A Few of the Appellate Cases With Robert Vance as the Expert Witness
This case was post-divorce action concerning modification of the Father’s child support obligation with the major issue being his true income for support. The Messers were Divorced in 2009 and the Permanent Parenting Plan (“PPP”) provided that Father was to pay to Mother $1,000.00 per month in child support, beginning on February 1, 2009. The parties agreed that this amount was a downward deviation to allow Father two years to pay a greater share of his income toward the marital debt. We reviewed detailed general ledger, bank statements, credit card statements & tax returns and found over $1.9m of personal expenses run through the books which were claimed as business expenses. Items listed in the appellate decision included private school tuition, vacations, payment to his then wife [E.M.], attorney fees incurred in the divorce, child psychologist expenses, student loans, personal medical bills, country club, fitness club, judo lessons, massages, jewelry, and house furnishings. The trial court stated: “The number of entries misclassified became quite contentious to the point that the case turned into the ‘battle of the experts.” Father argued that the Trial Court erred by declining to strike Vance’s testimony concerning the “advertising” expenses related to Father’s truck-pulling business that was truly his hobby and Vance was not qualified in this area. Most of the truck-pulling events were held in other states. Vance added approximately $500,000 to Father’s income for the years 2009-2016 from the “advertising” spent on this hobby and expensed as if a legitimate business expense. The Trial Court found that from February, 2009 through February, 2011, Father’s monthly income for modification purposes was approximately $40,000 per month and May, 2015 to present, Father’s income was approximately $45,000 per month. Appellate Decision: “We conclude that Mr. Vance’s opinion was not based on underlying facts or data that indicated a lack of trustworthiness. See id. The Appellate Court affirmed the trial court’s reliance on Vance’s testimony in reaching its determination concerning Father’s true income for child support purposes.”
“This appeal involves a unique divorce proceeding”. Throughout most of the parties’ 29-year marriage, the husband worked as vice president of his father’s railroad construction business, Shelby Railroad. Numerous properties, assets, and accounts were jointly titled in the names of the husband and his father (referred to as Grandfather in the appeal) over the years. When the wife filed a complaint for divorce, she named as defendants not only the husband but also Grandfather. Shortly thereafter, Grandfather drastically reduced the amount of money the husband was receiving from the company. The divorce trial was conducted over the course of twelve days. The trial court classified some of the disputed assets as belonging solely to Grandfather. It found that the husband had an ownership interest in land and building on which Shelby operated and included it in the marital estate subject to equitable division. The trial court imputed income to both the husband and the wife and ordered the husband to pay alimony and child support. The parties raise various issues on appeal regarding the classification, valuation, and division of marital property, the imputation of income for purposes of alimony and child support, and the alimony award. The wife sought an award of attorney’s fees on appeal. The Appellate Court affirmed the trial court’s decision in all respects and denied the request for attorney’s fees on appeal.
Lucchesi v. Lucchesi - 2019 - Value of Business at Date of Marriage, Separate Property & Asset Valuation Methods
The Lucchesi case was a forensic accountant’s dream engagement in that it brought to bear all of the skills of a forensic CPA and business valuation analyst. My firm, Forensic & Valuation Services, PLC valued a business at date of marriage in 1994 for a divorce occurring in 2016, traced funds in and out of many financial accounts and found $950,000 in undisclosed assets that the trial court ruled as marital and divided, opined on Husband’s “Failure to Preserve the Marital Estate”, figured Husband’s true income for support purposes versus that claimed in discovery and on draft tax returns, opined on his “underemployment”, valued numerous pieces of real estate from assessor records after Husband would not give a value, showed that Husband spent much more money during the pendency of the divorce versus what he claimed were his monthly expenses and testified at a combative deposition and trial.
Filed January 9, 2017. This case arises out of a divorce action. Case involves testimony by Vance concerning the value of a multi-physician medical practice in which enterprise goodwill was allowed although not called that by name. Also, Vance's detailed Marital Balance Sheet and Alimony Need and Ability to Pay schedule was essential for Wife to receive permanent alimony or alimony in futuro.
Trial court ruled that dental practice had enterprise goodwill. Based on the precedent of Hartline, the Eastern Section COA determined that the adoption of a valuation that expressly included enterprise goodwill was erroneous because the business involved was a sole proprietorship. The COA remanded for the trial court to determine the value of the dental practice without consideration of professional or enterprise goodwill.
Robert Vance, “The W-2 as Roadmap for Tennessee Child Support Guideline Income,” Family Practice, The Newsletter for the Family Law Section of the Tennessee Bar Association (August 2002) (discussing the various boxes and which should be used in different circumstances).
Tennessee Court of Appeals Eastern Section - Filed February 27, 2012; Robert Vance testified as the expert witness in this case in Knoxville, TN. Vance valued the orthodontic practice at $700,000 using a combination of the Market Transaction Method with data from the Goodwill Registry and the Capitalization of Net Cash Flow Method. The opposing expert valued the practice at $224,000 using the Adjusted Net Asset Value Method, which was lower than the price Husband paid for the practice a few years before. The Trial Court ultimately ruled the value to be $500,000 which was a value placed on the practice personally by the Husband in several personal financial statements filed with banks. The Trial Court was very aware that the $500,000 value did include an element of goodwill.
Tennessee Court of Appeals Western Section – Filed November 14, 2011; “Finally to rebut the economic conclusions of the Plaintiffs’ economist, Dr. Bates, the Defendants proffered the testimony of William Robert Vance (‘Mr. Vance’), a forensic accountant and business evaluation analyst. Mr. Vance was sharply critical of Dr. Bates’ ‘economic potential’ projection that, were it not for the Dixie Gas explosion, Mr. Roach could have made $325,000 in 2006. He explained that, in 2005, the Roaches’ tax returns showed that they had a loss of $27,000 for the year, and that ‘[t]o go from losing $27,000 in ‘05 to making [$325,000] in ‘06, absolutely does not add up. [Mr. Roach has] never made that much money ever in his life in one year.’ Referring to Dr. Bates’ assertion that the Roaches had lost some $4 million in ‘economic potential,’ Mr. Vance characterized it as ‘a ludicrous claim.’ Mr. Vance concluded that the Roaches’ ‘economic loss is zero.’ “At the conclusion of trial, the jury returned a unanimous verdict in favor of the Defendants. The Appellate Court stated: “From our careful review of all of the evidence submitted at trial, we find ample evidence to support the jury’s verdict of zero damages.”
Tennessee Court of Appeals Western Section – Filed December 30, 2008; At the February 2005 hearing, Ms. Lofton’s expert William Vance, a forensic CPA, indicated that Mr. Lofton might be using his association with his daughter, Ms. Lofton-Welles to hide business assets. Although Mr. Vance conceded that he could find no empirical evidence to conclusively support his suspicions (in part, because he was denied access to the “books and records of the Lofton-Welles Agency”), he testified that there were “oddities” in the accounting practices of the Lofton Insurance Agency, and that there was “certainly the ability to manipulate income.”
Powell v. Powell - 2003 - Owner Held to Values in Personal Financial Statements & Rev Ruling 59-60 Does Not Have to be Strictly Followed
Tennessee Court of Appeals Western Section - Filed April 7, 2003; Fair Market Value Standard as in IRS Rev. Rul. 59-60 does not have to be strictly followed when valuing a business in a divorce. Business owners can be held to values declared by them in personal financial statements submitted to banks. Credentials and experience of business valuation analysts are critical.