Showing posts with label insurance. Show all posts
Showing posts with label insurance. Show all posts

Will Your Municipal Bond or Your Life Insurance Company Still Have Value Next Year


Lance Wallach |


Will Your Municipal Bond or Your Life Insurance Company
Still Have Value Next Year?
By Lance Wallach

Investor protection with municipal bonds is so spotty that there is potential for much mischief.

Disclosure, that bedrock of fair securities markets, is the heart of the problem facing municipal investors. Municipal issuers often don’t file the most basic reports outlining their operating results or material changes in their financial conditions.

Even though hospitals, cities and states that borrow money are required by their bond covenants to make such filings, nondisclosure among the nearly 60,000 issuers is common.

With the S.E.C. largely on the sidelines, disclosure enforcement in the municipal market is left to participants. Do you think they really want to police themselves very closely? That leaves individuals who trade the securities, the investors, and the dealers, to monitor the disclosure information. There is almost no penalty for not complying with those requirements. This is another disaster waiting to happen. If you own municipal bonds, you had better be careful. You may want to investigate www.financeexperts.org and select someone that knows what they are doing to assist you.

Do you have a life insurance or annuity policy? If so, you may be in trouble. The plummeting financial markets are dragging down the life insurance industry, which is an important component of the U.S. economy. Continuously escalating losses weaken the companies’ capital and eat away at investor confidence.

More than a dozen life insurers have been awaiting action on applications for aid from the government’s $700 billion Troubled Asset Relief Program, and the industry is expecting an answer to its request for a bank-style bailout in the upcoming weeks. So far, the government hasn’t stated whether or not insurers qualify for the program.
Life insurers have undoubtedly been taking a beating in recent weeks. The Dow Jones Wilshire U.S. Life Insurance Index has fallen 82% since its May 2007 all time high. The Dow Jones Industrial Average has lost 21% this year to date.

Several of the hardest-hit companies are century-old names that insure the lives of millions of Americans. Shares of Hartford Financial Services Group Inc. are down 93% as of the close on Wednesday, March 11, 2009 from their 2008 high. MetLife Inc. and Prudential Financial Inc. are both suffering as the value of their vast investment portfolios declines.

As the economy weakens, analysts say many insurers face losses can eat away at the capital cushions regulators require them to maintain. In addition, experts say the industry is going through its most chaotic period in recent history and it’s a pretty scary situation right now.
The consequences of a weakened life-insurance industry for the overall economy are significant because life insurers are among the biggest holders of the nation’s corporate debt. For example, if life insurers stop buying bonds, the capital markets may not fully recover. Their buying activity has already declined.

Wall Street analysts say another problem for some life insurers is obligations for variable annuities, a retirement-income product that often guarantees minimum withdrawals or investment returns. As stock markets plunge to new lows, life insurers need to set aside additional funds to show regulators they can meet their obligations, further crimping sparse capital.

Life insurers’ woes have come largely from investment grade corporate bonds, commercial real estate and mortgages, regulatory filings show. Many insurers ended 2008 with high levels of losses that, due to accounting rules, they haven’t had to record on their bottom lines.
Hartford Financial had $14.6 billion in unrealized losses at year’s end. In addition, Hartford Insurance, through its agents, sold life insurance policies that were part of a welfare benefit plan popularly known as Niche Marketing, which has long been under IRS attack and is almost certainly regarded by the Service as an abusive tax shelter and/or listed transaction. Prudential, the second-largest insurer by assets, had nearly $11.3 billion in unrealized losses, up $5.4 billion in the fourth quarter from the previous quarter.

For additional advice and articles on this specific subject, you may want to look at www.IRS.gov, www.taxlibrary.us and www.financeexperts.org. You better review your policy and keep track of what is going on.
Lance Wallach, the National Society of Accountants Speaker of the Year, speaks and writes extensively about retirement plans, Circular 230 problems and tax reduction strategies. He speaks at more than 40 conventions annually, writes for over 50 publications, is quoted regularly in the press, and has written numerous best-selling AICPA books, including Avoiding Circular 230 Malpractice Traps and Common Abusive Business Hot Spots. Contact him at 516.938.5007 or visit www.vebaplan.com.

The information provided herein is not intended as legal, accounting, financial or any other type of advice for any specific individual or other entity. You should contact an appropriate professional for any such advice.

How to recognize a remodeling scam

How to recognize a remodeling scam

School's out and you're thinking about replacing a decades-old roof. As if in answer to your thoughts, a guy in coveralls shows up on your doorstep and offers his services. He just happened to be driving through the neighborhood and noticed that your roof's missing a few shingles. Fortunately, his truck is loaded with materials left over from a previous job. He'll give you a great deal, but it's a limited-time offer. After all, he's a busy contractor. His skills might be needed elsewhere — soon.
Should you hire him?
If it sounds too good...
According to the FBI, there are over 14,000 scam artists at work on any given day. Perhaps the information presented here will help you avoid becoming a victim. If you have questions, please call us. Remember, if it sounds too good to be true, it may well be a scam.
Before taking the bait, consider that remodeling scams often rise to the top of fraud listings published by the Better Business Bureau, especially in the aftermath of natural disasters such as floods or hurricanes. So it pays to be skeptical. Before hiring a remodeling contractor, watch for these warning signs:
  • High-pressure sales. If a contractor claims that a "special price" is available today only, or pressures you to pay for a project before you're ready, beware. Honest contractors will give you plenty of time to do your homework.
  • Cash right now. Never pay more than ten percent of the project's cost upfront, and don't part with the final payment until you're satisfied that the work has been completed properly. Watch out, too, for contractors who demand cash instead of checks or credit cards.
  • References — don't bother asking. If the contractor hesitates when you ask for references, take note. And don't forget to follow up. Call previous clients whose projects were finished a few months ago; then go back four or five years. Ask how those projects are holding up and how the contractor treated former customers.
  • License and insurance — who needs 'em? A reputable contractor will be licensed and bonded. Get the contractor's insurance and business license numbers and verify all information. With a little effort, much of this research can be done online. Check the Better Business Bureau for complaints lodged against the firm, and type the contractor's name into your favorite search engine. The results might surprise you.
  • Google the person that you will hire.

Working Capital



Working capital has a broad definition, but traditionally represents the difference between current assets and current liabilities, with requirements varying between companies, even within the same industry. These differences can result in difficulties between two parties when agreeing upon an amount in conjunction with the sale or purchase of a company. Several common issues often arise between the letter of intent and the final purchase agreement that could place a potential deal in jeopardy. This is why it's crucial to have a keen understanding of working capital management.
A company that is considering entering into a deal must consider several factors involving working capital management, and establish precise targets and definitions to protect themselves against miscalculations during negotiations. This white paper helps to illustrate the importance of working capital from company to company and outlines successful strategies for reaching an agreement and reducing the likelihood of future disputes.


The information provided herein is not intended as legal, accounting, financial or any type of advice for any specific individual or other entity. You should contact an appropriate professional for any such advice.


I have a CPA and an Attorney. Why do I need you?




Lance Wallach

FACT - "The Federal Tax Code is composed of 45,662 pages that require taxpayers to choose from 703 different forms. The Internal Revenue Code has grown to almost 1.4 million words today and is now 500,000 words longer than the Bible."

There is another unequivocal fact that every small businessperson should know - "small privately held businesses pay a considerably higher percentage of their earnings to taxes than do large corporations in America."

Why? Well, two reasons are on the payrolls of most small businesses. Though competent and qualified, the attorneys and accountants serving the small business community are not tax specialist. They are general practitioners. Small business attorneys focus mainly on legal matters such as contracts, entity formation and debt collections. Small business accountants wear many hats, such as: handling the books, interacting with the state and federal revenue services, reconciling bank records, preparing quarterly wage reports, etc. They simply don't have the time to spend 50 hours a week, 52 weeks a year, learning the intricacies of the ever changing tax code and applying the tax saving opportunities that lie within it.

When it comes to taxes, we have consistently found that most small businesses are merely doing year-end compliance work. Year-end tax compliance is what the IRS requires of a business. Basically, your accountant subtracts your expenses from your revenues, throws in the standard deductions and tells you how much you owe Uncle Sam. Does this sound familiar?

Small businesses should, like big businesses, properly structure their organizations to take advantage of the tax code. They should learn the tax reducing opportunities afforded to all businesses, both big and small. Tax Law Associates provides tax expertise that enables the small business owner to legally hold on to a considerably higher percentage of his earnings. 

On average, we reduce our clients' tax burdens by 20% to 40%. In fact, if after a complimentary verification of a client's tax disposition, we determine that we cannot reduce his full year tax payout by more than twice our one time fee, we walk away with no obligation to the client. We are so confident in our abilities that we will sign our name to a binding agreement assuring the client those tax savings. 


 Lance Wallach, National Society of Accountants Speaker of the Year and member of the AICPA faculty of teaching professionals, is a frequent speaker on retirement plans, abusive tax shelters, financial, international tax, and estate planning.  He writes about 412(i), 419, Section79, FBAR, and captive insurance plans. He speaks at more than ten conventions annually, writes for over fifty publications, is quoted regularly in the press and has been featured on television and radio financial talk shows including NBC, National Pubic Radio’s All Things Considered, and others. Lance has written numerous books including Protecting Clients from Fraud, Incompetence and Scams published by John Wiley and Sons, Bisk Education’s CPA’s Guide to Life Insurance and Federal Estate and Gift Taxation, as well as the AICPA best-selling books, including Avoiding Circular 230 Malpractice Traps and Common Abusive Small Business Hot Spots. He does expert witness testimony and has never lost a case. Contact him at 516.938.5007, wallachinc@gmail.com or visit www.taxadvisorexpert.com.

The information provided herein is not intended as legal, accounting, financial or any type of advice for any specific individual or other entity. You should contact an appropriate professional for any such advice.


Business Valuations


Here are some of the cases where business valuation was central to the decisions of the courts. BVR’s exclusive digests, plus the related court documents, are all available at BVLaw.

Farmer v. Farmer, 2011 WL 3929114 (Wash.)(Sept. 8, 2011)
Washington State Supreme Court rejects absolute rule for valuing converted employment stock options in divorce, deferring to trial courts’ broad authority to assess expert valuation of the options, including its reference to the tort framework of measuring conversion damages in some cases.

Experts: Ronald Nelson (wife); Steven Kessler (husband)
Judge: Stephens
State/Jurisdiction: Washington
Court: Supreme Court
Type of case: marital dissolution
SIC Code: 3713 Truck and Bus Bodies
Elliott v. Elliott, 2011 WL 3889181 (Mass. App. Ct.)(Sept. 6, 2011)(unpub.)
Trial court errs by valuing the husband’s minority interest in a family held limited liability corporation by reference to the underlying real property, when there was no evidence that the husband could access the property or its income.

Experts: none
Judge: Hanlon
State/Jurisdiction: Mass.
Court: Court of Appeals
Type of case: marital dissolution
SIC Code: 6733 Trusts, Except Educational, Religious, and Charitable (personal trusts, estates, and agency accounts)
Showell v. Pusey, 2011 WL 3860419 (Del. Ch.)(Sept. 1, 2011)

Delaware Chancery Court resolves ambiguities in CPA firm operating agreement to find that its provisions for liquidation value, rather than statutory fair value as a going concern, control buy-out price for retiring partner.

Experts: Jennings P. Hastings (plaintiff); Clyde G. Hartman (defendant)
Judge: Glasscock
State/Jurisdiction: Delaware
Court: Court of Chancery
Type of case: judicial dissolution
SIC Code: 8721 Accounting, Auditing, and Bookkeeping Services (auditing accountants)

Douglas Dynamics v. Buyers Products Co., 3-09-cv-00261 (W.D. Wis.)(Sept. 22, 2011)

Federal district court relies on 25% rule of thumb as starting point to calculate prospective reasonably royalty rate for patent infringement damages, despite (and without citation to) the Federal Circuit’s rejection of the rule in Uniloc v. Microsoft.

Experts: [unnamed]
Judge: Conley
State/Jurisdiction: federal/Wisconsin
Court: U.S. district court
Type of case: patent (IP)
SIC Code: 3714 Motor Vehicle Parts and Accessories

Rughani-Shah v. Noaz, 2011 WL 4104507 (N.J. Super. A.D.)(Sept. 11, 2011)

Without any evidence of shareholder oppression, court finds that buy-out price for terminated shareholder of 3-person pediatric practice is limited to book value, as defined in the buy-sell agreement.

Experts: Melvin Crystal (plaintiff); Deborah Mathis (defendants)
Judge: Rodriguez, Grall, and Miniman
State/Jurisdiction: New Jersey
Court: Court of Appeals
Type of case: judicial dissolution
SIC Code: 8011 Offices and Clinics of Doctors of Medicine (except mental health specialists, HMO medical centers, and ambulatory surgical and emergency centers)

In re Washington Mutual, Inc., 2011 WL 4090757 (Bkrtcy.D.Del.)(Sept 13, 2011)
Federal bankruptcy court criticizes debtors’ valuation of its proposed reorganization for being too low and plan objectors value for being too high, ultimately crediting the debtors’ more “complete” valuation, with adjustments.

Experts: Steven Zelin (debtors); Peter Maxwell (plan objectors)
Judge: Walrath
State/Jurisdiction: federal
Court: bankruptcy court
Type of case: bankruptcy
SIC Code: 6035 Savings Institutions, Federally Chartered
DFG Wine Co., LLC v. Eight Estates Wine Holdings, LLC, C.A. No. 6110-VCN (Del. Ch.) (August 31, 2011)
Delaware Chancery outlines the scope of documents that are required to be produced for those seeking to value a closely-held company, including its wholly-owned subsidiary that lacks, in reality, a “separate existence.”
Experts: None
Judge: Noble
State/Jurisdiction: Delaware
Court: Court of Chancery
Type of case: miscellaneous
SIC Code: 6719 Offices of Holding Companies, NEC
Oracle USA, Inc. v. SAP AG, 2011 WL 3862074 (N.D. Cal.)(Sept. 1, 2011)

Federal district court reverses record-setting $1.3 billion in copyright damages based on the lack of proof of any comparable, real world licenses, permitting the plaintiff to opt for a remitter of $272 million based on the defendant’s profits from a specific, infringing application.

Experts: Paul Meyer (plaintiff); Richard Clarke (defendant)
Judge: Hamilton
State/Jurisdiction: federal/Calif.
Court: U.S. District Court
Type of case: IP
SIC Code: 7372 Prepackaged Software (software publishing)
As an expert witness Lance Wallachs side has never lost a case.

Are You Really Prepared for the Valuation Litigation Meat Grinder?

Expert Witness Directory


     By Lance Wallach, CLU, CHFC, Carl L Sheeler
 Abusive Tax Shelter, Listed Transaction, Reportable Transaction Expert Witness

PhoneCall Lance Wallach,  at (516) 938-5007




Received your ABV certification. Check. Or your CVA certification. Check. Pulling down an extra $20,000 to $50,000 for the firm. Check. Performing 2 to 4 formal reports annually. Check. And you now have five years under your belt with 20 or so reports completed and while you haven’t memorized AICPA’s SSVS-1, you know it addresses valuation standards applicable to CPAs. Check. Check.
So, why is your former $50,000 annual billings $20 million annual sales metal fabrication client the firm has been serving for the past decade suing your firm and you for $4 million plus damages and your E&O insurer has declined coverage?

Let’s visit the fourth engagement you completed a few years back. Remember you thought since you had some industry data for your comparative analysis you were fine. You were using the valuation report writer, so fine here, too. You used one of the better priced transactional data sources, so good there, too. After all, you are designated and have thousands of hours doing compilation work for business owners just like the metal fabrication company. That is solid experience you tell yourself.

So, what happened? Why the cold sweats? Your bio at the company website represented you were a seasoned valuator. That’s true…. Or is it? Most professions tend to use the 10,000 hours of full-time experience as a benchmark for the partner track. Some valuation organizations do, too.

Counsel for your former client retained, affable valuation expert, Theodore Rexnard. His clients call him T. Rex. He’s your worst nightmare. He just eviscerated your valuation report and now counsel has you by the shorthairs. He started matter-of-factly and indicated your report had no market analysis and weighted prior years’ performance even though the trend was downward for the last three years. He pointed out that there were three other comparative industry databases, which you did not use and there was only 14 companies that made up the sample set for your analysis, so the officer’s compensation adjustment was off by 400 basis points. He then indicated your guesstimate for the fabricator’s equipment’s value was beyond the scope of your training. He indicated you misapplied the excess earnings method, which should not have been applied at all because the equity to be valued was a minority interest and this method assumes a controlling one. You applied the median multiples of the one data source you had of closely held transactions. Problem is the Subject company performance was way below the median performance and the last of the transactions occurred in 2007; yet, no time adjustments were made for your 2010 date of value. Let’s just say you took averages from the discount studies without tying in the company’s performance, holding period or investor expected return.

So, the computer generated report looked pretty good. Check. Client doesn’t know what good looks like and happily paid the $12,000 fee. After all he trusted you and your firm. Too bad the value was $4 million below the value you represented it was “In your professional opinion".

This scenario is real and the CPA’s career prospects came to a screeching halt - a common epitaph. Let it be a caution to those who prey on the ignorance of unsuspecting clients there is likely to come a time that the distorted truth will come back and bite. Hard. Or you can refer business valuation work to competent professionals who perform BV services full-time. Clients win. So do you. And, no nightmare!


The information provided herein is not intended as legal, accounting, financial or any type of advice for any specific individual or other entity. You should contact an appropriate professional for any such advice.

ABOUT THE AUTHOR: Lance Wallach,
Lance Wallach, National Society of Accountants Speaker of the Year and Member of the AICPA faculty of teaching professionals, is a frequent Speaker on retirement plans, abusive tax shelters, financial, international tax and estate planning.

Carl L Sheeler, PhD, ASA, CBA, AVA, A 20+ year business valuation expert, former Marine officer and Ph.D. (Finance) having performed 900+ high profile litigation, business appraisal, fairness opinions & restructuring engagements for legal, tax & transfer purposes for family businesses and midmarket companies. An IRS/Court qualified business appraiser serving hundreds of advisors, family offices, ESOPs, private equity groups & business owners in measuring, creating & defending $5.2+ Billion in company value.

Copyright Lance Wallach, CLU, CHFC

More information about Lance Wallach, CLU, CHFC


While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.