettry Marcus partner was the sole forensic accountant presiding on the panel with two veteran arbitration attorneys.

Result :

We were able to explain to the legal arbitrators why the respondent needed to produce certain company financial documents to allow the claimant’s expert to perform the required forensic review and subsequent business valuation. As a result of Gettry Marcus’s guidance, the tribunal ruled to release certain documents to the claimant, which forced the respondent to settle the case rather than release the documents.

Bankruptcy [+]

Assignment :

We were retained by counsel to assist the unsecured creditor’s committee of a well-known department store chain, to strategize and prepare claims against the corporate controlling shareholder for the return of $500 million through equitable subordination and the reclassification of debt to equity. We analyzed the ramifications of the shareholder’s liquidation scenarios for counsel and prepared for and participated in the depositions of the top-level executives and court ordered mediations.

Result :

Our work for the creditor’s committee was instrumental in its receipt of a significant settlement from the parent shareholder, which was substantially in excess of amounts traditionally received in department store industry bankruptcy settlements.

Bankruptcy-Forensic Accounting [+]

Assignment :

We were engaged by an international financial institution, which was the main secured creditor in a Chapter 11 proceeding, to verify the accuracy of the debtor’s collateral reports, review monthly bankruptcy report filings and prepare an analysis of potential preferential payments.

Result :

During our analysis of the accounts receivable, we uncovered major defalcations in the aging schedule and a lack of disclosure that the two largest customer receivable balances were being disputed in litigations. Our physical examination and review of the accounting records of the inventory revealed that a large percentage of the company’s inventory was obsolete. Our preference analysis concluded that a majority of the preferential payments were to insiders. As the result of our findings, the financial institution was able to minimize further exposure of its loan and have a receiver appointed.

Buy/Sell Agreement [+]

Assignment :

The owners of an established, successful business needed to determine the fair market value of their company. They wanted to incorporate this value into their shareholder’s agreement relating to the dissociation clauses which may affect either owner in the future. Their existing agreement had a value definition and formula which failed to properly represent the true value of the company.

Result :

Through our application of the appropriate methods and value calculations, we were able to provide the owners and their families with the future protection they needed by establishing the entity’s fair market value, which was almost twice the amount calculated under the original shareholder’s agreement value formula.

Civil Suit Defense [+]

Assignment :

We were retained to assist the attorneys defending the CEO and CFO, minority shareholders of a large private company, against accusations concerning theft of funds and disbursements for personal use. These accusations were a result of the minority shareholders’ dispute over the contract to purchase the remaining shares of stock from the majority shareholder.

Result :

Through interviews with company personnel and analyses of the information gathered by our team, we were able to prove that all the alleged improper expenditures were for bonafide business purposes. We developed charts and graphs used by our clients’ counsel that clearly explained our position to the jury. Through Gettry Marcus’s forensic efforts and effective presentation, we were able to assist our clients in receiving a favorable settlement with regard to the unfounded accusations and their purchase of the stock.

Collateral Audit [+]

Assignment :

We were retained by a major financial institution to examine the accounting books and records of a $100 million food distributor with outstanding credit obligations of $10 million.

Result :

Gettry Marcus uncovered $3 million of food products that were past the expiration date. This expired inventory was included in the collateral base calculation at full value. Based upon our findings, the financial institution revised its borrowing base formula providing itself with additional loan protection.

Estate Litigation [+]

Assignment :

On behalf of the beneficiaries of an estate, we were engaged to perform investigative procedures related to the sale of real estate owned by 13 different family partnerships, managed by a single family member who unilaterally decided to sell the properties valued at approximately $90 million. We examined the management and partnership agreements to verify the accuracy of the management fees and distributions of the sales proceeds to each of the family partners. It was also necessary to perform a detailed review of the accounting records to assure that there were no improper disbursements.

Result :

Our investigation disclosed that the single family member had overpaid himself $500,000 of management fees prior to the sale of the properties and that he initially received sales proceeds of $1 million in excess of his rightful ownership percentage.

Estate Tax [+]

Assignment :

We were engaged to value a decedent’s 50% interest in a wholesale distributorship in order to establish the value to be reported on the estate tax return.

Result :

Based on our research and interviews with the company’s personnel, we determined the decedent was the key person in the company, responsible for managing all relationships with their major customer and overseas manufacturing contractor. We applied a significant key-man discount to the fair market value of the company and reduced the taxable estate by $1.4 million. Upon subsequent challenge by the Internal Revenue Service, our key-man discount was accepted without change.

Fraud Investigation - Case Study [+]

Assignment :

A rapidly growing healthcare facility with over 200 employees retained us to review its existing internal controls. We interviewed key personnel; examined the company’s cash disbursements, cash receipts, payroll records, and purchasing policies; and designed and performed analytical procedures based on our research.

Result :

Through the use of state-of-the-art forensic software, we discovered several hundred thousand dollars per year of fraudulent activity relating to questionable purchase transactions. Our client replaced certain vendors and implemented our recommended internal control procedures, particularly, the proper segregation of duties related to purchasing and cash disbursements. As a result, our client is experiencing substantial savings on its purchases.

Gifting [+]

Assignment :

As part of his overall estate plan, our client wished to gift limited interests in the family limited partnership to his children and grandchildren. The partnership’s assets included residential buildings in New York City and a portfolio of marketable securities valued in total at $6.5 million. In addition, appraisals of the real estate were obtained and incorporated in our overall valuation.

Result :

Through our research and experience we valued the gifted interests applying an appropriate minority discount which will provide future tax savings to our client’s estate.

Insurance Claim [+]

Assignment :

As the basis for an insurance claim, we performed a business valuation of a restaurant that was destroyed by a fire. The restaurant was located in lower Manhattan and had been adversely affected by the events of September 11, 2001.

Result :

By using normalization and weighting techniques, we were able to increase the value of the restaurant and our client’s settlement.

Internal Control Review [+]

Assignment :

We performed a quality assessment review of the internal audit functions of a $500 million not-for-profit organization under contract with New York City and also reviewed their accounting systems and existing internal controls with various members of their management team.

Result :

We presented to their audit committee our findings and recommendations for additional procedures and controls, which are in the process of being adopted. An important procedure being implemented is the use of computerized data mining techniques which will help them uncover potential discrepancies and defalcations.

Lost Profit Claim [+]

Assignment :

We were retained to calculate the economic loss suffered by a corporation from a breach of a non-compete clause in an employment contract. A senior executive left the company to work for a competitor. In violation of the non-compete clause, he began soliciting our client’s customers causing a significant loss of customers and revenue.

Result :

In preparing the lost profit analysis, Gettry Marcus developed a loss calculation formula based on the longevity of the company’s customers. The court adopted our method and cited it in its decision in favor of our client.

Matrimonial-Litigation [+]

Assignment :

This litigation engagement involved an individual whose spouse died during the course of the matrimonial action, leaving this individual in charge of the family business. Our investigation surrounded the alleged theft of business assets and the unauthorized use of corporate funds by a key financial employee of the deceased spouse’s business. We traced the movement of monies through dozens of personal and business accounts controlled by the deceased, in an attempt to recover diverted marital assets.

Result :

Our investigation revealed that the key employee had signed checks from several business accounts totaling hundreds of thousands of dollars to pay personal expenses. We provided counsel with the supporting documentation necessary to recover the diverted assets.

Matrimonial-Valuation [+]

Assignment :

We were retained by a non-owner spouse to perform a forensic accounting investigation and business valuation of the other spouse’s business in a marital dissolution case. Historically, the business reported minimal net income resulting in nominal value.

Result :

While performing our forensic accounting review we uncovered sizeable undocumented disbursements, which resulted in a reduction of the company’s net income. By adding back these disbursements to net income, the value of the company was increased by approximately $1 million and our client’s equitable distribution by approximately $500,000.

Mergers And Acquisitions [+]

Assignment :

On behalf of the buyer, we performed due diligence on the financial operations of a large retail store to determine its fair market value for a potential acquisition. Working with the client, we prepared projections of the company’s future earnings, including appropriate adjustments.

Result :

Based on our findings, we determined the seller’s asking price was 40% greater than the fair market value of the company, leading our client to withdraw from the transaction.

Partnership Appreciation Rights [+]

Assignment :

We were retained by a well-known weekly New York entertainment magazine publisher to value both the 100% interest and a 1% limited partnership interest for the purpose of determining the amount to be paid to a departing executive.

Result :

Working with the company’s CFO and the treasurer from its controlling foreign partner, we calculated a range of values based on different terminal value scenarios, which offered our client the needed flexibility to negotiate the executive’s payout.

Royalty Dispute [+]

Assignment :

A public company allegedly breached its royalty agreement with one of its licensees. As the defendant, the public company was sued for $1.6 million and retained us to provide expert testimony as to any damages incurred by the plaintiff.

Result :

Through our research and forensic accounting procedures, we uncovered critical defects in the concepts applied by the opposing expert. Based on these findings and our expert testimony, the case was settled to our client’s benefit.

Shareholder Dispute [+]

Assignment :

We were retained, in an arbitration case, by a dissenting minority shareholder of a fitness club who was being forced out by the majority shareholders. The majority shareholders were intentionally not soliciting new members in order to reduce the value of the business until the minority shareholder’s interest was purchased. The majority shareholders’ expert valued the business at zero based strictly on the book value from historical financial statements.

Result :

We were able to obtain operating information of fitness clubs similar in size and geographic location to the subject club and prepared pro-forma income statements based on member- ship levels of comparable facilities. In addition, we prepared our report according to New York State’s standard of fair value which does not recognize discounts for minority interests in dissenting shareholder actions. From this, the arbitrator determined that if the company was managed properly it would have significant value, and ruled in favor of our client.

All Case Studies