Forensic, General & Medical
Expert Witnesses

Damages, Appraisal, Accounting & Economics Expert Witnesses

Fulcrum Inquiry

Fulcrum Inquiry

888 South Figueroa Street
Suite 2000

Los Angeles, California 90017

Phone(213) 787-4100
Fax (213) 891-1300

Website www.fulcrum.com
E-mail  Send an email

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Fulcrum Inquiry is a business and financial consulting firm. We have expertise in accounting, appraisal, economics, and finance. Our more experienced professionals regularly provide expert testimony, and have achieved outstanding results in this area.

Our careful economic analysis and industry research, presented through effective witness testimony and graphics, gives juries the basis to determine proper damage amounts. Accounting fraud and other financial investigations are thorough yet quick because our experts ask the right questions at the beginning.

Services

Fulcrum Inquiry offers the following services:

- Expert Witness Testimony / Litigation Consulting

In complex commercial litigation, an "expert witness" usually presents the calculation of damages. This occurs because of the complexity of the calculations, the specialized nature of the work, and the credibility and independence that only an outsider can provide.

- Forensic Accounting

Forensic accountants provide a wide variety of investigations to help ensure that your business is treated fairly.

- Business Valuations and Commercial Appraisals

We also assist management teams with the following related services: Exploration of New Business Opportunities/Business Plan Development; Corporate Strategy Planning; Situational Assessments

- Personal Injury and Employment Damages

We prepare economic damages calculations that address future lost earnings and costs for both plaintiffs and defendants. These analyses consider economic factors, including:

1. Future earnings and earnings growth
2. Value of employment benefits
3. Expected work life
4. Present value discounts for future investment earnings
5. Income tax impacts
6. Lost household contributions
7. Future consumption

- Bankruptcy and Restructuring

Most companies in financial difficulty require advice to determine what went wrong and what needs to change. After a plan is developed, transactional assistance is needed to implement the most important decisions. Here is how we help:

1. Troubled Company Restructuring
2. Forensic Accounting and Fraud Auditing
3. Asset Monitoring for Secured Lenders
4. Interim Financial Management
5. Fresh Start Accounting
6. Solvency, Retrospective Solvency, and related Expert Testimony
7. Fraudulent Conveyance Determinations and related Expert Testimony
8. Support of Plans of Reorganization
9. Asset Appraisals and Fairness Analyses

- Insurance Claims

Most commercial insurance policies provide coverage for (i) lost profits which occur in connection with a covered physical loss, (ii) the added costs of getting the business reopened, and (iii) losses in connection with closures from actions of a civil authority. Some business policies also provide protection from "contingent" business interruption losses caused when key suppliers or customers experience a disaster that also affects your business, even when the physically-damaged property is NOT owned, operated or controlled by the insured.

- Sarbanes-Oxley and Nonprofit Whistleblower Systems

Section 301(4) of the Sarbanes-Oxley Act ("SOX") requires Audit Committees to establish procedures for the collection and resolution of employee complaints covering an extremely broad range of financial and accounting control issues. The system must allow for anonymous and confidential submissions. Whistleblower reporting systems are widely considered a best practice for nonprofit organizations.


Litigation Support Services

Fulcrum Inquiry assists with computerized data analysis that will help defend or defeat class certification, testifying on appropriate damages, and administering class settlements.

We can identify and quantify the existence and effects of non-competitive behavior. Our experience includes allegations of unfair competition, price fixing, predatory pricing, and market share.

In disputes in which the damages, accounting, or valuation are the most important items at issue, Fulcrum’s skills are more helpful than, or can be a useful supplement to, what legal-based judges, arbitrators and mediators typically address.

Areas of Expertise

Additional Expertise:

Whistleblower Systems, Sarbanes-Oxley Act.

Profile

We are a team of experienced consultants with international accounting and consulting experience. Our firm provides outstanding analysis and research that assists our clients in solving complex business problems. We have a wide range of clients from the world’s largest companies to family owned businesses.

Our Lead Testifying Experts:

David Nolte has more than 30 years of experience in financial and economic consulting. He has served as an expert witness in over 100 trials. He has also served as an arbitrator. He has achieved the following credentials - CPA, MBA, CMA and ASA.

Mr. Hendricks is a real estate appraiser and MAI with more than 25 years of experience. He has appraised practically every type of real estate in both litigation and non-litigation settings. His major clients include some of the largest and most well-known developers in Southern California.

Mr. Donias is nationally recognized for his business valuation expertise with more than 35 years experience. He was formerly the President of the American Society of Appraisers (ASA) and has participated in numerous standard-setting bodies in the field of business valuation during his career.

Ms. Gould has a wide range of management, consulting, damages analysis and auditing experience, spanning over two decades. As an executive, she has operated companies and served as interim management. As a consultant, she has been responsible for significant corporate restructurings, numerous forensic accountings, and damages analysis for a wide range of complex commercial claims.

Consulting Practice

All States

More Information

Commercial Damages Expert Witness
Forensic Accounting Expert Witness
Whistleblower Systems Litigation Support
Insurance Claims Expert Witness
Business Appraisal Litigation Support
Contact Fulcrum Inquiry, Experts Witness

Professional Experience

Our Industry Expertise:

Entertainment
High Technology
Healthcare
Construction & Real Estate
Intellectual Property
Hospitality & Lodging
Manufacturing
Financial Services


Licenses

Our testifying experts have prestigious and difficult-to-obtain credentials such as CPA, MAI, ASA, CFA, and MBA. Individual resumes are available after more is known about your specific need. Please contact us for an initial and no obligation consultation.


Legal Experience & Services

Fulcrum Inquiry is a licensed Certified Public Accounting firm. Our investigatory skills allow us to learn what happened, and then apply that to applicable professional requirements.

Our firm is one of the most experienced damage analysis consultants. Our personnel have consulted on thousands of engagements, covering practically every type of civil case, and practically every industry.

We have significant witness experience. Juries and judges usually find our conclusions and presentations to be persuasive.

Our litigation work utilizes our investigative capabilities. The following is a sample of our experience:
Lost Profits
Valuations of Businesses & Intellectual Property
Anti-Trust & Unfair Business Practices
Lost Earnings
Accounting Malpractice
Arbitrator/Special Master

Our skilled professionals can assist you with the following investigations:

Forensic Accounting and Fraud Investigations
Licensing and Royalty Audits
Employee Investigations
Employee Whistleblowing


Seminars & Training

We provide no-cost educational seminars as a service to the legal and business communities. These presentations can be offered in your office to groups of 15 or more. If desired, these courses can be tailored to your firm’s particular needs.


Professional References

Our professionals have served hundreds of clients of all sizes. Some of our more well-known clients include the following Global 1000 companies:

Albertson’s, Allergan, American International Group, Amerisource Bergen, Amgen, AT&T, Baker Hughes, Bank of America, Bausch & Lomb, Baxter International, Becton Dickinson, Beverly Enterprises, Bridgestone, Bristol-Myers Squibb, British Petroleum, Brunswick, Carlisle Companies, Caterpillar, Chubb, Citigroup, Clear Channel, Coca-Cola, Comcast, ConAgra, Conseco, Cooper Tire & Rubber, Daewoo Electronics, Dole Food, Edison International, Exxon Mobil, Fifth Third Bancorp, Ford Motor, etc.


Articles Published by Fulcrum Inquiry

 Ninth Circuit Invites More Qui Tam Cases

The US Court of Appeals for the Ninth Circuit has opened the door significantly wider for those who wish to pursue qui tam False Claims Act suits by reversing a dismissal of two such matters. Ruling en banc in United States ex rel. Hartpence v. Kinetic Concepts, Inc., the Ninth Circuit has removed a prior restriction that any prior public disclosure must have originated from the whistleblower as well.

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 New Rules For Patent Royalty Arrangements May Be Coming

Royalty arrangements within patent licenses have long been constrained by an almost 50 year old Supreme Court decision in Brulotte v. Thys Co that prevents collection of royalties after a patent has expired. The Justices have now agreed to revisit the precedent set by that often-criticized ruling in a current case, Kimble v. Marvel Enterprises, Inc.

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 A Tax Avoidance Approach to Disgorgement Generates a Win for the SEC

The Securities and Exchange Commission (“SEC”) has been awarded a substantial win in its civil enforcement action against Samuel Wyly and Donald R. Miller, Jr. as the Independent Executor of the Will and Estate of Charles J. Wyly Jr. (the “Wylys”).

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 Appeals Court Says Missing Information Doesn’t Prevent Business Valuation

A recent Appeals Court decision addressed what level of evidence is required to demonstrate business value in a divorce proceeding. In Hugh v. Hugh, 2014, the wife in a divorce proceeding filed a cross-appeal on a number of issues, including the trial court’s failure to value her husband’s business (“E-Tech”).

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 Ninth Circuit Overturns Daubert Exclusion, Noting Trial Court Is a Gatekeeper, Not a Fact Finder

In a recent case involving the City of Pomona (“Pomona”) v. SQM North America Corporation (“SQM”), Pomona alleged that SQM’s importation of sodium nitrate for fertilizer caused a perchlorate contamination in the city.

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 The True Cost of Lowering Audit Fees Is Increased Restatement Risk

In association with general cost cutting measures over recent years, many companies have pressured their vendors to reduce fees. This downward pressure has extended to the accounting firms hired to provide independent audit opinions, resulting in a significant drop in audit fees. According to Audit Analytics, audit fees in 2012 were $472 per $1 million of revenue, the lowest amount since 2004. The question is whether audit quality has been sacrificed in order to achieve these reductions.

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 New Path for Accelerated Damages Discovery Requires Immediate Expert Assistance

The Eastern District of Texas is well known for its intense patent activity and already provides early disclosure of infringement and invalidity contentions to facilitate faster resolution of these cases. The Court has now taken similar action by providing an option for accelerated damage discovery, including requiring a two week turnaround between defendant’s production of potentially infringing sales data and plaintiff’s good faith estimate of damages.

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 Addressing The Seventh Circuit’s Concerns Regarding Consumer Surveys in Litigation

In the course of affirming the district court’s decision in Kraft Foods Group Brands LLC v. Cracker Barrel Old Country Store, Inc., 2013 WL 6017396, Judge Posner went a step further. While upholding the injunction, he ended his assessment with some comments “for future reference” when it comes to consumer surveys offered to demonstrate consumer confusion in support of a trademark infringement claim

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 Get The Courts Daubert Rationale On The Record

A recent ruling encourages any litigator sponsoring expert testimony to ensure that the Court memorializes its critique of the Court’s gatekeeping function of expert testimony. The ruling also reversed two inherently speculative damage claims claims that are not that uncommon.

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 Expert Thrown Out after Claiming Major Report “Typos” on Cross

A recently affirmed decision to grant judgment for the defendant as a matter of law highlights the importance of expert testimony that is consistent with previously-disclosed opinions presented in a Rule 26 report. In Rembrandt Vision Technologies, Inc. v. Johnson & Johnson Vision Care, Inc., the expert’s testimony was struck because of critical discrepancies, leaving the plaintiff with no basis for claimed patent infringement.

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 SCOTUS Rulings On Same-Sex Marriages Create Tax Refund Opportunities

The decision in United States vs. Windsor (No. 12-301, June 26, 2013) by the U.S. Supreme Court (SCOTUS) to strike down Section 3 of the Defense of Marriage Act (DOMA) creates important tax issues and opportunities. These include potential refunds for same-sex married couples and their employers for years not closed by the statute of limitations.

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 Neither Expert Nor Inventor Allowed to Opine On Reasonable Royalty Damages

A Delaware federal court recently closed the door on each of two possible paths to damages for Plaintiff in the matter of AVM Technologies, LLC v. Intel, Inc. (Civil Action No. 10-610-RGA).

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 Patent Infringement Damages Under Fire

Seventh Circuit Judge Richard Posner is one of the foremost legal scholars in the United States, particularly on economic matters. He has written numerous influential opinions and almost forty books on law and economics, teaches at the University of Chicago Law School, and is widely respected in the legal community. And two of his recent damage rulings will have a signification impact on the patent litigation process, or more specifically reduce it.

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 The Northern District Court of California Provides Useful ESI Guidelines

Electronic data comprises a large portion of discovery and provides efficiencies in searching and manipulating the data for further analysis. Establishing a protocol for retention of electronic information and e-discovery of electronically stored information (ESI) is a critical step toward ensuring that relevant data is preserved and ultimately produced.

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 Supreme Court Brings California Closer to the Federal Expert Witness Admissibility Standard

In a unanimous opinion, the California Supreme Court clarified that trial courts may use either California Evidence Code Sections 801(b) or 802 to admit or exclude the expert’s testimony. Potentially, the Opinion widens California judicial authority to exclude expert testimony by placing California closer to the federal Daubert standard and the majority of other states that follow such standard.

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 How 'Rules of Thumb' and Formulaic Software Models are Dangerous for Damage Calculations

Plaintiffs often desire short cuts to damage measurements. Given the cost of using experts employing proper methods and data, the temptation is obvious.

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 Posner Opinion Provides Worthwhile Damage Guidance

In re: Apple vs. Motorola, the parties sued each other for patent infringement involving smartphones. Seventh Circuit Judge Richard Posner, sitting by designation, threw out all damage witnesses for both parties on Daubert motions. Then, since both parties lacked damages testimony, he dismissed both cases with prejudice.

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 How To Get The Discovery You Need From Your Opponent

An extraordinary amount of time is incurred in discovery asking for records that may not even exist, or asking for records that do exist, but the other side declines to produce records that were not requested using just the right terms.

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 A Primer on Creating and Using Surveys

Opinion polls (surveys) are used extensively to understand almost everything that cannot be looked up as a scientific fact. Polls are reported everyday on subjects ranging from what flavor toothpaste kids like most (Colgate probably already funded this poll), to what voters think is the best way to get out of an economic recession.

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 California’s Business Judgment Rule Offers No Protection for Officers

Before its failure, IndyMac Bank was the largest savings and loan association in the Los Angeles area and the seventh largest mortgage originator in the United States. IndyMac was the fourth largest bank failure in United States history, and the second largest failure of a regulated thrift.

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 Seven Biggest Retirement Mistakes

As with most things in life, a few mistakes can dominate the final results achieved. We identify and explain the most expensive common retirement financial mistakes.

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 Addressing Electronic Database Discovery – Challenging yet Rewarding

It is naïve to think that any complex commercial case can be run competently without involving data bases used by your client and/or your opposing party. This short article provides the initial information needed to get you started on the correct course.

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 Selecting Discounts Rates for Personal Injury & Employment Damage Calculations

When calculating damages covering future periods, the future amounts must be reduced to present value to account for the time value of money. In the majority of cases, economic damage calculations in personal injury, wrongful death, and employment cases use discount rates that are too low. Consequently, the calculated damages pertaining to future periods are too high.

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 Obama Commission Presents First Ideas on How to End the U.S. Government Financial Disaster

In August 2010, we summarized an International Monetary Fund (IMF) report that concluded the U.S. is broke. Last week the Government Accountability Office (GAO) issued similar conclusions in its report on the Federal Government's Long-Term Fiscal Outlook.

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 IRS Scales Back Its Draconian Schedule UTP Draft, and Requires the Finalized Schedule in 2010

The now-finalized form is required in 2010. We provide the background, changes, potential solutions (for some), and the remaining difficult legal privilege issues.

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 Small Business Law Creates Tax Breaks and “TARP 2” Lending

This week, President Obama signed the Small Business Jobs Act of 2010. The law contains $12 billion of tax decreases & increases, and creates a $30 billion Small Business Lending Fund that allows the Treasury Department to make capital investments in smaller banks.

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 Prepare Now For 1099 Reporting Under The Health Care Act

In order to pay for health care benefits, the scope of Form 1099 was considerably extended. Effective for payments made after December 31, 2011, practically all business transactions will require 1099 reporting. We provide suggestions for the considerable additional work and systems, which should be started soon.

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 Supreme Court Certiorari Decline Paves Way for IRS Proposal of Important Tax Return Disclosure

Proposed Schedule UTP requires taxpayers to report areas in which the IRS can easily assert additional taxes are owing. We explain the accounting rules and legal privilege issues.

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 SEC Takes Initial Measures to Avoid a Second Flash Crash

We explain high-frequency trading that likely caused the crash, and the additional regulatory changes that will be seriously considered.

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 Interactive Chi-Square Calculator Illustrates Independence Testing

We explain this widely used and valuable test, other statistical alternatives, and non-discrimination uses. But the pièce de résistance is the online calculator that you can use yourself.

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 More Is Needed to Improve Credit Rating Agency Conclusions

Ratings of debt instruments are an integral part of U.S. financial markets. Reliance on these ratings is increasing, but their reliability is pathetic. A Congressional commission held a recent hearing involving the credit rating agencies. Past and current Moody’s employees who testified provided shocking information.

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 Nevada Attempts to Capitalize on California’s High Taxes

Nevada is running another series of advertisements which attempt to woo California’s businesses to their state. Advertisements released this last week mock California legislators.

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 CEOs Rank California Worst for Business in Entire Country

In its sixth annual report, CEO Magazine reported the results of its survey of over 650 chief executive officers regarding how all 50 states rank as to its business conditions. This is not a predetermined result based on uncontrollable factors, but is instead the result of leadership and policy issues that are avoidable.

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 Indian Tribes Win Big in California Lawsuit

In a ruling that has not received deserved press attention, the Ninth Circuit concluded California could not obtain revenue sharing or “taxes” from Indian tribes because the arrangements violate the Indian Gaming Regulatory Act. The case has national significance since it prohibits similar arrangements in numerous states that now benefit from Indian gaming.

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 In Midst Of Record Deficits, Congress Will Not Have A 2010 Spending Plan

This is the first time since the current 1974 rules were created that the House will fail to pass a budget. We explain legal requirements, and why this is happening.

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 Critically-Important CBO Cost Estimates for President Obama’s Health Care Changes Were Materially Wrong

Last week the Congressional Budget Office issued “updated and expanded” cost estimates that show their prior “final” estimates were entirely incomplete and misleading. We explain what happened, and what should have happened.

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 Expanded SEC Whistleblower Program Is Likely

A little-noticed provision in the financial regulatory overhaul legislation currently before Congress provides for a significantly expanded SEC whistleblower program. We explain the proposed law, the IRS’s results with a similar program, and practical suggestions of what to do.

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 New Economic Substance Test Eliminates Certain Judicial-Based Confusion, but still Allows Significant Judgment

The recent health-care legislation (H.R. 4872) will be partly paid by a 40% penalty on tax underpayments related to transactions that lack “economic substance”. Although aimed at tax shelters, the new penalties could be used by the IRS for much broader tax assessments.

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 Proposed DOL Rules Will Dramatically Change Investment Advice Provided To 401(k)S And IRAs

Last week, the Department of Labor proposed requiring investment advisers to (i) disclose their fees and (ii) show that the computer models used to offer advice are objective and unbiased. The new rules will alter the investments commonly held in 401(k) and IRA accounts.

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 Moody’s And Bernanke Warn Of U.S. Budget Deficits And Related Credit Rating Problems

Moody’s warned that it might pull the federal government’s triple-A credit rating if President Obama’s recently-released budget is implemented. Last week, Fed Chairman Ben Bernanke gave similar serious warnings about the same budget.

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 Expert Witness Federal Rule Changes Will Take Effect December 2010

On September 15, 2009, the Judicial Conference approved rule changes under federal Rule 26 regarding expert reports and the discoverability of communications with expert witnesses. The rule changes have been submitted to the U.S. Supreme Court with a recommendation that they be approved and transmitted to Congress in accordance with the Rules Enabling Act.

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 ESI Spoliation Case Will Be Widely Followed

In another case destined to be widely quoted, U.S District Judge Shira Scheindlin of Zubulake fame issued a ruling electronic discovery spoliation which she entitled Zubulake Revisited: Six Years Later. (See Original our case summary for a primer on the first Zublake decisions).

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 Dodd’s Retirement Casts Further Doubt On Proposed Financial Industry Regulation

The Obama administration’s financial regulation proposals are significant, although they have been overshadowed by the health care debate. The financial industry proposals will now receive much greater attention, but these “reforms” may also be in doubt.

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 IRS to Finally Require Tax Preparer Registration, Continuing Education, and On-Site Visits

For the 2007 tax year, about 60% of the 143 million individual tax returns filed with the IRS were done by paid preparers. Tax preparer registration for these paid preparers has been considered for years.

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 Obama Administration Shows Phony Tarp Profit Through Tax Trick

Without any Congressional approval, the IRS quietly eased net operating loss (NOL) rules for companies that sold stock to the federal government under the TARP program. The new tax rule provides still further subsidies to non-government shareholders, while paying for the increased value entirely with foregone taxes that apply to other corporations.

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 IRS Needs Significant Additional Controls in Its Role as Disbursing Agent for Refundable Tax Credits

In two reports made public in December 2009, the IRS Inspector General concluded (i) the IRS ignored previous recommendations, causing significant refundable tax credits to be paid improperly, and (ii) by improperly issuing taxpayer identification numbers, the IRS allowed billions of dollars of fraudulent refundable credits.

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 Sharia Law Will Likely Be a Creditor Disaster in the Dubai Restructuring

Dubai announced that it would seek a six-month postponement of debt repayments. The announcement came as a shock initially, but has since been generally dismissed by the press. This situation provides insights regarding Islamic finance with which most in the West are unfamiliar.

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 House Passes Important Regulatory Changes

The entire House of Representatives will soon consider the Investor Protection Act. We provide a summary of what it contains without the political sound bites that you have already heard (and hopefully dismissed).

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 401(k) Fee and Disclosure Litigation Gets a Boost

This month, a settlement occurred which (i) demonstrates that these cases have meaningful value and (ii) will likely provide a model for others. We review the settlement, and the primary employer-friendly case that encourages employers not to settle at all.

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 Upcoming Supreme Court Ruling Could Impact The Mutual Fund Industry … But Probably Will Not

Section 36(b) of the Investment Company Act establishes a fiduciary duty. Since a 1982 industry-favorable ruling, there has not been a single successful lawsuit against a mutual fund over management fees. The U.S. Supreme Court now is considering this issue. Mutual fund management fees may need to be reworked, or at least rigorously justified through analysis based on the costs of servicing the different classes of investors.

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 November 2009 Law Provides more Stimulus and Unemployment Spending

Under broad bipartisan support, Congress passed the Worker, Homeownership & Business Assistance Act. The authors provide details not covered in the surface-level reporting you may have already seen.

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 Small Public Companies Will Get No Further Reprieve From Internal Control Reporting

After years containing numerous delays, an additional six-month delay was granted. However, the new deadline is for real.

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 Affluent Should Consider Roth Conversions

Starting in 2010, affluent taxpayers can convert assets from a traditional IRA to a Roth IRA. We review the various factors that should be addressed in making this decision. Many affluent taxpayers should take advantage of this in 2010.

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 California Service Firms Must Now Register With BOE, and File Annual Use Tax Returns

Practically every California law firm and every other service business will now be required to register with California’s Board of Equalization (BOE), and file a new annual tax return covering use tax obligations. The first reporting will cover the three years of 2009, 2008, and 2007. Unless you are one of the rare businesses that fully reported use tax previously, penalties and interest will also be due.

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 Two Recent Bankruptcy Cases Threaten Secured Lenders’ Position

Secured lenders should be concerned about two recent rulings in which the bankruptcy court used its discretion in performing its role as a court of equity. The cases (i) expand the definition of an “insider” to include a creditor with a “close relationship” to a debtor, and (ii) under what circumstances a lender can be equitably subordinated.

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 Employee vs. Independent Contractor Status Receiving Increased Attention

The IRS announced a new audit initiative. In light of employers’ risk under both tax and employment laws, companies and their legal advisors should proactively review this area. We summarize the IRS and employment law rules for making these judgmental decisions.

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 Federal Circuit Reverses $350 Million Damage Verdict Not Supported by Proper Expert Testimony

The Plaintiff failed to put on a complete damages analysis, yet the jury (and trial court) allowed a huge award. The broader lesson involves the need to present a complete damages analysis at trial using an expert witness who is willing to say “no” when the client’s desired result is clearly ridiculous.

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 Financial Experts Improve Bankruptcy Litigation Results

Bankruptcy is largely a financial negotiation. The cost of getting expert appraisal and accounting assistance is a fraction of the “prize” that is being negotiated. We review the bankruptcy process and explain opportunities where financial expert help is necessary.

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 SEC Inspector General Report Shows Incompetence at Best and Fraudulent Cooperation at Worst

The Madoff scandal is the largest financial fraud to have ever occurred. The Office of Inspector General recently issued a scandalous report entitled “Investigation of Failure of the SEC to Uncover Bernard Madoff’s Ponzi Scheme”.

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 Detailed Audit Provisions Save Headaches

The audit provision within many licensing agreements is nothing more than a short paragraph in what may otherwise be a highly detailed document. We provide sample audit provisions that a licensee should include in every agreement.

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 First Circuit Applies New Standard Restricting Work Product Privilege when Information is Used for Financial Reporting

The attorney work product doctrine, now codified in Federal Rule of Evidence 26(b)(3), protects from discovery documents prepared "in anticipation of litigation or for trial." In a 3 to 2 decision, the First Circuit determined that only information directly "prepared for" use in litigation is protected from disclosure. Potentially, the ruling affects every public and private company that addresses litigation and/or tax exposures for financial reporting.

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 Ninth Circuit Reinstates More Lenient Standard For Whistleblower Protection

Because of the DOL’s hostility to whistleblowers otherwise protected under Sarbanes-Oxley, the only real relief for employees has been through the district courts. Last week, the Ninth Circuit made its first ruling on the standard necessary for fired employees to claim protection under SOX’’s whistleblower provisions.

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 Former Madoff CFO Pleads Guilty, Pledging Cooperation That Will Help Both Criminal And Civil Cases

Frank DiPascali Jr. is the first person to fully cooperate with the government in the $65 billion Madoff Ponzi scheme. DiPascali acknowledges the involvement of unidentified others in the fraud, and describes the mechanics of the cover-up. We also address failures of the regulators and government auditors in light of DiPascali’s revelations.

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 Taxpayers with Unreported UBS Foreign Accounts should Accept IRS Amnesty Deal

Previously-secret Swiss bank account information will soon be given to the IRS. The IRS contends that UBS has 52,000 of these unreported accounts containing $14.8 billion total asset value. We provide details of UBS’s court losses, and the IRS’s related amnesty program.

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 Practical Applications of California’s New Electronic Discovery Law

California’s “Electronic Discovery Act” is effective now. While most of this closely follows federal law, there are a few important distinctions. We provide practical guidance on understanding and applying the new requirements.

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 Largest-Ever Patent Infringement Damages Award

The plaintiff-friendly Eastern District of Texas, known for its “rocket docket”, dished up a Texas-sized damages award involving a blockbuster drug. The filings, docket, and time incurred look more like a small-time breach of contract case than a $1.7 billion case between industry titans. This district houses 11% of all patent cases nationally, and is the largest jurisdiction for patent cases in the country.

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 U.S. Private Companies Now Have Additional Accounting Alternatives

Although there has often been a call for simplified accounting principles for smaller or non-public enterprises, U.S. generally accepted accounting principles (GAAP) historically has not included a separate financial reporting standard for smaller companies. This changed last week. The new rules are dramatically simpler and shorter. But, companies adopting the new standards will also need to make other changes in how certain transactions are treated.

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 Bakken Oil Could Significantly Improve U.S. Economic and Political Strength

Worldwide oil discoveries have been less than worldwide annual production since 1980. U.S. oil reserves are quite low. We review a hopeful U.S. oil discovery that could be huge. Ironically, sharply increased oil prices could make the U.S less foreign-oil dependant.

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 Real Estate Tax Assessment Appeals Start Now

Real estate values are dropping materially. With these value drops comes the possibility that you may be entitled to real property tax relief. However, you must specifically ask for the lower taxes. We describe the process and requirements.

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 Residential Real Estate Declines Become Quite Large … and are Still Growing

The declines are far beyond the initial impact caused by subprime lending woes. We present graphs and related commentary using the best real estate price index that is available. Real estate lenders will continue to be quite cautions in this environment. It is likely that real estate will be one of the last industries to escape the current recession.

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 FASB Toughens Off-Balance-Sheet Accounting

An important accounting rule change will be finalized this month that will result in $900 billion in liabilities being put on the balance sheets of the nation's 19 largest banks that just completed the Treasury’s stress tests. Some banks will have to record related losses that have previously been hidden.

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 GAAP Reorganization Will Cause Short-term Frustration, but should Improve Research Capabilities

On July 1, 2009, the new “Accounting Standards Codification” (ASC) becomes the sole authoritative accounting guidance for U.S. generally accepted accounting principles. The ASC divorces new codification content from historical pronouncements, and will require certain accounting disclosures to be re-written. Accounting and legal professionals will need to re-learn everything they know about how U.S. GAAP is documented, updated, referenced, and accessed.

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 Toxic Drywall Claims Could Be Next Large Wave Of Construction Litigation

The newest phase of “sick house” litigation appears to be here. Drywall imported from China is releasing sulfur compounds that provide a rotten egg smell, and causes corrosion to copper used in plumbing and air conditioning tubing, electrical wiring, bathroom and kitchen faucets, appliances, and other metal products. Health hazards are also being alleged. We provide background and analysis.

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 Tax Proposal would Mean the Practical End of the Most Popular Estate Planning Trust

A Senate bill would allow the unused portion of the first-to-die’s estate tax exemption to be used by the second-to-die spouse. This eliminates the primary reason for most estate planning trusts. The bill makes other important estate planning changes, and makes permanent many of the existing rates and tax benefits outside of the estate planning area that are scheduled to sunset. As expected, outside of the estate planning changes, those making more than $171,550 will not get these tax goodies.

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 Post-Judgment Royalty Rates in Patent Infringement Cases Increase

As part of the fallout from the Supreme Court’s eBay decision, trial courts must make separate non-jury findings regarding post-verdict damages when a permanent injunction is not granted. Under this recent case, all other things being equal, the royalty rate will always be higher than what the jury found.

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 M&A Accounting for Lawsuit Contingencies Revoked

An accounting pronouncement highly criticized by the legal profession was formally revoked this month, putting back in place rules that the lawyers have known for years. The requirement of disclosing in the financial statement footnotes the range of expected outcomes for a recognized contingency at the acquisition date is similarly eliminated.

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 Central District of California Case Poses New Requirements for Internal Investigations

In a recent Central District of California case, the judge suppressed evidence and referred the lawyers involved to the state bar for disciplinary action. The Court concluded that a written conflict waiver was needed before the results of an interview of the chief financial officer could be used/shared. A written waiver is not the current standard when performing internal investigations, which causes the case to have broad interest and concern.

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 Employers Should Disable Internet Explorer 8 InPrivate Browsing

Microsoft recently launched Internet Explorer 8. This Internet browser controls around two-thirds of the market, and will be automatically updated through Microsoft’s updates. The most important feature of the new program is what the press called “porn mode”, or the ability to have Internet usage kept private. All other Internet browsers either have or soon will have a similar feature. This causes legal and human resource issues that are best addressed by turning this feature off.

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 Legal Work Explodes During A Troubled Company Restructuring

These complex deals require a host of legal efforts, even if a bankruptcy does not occur. We provide a graphical and summary explanation of the major efforts that should be occurring in the non-legal areas, and the timing of each.

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 The Prestigious American College Of Trial Lawyers Proposes Dramatic Litigation Changes

The very specific recommendations largely affect discovery. The entire process would be changed, and new strict limitations would exist. These proposals would change the economics of litigation, both for the clients and the litigators serving those clients.

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 RIF Statistical Audits Reduce Discrimination Risks

Employers contemplating a reduction in force (RIF) can reduce exposure to discrimination claims through relatively inexpensive pre-RIF statistical testing. When compared to the cost of litigation, testing before final conclusions are reached is an inexpensive check. We review recent disparate impact cases, and provide best practices for avoiding litigation.

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 Limited Time Remains for Valuation Discounts with Family Entities

Several important changes are expected in estate & gift taxes. A common planning tool involves creating family-owned entities and then valuing the transferred interests at a discount. In all likelihood, this tool will end. As long as the current proposal is not changed to become retroactive, estate planners should accelerate these plans. We describe expected changes in the estate & gift tax, and the likelihood of passage.

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 History Lesson for Stocks: Time to Buy?

With the major indexes hitting valuations not seen for more than a decade, one might understandably believe that stocks are a poor place to have one’s money. Regardless of whether you suffered from the recent stock carnage or were smart enough to exit before the decline, the question at this time (or any time) is what will be happening to future prices? Our interactive model calculates historical returns. We then provide the lessons to be learned for today’s market.

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 More Resources Will be Allocated to Financial Fraud Initiatives

Government resources are usually allocated based on the political sentiment of the day. Currently, white collar financial crimes associated with the recession are in favor. We summarize statistics released by the FBI and Treasury department. White collar defense lawyers face improving business conditions.

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 Major (And Expensive) Tax Changes in Stimulus Bill Explained

The American Recovery and Reinvestment Tax Act of 2009 makes over 300 changes to the Internal Revenue Code. Most changes are retroactive only to January 1, 2009, and affect primarily individual (vs. business) taxpayers. Practically none of the cuts benefit higher-income taxpayers. We explain who benefits, how much, and when.

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 First Law Signed by Obama will Increase Employment Discrimination Litigation

By reversing a Supreme Court the statute of limitations ruling, employees are now able to pursue discrimination cases that otherwise would not have been viable. Statistical analysis in these cases will likely be a tool used by both sides.

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 New SEC Chairperson is Likely to Bring Big Changes

Mary Shapiro is now the first permanent female SEC chairperson. She is almost certain to change numerous positions taken by her predecessor.

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 2008 and 2009 Personal Tax Changes For The Affluent

This article addresses changes that we already know about. The Obama administration and its friendly Congress will certainly enact additional tax law changes. We focus on items affecting the affluent, and not the myriad of tax breaks that are eliminated when one’s income reaches various threshold levels.

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 GAO Issues Report on Regulatory Changes – A Great History Lesson, but Most Ideas Come up Short

The GAO just issued a report that will likely to assist the Obama administration’s changes to the U.S. financial regulatory system. We summarize the GAO’s description of the regulatory problem, and their ideas of what to do about these problems. Although the report is correct on many fronts, the good ideas are lost in other Pollyannaish, obvious, and banal thoughts that are not worth the ink spilled.

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 SEC Finally Updates Oil & Gas Reserve Reporting

Reserves are the most important asset for most energy companies. Surprisingly, this publicly-reported data is based on 30-year old technologies and measurement approaches. Last week, the SEC voted to allow important changes that will give the public much-needed information.

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 Largest-Ever Ponzie Scheme should have been Obvious to Anyone who Looked Seriously

$50 billion was duped from wealthy and otherwise sophisticated investors who could have avoided their losses if they followed some easy rules. We summarize the Madoff scandal, and explain how ponzie schemes and other financial frauds can be avoided.

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 No Relief Likely for Huge Pension Underfunding

With the end of the year just weeks away, many companies having traditional pension plans face a significant problem with woefully underfunded pension plans. Because of falling stock market values, lower investment (interest) returns, and changes in pension funding from a 2006 law, most employers with these plans will need to make significant additional contributions. Appeals for legislative change will not occur under the Bush administration.

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 Volcker Is a Fascinating Choice for Obama’s Economic Advisor

President-elect Obama announced the formation of the "President's Economic Recovery Advisory Board". The board will be chaired by 81-year-old Paul Volker, who served as the chairman of the Federal Reserve under Presidents Carter and Reagan. Volcker is out-of-line with current government actions which are dramatically increasing the money supply. However, in the long-term, Volcker may be exactly the advisor Obama needs the most.

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 Licensing and Royalty Audits Deserve Greater Attention

Companies can improve performance by (i) licensing technology or other intellectual property, and (ii) more assertively performing audits of existing licensees. Both of these areas generate the need for legal assistance. Legal counsel wishing to add value to client services (and who isn’t during challenging economic times?) should inquire about client practices in these areas.

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 What You Should Be Doing for Taxes Before Year-End

Less than a month remains for planning transactions that will reduce your overall taxes. This year is considerably more complicated (yet important) because of expected changes under the Obama administration and the Democratic-controlled Congress. This article focuses on higher-income earners.

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 Electronic Data is Always Difficult … if You Don’t Try

Comments by the Obama campaign express a common belief that this data stuff is just too complicated. It really isn’t. We offer our pro bono services to both campaigns to improve visibility into campaign financing. Our work will assist in understanding whether/how outdated campaign laws should be altered.

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 IRS Toughens Position on Deductibility of Government Settlements

The IRS recently issued two pronouncements that specify limited conditions under which settlement payments made to any government will be deductible. Lawyers negotiating settlement agreements will need to be more specific before their taxpayer clients can get a deduction.

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 Controversial Proposal Regarding Litigation Disclosures is Tabled, but Still Alive

The legal community objected strongly to the FASB’s proposal to significantly increase litigation disclosures contained in financial statements. The proposed changes that were scheduled to start in just a few months will be delayed for a year. The FASB will create an alternative proposal for consideration, but the original proposal for has not been withdrawn.

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 Goodwill Impairment Tests are Important in the Current Economic Environment

Because of the current recession and related bear market, practically every company will need to pay greater attention to its annual goodwill impairment test. Even without the recession and changing valuation landscape, previously acceptable goodwill appraisals might not pass the new fair value rules. Not following this accounting rule could have legal consequences with acquisition agreements and loan agreements.

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 U.S. Treasury Committee Declines to Recommend Liability Limitations for the Large Accounting Firms

The major accounting firms have a major litigation problem that threatens their very survival. This blue-ribbon committee made around 30 suggestions to ensure the “sustainability of a strong and vibrant public company auditing profession”, but did not provide the accounting firms what they really wanted.

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 Bailout Bill Includes Numerous Tax Provisions

The $700 billion Wall Street bailout received most of the attention. But there are also important tax provisions that have little to do with the bailout. We provide a summary.

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 Nonprofit Organizations Now Need a Whistleblower Reporting Mechanism

Regrettably, a large number of nonprofit organizations are victims of employee fraud. We provide the statistics, and reasons for these results. Because whistleblowers are the most common means of identifying malfeasance, whistleblower systems are now considered a best practice. Larger nonprofits will need to publicly report whether they have such a system in place as of the end of this year, and annually thereafter. Smaller nonprofits will have similar disclosure requirements in the future.

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 Litigation Settlement Errors are Remarkably Common

A recent statistical analysis demonstrates that litigants should be settling more. A shockingly large percentage of litigants are getting trial results that are substantially worse than the offers they rejected. We summarize the study, when the errors are most common, and how to avoid this situation with better analysis.

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 DOL Continues to Ignore and Rewrite SOX’s Whistleblower Law

Complaints involving this portion of SOX are initially administered though the Department of Labor’s OSHA. OSHA has dismissed almost half of employee complaints based on a strained interpretation of the law, and has substantively ruled against the employee in most of the rest of the actions. The authors of this portion of SOX have demanded change

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 Insurance Claims for Large-Scale Hurricanes

If your business has key suppliers or customers in the Gulf Coast area, your business could be significantly affected. This is true even though your own business property may not have sustained physical damage. This frequently occurs because of strategic supplier and customer relationships, outsourcing agreements, and just-in-time inventory systems. We explain this specialized type of insurance coverage, and provide additional advice regarding hurricane-related claims.

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 Investment Calculator – Should You Sell Before New Capital Gains Rate Increases Occur?

One of the differences between the presidential candidates is their tax policies. Current tax rates arise from two pieces of legislation supported by and signed into law by President Bush during his first term.

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 California Loses Big in Litigation Involving Its Tax Jurisdiction and Related Residency Audits

A former California resident received a jury award of more than $388 million after suing California's Franchise Tax Board (FTB) for its conduct in auditing him.

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 “Shameful” Interpretation of GAO Report Used to Mislead The Country

Last week, the news repeated a Congressional report that the vast majority of corporations were making enormous profits, yet paying absolutely no taxes. The misleading commentary served as the starting point for proposing a corporate tax increase. Unfortunately, a complete and proper explanation of the facts was never offered. Examples like this support the saying “Figures lie and liars figure.”

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 Banks Settle With Regulators Over Auction Rate Security Misrepresentations

Last February, enormous numbers of investors were caught with illiquid investments that were sold as cash equivalents. Over the last week, five major banks agreed to repurchase these investments and pay substantial civil fines. The remaining non-settling banks now face increased pressure to also settle. However, litigation will continue over substantial consequential damages that customers incurred.

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 IRS Crackdown on Unreported Foreign Trusts Gets Big Boost

Wealthy Americans are tempted to avoid high U.S. income taxation by moving funds offshore. But this “foreign” income is still fully taxable by the U.S. … unless the IRS never knows about it. Recent investigations have (or soon will) uncover the names and details of thousands of wealthy Americans who have engaged in illegal tax evasion. If you never gave in to the obvious temptation to have such a “tax-free” account before, you should not start one now.

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 DOL Issues Significant New Requirements for 401(K) Plans

The DOL proposed new rules that will be effective as early as January 1, 2009. Generally, the rules require additional disclosures regarding costs charged to participants, and make it easier for plan sponsors to qualify for protection from litigation. Given the shameful undisclosed marketing practices used by vendors of 401(k) plans and the costs paid by participants at many these plans, the additional disclosure will cause plan sponsors to finally pay much-needed attention to this area.

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 DOJ’s McNulty Memo In Evaluating Corporate Cooperation Is No Longer DOJ Policy

Under pressure from proposed legislation that would mandate a policy change, the Department of Justice promised to retract controversial portions of current DOJ policy that allows USAAs to (i) force waiver of the attorney client privilege and (ii) prohibit payment of employees’ legal fees.

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 Cell Phones And Handheld Devices Provide Discovery Opportunities

The expanded power and intensive use of mobile devices mean that they often contain evidence that may not be anywhere else. But mobile devices provide challenges that do not exist for traditional computers.

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 Exxon Punitive Damages Case Has Broader Implications

In deciding to limit punitive damages to no more than related compensatory damages, the U.S. Supreme Court set forth principles that go beyond maritime law.

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 Supreme Court Rules In Employees’ Favor On Disparate Impact Issue

After plaintiffs are able to “isolate and identify the specific employment practices that are allegedly responsible for the statistical disparities”, the employer has the burden of proof regarding why no discrimination is occurring. This brings the rest of the country to where the Ninth Circuit and California state law already was. Stealing a page from the plaintiffs’ play book, more employers should consider use of statistics to justify their conduct.

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 SEC To Require Mandatory XBRL Submissions

Starting with this calendar year, the largest public companies will have to tag their financial statements with computer code that facilitates compilation and comparison of reported data. Starting next year, all “accelerated filers” will have such reporting. We explain the background, importance, and cost of this financial reporting.

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 Home Equity Lines Of Credit May Be Dischargeable Even When Borrower Lies

A bankruptcy ruling from the Northern District of California could have enormous impact to the subprime loan crisis. Despite finding that the borrowers lied and would otherwise not be eligible for a bankruptcy discharge, the Court concluded that typical “liar loans” which underlie much of the subprime crisis are dischargeable because no lender would have reasonably relied on the representations contained in the loan application.

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 SEC Investigators Are Themselves Investigated By Whistleblower

Last week, a federal Court ordered the SEC to produce thousands of pages of potentially damaging documents involving insider trading that the SEC did not pursue. Both the Senate and the Court are critical of the SEC’s lack of action. We summarize this interesting case.

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 Special Masters And Court-Appointed Experts Save Electronic Discovery Costs

When databases, computer forensics, or other large collections of electronic information are at issue, discovery challenges can be best handled with hands-on assistance from a neutral party. Courts lack the time and technical capabilities to cost-effectively get the job done. We summarize the reasons why special masters can save money, and summarize the authority for their appointment.

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 IRS Loses Another Case Involving Auditor Work Papers

Taxpayers won again in the ongoing dispute over whether tax accrual work papers are privileged. The case arguable applies regardless of which of the split in authority one adopts as the starting point. All of this is important because accounting requirements (FIN 48) would otherwise make accountants’ tax accrual work papers an IRS treasure trove. The case might also have applicability in battles over other types of work papers in which legal contingencies are at issue.

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 Study Addresses Electronic Storage Best Practices

The prestigious Advanced Practices Council just released a study that was not intended for lawyers, but which litigators and in-house lawyers should understand. We summarize the recommended best practices, explain why most Information Lifecycle Management applications fall short, and tell you why many lawyers should care.

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