This matter involves a dispute between a leading television and internet seller of jewelry and a software company.
Accumyn was asked to review and opine on the damages suffered by the jewelry seller as a result of the failed software implementation. Accumyn determined the jewelry seller’s out-of-pocket costs and extra-expenses incurred as a result of failed software implementation. This included payments to the software company, as well to the other third-party vendors. This involved a determination of the value of the benefit received, if any, for each of these payments. Accumyn also determined the internal labor costs incurred by the jewelry seller in order to ameliorate the damage from the failed software implementation.
The assignment also involved the preparation of five lost profit models to determine the damages suffered by the jewelry seller as a result of various delays in obtaining functionalities that had been promised by the software company. Five additional lost profit models were prepared to determine the damages suffered by the jewelry seller as a result of internal projects that were also delayed as a result of the failed software implementation. These analyses involved determination of the expected incremental profits the jewelry seller would have experienced, if not for these delay periods.
Scott Bayley provided two expert reports and trial testimony in support of his opinions.
This matter involves a dispute between a high-end credit card company that provides co-branded marketing services and a global payment processing company.
Accumyn was asked to review and opine on the damages suffered by the credit card company based on claims that the payment processing company breached its contractual and common-law obligations and interfered with the credit card company’s business operations.
Accumyn determined the credit card company’s lost profits as a result of the payment processing company’s actions. This analysis was based on offsetting the credit card company’s expected program revenues by expected incremental program acquisition and variable carrying costs to derive future profit projections. These revenues and expenses were determined based on the credit company’s historical operating results, as well as the typical operating margins in the credit card industry.
Accumyn then calculated the credit card company’s out-of-pocket costs and extra-expenses incurred as a result of the payment processing company’s actions. This included costs incurred by the credit card company in the process of re-branding its product, retaining its customers, and converting to a new payment network.
Accumyn also determined the internal labor costs incurred by the credit card company in order to ameliorate the damage from the actions of the payment processing company.
Additional analysis included a critique of the opposing experts’ damage calculations
Scott Bayley provided two expert reports and deposition testimony in support of his opinions.
Accumyn’s expert provided testimony in a dispute between a commercial real estate developer and a publicly traded REIT regarding an alleged breach of contract for the development of a first class, 1,000 room, multi-story convention-oriented hotel, and related improvements. The Accumyn team prepared a valuation analysis based on the income approach using hotel revenue projections and the related tax incentives and abatements to be provided by state and municipalities, and the analysis of financing options available given general market conditions and specific industry economics.
Accumyn’s team of economists and valuation professionals valued a successful haute couture fashion company. A start-up designer teamed up with a pair of Houston-based investors and fashion industry experts to secure funding. In the first year, sales to retail stores reached seven figures. However, as soon as orders for the second season were booked, the designer no longer wanted the involvement of her Houston partners. The designer backed away from her commitments to them, cutting off further involvement and breaking away to form a separate company that continues to flourish, with worldwide sales of eight figures.
On behalf of the Houston partners, who wished to realize the full value of their ownership interest, Accumyn prepared a detailed valuation analysis of the original company, as of the time the designer broke away. Using a Fair Value standard, the amount that compensates an owner involuntarily deprived of property, and presuming that the company had gone forward with the involvement of the Houston partners as intended, Accumyn reached a conclusion on the value of the company, under both an income approach and a market approach.
Accumyn refuted dilution claims made by a shareholder of a private entity when the entity issued additional shares of stock under an employee stock ownership plan and a long-term incentive plan. The Accumyn team analyzed the increase in value of the shareholder’s holdings over time and the benefits to the company and its shareholders in establishing employee stock ownership plans and long term incentive plans. The team also included a critique of opposing expert’s claims of dilution and overall methodology in arriving at such claims.
Accumyn’s expert provided testimony refuting a claim for over $60 Million in lost profits and value arising from potential hedging of natural gas production sales as part of a contemplated debt financing. The enterprise would have hedged natural gas price risk by means of forward fixed price sales of physical natural gas or swaps that would have extended over a multi-year period. Accumyn addressed the plausibility of the claimed economic damages in the context of actual forward market conditions at the time the alleged damages occurred. Accumyn discovered that the cost of unwinding underwater positions associated with existing forward physical natural gas sales was disguised. Accumyn showed that cash or credit was generated by selling gas based on the lower of the first of the month or the monthly average indices, at the option of the buyer and that these imbedded ‘lower of’ options as well as additional forward fixed price sales were in violation of a temporary restraining order.
Failure to timely exercise a Termination Agreement providing for the contemplated separation and distribution of assets from an existing natural gas exploration and production joint business venture agreement allegedly prevented both the funding of bank debt financing of plaintiff’s prospective remaining business interests as well as any allegedly prospective forward hedging of any related natural gas production. Accumyn reviewed standard terms and conditions required by bank lenders to oil and gas production companies and analyzed forward fixed price sales (i.e., hedging), including terms and condition, required credit support, and previous hedging patterns.
Accumyn assisted a state regulatory agency representing ratepayers in a proceeding to address the rising cost of construction for an electricity generating facility. The matter involved management of engineering and construction for a 630 megawatt Integrated Gasification Combined Cycle (IGCC) power plant, the first of its kind of its size. The owner had received approval to construct the facility in 2007 based on an estimated project cost of $1.98 billion. The estimated cost soon increased to $2.53 billion for which a second approval was granted in 2009. By early 2011, the estimated cost had increased again to $2.88 billion.
Accumyn’s experts provided testimony on gross mismanagement based on a review of records illustrating the utilities performance in its execution of the project. Aided by a team of engineers, economists and accountants, Accumyn conducted a review of the project’s progress and cost reports, correspondence, and hearing testimony. To enhance research efficiency, Accumyn’s e-discovery specialist converted almost 8,000 separate documents to searchable format. Project management and financial specialists addressed mismanagement of the project’s FEED Study; the delivery method; the contracting approach; the project controls program; the reasonableness and prudency of management’s engineering and construction of the project’s grey water disposal process; and budget manipulation. Testimony addressed financial reporting, transparency and management’s adherence to industry standards and practices for project and construction management.
Accumyn’s expert provided testimony in connection with the dissolution of a commercial real estate development and management partnership, based on the minority partner’s claims of breach of contract, breach of fiduciary duties, and other causes of action. Accumyn analyzed the company’s internally developed financial models and subsequent project appraisals to determine the fair value of the partnerships’ carried profit interests in nine joint-venture projects related to cargo warehouses and related office space. Additional damages were based on the expected value of continuing development and management fees.
Accumyn’s experts analyzed a hospital’s economic damages from the additional construction costs and rent paid on an unfinished diagnostic imaging facility. Shortly after the non-profit Texas hospital entered a long-term commercial lease, began construction and ordered the necessary equipment, expansion was halted when the hospital learned that an existing ground lease with the landowner had restrictive covenants in place that prohibited diagnostic imaging and signage rights. The hospital continued to pay rent on the unfinished space, incurred significant construction delay expenses and had to give up the revenue stream it counted on from the planned expansion. Along with lost profits, Accumyn stepped in to analyze construction cost estimates and economic damages associated with the lost use of exterior signage.
Accumyn’s expert provided deposition testimony valuing damages in connection with an alleged breach of contract and tortious interference claim between a major radiology practice and one of its contracted physicians regarding the provision of services to a third party hospital. Accumyn’s expert analyzed historical financial results in connection with the hospital services contract and determined an appropriate valuation matrix based on a review of guideline professional practices, clinics and medical facilities.
Accumyn analyzed a Loss of Production Income (LOPI) claim against underwriters related to a shut-in of production from deep water offshore wells allegedly due to a hurricane in the Gulf of Mexico. The wells were in varying stages of production at the time of the hurricane so Accumyn had to determine the LOPI for each well, depending upon insurance policy provisions, factual circumstances, and stage of production. Accumyn obtained information from third party sources, including the Minerals Management Service, regarding the dates each well was spud, total depth reached, and production achieved. Accumyn also provided an economic analysis as to the commodity prices of oil and gas during the shut-in period as compared to later periods when there were record high prices.
Accumyn’s expert investigated and analyzed the flow of funds between a series of companies holding the ownership interests in an electrical power plant supplying one of the largest cooperatives in the United States. The Accumyn team assessed the profitability and the economic and financial implications of the ownership structure which included off-balance sheet holdings of one of the world’s former leading energy companies. Accumyn also traced profits and cash flows between entities in light of financing arrangements, option agreements and a buy-out option. Throughout the multi-stage litigation and FERC proceedings, Accumyn prepared a valuation of a power purchase agreement, financial analysis of solvency of parties to the agreement, assessment of various acquisition and disposition options based on historical financial performance of plant and holding entities and modeling to assess provisions to cure the alleged breach of contract.
Accumyn’s expert valued a buyer’s damages incurred due to receipt of a sub-standard luxury aircraft that was repeatedly delayed and when finally delivered by the seller, did not meet the buyer’s expectations. The seller failed to remedy the mistakes in a timely manner and the buyer relied upon the seller’s representation that the aircraft was being made to the buyer’s expectation and therefore did not exercise their right to terminate the purchase agreement. The expert’s damage analysis had to include pre-judgment interest rate calculations and lost revenue analysis due to the fact that the aircraft could not be chartered in its sub-standard condition.
Accumyn’s expert provided trial testimony regarding disgorgement of alleged unlawful profits, based on historic sales patterns by customers’ accounts in connection with an alleged theft of trade secrets between two manufacturers of multifrac toe valves used in wellbores. Accumyn’s expert also prepared a lost profit analysis as an alternative measure of economic damages which included an evaluation of the competing tools in the marketplace which would have limited the ability of the original manufacturer to make any sales, but-for the competitor’s entry into the marketplace.
Accumyn’s expert provided testimony regarding a reasonable royalty in connection with the alleged infringement of a patent by a Taiwanese manufacturer of notebook computers. The patent at issue, owned by a Korean multinational, involved a method of implementing certain keyboard functionality in the notebook computer. The analysis included quantification of the alleged royalty base by model over time, comparison of profitability and incremental production costs, and determination of a reasonable royalty under U.S. statute and case precedent.
The royalty was analyzed based on the relative bargaining positions of the parties in the assumed royalty negotiation, economic analysis of the relevant market, and a detailed analysis of pricing and costs based on component changes in notebook computer models over time.
Accumyn’s expert provided testimony regarding the lost profits, under various valuation approaches, of a publicly traded software company resulting from the alleged misappropriation of trade secrets of another publicly traded software company. The analysis included the determination of “but for” and actual sales, the review of competitive factors and other companies in the relevant market, incremental costs, and present value calculations. Accumyn’s expert also critiqued the opposing expert’s report in which critical assumptions were identified and tested against facts and other information.
Accumyn prepared a detailed damage analysis for an employee of the U.S. Department of Homeland Security who was severely injured after being struck by a bus while attempting to cross a downtown intersection. The testimony of a medical expert established that the injuries sustained from the accident hastened a pre-existing kidney disease, requiring a premature kidney transplant and reducing the individual’s life expectancy.
Accumyn projected long-term growth for future medical costs and wages from federal government agencies. Accumyn also established the individual’s pre-injury earning capacity and applicable income tax rates and deductions, factoring in the employer’s cost for applicable fringe benefits. Finally, Accumyn calculated the amount necessary to pay future income taxes on the interest earned from the anticipated damage award.
Accumyn audited the internal control policies of an independent refiner and marketer of petroleum products (the “Company”), operating several refineries in the United States, to determine if its senior management breached the Company’s policy on extending credit. The Company’s senior management, pursuant to internal control policies and procedures, extended credit to a wholesale customer on an open account basis based on letters of credit the customer provided as collateral and statements made by the Company’s external auditors.
After analyzing the roles and responsibilities of the Company’s management and its external auditors in accordance with generally accepted auditing standards and the Sarbanes-Oxley Act of 2002, Accumyn determined that it was not the role of the Company’s external auditors to determine the credit limit for customers, but the role of the Company’s management, who as a result of failing to adhere to its own internal controls, caused the Company to sustain a significant loss from bad debt. Accumyn ultimately determined that the letters of credit were not valid; were issued several years after the customer’s credit balance had already exceeded the Company’s internal credit limit and the authority of its senior management; and that the Company’s senior management failed to follow its own internal control policies and procedures as it related to verifying customer collateral.
Accumyn’s forensic accounting analysis traced funds among two locations of a magnetic resonance imaging (“MRI”) business and its management company. The MRI business allegedly attempted to avoid paying its lease obligations for one of its locations because of poor performance. Each location was a separate legal entity, but they were being managed and operated as a single business enterprise by a management company. One entity was receiving a disproportionate amount of the scanning revenue from its management company, while the other entity was being charged a disproportionate amount of the fixed asset costs for assets that were being shared among the two entities such as computers, printers, software, faxes and telephone systems. Accumyn was able to identify factors such as common ownership, common management, common employees, common record-keeping, centralized accounting, paying expenses for one another, and sharing expenses. Accumyn then prepared a comprehensive analysis of each entity’s books and records including historical transactions, fixed asset schedules, personal property tax renditions, and income tax returns.
Accumyn’s expert provided testimony on the dissolution of a commercial real estate development of a prominent hospital system and management partnership of physicians, based on the minority partner’s claims of breach of contract, breach of fiduciary duties, and other causes of action. The Accumyn team determined the fair value of the partnerships’ carried profit interests in nine joint-venture projects related to cargo warehouses and related office space. Fair value was determined through consideration of the company’s internally developed financial models and subsequent project appraisals. Additional damages were derived from the expected value of continuing development and management fees.
Accumyn’s expert provided deposition testimony on the economic benefits to the owners of an offshore production facility pursuant to the False Claims Act, 31 U.S.C. § 3729(a)(1) and to an incident of noncompliance determined by the Bureau of Ocean Energy Management, Regulation and Enforcement.
Accumyn’s team analyzed historical production of hydrocarbons reported to the government for royalty purposes; historical costs of lease payments, royalty production payments, and capital additions; annual volumes summarized by resource and reserve category; and the operator’s standardized measure of discounted future net cash flows relating to proven oil and gas reserves.
Accumyn’s expert provided a report and deposition testimony regarding the value of amounts received as consideration for the redemption of equity interest of an independent exploration and production company operating in the Barnett Shale of North Texas. Accumyn critiqued the opposing market value opinion and prepared forensic accounting analysis to determine damages under recession and disgorgement theories.
Accumyn’s expert provided testimony regarding economic damages resulting from a shareholder dispute involving a closely held corporation which trades in refined petroleum products. Accumyn’s expert also critiqued the opposing business valuation and economic damages analysis and provided an assessment of the accounting procedures and methods by which shareholders receive compensation. Accumyn considered working capital on the entity’s financial statement and the proper accounting treatment of shareholder notes as either liabilities or equity in accordance with generally accepted accounting principles, reporting the economic substance of the notes rather than their legal form.
Accumyn’s expert calculated post-liquidation gains realized by certain officers/shareholders from hedging oil and gas production with collar and swap energy derivative instruments after induced liquidations of shareholder convertibles and redeemable preferred stock of non-officer/shareholders. The alleged failure to disclose the subsequent gains resulted in an alleged breach of fiduciary duty claim in a multi-million dollar shareholder dispute. Accumyn thoroughly examined market premiums and Black-Sholes option models, taking into consideration exposure to price and volume risk. Accumyn also compared post liquidation gains using collar and swap derivates versus long put options.
Accumyn assembled a team of engineers and forensic accountants to determine the profits earned by a sub-contractor from constructing two land-based drilling rigs for a Canadian exploration and production (“E&P”) company. The E&P company hired a contractor who sub-contracted the project to a land rig specialist. After more than $8 million was paid to the original contractor, the contractor ceased operating and entered chapter 7 bankruptcy. The sub-contractor said a delay in payments by the contractor had resulted in a price escalation and demanded almost $2 million in additional payments to complete the first rig. After the first rig was delivered, the sub-contractor terminated the agreement and sold the uncompleted second rig to a third party.
Accumyn’s technical engineering experts identified each major component of the rig construction and the related purchase orders and disbursements. Accumyn’s engineering and forensic accounting experts demonstrated that funds had been used to acquire parts and pay expenses for unrelated purposes, including other rig construction projects.
Accumyn’s expert determined the economic benefits reported by an employee’s numerous affiliated businesses during his employment with a global enterprise data center. In 2008 the data center hired a new Director of New Construction who breached his employment agreement and his fiduciary duty to the data center when he owned, operated, or was connected to numerous affiliates which became vendors of the data center.
Accumyn’s expert determined that the data center made substantial overpayments to the employee’s affiliated businesses in the form of either markups for services performed by the affiliates or payments for services not adequately performed by the affiliates. The Accumyn team prepared a detailed review of the reported income and expenses from various income tax returns of the affiliates and prepared demonstratives tracing funds through various bank statements of the employee and his affiliates.
Accumyn prepared a detailed analysis of the deteriorating capital markets during the 2007 financial and credit meltdown and the impending sub-prime mortgage crisis to derive a but-for calculation that would represent what could have been done by a shopping center developer had they been informed in March 2007 of their anchor tenant’s intent not to lease. This analysis included a comparison of the value of the center based on spring 2007 market conditions and conditions at the time of trial in late 2009.
The shopping center developer initiated a project in The Woodlands, Texas, to build a Class-A center under the assumption that the anchor tenant, a high-end organic grocery store, would be occupying the most visible space to attract customer traffic and enhance its appeal to other tenants and institutional investors. However, the grocery tenant allegedly decided to terminate its lease several months before disclosing to the developer. The alleged misrepresentation coincided with the 2007 financial and credit meltdown and the impending sub-prime mortgage crisis. Due to the anchor tenant’s delayed notification, the developer experienced difficulty in filling the remaining space and subsequently had to develop the center in a market characterized by scarcity of credit funds, higher required rate of returns from equity investors, and a poor overall prospect of the U.S. economy; this resulted in higher capitalization rates and a lower market value of the center. The Accumyn team assisted the developer by preparing analysis of various budgets based on different development scenarios, including net rentable square footage, lease rates, capitalization rates, and discounts rates in various timeframes.
The Accumyn team prepared a forensic analysis of transactions dating back to 1986 to determine a decease CEO’s Heirs’ and investors’ share in economic benefits from a patented technology. The technology was developed in 1990 and was the subject of patents filed in 1991. Subsequently, these patents were the subject of a lawsuit resulting in a settlement of $612.5 million in 2006. Accumyn determined the proportional distribution of the 2006 settlement proceeds the heirs and investors were entitled to as well as a proportional distribution of the sums received for this technology in 2004, 2005, 2012 and thereafter. Accumyn performed a review of S corporation, partnership and individual federal and state income tax returns.
Accumyn prepared detailed funds tracing binders with explanations and support of investor funding before, during and after the development of the patented technology. As a result of Accumyn’s forensic analysis, the underlying sources of funds provided during development of the patented technology, as well as the changing shareholder interests over time, including the conversion of the entity’s convertible debt instruments at issue, were corroborated. Accumyn determined the sources of claimed ownership in the patented technology, and the receipt and distribution of sums subsequently received in connection with monetizing the patented technology. Accumyn prepared an analysis of the magnitude of equity ownership by chief executive officers of companies in the United States and Canada in order to determine a percentage range for granting equity in exchange for services (sweat equity) to the heirs of the deceased CEO. Accumyn’s forensic analysis provided the foundation from which computations could be made for the shareholder’s share of the monetary benefits received from exploitation of the patented technology. Accumyn’s expert calculated the current net worth of certain individuals and entities for the purpose of assessing punitive damages, and rebutted similar calculations by the opposing expert.
Accumyn’s expert determined and detailed the economic benefits reported by an employee’s affiliated company during his employment with a global cosmetic producer. In 2010 the cosmetic producer hired a new Vice President of Technology who later secretly formed and operated an IT support company which became a vendor of the cosmetic producer. This employee/vendor relationship violated the cosmetic producer’s employee handbook, which the employee signed, prohibiting conflicts of interest.
The employee utilized his officer position to channel a significant amount of the cosmetic producer’s information technology business to his affiliated company. Accumyn determined that the cosmetic producer made substantial overpayments to the employee’s affiliated company in the form of markups. Accumyn also prepared a detailed review of the reported assets and business expenses from financial statements, as well as a detailed analysis of bank statements, credit cards, invoices and income tax returns.
Accumyn assisted a receiver for a failed financial advisory group by evaluating claims against a bank for negligence, violation of account integrity, and conversion, in which the bank improperly allowed a check purchased by the financial advisory group to be deposited into an unrelated account at the same bank. Accumyn examined standards of ordinary care, deposit account integrity, conversion, commercially reasonable standards on deposit account activity, adherence to the bank’s own internal policies, and customary procedures for cancellation of an official check.
Accumyn’s expert assisted in the recovery of amounts due under provisions of a credit facility agreement with a public financial institution engaged in the origination and servicing of residential mortgages in the United States. The financial institution was experiencing difficulties in 2007 due to the market downturn related to subprime mortgages. The financial institution was acquired and made private by a private equity company based in Texas, which specialized in investing in distressed companies. A provision in the credit facility agreement between the lender and the financial institution provided that the debt should have been paid off if the credit rating of the financial institution would have fallen more than one “notch”. During mediation Accumyn prepared demonstratives of the various liquidation scenarios and identified key documents that revealed how management’s misrepresentations intended to prevent the credit rating downgrade.