Laro to BV experts: Value conclusion is last on my lis

BVWireIssue #68-3
May 22, 2008

“This program has the best panelists of any that I’ve seen in the country,” the Honorable David Laro (U.S. Tax Court) told a rapt audience at the New York State Society of CPAs 2008 Business Valuation Conference, which met in Manhattan earlier this week.  “These are the experts,” he said—and attendees might as well have returned the compliment, as the esteemed Judge spoke on everything from his own experience (“Candidly, I did not know much about discounts for lack of marketability before Mandelbaum, but I studied it and realized how important it is”), to his expectations from the professionals who walk into his courtroom.  For example—if he sees an expert passing notes to the attorney on the case, he puts a stop to it.  “That’s advocacy,” he said.  “That’s not neutrality—and I’ve seen it,” he added, meaning that some measure of damage to credibility may have been done.  “Once you are retained you must maintain your independence,” he reminded valuation experts, “because if not, [your testimony] is of no value.”  

And what about the movement toward “thinner” reports, in an effort to omit extraneous matters and shave costs for clients?  He sympathizes with the increasing complexity and cost of many valuation engagements, but expert reports should contain “all relevant information,” he said, “everything you think that the judge needs to get into her [final] opinion,” because in federal Tax Court, the reports are tantamount to an expert’s direct testimony.  Moreover, “I read the bottom-line number last,” Laro said.  “The analysis is the most important—how you took the data, analyzed it, and wed it to your conclusion.  I want transparency; I want to see your thinking—because that’s what appellate courts want to see from me” should they review his decisions (which currently enjoy a 97% confirmation rate).  One more tip: Keep your supporting data on hand, so that when an opposing counsel asks where you got the information for your report you don’t have to say that it’s back in your files.  “I always get bothered by that,” he said.  “No judge stops a trial so that the expert can run back to the office.”

Your job is to tell a story.  Echoing Laro’s comments, Mel Abraham ( told attendees that the “right” ratio for valuation reports is “two parts words and one part numbers.”   A valuation professional’s “true” job is not about the numbers—it’s about telling the story of the numbers.  “We are in the world of persuasion,” he said.  Persuasion is not advocacy; instead, it’s taking the information, data, and concepts—and putting them together in a truthful, credible opinion that persuades the users of the information and educates the trier-of-fact.  “The focus is too much on the numbers,” Abraham said, referring to clients as well as experts.  “Be the storyteller, from an objective, independent perspective.”  

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