The following cases are examples only. The fact patterns of another case will be different. Reliance on testimony or findings of these cases should not be used for your case. Z&C reserves the right to give all relevant facts and research if further inquiry is made by any parties on these examples.
ISSUE: What is the value of a 26% interest in a chemical distributor?
MATTER: What is the value of a minority interest in a chemical ditribution company when the industry is in decline due to exposure to toxins?
TESTIMONY: Testimony not required. The valuation was prepared for use with the estate tax return.
FINDINGS: No goodwill was attributed to the company because of the competitive nature of the industry, the lack of profitability experienced by the company and the high exposure to liability for toxic cleanup. Further, 40% marketability discount was applied to the net book value of the company. The marketability discount reflected the fact that half of the warehouse was not usable because it was filled with non-saleable toxins, and the company was still paying for the liability related to two Superfund cleanups.
ISSUE: What is the value of a 50% interest of a power boat dealership?
MATTER: What is the value of a 50% interest in a boat dealership owned as an S corporation where the dealer had a history of little or no distributions to the shareholders?
TESTIMONY: Testimony not required. Our report was prepared for buy-out negotiations.
FINDINGS: Our opinion indicated the value of this interest was $170,000. The dealership's revenues averaged $7 million per year because of the competitive nature of the business. The business also had about $400,000 of inventory. The value of the dealership was determined to be around $500,000. This value was reduced by discounts for marketability and then further reduced in half to reflect that only 50% was valued.
ISSUE: Controllable cash flow for ex-spouse.
MATTER: Wife took ex-spouse back to court for an increase in child support payment. Ex-husband was a CPA and owned his own corporation. As his standard of living continued to rise, he recently purchased a home valued at $1 million, a $75,000 Porche, a land cruiser, trips to Hawaii, DisneyWorld, memberships to private clubs plus he re-married and is supporting his new wife's two children according to his high life style.
TESTIMONY: Based on our review of tax returns (corporate and individual), bank statements and financial statements, we determined that the husband's cash flow was no less than $19,000 per month. Husband's income and expense declaration was at $6,600 per month. We started with the income declared on the personal tax returns and then subtracted all known personal expenses. This method reflected a cash deficit of approximately $130,000. When we added the deficit to the reported income, we arrived at a cash flow of approximately $300,000 ($25,000 per month). We then looked at the financial statements and adjusted the net worth with add backs that appeared to be personal in nature or extremely high for the industry. It is important to note that we were never provided with general ledgers, check registers or any supporting data for the expenses on the financial statements or the tax returns. We made assumptions in the hopes the husband would provide the requested information in an attempt to prove us wrong. This did not happen. The husband took the position that he couldn't recall and did not have requested information. The husband's explanation for the cash deficit was that he was borrowing money from the credit cards and his parents. Prior to the day of trial, no records were ever produced to support any loans. During the lunch hour, the husband produced a note to his mother for $125,000. After listening to the husband's explanation as to why the add backs were too high and discounting most of what he said for lack of documents, our testimony was still not less than $19,000 per month.
FINDINGS: The judge found that the husband's lifestyle was maintaining in a rather high standard even if it may be due to leverage. The judge noted that the children from the prior marriage were entitled to the same benefits as the Current marriage was enjoying. He found the monthly gross known controllable cash flow to be $15,000 per month. This doubled the amount of child support. The order was made retroactive and the husband was ordered to pay $4,000 of the wife's fees.
ISSUE: Cash flow of a roofing contractor in a dissolution case.
MATTER/TESTIMONY: The contractor used day labor on most jobs for roofing work. They were paid in cash. At issue was the validity of the cash payments, which opposing counsel maintained were income to the contractor. We testified to the scale of the activity, through contracts and revenue, and proved the labor component of the expenses.
FINDINGS: The labor paid in cash was found to be a valid company expense. The cash flow from the business was adjusted accordingly.
ISSUE: Business damages. An offshore speedboat race promoter was allegedly prevented from putting on a race by the sanctioning body.
MATTER/TESTIMONY: Extent of damages. We computed the revenue, expenses and projected net profit of a national offshore speedboat race. This was to be a pier-to-pier race between Huntington Beach and Newport Beach. The damages were calculated to be $3.5 million over a five-year contract. We testified to a jury complete with exhibits.
FINDINGS: The jury found that the case was not proven and the damages were moot.
ISSUE: Wrongful dismissal.
MATTER/TESTIMONY: Damages due to past lost earnings and future lost earnings. A branch manager of a large insurance company was dismissed after a whistle-blowing incident. The manager obtained a similar position with another major insurance company but meanwhile had lost earnings. His benefits were less than at the old company. We calculated the net loss of earnings at its present value and testified before an arbitration panel.
FINDINGS: Case pending.
CASE: Goodwill Valuation- Eminent Domain
A retail billiard and gaming store was targeted for total acquisition by Caltrans for a freeway widening project.
Z & C Forensic Work (for Business Damages)
Damages including goodwill loss, precondemnation damages, loss of advertising billboard and real property value* totaled in excess of $5 million. Caltrans later decided to take only a portion of the property. Damages were revised for all components referenced above. The claim for all damage components was still a multi-million dollar claim. The case settled for a multi-million dollar amount (including legal and expert fees paid by Caltrans because of the decision to change from a full-take to a part-take).
*(Property value was provided by a real property appraiser)
Matter: A wealthy Orange County businessman invests over three million dollars in a hotel/condominium existing property. The investor owns less than 25 % and personally guarantees one loan that is over three million dollars. The promoter continually refinances the property. Upon receipt of the bank proceeds, the promoter pays himself back for his previous alleged loans. Loans are mainly based on journal entries and off the books payments to third parties. Eventually the partnership cannot service over 15 million dollars in loans and the loans go into default. The investor is responsible for his guarantee and loses his investment.
Matter: An astute real estate investor trades, through a 1031 tax deferred exchange, into a large out of state office complex. The general partner has put together over 25 limited partnerships in the past 30 years. The partnership agreement calls for dissolution of the partnership after seven years. However the general partner’s common theme is to:
- Never sell the properties.
- Borrow from one partnership to fund the other partnership losing money and/or allow new partners (without disclosure) into the partnership.
- Always pay yearly dividends to the investors.
- Give the general partner, himself, a majority interest by allowing his contribution to be in the form of promissory notes instead of cash. Other investors have invested cash for their interest.
After 30 years of running subject property the general partner receives over one million dollars a year in cash flow for no invested capital. The astute real estate investor requests payment of dividends based on his true ownership.
Matter: A businessman gives a loan in excess of two million dollars to individuals/companies in the garment and art industry. The loan is not paid. The owner of the businesses also owns and/or controls through relatives/associates seven other entities. Over 15 million dollars is disbursed and received from the seven entities in a five year period. In discovery, defendant testifies no books or records are maintained in any of the businesses and all transactions are loans. Over 100,000 documents were subpoenaed from banks by the plaintiff. The plaintiff sues for his unpaid note and interest.
Zamucen & Curren Work
- Reviewed and analyzed all documents.
- Gave written reports to the attorneys regarding Forensic Accounting findings.
- Testified in depositions and/or trial or assisted in depositions.
The Following are Examples of Our Family Law Cases
Case One – Tree Trimming/Arborist
Retained by husband regarding dissolution of a long-term 23+ year marriage. Total community assets were $4+ million, including tree trimming/arborist business owned by the husband before marriage with annual sales over $1.5 million. Key issues involved seasonality of revenue, appropriate rate of return on separate property business, personal expenses paid for by the business, and income of the wife from a hobby activity.
Zamucen & Curren Forensic Work (for the husband/petitioner)
Mr. Plante developed cash flow for support and a business valuation for the tree trimming/arborist business using alternate dates of value. A Pereira/Van Camp analysis was also developed to determine community interest. Mr. Plante worked with the opposing CPA to resolve issues where possible, resulting in most items being settled per stipulation with relatively few items argued before the court. Mr. Plante testified and presented reasoning and opinion supporting his conclusions on cash flow and rebutting the position of the opposing CPA.
Case Two – Auto Parts Manufacturer
Retained by husband regarding dissolution of a long-term 19+ year marriage. Total community assets were $5+ million, including auto parts manufacturing business, and related business holding properties where the business operated. Both businesses were owned by the husband before marriage with annual sales over $8 million. Key issues included community interest in the businesses, loans taken from the business, payments required under a line of credit and perquisites related to an aircraft owned by the business.
Zamucen & Curren Forensic Work (for the husband/respondent)
Mr. Plante developed cash flow for support, marital balance sheet, standard of living analysis and a business valuation each of the businesses, including a Pereira/Van Camp analysis to determine community interest. The community interest value was determined to be negative for both businesses, and this was accepted by the opposing counsel and the wife. Mr. Plante testified and presented reasoning and opinion supporting his conclusions on cash flow and rebutting the position of the opposing CPA.
Case Three – Chiropractor
Retained by wife regarding dissolution of a long-term 27+ year marriage. Total community assets were $5+ million, including chiropractic practice with annual sales over $400,000. Key issues included significant perquisite to the husband paid for by the business, unrecorded income from cash sales and barter transactions
Zamucen & Curren Forensic Work (for the wife/petitioner)
Mr. Plante developed cash flow for support, marital balance sheet, tracing of funds, standard of living analysis and a business valuation of the chiropractic practice. Mr. Plante also calculated a buyout in lieu of spousal support and worked with attorneys and the opposing CPA to resolve all issues. Settlement reached during trial.
Case Four – Food packaging & Distribution
Retained jointly by husband and wife regarding dissolution of a long-term 26+ year marriage. Total community assets were $12+ million, including food packaging and distribution business with annual sales over $100 million, and related businesses owning a trucking company and holding properties where the business operated. Key issues included community interest in the businesses, shares received from inheritance, and perquisites.
Zamucen & Curren Forensic Work
Mr. Plante developed cash flow for support, marital balance sheet, standard of living analysis and a business valuation for each of the businesses. Mr. Plante worked with both sides to present reasoning and opinion supporting his conclusions and assist attorneys and the parties with settlement proposals.