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Certified Public Accountants
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Litigation Consulting


Forensic Accounting - Fraud - Business Valuation


June 2012

Recent Case:
"Recent Case: Loan Agreement and Conversion to Equity – Fraud and Business Valuation"

Summary of issue:
Arxis was hired by defendant in a case alleging fraud and related claims.  The case revolved around a loan agreement that provided for a conversion to equity under certain conditions.  Our client loaned the money and, eventually, all of those conditions were met and our client exercised the conversion provision of the agreement.  Plaintiffs (borrower) immediately sued for fraud and other claims surrounding related to the formation of the original agreement. Defendant counter-sued for damages associated with being “locked out’ of the business and not participating in dividend distributions.

Money involved:  The business was valued at several million dollars.  Alleged damages against our client was the value of the business as well as additional tort damage claims.

Arxis work:
Discovery – Plaintiffs refused to provide most of the financial discovery making the case highly forensic, meaning that there were very few records available that would normally be relied upon to express a value.

Valuation – The valuation work was based entirely on tax returns and other random information intentionally and inadvertently provided by Plaintiff.  Opinion of value was based on distributions from the business (S- corporation) to the plaintiffs adjusted for reasonable compensation, taxes, and estimated capital investment required in the business.  The result was a value that was likely conservative due to the inability to adjust draws for personal expenses paid through the business since that information was not available.

Testimony – A bench trial was held involving expert testimony of several hours.

The court ruled in favor of the defendant and on the issues and deferred ruling on the damages.  This allowed the parties to settle the remaining issues.

Upcoming Speaking Engagements for Chris Hamiltion

June: "Corporate Fraud"Simi Valley Chamber of Commerce

September: “Fraud and Forensic Accounting-From Inception to Trial" – San Fernando Valley Bar Association - Probate Section

Practice Profile:
Forensic Accounting Services for Fraud

Every month, we profile a different service offered by Arxis Financial. This month, we invite you to learn more about our Forensic Accounting Services for Fraud.

Increasingly, businesses are being victimized by embezzlement and fraud, which are serious and costly crimes. Arxis Financial’s forensic and fraud accountants assist in determining the extent of monetary loss or damages and who committed the fraud.

A detailed fraud examination can uncover a dizzying maze of transactions, documents and stonewalling. Forensic experts use a variety of techniques to detect fraud and trace misappropriated cash. By scouring the company's financial ledgers and supporting documents, a Certified Fraud Examiner can help unravel the web of fraudulent transactions. For example, the investigator may review or reconcile the company's bank accounts, identify payees, track electronic transfers and payments through the company's general ledger, and scrutinize documents supporting check disbursement, such as vendor invoices and expense authorizations.

Our forensic and fraud accountants serve a critical role in both plaintiff and defense matters. We have extensive experience in determining the necessary documentation, discovery approaches, and management of these documents. We then evaluate, analyze, summarize, and present the evidence. In conjunction with Arxis Financial's experts, the attorney can assess whether fraud occurred, the legal and financial viability of the case, and the best litigation strategy.

Partner Profile:
The Forensic Accounting practice is headed by partner Chris L. Hamilton, CPA, CFE, CVA, DABFA. Mr. Hamilton is a Certified Public Accountant, Certified Fraud Examiner, Certified Valuation Analyst, and a Diplomate with the American Board of Forensic Accounting. 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.

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Chris Hamilton, CPA CFE, CVA, DABFA
(805) 306-7890
@ArxisChris on Twitter
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Litigation Consulting
Forensic Accounting - Fraud - Business Valuation

Clients know us for results. Opposing counsel know Arxis for wishing they had hired us.