Showing posts with label forensic accountant. Show all posts
Showing posts with label forensic accountant. Show all posts

Friday, February 11, 2022

Why Your Forensic Accountant May Not Provide Services on a Contingency Basis (i.e., Compensated on a Percentage or Commission of Client Recoveries)

As a forensic accountant, I almost never perform work on a contingency or deferred fee basis for several reasons, including:
  1. It introduces some apparent conflicts (e.g., whether we take an aggressive approach for short term gains at the expense of a profitable counterparty-client relationship)... not to mention, who is our client anyway? It is often not one of the parties to a case.
  2. It often compromises our ability to provide timely service since we have to prioritize other work to ensure we have the cash to pay our employees for their work
  3. Our work will likely be inadmissible in court since contingency accountants or auditors have a financial stake in the outcome of the case 
  4. For most of our clients, because they have a great deal of assets at stake, usually it is most cost-effective to engage us on our standard hourly basis
  5. On the other hand, it is not profitable for us to accept very small contingency matters
  6. There are lenders to clients who need to borrow money to afford legal costs - search "litigation financing" to learn more about this. 
If this fee structure doesn’t work for you, I completely understand. It does not work for everyone.

Friday, January 1, 2016

2015 Year-In-Review: Damages

 What We Learned About Damages from Blurred Lines + Howard King Talk

Monday, November 2, 2015

Revenue Stability in the Music Market - Materials from Cedar Boschan's October Presentation at The University of Southern California Posted

Our founder Cedar Boschan had a great time speaking last month at the University of Southern California's 2015 Institute on Entertainment Law and Business.  The topic was "The Search for Revenue Stability in the Evolving Music Market."
Image courtesy of NARIP (c) 2015 L-R: Tess Taylor, President of NARIP, Todd Brabec, Esq., author of "Music, Money & Success," Cedar Boschan of Boschan Corp., Kent Liu, Esq. of Rhino Entertainment

Ms. Boschan was honored to serve as a panelist at her alma mater (USC conferred Ms. Boschan's bachelor of science in music industry), where her instructors included fellow speaker Todd Brabec, attorney and co-author of the classic, "Music, Money & Success."  

Images courtesy of NARIP (c) 2015 Top, L-R: Tess Taylor, President of NARIPThomas White, program chair, Kent Liu, Esq. of Rhino Entertainment, Anita Rivas, Esq., materials chair, Todd Brabec, Esq., author of "Music, Money & Success," Cedar Boschan of Boschan Corp. 
Following the panel discussion, many audience members requested copies of Ms. Boschan's presentation.  Due to overwhelming demand, our sister site, today posted the presentation images as well as some written materials that were included in the materials that attendees of the USC event received.

Since Auditrix readers may find Ms. Boschan's presentation of interest, we are including a link here:

Note: During the time since Cedar prepared the above-linked materials, updated music publishing revenues figures were released by the NMPA and CISAC.  Therefore, don't miss Cedar Boschan's next music industry presentation for the most up-to-date analysis.

Tuesday, September 29, 2015

A Forensic Accountant Does Not a CPA or CFE Make

Beyond navigating all kinds of accounting and record keeping systems, a modern forensic accountant needs the ability to ascertain compliance with relevant regulations and/or contracts and, often, to process terabytes of information using sophisticated database software, plus the ability to communicate findings in a manner in which a layperson can comprehend.

It isn't easy to find an expert who possesses all of the above qualities and when you do, your counterparty will likely endeavor to bar the expert from auditing or testifying.

Some of the strategies to limit a party's top choice of forensic accountant include attempting to:

  • Proactively limit contractually:
    • Who can conduct an audit (e.g., requiring it be a CPA and/or nationally recognized firm, even though the "Big 4" accounting firms are not especially well regarded as royalty audit or forensic accounting experts and many are unwilling to take on such engagements)
    • When an audit can be conducted by your auditor of choice (e.g., certain companies try to prevent the best auditors from conducting more than one audit at a time at any particular company)
  • Reactively attempt to discredit your expert by attempting to equate the term "accountant" with "CPA" (although they are not the same) and frame your accounting expert's credentials solely in terms of CPA certification (or other certification or degree), even if the expert is opining on industry practice or damages calculations (and not a public-accounting-related matter, such as compliance with GAAP).
However, forensic accounting (including royalty auditing) is a private accounting service, not public accounting.  No official certification exists for "forensic accountants" or other forensic experts; neither CPA and/or CFE certifications, nor economics and/or statistics degrees validate that the bearer has the training or experience necessary to succeed in forensic accounting.  Although these and other degrees and certifications can have bearing on the suitability of an expert, depending on the particular case, a "forensic accountant" these qualifications do not alone make.

Modern forensic accounting is really a blend of:

  • Accounting
  • Eeconomics
  • Industry expertise
  • IT
  • language arts
  • Above-average understanding of certain legal concepts

While some CPAs, CFEs and economists have this, the vast majority do not, as I once observed when a highly degreed certified public accountant had a meltdown on the stand when he had to admit during questioning that he had no relevant expertise that pertained to the matter at hand.

Fortunately, the curriculum at the University of Southern California - where I studied under highly respected IP attorneys, accountants and economists - and my decades of work experience focus on all of the above areas, so I am a very well rounded forensic accountant, particularly in the entertainment and IP sectors, where I bring deep industry expertise.

My recommendations for finding the right auditor or forensic accountant for you or your client are to search for someone with a balance of industry expertise and relevant accounting and/or testimony experience.  Request the potential expert's CV, a list of cases in which they have testified and/or participated and client references.  If the potential expert forensic accountant doesn't ask a lot of questions and clear conflicts before learning details of the case, it is a red flag that he or she is inexperienced.

Finally, make sure you discuss your or your client's budget with the expert; a rate sheet alone won't tell you how many hours of work will be required on your case and if you think all you need the forensic accountant to do is spend an hour putting together a spreadsheet and signing a declaration that you drafted, you may be mistaken; although we often need to define the scope of an engagement to meet a budget, a forensic accountant's work is usually a bit more complex than meets the eye, so do not assume you know how much time a particular engagement may take.

Saturday, March 28, 2015

Introducing Boschan Corp.

Dear readers,

It is my great pleasure to announce that audit and forensic expert services successfully launched this week at Boschan Corp., the sister company of Auditrix, Inc.

Boschan Corp. is dedicated to empowering attorneys to optimize client claims / counterclaims through:

  • Contract and royalty audits
  • Damages, property and restitution valuation

Personally speaking, I am thrilled to return to an entrepreneurial role focused on music, IP, interactive and other select clientele, not to mention a commute that saves hundreds of hours!

Please update your contact records as follows:

Cedar Boschan
President & CEO

Boschan Corp. & Auditrix, Inc.
8383 Wilshire Blvd.
Suite 800
Beverly Hills, CA 90211

Tel: 424-248-8866

I hope to hear from and see you soon!

Have a wonderful week ahead,

Friday, January 9, 2015

Five Things to Consider Before Filing a Music Copyright Case

By Gerard P. Fox, Esq.

Gerard P. Fox, Esq. and his firm
handle general business, contract
and IP litigation across the
entertainment industry and

Attorney Gerard P. Fox has acted as lead trial counsel for corporate clients such as Vivendi and Clear Channel. Mr. Fox has also represented high profile entertainers including Madonna, Anita Baker and the Isley Brothers.  

From hiring experts to damage awards, in his post below, Mr. Fox shares some very useful tips from his years of copyright litigation experience.  For a personalized consultation, contact the Law Offices of Gerard Fox and also check out his Fox's Litigation Strategies Blog.

1.      In my opinion the Federal District Courts have been improperly applying a quantitative and not qualitative copyright analysis in music and film cases. This means that they take the totality of your copyrighted work which you claim has been infringed, and hold it up against the totality of the infringing work and actively look for dissimilarities.  This is incorrect under the law because in truth a song often includes many small, integrated and unique copyrightable works. Unfortunately, because the courts are taking this approach, it is much harder to win a copyright case in district court.  I tried one of the last published wins where I represented an artist claiming a part of their song was infringed. See Three Boys Music (Ronald Isley) v. Michael Bolton.  It’s not common.
2.     You will need to hire a musicologist up front.  If you want to have any chance of negotiating an early settlement or defeating an early motion for summary judgment (see below), you will need to retain an accomplished and respected musicologist. First, you should secure their independent opinion as a consultant, then if their opinion is one you respect and one that supports your contentions you should retain them as a formal expert.  Good musicologists, who are respected by defense counsel and the court, will usually ask for an up front retainer of no less than $5,000 or $10,000. Keep in mind that this retainer is not a cap of their total billings.  If the case proceeds through to depositions, summary judgment and trial, the musicologist would likely charge you upwards of $25,000. 
3.     Another consideration is that the defendants will most assuredly make an early motion for summary judgment wherein they will argue that the infringed elements of your song are common and not unique, and that the two musical works are not substantially similar.  They may make other arguments that are common to these type cases, but these are the two most likely arguments.  In making these arguments, they will put forth cases that move away from the proper application of Copyright law to a quantitative analysis of the works.  It is imperative that you retain attorneys who have a deep and up to date understanding of the case law, legislative history and this process to have any chance of defeating this type of motion.  This is no area for a general practitioner.  Defeating this summary judgment motion is essential, because if you do, which is rare in these cases, you will have all the leverage, as the defendants would be left to face a public jury trial.
4.     The prevailing party may be awarded their attorney’s fees under Copyright law.  Under 17 U.S.C. § 505 “the court may also award reasonable attorney’s fees to the prevailing party” in a copyright infringement case.  This is a huge issue to consider if you are the artist because if you lose, you could be ordered to pay hundreds of thousands of dollars of defense fees.  Now, awarding attorney’s fees and costs is discretionary with the district court judge, and many of these judges will NOT award the defendants their fees even if they win, on account of their very human concern about the financial devastation such an award would cause the artist, but this is a risk.
5.     Finally, when it comes to estimating your damages, you will not be awarded all of the infringing defendants’ net profits from the infringing distribution and use of the song, but an apportioned amount.  17 U.S.C. § 504(b) provides that the defendants are entitled to prove that certain elements of the profits are “attributable to factors other than the copyrighted work.” See Mackie v. Rieser, 296 F.3d 909, 915–16 (9th Cir.2002) (In the Ninth Circuit, on a claim to recover profits that are attributable to the copyright infringement, a plaintiff must show that the infringement itself, that is, the use of the plaintiff's work, was causally linked to the gross revenue claimed.).  This means that the defendants will argue that their notoriety, other songs on an album, the marketing behind them and their songs, the market that pre-exited for their music and other non-infringing parts of the song at issue were responsible for most of the profits earned, and that you should only be awarded a small apportioned amount of the net profits.  Of course, most defendants are not truthful about their actual net profits and will try to hide the true amount of their profits. To combat this it is important that you hire a forensic accountant who is knowledgeable about the music industry, such as Green Hasson Janks, to figure out the actual net profits, and then use your musicologist and maybe another music industry expert to argue that the piece of music stolen from you drove the sales and as a result defendants’ profits.
# # #

Gerard ("Gerry") Fox graduated from Georgetown Law School, magna cum laude, and earned an accounting degree from the University of Richmond. Mr. Fox acted as lead trial counsel for clients such as Vivendi, Clear Channel and Dow Chemical.

Gerry started his career at Covington & Burling, followed by Kaye, Scholer, before forming Fox & Spillane, where Mr. Fox honed his trial skills for twelve years. Four years ago, Gerry began the Law Offices of Gerard Fox.

Gerry handles General Business Litigation, Contract Litigation and Intellectual Property Litigation across the entertainment industry and beyond.

Gerry is admitted to practice in Maryland, Washington, D.C., California, has served as a media commentator, and wrote the book “Sue the Bastards.”