Always Looking Deeper

ACCOUNTING & AUDITING Case Studies

Bank Financing

Assignment:
A major client with sales volume of over thirty million dollars, wanted to, simultaneously, obtain an increase in an existing line of credit, and secure financing for the purchase of two parcels of real estate. The client presented multiple challenges, including a lack of senior management, renewal and expansion of the credit line that also would permit the company to purchase the two real estate parcels. And, everything needed to be completed in a four month period.

Result:
To help the client overcome these challenges, we developed and implemented a three part strategy. First, we focused on the credit line, then on securing a financing commitment for the purchasing of tow parcels of land and finally on reviewing all loan covenants. This was a prudent course of action due to the complexity of the transactions and the time constraints faced by the client.

We obtained various proposals for the credit line with contingent financing to enable our client to purchase the two parcels of real estate. By obtaining alternative financing proposals, the client was able to reduce the cost of the credit line by half a point and obtained an increase in the operating line of five million dollars. Over the next two months we prepared, reviewed and assisted with all the financial documentation to successfully obtain an IDA loan and complete the commercial financing. We completed the project by reviewing financial aspects of all loan documents to ensure that they were consistent with the terms negotiated.

Benchmarking Analysis

Assignment:
We were engaged to perform a review of an apparel company’s financial statements. The review consists of inquiry and analytical procedures promulgated by the AICPA’s Statement of Standards Accounting Review Services.

Result:
We analyzed the client’s financial information and compared the results to relevant industry benchmarks. Also, we performed various trend analysis of the company’s performance over a several year period. Based on our analysis, our client was able to renegotiate better pricing with its vendors and increase the selling price of premium products to certain of its customers. This resulted in significant improvements in its revenue and operations.

CFO Fraud

Assignment:
We were engaged to perform an initial audit to satisfy bank requirements of a wholesale/distributor of office products. Our experienced team performed the required audit procedures. As is our process, we always look beyond the required steps. Upon finding some inconsistencies and unusual increases in certain balance sheet accounts, we began making inquiries by first developing strong relationships with the owner and obtaining the trust of other key personnel. Then through our strong analytical procedures and review of certain invoices we uncovered an embezzlement of funds committed by the CFO.

Result:
Upon uncovering our suspicions, the CFO admitted to stealing $100,000. Our fraud examination discovered the funds actually stolen to be five times that amount. After terminating the employee, the owner was able to recoup a significant amount of the funds lost. We assisted in interviewing and hiring the new CFO as well as implementing stronger internal controls to help prevent this or other improprieties from occurring in the future.

CO-OP Audit

Assignment:
A cooperative housing corporation (Corporation) engaged us to perform an audit. The Corporation, located in Manhattan, owned a parking garage for use by its shareholders. During our review of the predecessor accounting firm’s work papers, we noticed that a considerable amount of time was spent accounting for and reconciling garage rental income, and amounts due to the garage operator each month.

During the audit, we investigated this matter. Under the terms of the lease, the garage operator was obligated to pay a fixed monthly rent to the Corporation. The garage operator was supposed to then bill the shareholders for the rent applicable to the occupied parking spaces. However, the monthly billing became the obligation of the Corporation. In addition, the garage operator’s obligation to pay its monthly fixed rent would be offset by the rent received from those shareholders who occupied the parking spaces. In the event the amount of rent applicable to the shareholders’ parking spaces exceeded the amount of fixed rent due from the garage operator, the Corporation was required to refund the excess to the garage operator.

Result:
We determined that, in effect, each month the Corporation was providing the accounting for the garage operator, including billing and collections. This function was very time consuming both for the client as well as the auditors at the end of the year. The reason for this arrangement was attributable to a 6% New York City Sales Tax on parking. Under prior law, rent paid directly to a garage operator was subject to sales tax. However, if rent was charged by the cooperative housing corporation, the sales tax was not applicable. We researched this and determined that the law had changed. Rent paid by a shareholder directly to a garage operator under the terms of a master lease was not subject to the 6% sales tax.

Based on our findings we advised the Board on a recommended course of action. Effective immediately, the garage operator began billing the shareholders directly, and paying the Corporation its monthly fixed rent. The client was very appreciative because we improved their cash flow and also reduced the time, cost and resources required to provide the monthly accounting.

Corporate Restructuring

Assignment:
We were engaged by a shareholder of a domestic corporation (Corporation) that had two equal shareholders. Our client, one of the shareholders, planned to retire and have his son continue in his capacity as the company’s salesman and be able to purchase an equity position. At the same time, the shareholders were approached by a private investment company (PIC) who was interested in purchasing a minority interest in the Corporation. The shareholders agreed to the sale of the minority interest in the Corporation. An additional relevant fact was that the shareholders and several related individuals owned the stock of a foreign based corporation.<

We developed a plan to have the Corporation contribute it’s assets to a new company (“NEWCO”) and have equity partners make capital contributions. In addition, NEWCO needed additional financing to buy the shares of the Corporation and also to buy the stock of the foreign corporation.

There were two complex issues our plan needed to address. First, a transfer of net assets or an exchange of shares between entities under common control is accounted for on a historical cost basis. The corporation would be transferring its net assets and its operation to NEWCO. Under accounting rules the two companies were considered to be held under common control.

Second, the bank financing the transaction wanted NEWCO to show a balance sheet with net worth that included the goodwill purchased. This was substantially greater than the contributed net assets and contributed capital.

Result:
Our plan called for the formation of a Family Limited Partnership (FLP) that would own NEWCO, in conjunction with the PIC, and the two original shareholders. This structure allowed the creation of a defective trust and the gifting of stock by both partners. Further, the structure met accounting rules and allowed for the use of Fair Market Value (FMR) accounting rather than historical cost.

Ultimately, the new entities were formed in which the PIC, the FLP and the original owners held equity in NEWCO and meet the rules of not being considered under common control.

The IRS audited all aspects of the transaction and passed it without exception. This resulted in significant savings for our client and an effective corporate structure for NEWCO.

Due Diligence On Merger & Acquisitions

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.

Forecasts & Projections

Assignment:
We worked closely with a consortium of importers to develop comprehensive forecasts that were to be used by both management and lenders to better understand and monitor the importers’ profitability, cash flows and financing needs. When creating the forecasts we considered accounts receivable, inventory, payable levels and seasonality.

Result:
As a result of our efforts, management developed credible forecasts that allowed them to better monitor and understand the financial results of their businesses. Lenders were able to enhance the monitoring of their borrowers, which gave them a greater comfort level with and better understanding of their borrowers’ needs. This resulted in a closer working relationship between lender and borrower, actual loans being approved and provided for continued financing, even in challenging times.

Outsourced Accounting
Assignment:
We were retained by a $108 million mezzanine lender and real estate fund to perform all bookkeeping and accounting functions, compile quarterly financial statements and provide a big four accounting firm with all documentation supporting the year end financial statements for them to perform an annual audit.

Result:
By the Fund outsourcing all the accounting functions to Gettry Marcus it did not have to hire an entire internal accounting department which would have included a chief financial officer and additional staff and incur costs for salaries and benefits. A better fit for them was to pay for accounting services strictly based on time and utilize Gettry Marcus to provide these various accounting functions on its behalf while keeping operating costs down and being able to focus on running the operations of the Fund.

BUSINESS VALUATION Case Studies

Business Interruption Claims

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 local events.

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

Buy/Sell Agreements

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 shareholders 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.


Assignment :
We were retained by a 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.

Due Diligence

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 :
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 :
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 :
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.

Estate Administration

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.

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.

Result :
Utilizing our experience, coupled with our focused research, we valued the gifted interests applying an appropriate minority discount which will provide future tax savings to our client’s estate.

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.

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 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.

EMPLOYEE BENEFITS PLAN Case Studies

DOL Targets Union Benefit Plan

Assignment:
Gettry Marcus was engaged to perform a re-audit of a multi-employer union health and Welfare Benefit Plan, with over 2,500 members, under circumstances that carried a high level of exposure to the Plan for significant penalties and enforcement action. The Plan’s financial statements, which were attached to the form 5500 that had been filed with the DOL, had been audited by another independent qualified public accountant. The DOL selected the Plan’s audit for examination. After examining the financial statements and work papers of the prior accountant, the DOL rejected the filing, stating that there were numerous significant deficiencies in the financial statements and that the audit of the financial statements was not performed in accordance with Generally accepted accounting standards (GAAS) as required under the employee retirement security act of 1974 (ERISA).

Gettry Marcus was required to, in a very compressed period of time, establish a complete understanding of the Plan and it’s accounting and financial reporting structure, perform a complete re-audit of the financial statements of the Plan, correct all deficiencies in the financial statements noted by the DOL and submit a complete set of work papers to the DOL that not only support the opinion on the financial statements, but that could stand up under intense scrutiny. This entailed Gettry Marcus committing the necessary experienced personnel to make certain that the outcome would be a positive one for the client.

Result:
As a result of working closely with the management of the Plan and maintaining an open line of communication with the DOL on the client’s behalf, an amended form 5500, along with the financial statements audited by Gettry Marcus, were filed within the time frame allowed by the DOL. a complete set of work papers was submitted and was subjected to the DOL’s review process. The DOL indicated that there were no deficiencies noted as a result of its in depth review of the amended form 5500, financial statements and the audit procedures and documentation thereon performed by Gettry Marcus. The DOL therefore accepted the filing as submitted and issued a notice of satisfactory Filing and immediately discontinued any action against the Plan, saving it from onerous penalties.

FORENSIC ACCOUNTING & 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:
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 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:

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:
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.

Trust & Estate Litigation

Assignment:
On behalf of certain beneficiaries of a decedent’s estate, Gettry Marcus was engaged to perform investigative procedures related to operating and real estate entities owned by the estate and the decedent’s son. Our clients were convinced that the son had stolen assets from the operating entities. In addition, each operating entity was located on real estate that was owned by 13 different family partnerships managed by the son. During the estate proceedings, the son unilaterally decided to sell the properties valued at approximately $90 million.

Result :

It was necessary for Gettry Marcus to perform a detailed investigative analysis of the accounting records to determine if there were any improper transactions. While analyzing the operating entities’ accounting records, we identified assets that were misappropriated by the son.

In addition, we reviewed the management and partnership agreements of the real estate entities to verify the accuracy of the management fees and distributions of the sales proceeds to each of the family partners. Our investigation disclosed that the son had overpaid himself $500,000 in management fees prior to the sale of the properties, and that he 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.

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:

Gettry Marcus was retained by counsel to investigate a scheme perpetrated by a corporate officer (V.P. of M.I.S.) of a major health insurer and an outside party, involving the purchase of mainframe computer systems by the insurer. We developed evidence of over-billing by, and kickbacks from, a sham intermediary company, which had acquired used equipment, and resold it to the insurer as new equipment; realizing a $4.5 million “profit” through a series of transactions totaling $9 million. We traced the trail of shipping documents, elicited admissions from a party fronting for the sham company, matched the monies flowing through the sham company’s ledger to each of the purchase transactions and determined the amount by which our client had been defrauded.

Result:
We prepared the employee dishonesty damage claim which resulted in a $2.5 million uncontested insurance recovery. We then testified before the grand jury and at the criminal jury trial. Both the V.P. of M.I.S. and his outside accomplice were convicted and served time in jail.


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:

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.


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.


Assignment: 
Gettry Marcus was retained by counsel to investigate a scheme perpetrated by a corporate officer (V.P. of M.I.S.) of a major health insurer and an outside party, involving the purchase of mainframe computer systems by the insurer. We developed evidence of over-billing by, and kickbacks from, a sham intermediary company, which had acquired used equipment, and resold it to the insurer as new equipment; realizing a $4.5 million “profit” through a series of transactions totaling $9 million. We traced the trail of shipping documents, elicited admissions from a party fronting for the sham company, matched the monies flowing through the sham company’s ledger to each of the purchase transactions and determined the amount by which our client had been defrauded.

Result: 
We prepared the employee dishonesty damage claim which resulted in a $2.5 million uncontested insurance recovery. We then testified before the grand jury and at the criminal jury trial. Both the V.P. of M.I.S. and his outside accomplice were convicted and served time in jail.

Matrimonial

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.


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

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 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.


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.

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.

HEALTH CARE Case Studies

Audit

Assignment:
Retained by several large group practices, each with revenues in excess of $50M dollars, to audit their financial statements.

Result:
These audits included addressing specific accounting and audit issues unique to the health care industry. We presented our findings to the groups’ audit committees, which included recommendations for additional procedures and internal controls, many of which were adopted by management.

Business Valuation

Assignment:
Retained by major New York hospital systems to value both single-specialty and multi-specialty groups under consideration for acquisition by the hospital systems.

Result:
We performed due diligence procedures on the targeted practices and prepared projections of future earnings to determine the practices’ fair market value for potential acquisition. Based on our findings, the hospitals were able to successfully negotiate and close on these transactions.

Equitable Profit-Sharing Allocations

Assignment:
We were retained by several large group practices to develop profit-sharing allocation methodologies for the physician-owners of the practices.

Result:
Working directly with the management of several large practices, each comprised of 40+ physician-owners, we developed and implemented profit-sharing allocation methodologies. The results provided for an equitable distribution of profits, which were ultimately accepted by management.

Fair Market Value Opinion

Assignment:
We were retained by several hospitals to provide fair market value opinions.

Result:
We used our established methodologies to perform fair market value assessments for the fees to be paid for the outsourcing of various departments, including nuclear imaging, emergency room, and hospitalist programs. Our assessments allowed the hospitals to move forward with their outsourcing plans.

Financial Reporting

Assignment:
A large medical laboratory was in need of improved financial reporting.

Result:
We developed and implemented more meaningful financial reporting, which allowed management to better assess and monitor the lab’s profitability.

Group Formation

Assignment:
Called upon by several single-specialty and multi-specialty groups to assist with consolidating several practices into a single large group, commonly referred to as a “mega-group” or “super-group”.

Result:
We were intimately involved in all aspects of the group consolidation, including governance issues, financial modeling, banking and financing, internal controls and selection of a management service organization, as well as additional operational issues up to and including a successful launch.

Practice Acquisition

Assignment:
A major New York hospital required benchmarking and other financial analyses to evaluate the finances of a targeted medical practice.

Result:
We worked closely with hospital’s management in analyzing the financial results of a large single-specialty medical practice, which included specific benchmarking analyses. Our professionals advised the hospital’s CFO and attorneys in structuring a purchase of that practice, which included structuring the compensation arrangements between the hospital and the physicians. Our efforts resulted in a successful transaction for the hospital.

Revenue Allocation Analysis

Assignment:
We were retained by a major health care law firm whose client, a large multi-specialty medical practice, required the services of a specialist to develop an acceptable revenue allocation methodology for the practice’s physicians.

Result:
We developed a methodology for the sharing of designated health service (“DHS”) revenues amongst the physicians in the practice. As part of the engagement, we considered various allocation methodologies, each complying with both federal and state regulations, including those promulgated under Stark. In the end, the practice-owners were able to agree on an accepted allocation methodology, which was then implemented.

Start-Up Projections

Assignment:
We were engaged by several large radiation treatment and diagnostic imaging facilities to prepare start-up projections for proposed facilities.

Result:
Working closely with investor groups, we developed projections using both industry-wide benchmarks and specific revenue and cost data provided by management. Our efforts allowed the investor groups to raise additional capital and attract physicians to work in the facilities.

Strategic Planning

Assignment:
We were engaged to develop long-term strategic plans for physician groups.

Result:
We worked with both lead physicians and management in developing strategic plans that addressed such critical areas as new clinical service offerings, practice acquisitions, capital expenditures, long-term financing, and exit strategies for the more senior physicians. This allowed practice owners to develop strategies for future growth and stability.

REAL ESTATE Case Studies

Co-Op Operating Efficiencies

Assignment:
A cooperative housing corporation (the “Corporation”) engaged us to perform an audit. The Corporation, located in Manhattan, owned a parking garage for use by its shareholders. During our review of the predecessor accounting firm’s workpapers, we noticed that a considerable amount of time was spent accounting for and reconciling garage rental income, and amounts due to the garage operator each month.

During the audit, we investigated this matter. Under the terms of the master lease, the garage operator was obligated to pay a fixed monthly rent to the Corporation. The garage operator was than required to bill the shareholders for the rent applicable to the occupied parking spaces. However, the monthly billing became the obligation of the Corporation. In addition, the garage operator’s obligation to pay its monthly fixed rent would be offset by the rent received from those shareholders who occupied the parking spaces. In the event that the amount of rent applicable to the shareholders’ parking spaces exceeded the amount of fixed rent due from the garage operator, the Corporation was required to refund the excess to the garage operator.

Result:
We determined that, in effect, each month the Corporation was providing the accounting for the garage operator, including billing and collections. This function was very time consuming both for the client as well as the auditors at the end of the year. The reason for this arrangement was attributable to a 6% New York City Sales Tax on parking. Under prior law, rent paid directly to a garage operator was subject to Sales Tax. However, if rent was charged by the cooperative housing corporation, the Sales Tax was not applicable. We researched this matter and determined that the law had changed. Rent paid by a shareholder directly to a garage operator under the terms of a master lease was not subject to the 6% Sales Tax.

Based on our findings, we advised the Board on a recommended course of action. Effective immediately, the garage operator began billing the shareholders directly, and paying the Corporation the monthly fixed rent. The client was very appreciative, because we improved their cash flow and also reduced the time, cost and resources required to provide the monthly accounting.

Real Estate Fund Outsourcing Services

Assignment:
We were retained by a $108 million mezzanine lender and real estate fund to perform all bookkeeping and accounting functions, prepare tax returns, compile quarterly financial statements and provide a big four accounting firm with all documentation supporting the year end financial statements necessary to perform the annual audit.

Result:
The fund outsourced all the accounting and tax functions to Gettry Marcus and therefore did not have to hire an entire internal accounting department, including a Chief Financial Officer and additional staff, which would have incurred significant costs for salaries and benefits. A better fit for the fund was to pay for accounting services strictly based on time and to utilize the expertise of Gettry Marcus to provide these various accounting and tax functions on its behalf while keeping operating costs down. The client has been very pleased with the services provided by Gettry Marcus because it allows management to focus on running the operations of the Fund.

Sale Of Property & Estate Planning

Assignment:
We were engaged to assist our client with the sale of a piece of property, formerly the main manufacturing site of the business. In assisting our client we assessed the risk of the purchaser not performing under a contract, evaluating the liquidly of the combined assets of all related companies through the contract period and long term planning for family succession. To meet the needs of the all the related companies, we met with our client frequently to focus on issues and proposed paths to solutions. Where needed, we brought in outside professionals with specific expertise.

Result:
Due to market conditions and our clients’ desire not to share in any future upside we worked with outside counsel and the client to develop a contract based on a non-refundable deposit if the buyer did not complete the purchase. During the contract period to protect the principal’s family we recommend the purchase of life insurance to protect against a lack of liquidity if the principle died. Additionally, with management we planned to maximize the use of the recording income to satisfy banking covenants. As the transaction closing date was extended, we were able to show our principal that he could do estate planning and transfer shares of the company by taking discounts on transfer of stock interests while maintaining total control.

Gettry Marcus’ total approach to the transaction, from the real estate transaction, to making sure the operating business flourished, to planning for the principal’s family, strengthened the firms relationship with the client.

Sale/Refinance

Assignment:
A Gettry Marcus client, who owns a shopping center in excess of 1 million square feet, requested our firm’s advice and guidance with a potential sale, refinance and restructuring of a partnership agreement. The entire process evolved over a period of 12 months. The client’s objective was to obtain a consultant and trusted advisor who was capable of wearing many hats.

Result:
Our firm was part of numerous discussions and meetings with potential buyers to determine a potential selling price. The client decided to maintain ownership.

Afterwards, we arranged for the successful refinancing with a national company through one of the firm’s trusted mortgage brokers. The partnership agreement needed to be renegotiated, among the existing partners and their legal counsel, to reflect the current operations and understanding of the managing members. There were numerous potential tax traps with the restructuring, including potential technical termination of the existing partnership as well as abiding by complex IRS regulations under 1.704 (b) of the internal Revenue Code.

In this engagement, Gettry Marcus assumed the role of a trusted advisor and “quarterback” of the entire process.

Tax Planning

Assignment:
We were asked by one of firm’s largest family-owned real estate clients to structure the partnership allocations with respect to a pending acquisition of a portfolio of properties. The properties would be owned by three generations of the family. The objective was to allocate as much depreciation as possible to oldest generation so as to shelter significant taxable income from other sources. In all cases, however, the client did not want to take a position that would be overly aggressive.

Result:
Using our deep technical knowledge of the very difficult partnership allocation regulations, we came up with a proposal that allowed the partnerships to allocate a percentage of depreciation deductions to the oldest generation that was far in excess of its percentage interest in the partnership. These allocations were reviewed by a “Wall Street law firm” that ultimately agreed with our proposal. Gettry Marcus was able to bring tremendous value to the family.

SMALL BUSINESS SERVICES Case Studies

Payroll Preparation

Assignment:
A Gettry Marcus staffing client had specific needs to enter very detailed payroll information for 500 employees into QuickBooks every two weeks. The client was using a payroll service provider to prepare their payroll however, it took them several days to enter the information into QuickBooks. Our team worked with the payroll service provider to map the payroll information into QuickBooks so that the data went almost instantaneously into the program.

Result:
The client made a decision to switch to a new payroll service provider. However, the new payroll service provider did not have the same mapping capabilities. To reconcile this issue and help our client achieve their goals, Gettry Marcus’ QuickBooks team worked with a third party add-on product to create custom interfaces from the new payroll service provider.

Sales Commissions

Assignment:
Using a combination of QuickBooks and manual entry, a Gettry Marcus client calculated commissions for their salespeople based upon a complicated formula that varied by salesperson.

Result:
Gettry Marcus found and implemented a third party add-on application which integrated the entire process using QuickBooks.