We invite you to view the following case studies to gain a deeper understanding of the approach Skoda Minotti takes to resolving particular challenges our clients encounter. We welcome any questions you may have.

Assisting Bank Workout Department

Challenge

Skoda Minotti was retained by a bank to investigate the financial health of a borrower and analyze what caused that borrower’s loan to go into default.

Solutions

Skoda Minotti’s Valuation and Litigation Advisory Services Group professionals performed a forensic investigation and determined the borrower had created a second set of books to inflate its receivables, inventory, sales and income. The second set of books was used to report financial condition and loan compliance to the bank, but was not reflective of economic reality.

Results

The bank ended the forbearance agreement and liquidated its collateral, which resulted in a recovery by the bank and the closing of the borrower.

Bankruptcy and Forensic Accounting for Fraud and Ponzi Scheme

Challenge

Skoda Minotti was retained by the Fair Finance bankruptcy trustee to serve as his bankruptcy and forensic accountant in a $200 million Ponzi scheme.

Solutions

Our Valuation and Litigation Advisory Services Group professionals assisted the trustee in various bankruptcy matters, including:

  • Securing computers
  • Closing seven Fair Finance branch offices
  • Dealing with IRS and other payroll and employee benefit issues
  • Securing, indexing and reviewing hundreds of boxes of records
  • Corresponding with customers, vendors and dealers
  • Preparing bankruptcy schedules
  • Assisting with the collection of accounts receivable

We provided the trustee with a forensic accounting that involved the tracing of over $1 billion of cash transactions, documenting numerous fraudulent transfers, documenting the fraud and Ponzi scheme, preparing an insolvency valuation analysis, and preparing expert reports regarding our forensic findings and opinions.

Results

The three main participants in the fraud were convicted and sentenced to 10 to 50 years in prison. To date, the trustee has recovered over $50 million, primarily through litigation, which is still underway.

Fraud Analysis – Embezzlement Due to Collusion Among Key Employees

Challenge

A company’s president and controller conspired to embezzle over $500,000 from the business. The fraud involved personal expenses charged to the company’s credit cards, a check-for-cash substitution scheme, off-the-books bank statements used as a slush fund by the fraudsters and an unreconciled receivable account used to conceal misappropriated customer checks.

Solutions

Skoda Minotti’s Valuation and Litigation Advisory Services Group professionals documented the amount of the embezzlement and recommended improvements to the internal control system including better oversight by the board, segregation of duties, month-end reconciliation procedures, and an annual review of the financial statements by a CPA firm, among others.

Results

The company implemented certain internal control improvements, the president and controller were prosecuted by the city, and the company received a partial recovery from its employee theft insurance policy.

Fraud Analysis – Embezzlement Due to Lack of Internal Controls

Challenge

A company’s controller embezzled over $500,000 from the company using various schemes including ghost employees, credit card advances and pre-signed checks.

Solutions

Skoda Minotti’s Valuation and Litigation Advisory Services Group professionals documented the amount of the embezzlement and recommended improvements to the company’s internal control system including better segregation of duties, month end reconciliation procedures, prohibiting pre-signed checks from the owner, and the mailing of bank statements to the owner’s residence for review prior to accounting performing its monthly review.

Results

The company implemented certain internal control improvements, the controller was prosecuted by the city and the company received a partial recovery from a bank.

Damages Rebuttal

Challenge

An insurance company was hit with a $100 million claim for damages from a policy holder in connection with an alleged employee fraud scheme.

Solutions

Skoda Minotti was hired by the defendant’s counsel to provide a rebuttal report critiquing the plaintiff’s expert report, which alleged that damages stood in excess of $100 million. Our Valuation and Litigation Advisory Services Group also developed an independent opinion of damages, which was considerably less than the damages alleged by the plaintiff’s expert witness.

Results

The case settled for an amount considerably less than the $100 million claim, in part due to the analysis prepared by Skoda Minotti’s Valuation and Litigation Advisory Services Group.

Shareholder Buyout

Challenge

The majority owner of a privately-held manufacturing company passed away, which triggered a buyout requirement by the other owners based on the company’s buy-sell agreement. The agreement required that a valuation expert be engaged to determine a value of the deceased owner’s shares for the required sale to the remaining owners.

Solution

Skoda Minotti worked with the company, the company’s attorney and CPA, and the parties involved in the transaction in order to determine the value of the deceased owner’s shares. The valuation report given to the parties provided them with an explanation of the analysis and how the value was reached, giving the parties comfort that the concluded value was fair.

Results

The parties in the shareholder buyout transaction were provided with a reliable valuation of the company that they agreed with. As a result, the valuation analysis served as the roadmap for the ultimate purchase/sale of the company’s shares.

Probate Valuation

Challenge

A small privately-held company was owned by an individual who passed away, leaving the business to transfer to her beneficiaries through the probate process. While the ownership interest was a small asset in the total estate, a valuation of the business was necessary in order to fulfill the asset inventory requirements of the probate court.

Solution

Skoda Minotti worked with the executor of the estate and the estate attorney to develop a deliverable that met the court’s requirements while keeping the scope narrowed in order to minimize cost given the size of asset in relation to the total estate. 

Results

The estate was provided with a reliable valuation of the company that was utilized in the probate asset inventory.

ESOP Valuation

Challenge

A subsidiary in a multi-entity company was partially owned by the parent company and partially owned by an ESOP (employee stock ownership plan).  In order to fulfill his duties as trustee of the ESOP plan, the trustee is required to have the ESOP’s ownership interest in the company valued annually to the set price for purchases and sales within the ESOP.  Given that the company was a segment of a larger group of entities, the normalizing analysis was particularly important in reaching an accurate conclusion of the company’s fair market value.

Solution

Skoda Minotti valued the ESOP’s ownership interest in the company, taking into careful consideration the normalizing adjustments appropriate to accurately value the business. 

Results

The ESOP trustee was provided with an accurate determination of the fair market value of the ESOP’s shares of the company.

Economic Damages

Challenge

Certain beneficial owners in a real estate holding company who were not involved in the day-to-day operation of the business were alleging they had been damaged as a result of excess compensation being paid to the active owners as well as the mismanagement of the property by the active owners. Central to the plaintiffs’ case was determining the amount of damages incurred.

Solution

Skoda Minotti was hired by the plaintiffs’ counsel and developed a detailed economic analysis calculating the damages related to both the alleged excess compensation and mismanagement of the property. Skoda Minotti then presented its findings to the defendants.

Results

The case settled prior to trial based, in part, on the analysis prepared by Skoda Minotti.

Valuation and Lost Income Damages

Challenge

The owners of a group of companies were involved in a dispute.  Central to the case was the value of the companies to be used in a potential buyout of certain owners along with the amount of lost income damages due to the alleged improper termination of two of the owners.

Solution

Skoda Minotti was hired by the plaintiffs’ counsel to determine the value of the companies and lost income damages of the terminated owners. 

Results

The case settled prior to trial based, in part, on the analyses prepared by Skoda Minotti.

Equity and Stock Option Valuation

Challenge

A large service company that had undergone a sale to a private equity firm the prior year had issued stock options to certain key employees.  The company’s auditor, a national CPA firm, was requiring it to determine the fair value of the company’s equity as of each grant date along with the fair value of the stock options issued on those dates in order to satisfy the company’s financial reporting requirements under GAAP.

Solution

Skoda Minotti developed a detailed valuation analysis of the company’s equity, which was able to be leveraged in valuation of the company as of each of the stock option grant dates.  Skoda Minotti also valued each of the stock options issued, using both Black-Scholes and binomial methods based on the characteristics of specific option grants.

Results

The service company’s management team avoided conflict and delays with their auditor by engaging Skoda Minotti to prepare the valuation analyses rather than attempting to develop them in-house.  In addition, the company was able to rely on our valuation analyses to support the fair value of the company’s equity and stock options issued, as well as the related compensation expense, which was necessary for the financial statements to receive a clean audit opinion in accordance with GAAP. 

Contingent Consideration Valuation

Challenge

A large healthcare company had made multiple acquisitions and just completed a recapitalization.  Many of these transactions, including the recapitalization, included complex contingent consideration (earnout) provisions.  The healthcare company’s auditor was requiring it to determine the fair value of the contingent consideration liabilities as of the recapitalization date in order to appropriately present the transactions and the related liability balances in accordance with GAAP.

Solution

Skoda Minotti developed a comprehensive valuation model that included Monte Carlo simulations in order to appropriately value the contingent consideration liabilities, some of which included complex, interdependent tranches. 

Results

The healthcare company was able to outsource this complex analysis, allowing it to focus the time saved on integrating its acquisitions, and the audit firm accepted the valuation analysis without requiring any revisions.

Rebuttal Damages Analysis

Challenge

One of the largest privately-held companies in the U.S. was the defendant in complex business litigation in which the plaintiffs were claiming over $10 million in damages based the analysis prepared by the plaintiff’s financial expert.  Based on court-imposed deadlines, the defendants had approximately 30 days to submit a rebuttal report.

Solution

Skoda Minotti was engaged by the defendant’s counsel and quickly dove into the complexities of the case.  The plaintiff’s expert report was reviewed in detail and numerous issues were identified that called into question the reliability and accuracy of the conclusions therein.  Based on this analysis, Skoda Minotti drafted a comprehensive rebuttal report within the tight window allowed by the court.

Results

The case settled prior to trial based, in part, on the analysis contained in the rebuttal report prepared by Skoda Minotti.

Purchase Price Allocation Review

Challenge

The valuation group of a regional CPA firm was preparing a purchase price allocation in which the valuation of certain unique intangible assets was necessary.  The valuation analysis was going to be reviewed by a large national CPA firm in connection with a financial statement audit.  Therefore, the preparer wanted an independent review of the report by an outside party to allow for any errors or issues to be addressed before the report was submitted for review to the large national CPA firm.

Solution

Skoda Minotti reviewed an initial draft of the valuation report and provided feedback regarding methodologies applied, calculations, assumptions, and report content.  Based on this review, the preparer was able to proactively address various items that would have likely been brought up in the audit review by the large national CPA firm.

Results

The valuation group of the regional CPA firm was able to address and revise many items that may have made the audit review process more challenging while making sure that the report was compliant with prevailing valuation theory.  As a result, the valuation report was accepted by the audit firm with minimal surprises in the way of feedback and review comments.

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