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February 2025
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Recent Case:
Fraud Examination with Surprising Results
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Type of Matter:
Business partners in multiple real estate transactions stretching over
many years had a falling out that eventually resulted in a claim of
fraud against one of the partners.
Background:
Over 20 commercial buildings were acquired over several years. Some had
been sold and some were still owned jointly. Neither of the partners,
jointly or individually, maintained any formal accounting for the
purchases, sales, or management of the properties. One of the partners
took the lead role in buying, selling, and managing the properties. The
non-active partner made claims of substantial amounts of cash that were
unaccounted for and presumed stolen.
Arxis was retained by defense counsel
to direct discovery and prepare a forensic accounting needed to
establish whether the money had indeed been stolen.
Arxis Work:
Documentation was needed to establish purchase date, purchase price,
identity of property, and source of funds for each of the purchased
properties. For properties that were subsequently sold, documentation
was needed to establish the sale date, sale price, identity of the sold
property, and the distribution of proceeds from the sale. For property
that was retained, documentation was needed to establish the source
(rent) and use (expenses) of funds for each individual property.
The traditional sources of such
information were not available as formal accounting records were not
maintained and most relevant records were not even preserved.
Third-party sources were used to accumulate deeds, escrow statements,
bank statements, and other data to allow us to piece together what
actually happened.
Result:
Contrary to all expectations, the evidence showed that
the Plaintiff had already received substantially more proceeds than
were originally invested in the projects. When adding together proceeds
plus the fair market value of the property that was still owned, not
only had his partner not stolen from him, but he had turned a very
healthy profit. Even the defendant was impressed with his own success.
Due to the lack of contemporaneous accounting neither party understood
that their real estate partnership was actually quite successful.
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Service Profile:
Business Valuation Services for Franchises
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Since franchises by definition, are
intertwined with a larger and greater entity, the valuation of an
individual franchise is not as clear-cut as a stand-alone, independent
business. There are a number of franchise-specific Issues that impact
value, such as competitive advantages/disadvantages, relationship with
other franchisees, capital infusion requirements, contract obligations
with franchisor, product and marketing constraints, revenue potential,
and operating costs. As such, business valuations for franchises
require a knowledgeable and experienced valuation specialist.
The specialists in Arxis Financial's
"Business
Valuation" practice provide clients with a comprehensible
valuation that carefully considers critical factors in the franchise
context. Our clients benefit from having valuation professionals who
understand the realities of market valuations much better than the
purely theoretical practitioners, resulting in very defensible and
clear valuations. Our experts are well-known in the industry and
highly-respected for their depth of knowledge and resources.
Arxis Financial
provides valuation expertise to determine the value of a business, the
value of an ownership interest, and the change in value over a
specified period of time. These valuation services are often performed
in the context of commercial and civil litigation. However, there is
tremendous value in a business appraisal in estate and gift tax
planning and succession planning. Our specialists provide clients with
a comprehensible valuation that aids attorneys, business owners,
management, and financial planners in decision-making. We also have
extensive experience in presenting and defending our findings in the
context of litigation.
The Business Valuation 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.
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.
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Speeches:
Upcoming Speaking Engagements for Chris Hamilton
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Chris Hamilton's upcoming presentations include:
- "Valuation
Fundamentals, Techniques and Theory" (2 days), NACVA, Salt Lake City (March 2025)
If you are interested in asking Mr.
Hamilton to speak at your organization's upcoming meeting, please feel
free to contact him.
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