Tax Court Denies Taxpayer’s Motion for Summary Judgment Relative to an Excess IRA Contribution Relating to an ESOP Purchase/Sale
The Tax Court was asked in this ESOP-related case to approve the taxpayer’s motion for summary judgment. The petitioner contended that the IRS “is precluded as a matter of law from asserting excise tax liability under section 4973” because it did not issue him a notice of deficiency challenging his income tax treatment of the transactions that generated the excess contributions. The motion was denied. The alleged excess contributions were more than $26 million with alleged excise tax of more than $8 million.
ESOP valuations may be at a turning point
At last week’s inaugural ESOP Virtual Conference hosted by the American Society of Appraisers, the landmark Bowers case was discussed, which could represent a turning point for ESOP valuations.
ASA debuts virtual ESOP conference June 21
The American Society of Appraisers has added a new specialized event to its conference schedule: the 2022 ASA ESOP Virtual Conference on June 21.
DOL proposes change to ESOP prohibited transaction exemption requirements
ESOP appraisers should take note of a proposed rule to amend the Department of Labor (DOL) prohibited transaction exemption procedure, reports the American Society of Appraisers (ASA).
Harrison v. Envision Mgmt. Holding, Inc.
The U.S. District Court (Colorado) denied a motion to compel arbitration the defendants brought in a case the plaintiff participants brought (a purported class action) in an ESOP the defendant company, et al. established. “The Plaintiff argues that the Defendants’ actions related to the sale caused him and all other ESOP participants to suffer significant losses to their ESOP retirement savings.” The court denied the motion.
U.S. District Court Denies Motion of Defendants in an ESOP Case to Compel Plaintiff Into Arbitration
The U.S. District Court (Colorado) denied a motion to compel arbitration the defendants brought in a case the plaintiff participants brought (a purported class action) in an ESOP the defendant company, et al. established. “The Plaintiff argues that the Defendants’ actions related to the sale caused him and all other ESOP participants to suffer significant losses to their ESOP retirement savings.” The court denied the motion.
Stout Risius Ross, LLC v. Aspen Specialty Ins. Co.
Stout Risius Ross LLC asked for a declaratory judgment to require Aspen Specialty Insurance Co. to defend Stout Risius Ross in a lawsuit brought against it by its former client, Wilmington Trust, in an ESOP matter. Stout Risius Ross performed a valuation for an ESOP transaction that the court later criticized in that matter (Brundle). After being sued by Wilmington Trust, Stout Risius Ross filed a claim with Aspen, which was denied by Aspen, citing the “prior knowledge” clause. The court denied Stout Risius Ross’ motion for declaratory judgment and did not allow Stout Risius Ross to amend its motion.
U.S. District Court Dismisses Accounting Firm’s Plea to Require Insurance Company to Defend a Lawsuit Against It
Stout Risius Ross LLC asked for a declaratory judgment to require Aspen Specialty Insurance Co. to defend Stout Risius Ross in a lawsuit brought against it by its former client, Wilmington Trust, in an ESOP matter. Stout Risius Ross performed a valuation for an ESOP transaction that the court later criticized in that matter (Brundle). After being sued by Wilmington Trust, Stout Risius Ross filed a claim with Aspen, which was denied by Aspen, citing the “prior knowledge” clause. The court denied Stout Risius Ross’ motion for declaratory judgment and did not allow Stout Risius Ross to amend its motion.
ESOP companies more optimistic about recovering
Valuation experts assessing how a subject company will recover from the pandemic will be interested in a new study.
15 Cautionary Areas to Review in ESOP Valuations
Business valuation practitioners perform private-company equity appraisals for many applications including gift/estate tax planning, transaction opinions, and financial reporting; yet ESOP valuation assignments present complex challenges. Not only is the purpose of the appraisal unique, but the particular client, an ESOP trustee (acting as a fiduciary), also has many ESOP-specific disclosures and requirements. A well-developed ESOP valuation report may not simply achieve the appraisal prescription set forth in Revenue Ruling 59-60 or USPAP compliance. Join ...
Silver lining to Vinoskey ESOP appeal decision
In the well-publicized Vinoskey ESOP case (our latest coverage is here), the appellate court affirmed the district court in deciding that the company owner had extensive knowledge about the company and its prior valuations, and, thus, it was plausible to infer that “something was off.”
An Inside Look at the Landmark ESOP Valuation Case
For over a decade, the Department of Labor has not lost a major ESOP case on a valuation issue, but its winning streak ended with Walsh v. Bowers. The case involves many key valuation issues, and Ken Pia (Marcum LLP) and Ian Rusk (Rusk O’Brien Gido + Partners LLC), expert witnesses for the defense, give their insights.
Walsh v. Vinoskey
This case covered the appellate decisions regarding the well-publicized Vinoskey ESOP case. The appellate court affirmed the district court in deciding that the company owner had extensive knowledge about the company and its prior valuations, and thus it was plausible to infer that “something was off.” There was no clear error in the district court finding that the owner violated ERISA. The appellate court also allowed an offset to damages for the debt the owner forgave.
Court Affirms Violation of ERISA but Allows Offset of Debt Forgiveness in Determining Damages
This case covered the appellate decisions regarding the well-publicized Vinoskey ESOP case. The appellate court affirmed the district court in deciding that the company owner had extensive knowledge about the company and its prior valuations, and thus it was plausible to infer that “something was off.” There was no clear error in the district court finding that the owner violated ERISA. The appellate court also allowed an offset to damages for the debt the owner forgave.
Recent ESOP Ruling Changes the Game
Recently, a district court in Hawaii has ruled in favor of the trustees and sponsors in a case that is getting a lot of attention, Walsh v. Bowers, 2021 U.S. Dist. LEXIS 177184. The Department of Labor sued the defendants, which included two individual owners. read on to dive a little deeper into the details of this fascinating case!
Key ESOP case underlines importance of the management interview
In the published opinion in the groundbreaking recent Walsh v Bowers ESOP case, the court noted that the DOL’s valuation expert’s “failure to follow Uniform Standards of Professional Appraisal Practice (USPAP) introduced substantial errors into [his] analysis.”
Will the landmark ESOP valuation case open the door?
During an amazing webinar with the testifying experts in the recent Walsh v Bowers ESOP case, a question came in from the audience: “Do you think this case will open the door for the Department of Labor and the valuation profession to work together to develop guidance around ESOP valuations?”
Landmark ESOP Ruling: Inside the Walsh v. Bowers Case with the DOL
Join experts Ken Pia and Ian Rusk for a deep dive into the recent ESOP case decision involving the Department of Labor, a Hawaii-based ESOP company (Bowers & Kubota), the ESOP’s trustee, and selling shareholders. Many key valuation issues and standards were addressed through expert testimony and later in the district court’s decision. The expert witnesses for the defense will walk the participants through each phase of the case through the trial and court’s decision.
Experts in landmark ESOP valuation case give the inside story
For over a decade, the Department of Labor has not lost a major ESOP case on a valuation issue, but its winning streak ended with Walsh v. Bowers.
ESOPs Are a Mine Fields for Valuation Analysts
The Department of Labor (DOL) has a long history of challenging transactions involving company owners selling some or all of their interests to an ESOP. The most common challenge is to the value the trustees approved for executing the sale of company stock held by owners to the ESOP.
Insurer not required to defend valuation firm in ESOP lawsuit
A valuation firm can no longer force its professional liability insurer to defend a lawsuit challenging the firm’s ESOP valuation because the case’s surviving claim falls under a policy exclusion, a federal court has ruled.
Major win in ESOP valuation case vs. DOL
A district court has ruled “decisively” against the Department of Labor (DOL) in an ESOP valuation case, stressing that the DOL failed to follow standard valuation practices.
Walsh v. Bowers
A district court has ruled “decisively” against the Department of Labor (DOL) in an ESOP valuation case, stressing that the DOL failed to follow standard valuation practices.
District Court Rules ‘Decisively’ Against the DOL in an ESOP Overvaluation Case
The Department of Labor sued the defendants, which included two individual owners, Bowers & Kubota Consulting Inc. and the Bowers & Kubota ESOP, alleging that the defendants had violated ERISA laws by manipulating data to induce the ESOP to pay $40 million for the shares of the individual shareholders that the DOL claimed was in excess of the fair market value of the shares. After extensive testimony of valuation experts and analysis of the facts of the case, the court determined that no ERISA violations have been established.
Malpractice Insurer Not Required to Defend Valuation Firm for Claim Alleging Securities Fraud
This case featured a motion to dismiss a claim from an insured that the plaintiff, Great American, was required to defend the defendant, Stout, against a claim by ESOP plaintiffs that Stout committed “federal securities fraud.” While the Great American policy covered valuation services, the policy also featured an exclusion for claims against the insured for securities violations.