Consulting

FORENSIC ACCOUNTING AND LITIGATION

Gettry Marcus assists attorneys and their clients in untangling complex financial issues. Our forensic accounting and litigation specialists speak the language of business, and are invaluable in providing attorneys with the financial documentation and explanations needed for tactical planning and negotiations for matters in Federal and state courts, as well as arbitration proceedings.

Forensic accounting involves the combination of special skills in accounting, auditing, finance, quantitative methods, research, and investigation to collect, analyze, and evaluate information, and to interpret and communicate the findings.

Our litigation services professionals have extensive forensic accounting experience. We combine data analysis and data mining techniques with strong investigative skills. The result highlights our keen ability to “follow the people and the money” in developing our findings for a wide range of applications.

Clients and attorneys can often attain dramatic leverage at the negotiating table and in the courtroom by presenting quantifiable data in a clear, cogent, and persuasive manner. A case that is substantiated by indisputable documentation will most often be received favorably.

Our multi-credentialed team of specialists work within the context of the time pressures usually present in litigation.

Services Offered

We maintain active roles in many professional organizations in our disciplines, and contribute articles to nationally recognized peer reviewed journals and publications. We have attained the highest level of credentials within our profession and serve as national instructors and lecturers to various professional groups, including state CPA organizations, on various business valuation and forensic accounting topics.

We Maintain Active Memberships In Many Professional Associations, Including:

  • American Bar Association (Associate Member, Section of Litigation)
  • American College of Forensic Examiners
  • American Institute of Certified Public Accountants
  • American Society of Appraisers
  • Associated Licensed Detectives of New York State
  • Association of Certified Fraud Examiners
  • Financial Consulting Group
  • Institute of Business Appraisers
  • National Association of Certified Valuators and Analysts
  • New York State Society of Certified Public Accountants
  • Society of Professional Investigators
  • The Estate Planning Council of Nassau County

Practice Leader


MARK S. WARSHAVSKY
mwarshavsky@gettrymarcus.com
516-364-3390 x121

Forensic Accounting and Litigation Case Studies

Arbitration/Mediation Services

Assignment:
A Gettry Marcus partner was 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. 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’ 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/Insolvency

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 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.


Assignment:
Gettry Marcus was retained by a large creditor of a hospital that had filed for bankruptcy protection. Due to an administrative oversight, our client failed to timely secure a loan made to the hospital prior to the hospital’s filing for bankruptcy. Our assignment was to prove that the hospital was solvent at a certain date prior to the bankruptcy filing, thereby allowing our client’s claim to be considered secured. Our tasks also included the critiquing of our opposition’s expert report demonstrating insolvency.

Result:
Our thorough analysis and computation demonstrated that the hospital was solvent on the agreed upon date and several subsequent alternative dates. We were able to successfully convey this at deposition. In addition, we assisted counsel in drafting questions that resulted in impeaching our counterpart’s conclusions. Our efforts resulted in the matter being settled with our client receiving repayment of nearly 100% of the original loan amount.


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 inventory records revealed that a large percentage of the company’s inventory was obsolete. Our preference analysis concluded that a majority of the pre-petition 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.

Contract Disputes

Assignment:
We were engaged as Plaintiff’s testifying expert by a European software developer that was in a contract dispute related to royalty payments with a Fortune 500 Company. The software developer alleged that the Fortune 500 Company had breached the royalty agreement. We computed the damages incurred by the software developer and, subsequently, refuted the Fortune 500 Company’s expert report which stated that his client was owed monies from the software developer due to royalty overpayments. In performing our damage calculation, it was necessary for us to analyze and calculate the numerous distinct usage formulas contained in the licensing agreements between the Fortune 500 Company and its international customers.

Result:
Gettry Marcus submitted an expert report that calculated the damages due to the software developer. In addition, we identified several deficiencies in the methodology of the opposing expert, which we described in our expert rebuttal report. As a result of our detailed analysis, expert reports and subsequent deposition, the software developer was able to negotiate a favorable settlement with the Fortune 500 Company.

Due Diligence

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.


Assignment:
On behalf of the seller of a large medical equipment distributor, we prepared the company’s balance sheet at the closing date for the purpose of a purchase price adjustment. The buyer’s accountants prepared their own balance sheet to be used to calculate any purchase price adjustment which was based on an agreed upon amount of working capital.

Result:
The buyer’s accountants arrived at a balance sheet which reflected a shortage of required working capital totaling $1.5 million, while Gettry Marcus’s balance sheet reflected a shortage of $200,000. We were able to prove that our working capital calculation was correct and highlighted many errors and items not properly considered by the buyer’s accountants. Based on our findings we were able to save our client $1.3 million on the purchase price adjustment.


Assignment:
Gettry Marcus was 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.

Economic Damages

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.

Expert Witness Services

Assignment:
We were retained by twenty two insurance companies to review thousands of transactions, read and analyze numerous agreements to determine whether a medical practice was “truly owned” by the doctor named on the certificate of incorporation. Our analysis of the financial transactions resulted in the necessity to reconstruct the books and records of the medical practice, allowing us to apply benchmarking statistics.

Result:
In a landmark unanimous jury verdict, we were able to successfully assert the “Corporate Practice of Medicine Prohibition” principles in demonstrating that the medial practice was owned and controlled by the non-physicians. Our expert witness testimony covered the movement of funds between bank accounts, as well as the reasonableness of the transactions within the context of the agreements entered into between the parties. The verdict delivered by the jury relieved our clients of several thousand pending individual no-fault lawsuits totaling more than $20 million.

Financial Fraud Investigations

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. We also designed and performed analytical procedures based on our research.

Result:
Through the use of state-of-the-art forensic software, we discovered 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 experienced substantial savings on its future purchases.


Assignment: 
Gettry Marcus was retained to assist the attorneys defending a 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 expenditure claims against the CEO and CFO were actually 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 forensic efforts and effective presentation, we were able to assist our clients in receiving a favorable settlement with regard to the unfounded accusations.

Internal Investigations

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. We also designed and performed analytical procedures based on our research.

Result:
Through the use of state-of-the-art forensic software, we discovered 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 experienced substantial savings on its future purchases.


Assignment:
Gettry Marcus was retained to perform a quality assessment review of the internal audit functions of a $500 million nonprofit organization under contract with New York City, and also review their accounting systems and existing internal controls with various members of its management team.

Result:
We presented our findings and recommendations of additional procedures and controls to the nonprofit organization’s audit committee. These findings and recommendations were immediately adopted. One significant recommendation was the implementation of computerized data mining techniques, which will assist the organization to uncover potential discrepancies and defalcations in the future.

Matrimonial

Assignment:
We were retained by a non-owner spouse to perform a forensic accounting investigation and business valuation of the owner 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.


Assignment:
We were retained by a non-owner spouse whose husband died during the course of the matrimonial action, leaving this individual in charge of the family business. Our investigation focused on 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 from dozens of business accounts to determine if any funds were misappropriated.

Result:
Our investigation revealed that the key employee had signed checks from several business accounts to pay personal expenses. We provided counsel with the supporting documentation necessary to recover the stolen assets.

Partner/Shareholder Disputes

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. 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.


Assignment:
Gettry Marcus was retained to assist the attorneys defending a 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 expenditure claims against the CEO and CFO were actually 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 forensic efforts and effective presentation, we were able to assist our clients in receiving a favorable settlement with regard to the unfounded accusations.


Assignment:
Gettry Marcus was retained by counsel to represent a medical doctor holding a minority interest in a multi-location medical practice, with annual revenues in excess of $100 million. In addition, there were multiple real estate holdings owned by the same shareholders in separate entities. We were engaged to evaluate an existing buyout offer, and perform an extensive forensic examination of the medical practice and real estate entities.

Result:
Our forensic investigation yielded several instances of undisclosed corporate opportunities being diverted from the medical practice where our client was a partner. In addition, we documented examples of the medical practice paying personal expenditures and unauthorized disbursements for the benefit of the other partners. We also identified several instances where funds of the medical practice were used to acquire real estate that was titled in the names of the other partners. These findings, when presented to the existing partners, resulted in the purchase price being increased by approximately eight-fold. We also worked closely with tax counsel regarding tax planning and projections associated with the transaction.


Assignment:
Gettry Marcus was retained by counsel representing the Plaintiff, a 50% owner of a $30 million privately held company, to calculate the amount due to his client related to the disproportionate benefits which had been received by the Plaintiff’s partner. We were also engaged to value the Plaintiff’s interest for the purpose of negotiating a buyout. We prepared analyses detailing the various manners in which our client’s partner had diverted corporate opportunities and funds to himself and to entities in which our client did not have an ownership interest.

Result:
Our investigation resulted in a buyout transaction with terms that far exceed the amounts previously offered to our client by his partner, and with the opportunity to realize even greater sums if reasonable growth targets were achieved.

Trust and Estate Litigation

Assignment:
On behalf of the beneficiaries of a decedent’s estate, Gettry Marcus was engaged to perform investigative procedures related to the sale of real estate. The real estate was owned by 13 different family partnerships, managed by one family member who unilaterally decided to sell the properties valued at approximately $90 million. We reviewed 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 investigative analysis of the accounting records to assure that there were no improper disbursements.

Result:
Our investigation disclosed that the 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. Our findings resulted in the estate’s beneficiaries receiving a favorable settlement from the family member.

White Collar Criminal Litigation

Assignment:
Gettry Marcus was retained to assist the attorneys defending a 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 expenditure claims against the CEO and CFO were actually 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 forensic efforts and effective presentation, we were able to assist our clients in receiving a favorable settlement with regard to the unfounded accusations.