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Certified Public Accountants
(805) 306-7890

Litigation Consulting


Forensic Accounting - Fraud - Business Valuation

September 2012

Recent Case:

“Collusion and Fraud to Attract Business Investors”

Summary of issue:
Arxis Financial was retained to quantify the effect of an alleged fraud and breach of contract. The organizers of a new business made multiple and extensive representations about intellectual property that was owned by the business and the prospects of converting that ownership into rather healthy cash flows in the future. Our client was persuaded to invest hundreds of thousands of dollars in stock and then, in subsequent years, over a million more dollars in the form of loans. The loans were convertible to equity.

In the course of attracting investors, the defendants presented an image of success and a high profile celebrity presence. A valuation firm was even retained that opined in writing that the business was worth more than $20,000,000. All of this masked the reality that the business never made a profit. In fact most, if not all, of the revenue was simply business diverted from another business controlled by one of the defendants. The intellectual property that was the basis for the entire business venture was owned by some of the defendants - but not the business that was issuing stock and borrowing money.

Arxis work:
Our initial involvement was to re-create accounting records and attempt to identify a pattern of transactions that would suggest or support a case of collusion and fraud. Because of the financial constraints our work was very targeted and limited. Our work was used to support and assist the work of the team of lawyers in depositions, interrogatories, and other discovery. Our work was also useful in identifying the realizable value of the funds loaned to the business. We also calculated the value of the business for purposes of determining the value of the equity investments of the plaintiffs. Needless to say, the value of the debt and equity was zero.

A jury trial was held. Arxis Financial presented testimony at trial that was focused mostly on the valuation of a business and, more specifically, intellectual property. The trial lasted several days and the jury came back with verdicts for the plaintiffs.



Upcoming Speaking Engagements for Chris Hamiltion

"Fraud and Forensic Accounting-From Inception to Trial" - San Fernando Valley Bar Association, Probate Section

"Business Valuation Fundamentals, Techniques, and Theory" in San Diego, CA
"Cost of Capital" in San Diego, CA
"Forensic Accounting & Fraud" - CalCPA, Beverly Hills, CA
"Advanced Business Valuation" in Atlanta, GA
"Valuation: Income and Asset Approaches" in Atlanta GA
"Cost of Capital" in Chicago, IL


Practice Profile:

Litigation Consulting Services for Insurance Fraud

Arxis Financial's "Litigation Consulting" practice provides objective and independent evaluation of the economic and financial issues involved in insurance fraud matters. Attorneys engage Arxis Financial to analyze, explain and present financially complex issues, typically relating to on-the-job injury and property-casualty fraud, as well as other insurance fraud schemes. Arxis Financial employs trained fraud examination professionals who specialize in the detection and prevention of fraud.

The specialists in Arxis Financial's "Litigation Consulting" practice apply detailed investigation and analysis that is necessary to uncover essential facts and provide meaningful insights. Our fraud investigators assist in determining whether fraud occurred, and if so, to estimate the extent of monetary loss or damages and to determine who committed the fraud.

Arxis Financial utilizes various investigative and analytical procedures to support criminal or civil actions. Our services include analysis of personal and business transactions, document review and tracing, and expert witness testimony. Arxis Financial's professionals work with litigators through the evaluation of opposing party's claims, assistance in preparation of deposition and cross-examination questions, document request lists, other discovery assistance, analysis and calculation of damages, preparation of trial exhibits, 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. This level of support can be a key asset in determining a legal strategy as well as reaching a reasonable and efficient conclusion.


Partner Profile:

The Litigation Consulting 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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Copyright 2012 Arxis Financial. Articles may not be reprinted without permission.

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Chris Hamilton, CPA CFE, CVA, DABFA
(805) 306-7890
@ArxisChris on Twitter

Arxis Financial Logo

Litigation Consulting

Forensic Accounting - Fraud - Business Valuation


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