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Contents
Quick Links to SC&H Group, LLC 2009 MSBA Conference We were excited to see everyone at the 2009 Annual MSBA Conference in Ocean City. If you didn't get a chance to meet us in person, please give us a call. We would be happy to discuss any valuation issues that your clients are contemplating. Congratulations to Scott Wilson from Miles & Stockbridge who was the winner of our $100 American Express Gift Certificate drawing. Valuation and Estate Planning in the Current Environment The challenging economic environment has negatively affected many owners of privately-held businesses over the last 12 months. However, it has also created a unique estate planning opportunity for business owners who may be subject to estate taxes in the future. Due to these economic conditions, the values of many privately-held businesses and other assets have declined significantly due to:
As a result of these temporary declines in the value, business owners can use a variety of techniques to pass stock and other income producing assets to their heirs at a fraction of the long term value of those assets. In combination with the observed declines in the value of many assets, the low interest rate environment further contributes to the attractiveness of certain estate planning vehicles such as:
Our experienced valuation and estate planning experts are available to discuss these opportunities with you and guide you through the process of setting up estate plans and properly valuing interests for estate planning purposes. For more information about our Business Valuation practice, email BVLS@SCandH.com or call (410) 403-1500 | (800) 832-3008.
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Valuations Insights, Third Quarter, 2009 Court Frustrated by 'Hide the Ball' Tactics in Damages Discovery Kingsway Financial Services, Inc. v. PricewaterhouseCoopers LLP, 2008 WL 5336700 (S. D. N.Y.) December 28, 2008
The Kingsway court quoted this older case when deciding whether to impose discovery sanctions on the plaintiffs in their suit against PricewaterhouseCoopers (PwC) for securities fraud and conspiracy. The plaintiffs claimed that from 1999 to 2002, the defendants inflated the value of company to induce their purchase of stock. However, in the long litigation that ensued--spanning more than four years--the plaintiffs refused to provide a detailed description of how they and their experts would calculate damages, which allegedly amounted to over $205 million. A costly and contentious discovery. For example, in PwC's first set of interrogatories, they asked the plaintiffs to identify the category of damages sought and their calculation, plus supporting documents and witnesses. In a court conference, the plaintiffs explained that they did not want to disclose these items. Why? They were concerned that damages calculations might change during discovery and how they might give defendants a "roadmap" by which to plan their trial strategy. The court directed the plaintiffs to answer the discovery requests pursuant to the applicable federal rules. The plaintiffs complied, to a certain extent. Their response detailed their damages calculations, including breaking them into nine categories (e.g., $50.4 million lost due to materially understated reserves; $107.4 million lost due to increased cost of capital), and they designated three witnesses with knowledge of these numbers. Nonetheless, when the defendants deposed one of them, the witness acknowledge knowing little about the damages component, including not even realizing any adverse consequences to plaintiffs' capital reserves. The defendants moved for sanctions, including a request for the "ultimate" penalty of default judgment. The court clearly expressed frustration with the unnecessary costs and conflict:
The court declined to dismiss the case, however, and instead ordered the plaintiffs to pay the defendants' fees and costs in taking the deposition. |
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