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.
Physician Distribution, Mobility, Fair Market Value, and Compensation Surveys: An Update
This article updates the author’s peer-reviewed research on the geographic distribution of physicians in the United States, including some key commentary from CMS about the use of surveys for Stark fair market value.
Harvey v. Harvey (In re Michael S.)
In this divorce case, on appeal, the California appellate court rejected a discount for taxes not immediate and specific and allowed a DLOM regarding the value of the wife’s one-half interest in the jointly owned business. The court also determined that “the [trial] court impliedly made the factual findings necessary to support its ruling regarding Cynthia’s breach of fiduciary duty claim.” Finally, the appeals court determined that the trial court had the authority to set its own terms for payment of the equalization amount to the wife.
In a Divorce Case, the California Court of Appeal Rejects Discount for Taxes Not Immediate and Specific But Allows a DLOM
In this divorce case, on appeal, the California appellate court rejected a discount for taxes not immediate and specific and allowed a DLOM regarding the value of the wife’s one-half interest in the jointly owned business. The court also determined that “the [trial] court impliedly made the factual findings necessary to support its ruling regarding Cynthia’s breach of fiduciary duty claim.” Finally, the appeals court determined that the trial court had the authority to set its own terms for payment of the equalization amount to the wife.
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.
Guttman v. Guttman
The one-third partner of a real estate partnership, Bruce Guttman (Bruce), sued for dissolution. The two majority partners initiated a statutory procedure to buy out Bruce. All three appraisals were very close to $38 million. Feeling the valuations to be too low, Bruce sought to withdraw his complaint without prejudice. The trial court, on a motion from the majority partners, vacated Bruce’s dismissal. The appellate court affirmed the trial court.
One-Third Partner Sued to Have Partnership Dissolved, Asked to Vacate His Dissolution Assertion
The one-third partner of a real estate partnership, Bruce Guttman (Bruce), sued for dissolution. The two majority partners initiated a statutory procedure to buy out Bruce. All three appraisals were very close to $38 million. Feeling the valuations to be too low, Bruce sought to withdraw his complaint without prejudice. The trial court, on a motion from the majority partners, vacated Bruce’s dismissal. The appellate court affirmed the trial court.
The Myth of the Healthcare Multiple
For most, the concept of a valuation multiple is easy for market participants to understand. Unfortunately, this simplicity of concept leads to widespread misapplication of valuation multiples and often results in sellers having unreasonable expectations. In the myth of the multiple, healthcare valuation expert Jason Ruchaber, CFA, ASA, will separate fact from fiction and explore the real financial and compliance considerations that drive FMV and purchase price in healthcare transactions.
TAF now has 32 podcasts on appraisal topics
The Appraisal Foundation (TAF) has a podcast series called “Appraiser Talk” that answers questions from every corner of the appraisal profession from consumers to appraisers and real estate to business valuation.
‘Survey Says’ for FMV of Physician Compensation Is on Its Last Legs
The use of compensation surveys to determine the fair market value of physician compensation is seriously flawed, a position well-known expert Mark Dietrich has long maintained. Plus, recent government regulations confirm his position. He offers an alternate methodology.
BV News and Trends November 2021
A monthly roundup of key developments of interest to business valuation experts.
Dietrich updates landmark research on physician compensation
The December issue of Business Valuation Update includes an article by Mark Dietrich that updates his important research on the geographic distribution of physicians in the United States.
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?”
BV News and Trends October 2021
A monthly roundup of key developments of interest to business valuation experts.
D&P/Kroll updates multiples in healthcare services
The S&P Healthcare Services Index declined by 0.6% in August, compared to the S&P 500 Index, which increased 2.9% over the same period, according to the August 2021 “Healthcare Services Sector Update” from Duff & Phelps, a Kroll Business.
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.
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.
BV News and Trends September 2021
A monthly roundup of key developments of interest to business valuation experts.
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.
New online tool for valuing fractional interests
This October will see the launch of the Partner Value Expert (PVX), an online application that represents a new approach to valuing fractional interests involving real estate.
Specialty pharmacies resilient amid COVID-19
The pandemic had less of an impact on specialty pharmacies than other types of entities, say speakers on a recent BVR webinar.
New rules for FMV in healthcare should dull DOJ’s sword
The Department of Justice has taken an aggressive stance in fraud and abuse cases involving the measurement of fair market value of physician compensation.
Cheng v. Coastal Lb Assocs.
This case concerned the purchase of minority interests in a California limited liability company under the Corporate Code concerning the purchase of these interests in lieu of a liquidation of the company. The appellate court affirmed the trial court’s order confirming the purchase of these interests at a discounted fair market value.