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Type of Matter:
A food processing company was
notified by Federal and state agencies that Listeria had been traced to
their facility. This began a process of sourcing the Listeria and
commencing extraordinary measures to recall tainted food, eradicate the
contamination and try to recover the business. The result was a lawsuit
against the food supplier that shipped the Listeria to the plant.
Background:
Arxis was retained to determine lost
profit damages associated with the events surrounding the Listeria
contamination, including shutting the facility for a period of time,
recalling product, and overcoming the incredibly negative publicity
associated with food poisoning. The source of Listeria was never in
doubt. The litigation was almost entirely related to the question of
economic damages.
Arxis Work:
Initially our analysis considered the
prospect that there would be a permanent loss of some or all of the
value of the company since, at best, the recovery would likely require
several years. The certainty of the Listeria contamination and the
appearance to the marketplace of negligence or other failings on the
part of the company made the prospect of recovery very difficult. After
extensive discussions with management we were persuaded that it was
reasonable to assume that the company could eventually recover in spite
of substantial loss of income, reputation, and goodwill in the industry
in the interim.
The next step was to calculate the
amount of damages required to compensate the injured party for the
injury sustained, and nothing more; such as simply make good or replace
the loss caused by the wrong or injury. Because our work was being done
before the business had fully recovered, two projections were required.
First, we projected financial results for the company as if there has
been no Listeria contamination. The second projection involved looking
at actual financial results since the damage event and projecting into
the future until results matched the "without Listeria"
projections signaling the end of the "loss period."
The difference between financial
results as-if the Listeria event did not happen minus the results
(actual and projected) after the Listeria contamination was the lost
income damages. Finally, the projected lost income was discounted to
arrive at a damage amount as of the date of trial.
Result:
After extensive discovery and
deposition testimony, the case settled on the eve of trial. Arxis' work
in clearly and independently identifying the lost income was compelling
and that factor, along with others, drove the parties to a pre-trial
settlement.
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In family law matters, attorneys engage Arxis Financial
to analyze, explain and present financially complex issues, typically
relating to asset values and income verification. For example, if a
spouse is suspected of understating income, our professionals can
review financial practices (e.g., hidden bank accounts, unreasonable
salary, unreported cash transactions, etc.) to help identify the money
trail. Our forensic accountants are called upon to help in identifying
marital vs. separate property, uncovering hidden income within a
business, determining the value of a business, locating concealed
assets, and other related issues.
The specialists in Arxis Financial's "Forensic Accounting"
practice apply detailed investigation and analysis that is necessary to
uncover essential facts and provide meaningful insights. Our services
include reconstruction of accounting records, analysis of personal and
business transactions, document review and tracing, and expert witness
testimony. Expert analysis and conclusions are presented in depositions
and trial at local, state and federal court levels as well as mediation
and arbitration. We assist attorneys in interpreting the data, and help
counsel to understand and analyze events or issues. This level of
support can be a key asset in determining a legal strategy as well as
reaching a reasonable and efficient conclusion.
The Forensic Accounting
practice is headed by partner Chris
L. Hamilton, CPA, CFE, CVA. Mr. Hamilton is a Certified Public
Accountant, Certified Fraud Examiner and Certified Valuation Analyst.
He is a licensed life and disability insurance agent and a General
Securities Representative. Mr. Hamilton has published articles in
several publications, and has made presentations at national
conferences, training institutes and seminars on topics including
forensic accounting, fraud and business appraisal.
If you have any questions about Forensic
Accounting Services for Business Interruption, please
feel free to contact
us.
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