11/25/2009· Damages
Lost Inventory and Lost Profits Damage Formulas in Litigation
This article arose from an actual litigation. To protect the identity of the parties, I usefictional names.
By: Dr. Donald M. May, PhD, CPA
Tel: 212-390-0595
Email Dr. May
One of the largest employee retirement funds in the country at the time with nearly $1b in assets under management.
The fund managers were alleged to have violated their fiduciary duty to maintain proper diversification in the fund by allowing one particular security to make up more than 25% of fund value and up to over 40% of fund value by mid-2015.
There were also allegations against the retirement fund managers of failure to prudently divest the security when accounting irregularities became publicly known in late 2015.
DMA was brought in to calculate how pension fund investors were harmed by the alleged breach of fiduciary duty in failure to adequately diversify the portfolio and prudently divest a particular security when its accounting irregularities became public.
DMA also assisted the client in engaging Richard Marin, a seasoned portfolio manager who could opine on the proper level of portfolio diversification and the time period when the security should have been divested.
DMA was asked to calculate damages to retirees based on simulated but-for portfolio values assuming the fund managers did not violate their fiduciary duty
DMA simulated fund performance under four alternative portfolio management strategies to calculate but-for performance and fund value had the fund not violated their fiduciary duty.
DMA calculated the value of the portfolio less the value of each but-for simulated portfolio to assess damages for the fund as a whole under each of the four scenarios.
Aggregate damages were calculated to be nearly $300 million under the most accepted scenario.
Damages were then allocated to each retiree based on a month-by-month basis their monthly account balances relative to the value of the fund as a whole.
Damages were calculated as of June 2016, when defendants ceased to manage the pension fund and brought forward to 2020 based on pre-judgment interest.
Using this approach DMA was able to calculate damages for over 400 individual fund investors.
Arbitrators have concluded that DMA’s calculations were rigorous and clearly communicated and accepted the damages calculations for over 90% of investors.
Thus far, almost every retirement fund investor has been able to recover damages which DMA Economics calculated to be nearly $300 million for all retirement account investors.
Donald M. May PhD, CPA, Managing Partner at DMA Economics, LLC, possesses over 30 years of Valuation and Economic Damages experience. He implements a broad range of damage analyses and valuations for clients, including billion-dollar investment funds under SEC investigation as well multi-national firms involved in intellectual property disputes, consumers in product mislabeling cases, and small to mid-sized businesses involved in complex commercial litigation.
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11/25/2009· Damages
Lost Inventory and Lost Profits Damage Formulas in Litigation
This article arose from an actual litigation. To protect the identity of the parties, I usefictional names.
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Minimizing the Impact of Medical Equipment Losses
By: Envista Forensics - Andrew Spetter and Mark Ewing
Doctors and nurses need to make quick, educated decisions to minimize the impact of difficult situations. These decisions are based on the practitioner's years of experience, their education, the science and technology available, and with the assistance of critical analytical and diagnostic equipment.
9/5/2010· Damages
A Quick Overview of Commercial-Damages Economics
Commercial damages occur in breach-of-contract and business-tort cases that result in claims of lost profits or diminished business goodwill or business value. Intellectual-property-infringement cases and antitrust cases also can involve such loss claims. The measurement of damages in these types of cases follows a basic methodology, with some variations in intellectual-property matters. Measurement of damages in securities-fraud cases uses a different approach.