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Representative Cases

Litigation Cases

Overview: The SEC alleged that a CEO of a company committed securities fraud through the revenue recognition of a contract that had yet to be approved by a customer’s board of directors and that the CEO did so to avoid busting debt covenants and to meet revenue expectations. If found guilty, the CEO would be prohibited from serving as an officer or director of a public company.
HSG’s assignment was to rebut an expert report that asserted the CEO’s primacy in the propriety and accuracy of company financial statements. HSG’s report demonstrated that management involved in directing and operating the finance function play a far more significant role in assuring the propriety and accuracy of the company’s financial statements; that the CEO and other senior management members are entitled to rely on internal and external advisors; and that a financial restatement is not tied to the certifying CEO’s personal acknowledgment. Shortly before trial, the judge questioned the SEC’s basis for a fraud suit. 

Result: The matter settled with no suspension for the CEO and for a monetary amount of approximately fifty thousand dollars.

Overview: The matter filed involved more than a billion-dollar accounting restatement due to improper revenue recognition and allegations of tens of millions of dollars of insider trading by the three executives.
HSG addressed the allegations against the CEO and found that he was not responsible for the organization that made the decision of when revenue could be recognized, nor for the decisions made internally by the organization or its external auditors on when to recognize revenue.
HSG highlighted several important facts that helped dismiss the case against the CEO – that his tenure was only 11 months out of the 57 month restatement period; that the CEO was appointed during a time of a radical reduction in force of 60% of the employees, thus making him out as the hachet man; and importantly, that the prior CEO kept the role of chairman when he stepped aside from his role as CEO and maintained control over the final approval of the revenue recognition decisions through the entire restatement period and was the single member of the company’s Options Committee.
Result: The matter settled satisfactorily with the client being dismissed from the charges.

Overview: A court appointed examiner selected HSG to assist in the review of a number of complex commercial issues and transactions arising from an offshore energy related bankruptcy. These issues included analysis of corporate structures, financing, inter-company agreements, sale and buyback transactions among related parties, payments to owners, related party loans, going concern and consolidation accounting, valuation, solvency concerns and refinery construction issues.
Result: HSG raised a number of issues for the examiner to include in his report and as a result, both the major creditor and the United States Trustee entered motions to request that the bankruptcy court appoint a trustee to manage the debtor’s affairs. In response to the motion, the debtor paid the major creditor in full and made an initial payment to other creditors of 70 cents on the dollar.

Overview: H.S. Grace & Company, Inc. (HSG) was named financial advisor and real estate consultant to the unsecured creditors committee in a major international bankruptcy involving large retail chains and significant commercial, retail, and residential real estate holdings. Work involved sale of various business units, including the parent company, and of individual real estate holdings. HSG also advised on the creation of partnerships in connection with certain real estate holdings, and advised regarding tax planning in connection with the dissolution.
Result: Successful disposal of company holdings and creation of ongoing entities in which the bankruptcy estate continued to participate.”

Overview: HSG’s analysis on behalf of debtors (defendant) pointed out serious areas of mismanagement by the landlord (plaintiff) and errors in landlord’s damage calculation of its claim for rejection of the lease. HSG’s analysis led to the discovery of a document claimed to be non-existent by landlord, for which the judge invited a motion for sanctions from our client.
Result: Material reduction in landlord’s claim.

Overview: The bankruptcy trustee of a failed dot com sued the former directors and officers of the dot com company (HSG clients) contending they had wasted corporate assets, engaged in insider trading, and breached their fiduciary duties to creditors while the company was in the zone of insolvency. HSG’s analysis showed that the defendant directors and officers had acted appropriately and that outside economic factors, including the virtual drying up of the venture capital funding market for dot com’s in 2000, caused the failure of the company.

Result: The case was favorably resolved at mediation.

Overview: The trustee of a litigation trust relating to a bankrupt physician practice management company sued HSG client, a group of related healthcare plans, under various bankruptcy laws for sums withheld by the plans prior to the bankruptcy when the management company fell behind in payments to medical care providers. When the company fell behind, the plans had made payments directly to the medical care providers and also ceased paying the full capitation and other payments to the company. HSG’s review demonstrated that the direct payments to the medical care providers were authorized and that the plans had made all payments due to the company.
Result: Counsel for the plans used HSG’s report to negotiate a favorable settlement.

Directors’ and Officers’ Role in Mortgage Company Bankruptcy

Overview: A large mortgage company with a subsidiary that acted as a clearinghouse for other mortgage companies entered into bankruptcy for the second time. Plaintiffs claimed that certain senior management and directors had mishandled investments and hidden risks through use of speculative interest rate swaps. HSG analysis showed that the investment activities were appropriate, that the losses were market-driven and that management had kept the board properly advised of actions and associated risks.
Result: Favorable settlement for defendant following mediation.

Overview: During bankruptcy proceedings of a major telecommunications firm, bondholders with $500 million in exposure sued the bank saying it failed in its duty as the bond indenture trustee. In its analysis, HSG analyzed the role of an indenture trustee, finding its scope much narrower than the plaintiff was claiming. HSG also found that the company issuing the bonds conducted itself appropriately but was caught in a market situation that caused it to fail and its failure to repay the bonds was not related to the trustee bank’s action or inaction.
Result: Satisfactory settlement during trial.

Overview: Plaintiffs (major shareholder, banks and other shareholders) charged that another majority shareholder and his two sons, who had served as CEO and COO of the company, unfairly influenced separation of interests in the company in a way that enriched them and damaged the other interests. HSG examined the situation and found that the board did not have appropriate checks and balances in place to insure fair treatment of both parties, allowing family members to manipulate the process in their favor over a two-year period.
Result: Plaintiffs were awarded a nine-figure settlement.

Overview: Shareholders sued Walt Disney Company alleging that the amount of compensation paid CEO, Michael Ovitz, who was terminated after just over a year, was excessive. HSG was hired to analyze the business case behind the decisions. HSG’s report found that the company followed appropriate governance processes in the hiring process and that the contractual arrangements were justifiable based on the circumstances and similar executive pay plans.
Result: An appellate court ruling validated these findings.O

Overview: State Pension Fund (plaintiff) sued HSG client bank (defendant) in connection with its role as indenture trustee for the bondholder (State Pension Fund) asserting damages approximating $200 million. HSG’s analysis demonstrated that the indenture trustee’s actions did not cause the damages. HSG’s participation in key depositions and the mediation identified breakdowns in pension fund investment operations and material conflicts of interest regarding its board of trustees not discovered by the State Attorney General’s investigation.
Result: Defendant bank, although the primary target among a number of defendants, paid nothing in the settlement of the lawsuit. Payments from other defendants approximated nine digits.

Overview: The liquidating trustee of a creditor trust sued the independent directors of a twice-bankrupt energy company asserting that they had breached their fiduciary duties by pursuing excessively risky business strategies and had abdicated their corporate governance responsibilities and engaged in self-dealing. Drawing on their experience in bankruptcy and oil and gas and as board members, HSG found that the independent directors were well-informed and appropriately interacted with and relied on management and exercised experienced and reasonable judgment in addressing their responsibilities in an effort to make the reorganized entity a success. HSG also found that the plaintiff’s loss of value damages were speculative and not based on any evidence.
Result: After extensive discovery, including expert depositions, the case was dismissed on defendants’ motion for summary judgment.

Overview: The old board of a commodities trading exchange was sued by the new board alleging negligence, self-dealing and misconduct in its oversight of the market. HSG was brought in a specialized consulting assignment to review the board’s actions. We found significant problems with the board’s actions and that its responsibilities were not satisfied.
Result: The matter was subsequently resolved.

Overview: HSG analysis and testimony on behalf of Plaintiff focused on Defendant trustee’s mismanagement of real estate assets over 20 years. HSG showed that Defendant trustee’s failure to understand building codes and the means and options that were available to remediate a parcel of land according to building codes resulted in a significant devaluation of the property and therefore the assets of the trust.
Result: Jury verdict estimated at $150 million for our client.

Overview: Investors sued a financial institution (HSG client), which had provided custodial accounts services in connection with a bankrupt investment limited partnership. The investors claimed that the financial institution had made fraudulent representations, provided false financial reports, allowed investors’ funds to be commingled with the promoter’s funds, and vouched for the promoter. Investors sued for fraud, negligent misrepresentation, breach of fiduciary duty and aiding and abetting breach of fiduciary duty and fraud. HSG’s analysis showed that the financial institution generally played no part in the investors’ initial decision to invest and that the financial institution’s role with respect to the investors was very limited. HSG also determined there was no causal relationship between the investors’ losses and any actions of the financial institution.
Result: A satisfactory settlement was reached after extensive discovery.

Overview: Seller of a major league sports team sued a financial institution (HSG client) for allegedly providing false information regarding the financial capability of a potential buyer who had negotiated for the purchase of part of the team but failed to close. A few months later, Seller sold 100% of his interest in the business, but subsequent to the sale, the value of the business rose. Seller contended that the financial institution’s actions had caused him to sell the entire business rather than the 50% he had originally intended to sell and deprived seller of the appreciation in the minority interest which was to be retained. HSG’s analysis determined, among other issues, that the seller’s inability to fund his share of financing responsibilities for the team would have likely resulted in a step-down of the seller’s interest to zero.
Result: A satisfactory settlement was reached after extensive discovery.

Overview: The subordinated sellers (plaintiffs) of a large tract of land sued the defendant bank (HSG client) alleging that the bank had colluded with the project developer to financially damage the subordinated sellers. HSG’s analysis indicated that the subordinated sellers’ damage claims were incorrect, and without foundation, and that the bank’s actions had actually worked to the financial benefit of the subordinated sellers rather than to the contrary.
Result: Favorable out-of-court settlement for our client.

Overview: Seller of a major league sports team sued a financial institution (HSG client) for allegedly providing false information regarding the financial capability of a potential buyer who had negotiated for the purchase of part of the team but failed to close. A few months later, Seller sold 100% of his interest in the business, but subsequent to the sale, the value of the business rose. Seller contended that the financial institution’s actions had caused him to sell the entire business rather than the 50% he had originally intended to sell and deprived seller of the appreciation in the minority interest which was to be retained. HSG’s analysis determined, among other issues, that the seller’s inability to fund his share of financing responsibilities for the team would have likely resulted in a step-down of the seller’s interest to zero.
Result: A satisfactory settlement was reached after extensive discovery.

Overview: An insurance firm hired HSG to examine a set of claims between the insurance company and a bank pertaining to a fraudulent insurance derivatives scheme perpetrated by a third party insurance agent. HSG’s analysis demonstrated various breakdowns in the bank’s operating practices and established that the client insurance firm had taken the appropriate steps throughout the course of the various transactions.
Result: Favorable out-of-court settlement for our client.

Overview: An oil-rich developing country had planned a major infrastructure project and HSG client (plaintiff) arranged financing through a large, financially sophisticated entity. Defendant backed off its obligation to provide financing at the last minute, asserting the financial structure was too complex. Plaintiff sued for bad faith breach of contract. HSG’s analysis demonstrated the economic viability of the transactions and broke down a highly complex series of transactions to a simple analogy that the jury was able to understand.
Result: Substantial eight-digit jury verdict for our client.

Overview: HSG was engaged by a company to defend against a wrongful termination claim brought by a former CEO. Plaintiff asserted claims for breach of contract, tortious interference with contractual relationship and slander. HSG evaluated circumstances related to the plaintiff’s hiring, tenure as CEO and termination. HSG determined that the actions of the defendant company were appropriate and that the company followed normal and customary business practices throughout the course of its relationship with the CEO.
Result: The company achieved a satisfactory settlement out of court.

Overview: HSG was hired by its defendant client, a drilling rig operator, who was being sued by a contractor as a result of the operator choosing not to proceed with the construction of certain drilling rigs. HSG drew upon its knowledge of customary and normal practice in the purchase and construction of such equipment to analyze the business practices applicable to the purchase cancellation. HSG’s analysis also challenged the plaintiff’s damage claims and pinpointed weaknesses in the plaintiff’s position regarding certain contractual issues.
Result: Favorable out-of-court settlement for our client.

Overview: The partner controlling an entity which managed several large multi-family residential complexes brought multiple arbitrations and lawsuits against the managing general partner (HSG client) and others in a group of partnerships which owned the residential complexes. Plaintiff challenged both the authority of the managing general partner and his decisions in connection with the operation of the partnerships and the potential sale of several of the complexes. Utilizing a team with extensive experience in negotiating and operating complex real estate partnerships and in the construction, marketing and sale of large real estate projects, HSG analyzed the relationships and performance of the parties under the agreements, and specifically the governance of the partnerships by the general partner in accordance with normal and customary fiduciary standards. HSG concluded that the managing general partner had acted appropriately under the circumstances.
Result: The parties resolved their differences, and the sales of the multi-family residential complexes went forward.

Overview: Private investor sued HSG client, U.S. oil company, the owner of a major oil field in Indonesia, for moneys allegedly due under a loan agreement. U.S. oil company counterclaimed contending that private investor had materially breached the loan agreement by failing to fund and provide remediation services for the field. HSG calculated the damages suffered by U.S. oil company as a result of the breach, which included both lost production revenues through the date on which U.S. oil company sold a majority interest in the field to a third party and the diminution in the sale price of the field upon the sale to the third party. Using private investor’s estimates of increased production from the field to be achieved by the remediation operations, HSG calculated a range of damages at various production levels, oil prices, and capital costs.
Results: A satisfactory resolution was reached after expert reports were filed.

Overview: A retiring member of a professional association sued the remaining owners/partners (HSG clients) for payment of contractual benefits. HSG analysis, on behalf of Defendants, pointed out problematic issues regarding the retiring managing partner’s actions in developing and subsequently restructuring various contracts, which provided the basis for his claim for benefits.
Result: Favorable out-of-court settlement for clients.

Overview: Bond holders of a specialized finance company sued Defendant bank (HSG client) as a result of the failure of the finance company. The bank’s position was hampered by the fact that the Trust department’s responsibility had moved through a series of three banks and significant confusion existed in the records. HSG analysis and subsequent participation in mediation set out the shortcomings in the experience and operating skills of the senior executives of the specialized finance company, and further demonstrated that the bank’s actions were not causally related to the failure of the firm.
Result: Favorable out-of-court settlement for our client.

Overview: HSG analysis on behalf of debtors (Defendant) pointed out serious areas of mismanagement by the Landlord (Plaintiff), and errors in landlord’s damage calculation of its claim for rejection of the lease. HSG analysis led to the discovery of a document claimed to be non-existent by Landlord, for which judge invited a Motion for Sanctions from our client.
Result: Material reduction in Landlord’s claim.

Overview: HSG client (Plaintiff) contracted with the defendant to create an interactive CD-ROM based upon a book and characters owned by Defendant. Defendant failed to publish and distribute the CD-ROM. HSG analysis established Plaintiff was entitled to both monetary and non-monetary compensation and HSG calculated appropriate damages. The report also pointed out certain organizational changes initiated by Defendant that contributed to Defendant’s failure to deliver the required non-monetary compensation.
Result: Favorable out-of-court settlement for our client.

Overview: HSG client (plaintiff) was a wholesale electric supply company. Its principal competitor responded to client’s market penetration by undertaking a negative campaign to undermine client’s credibility. Competitor instituted litigation, the expense and settlement of which ultimately caused client to cease operation. The client’s insurance company (defendant) failed to defend client in the stated litigation and client filed a lawsuit for recovery. HSG was retained to examine the business issues associated with the conflict and to quantify client’s actual damages from insurance company’s failure to defend.
Result: Favorable out-of-court settlement for our client.

Overview: Plaintiff oil company sued defendant operator (HSG client) under a letter agreement and operating agreement contending that the operator had intentionally hindered plaintiff’s efforts to participate in field development. Plaintiff claimed that the resulting delay in field development had injured plaintiff by lowering its stock price in a subsequent public offering. Drawing on their knowledge of the oil and gas industry and financial experience, the HSG team determined that Plaintiff was not capable of financing the proposed development program. HSG also determined that Plaintiff’s expert’s stock pricing model damage calculation violated generally accepted valuation techniques and ignored accepted factors used in valuation, e.g. the timing and amount of future cash flows.
Result: A satisfactory settlement was reached after extensive discovery.

Overview: HSG client (defendant bank) was sued for direct and consequential damages of approximately $12.5 million stemming from an embezzlement scheme in which two plaintiff employees colluded and deposited/wired funds into a fictitious corporate bank account opened at the defendant bank. HSG’s analysis demonstrated that plaintiff’s financial reporting and internal controls were deficient, resulting in a lack of oversight of the two employees. HSG also challenged the business basis for plaintiff’s consequential damages claim stemming from alleged actions by defendant bank.
Result: Highly favorable for HSG client. Jury found no consequential damages. Regarding direct damages, which were substantially reduced by the jury, the jury found the plaintiff liable for 95% of the remaining direct damages and our client responsible for 5% (or approximately $6,000).

Overview: A small manufacturer of healthcare devices sued HSG client, a major manufacturer, claiming that defendant had restricted plaintiff’s entry into the hospital market allegedly through defendant’s support of buying groups. HSG found that plaintiff’s failure to meet its business plan goals resulted from operational and manufacturing problems, including inability to meet potential demand in the market. Acceptance of plaintiff’s products was mixed and other competitors, who did not sell through buying groups, had much stronger revenue growth.
Result: The action was satisfactorily resolved.”

Overview: HSG was deposed in an arbitration between an executive seeking back compensation and his former employer (HSG client) who asserted the executive was terminated with cause and no compensation was due.
HSG examined the roles and responsibilities of internal and external professionals, senior executives and board members, and found that the executive repeatedly violated the company’s code of ethics in respect to his own and certain other executives’ compensation. The executive overrode the concerns of other professionals and executives, made inappropriate investments of company money to keep selected personal investments afloat and intentionally oppressed the value of shares of a subsidiary company that he and another executive would benefit from, as HSG discovered a number of other self-dealing transactions.
Result: Subsequent to HSG testimony just prior to the arbitration, the company achieved a favorable result paying much less than they had reserved.

Overview: A litigation trust funded by six banks (plaintiff) sued certain directors and officers (defendants) of a corporation and their advisors, alleging that a spin-off had been intentionally structured to benefit the defendants. Attorneys for the plaintiff litigation trust hired HSG, which had worked for opposing parties in another complex commercial matter. HSG’s analysis identified numerous areas in which the designated directors and officers and certain of their advisors had operated outside of customary and ordinary business guidelines and determined that the board did not have appropriate checks and balances in place to insure fair treatment of both parties.
Result: The client attained a nine-digit settlement from the specified directors and officers, the surviving company, and certain of its advisors.

Overview: Employees (Plaintiff) holding a controlling interest in a “Special Purpose” corporation sued the Defendant parent corporation (HSG client), asserting that funds upstreamed through the Special Purpose Corporation were undeclared dividends. HSG’s analysis identified errors in the Plaintiffs’ underlying business model and in their damage calculations. Our analysis demonstrated that the payments were not dividends and that the employees who were the majority owners of Special Purpose Entity were not entitled to a portion of those cash flows.
Result: Favorable out-of-court settlement for our client.

Overview: HSG was engaged on behalf of minority shareholders of a small capitalized company to determine whether the value of their investment was intentionally devalued over the course of a seven-year period by the senior management of the acquiring company. HSG found governance problems in the financial, operational, and management practices of the Defendants.
Result: A settlement was reached that was favorable for the Plaintiffs.

Overview: Shareholders owning tracking stock in a division of a biotech company (HSG clients) sued the company and its directors and officers for securities fraud under Rule 10b-5 and for breach of fiduciary duty under state law in connection with a repurchase of the tracking stock by the company. The shareholder class asserted that defendants had intentionally manipulated the timing of the repurchase and related disclosures and the earnings of the division to reduce the price at which the repurchase occurred in order to benefit the shareholders of the dominant division of the company. HSG’s analysis showed that the board had failed to employ customary and usual corporate governance practices and processes in assessing the fairness of the transaction.
Result: The case was settled favorably.

Overview: Shareholders sued a major entertainment company alleging that the amount of compensation paid a senior executive who was terminated after just over a year was excessive. HSG was hired to analyze the business case behind the decisions. HSG’s report found that the company followed appropriate governance processes in the hiring process and that the contractual arrangements were justifiable based on the circumstances and similar executive pay plans.
Result: An appellate court ruling validated these findings.

Overview: A shareholder class of a retail company sued the company’s directors and officers (HSG client) for securities violations under Section 11 of the 1933 Act for investment losses allegedly resulting from the company’s failure to disclose risks affecting the company’s marketing of its products and distribution channels and the company’s financial situation. HSG’s analysis showed that the defendants had diligently investigated the representations in the prospectus and where appropriate had relied on qualified experts in making certain representations in the prospectus.
Result: The case was satisfactorily resolved.

Overview: HSG clients, Officers and Directors, were sued by a Litigation Trustee for breach of duty and mismanagement asserting damage claims of approximately $1.2 billion. HSG analysis demonstrated the defendants had acted responsibly in developing interest rate forecasts, in the investment of funds under their control, in the disclosure of various business risks to the entire board and the public, and in the operation of a major subsidiary.
Result: Favorable out-of-court settlement for our client.

Overview: HSG was selected to represent a defendant in a financial reporting fraud matter filed by the SEC against three senior executives of a software company. The SEC alleged that three members of senior management misreported $1 billion dollars of revenue over a three-year period. HSG established that the allegations against our client were beyond his responsibilities and outside of his area of expertise.
Result: The case was settled favorably.

Overview: Shareholders of a pharmaceutical company sued the company for securities fraud under Section 11 of the 1933 Securities Act for investment losses allegedly resulting from the company’s failure to disclose risks affecting the company’s financial situation. The company had only one drug in the testing phase and when that drug did not receive final FDA approval the stock value dropped significantly. HSG’s analysis established that the company in its public filings had disclosed numerous risk factors relating to the fact that it had only one potential product which could only be sold after successful FDA trials and approval and that it might have no future revenue.
Result: The case was dismissed on summary judgment in favor of the company.

Governance Cases

Overview: HSG was hired to serve as an independent compliance consultant to a family of mutual funds as part of an SEC settlement over allegations of market timing. The company operated a mid-sized family of mutual funds with three subsidiaries: a registered investment advisor, a registered broker-dealer and a registered transfer agent. HSG’s role was to review the company’s supervisory, compliance and other policies and procedures designed to prevent and detect breaches of fiduciary duty, breaches of the code of ethics and federal security law violations.

Result: Our final report included findings relative to needed improvements in policies and procedures and also included observations and suggestions which, while not necessary to achieve regulatory compliance in and of themselves, were helpful in improving governance and strengthening internal controls.

Overview: HSG was asked to review the board’s action in an initial public offering. Shareholders had sued, alleging that the company had deliberately misled the marketplace as shares were down 40% two months after going public. HSG’s analysis determined the appropriate checks and balances were in place, with lines of communication open between senior management and the board. The board was informed of problematic, recurrent issues in the industry and the company had taken appropriate steps to address them. The share price decline was the result of market forces, not board action or inaction.

Result: Favorable settlement was reached for our client.

Overview: HSG was engaged on behalf of minority shareholders of a small capitalized company to determine whether the value of their investment was intentionally devalued over the course of a seven-year period by the senior management of the acquiring company. HSG found governance problems in the financial, operational and management practices of the defendants.

Result: A settlement was reached that was favorable for the plaintiffs.

Overview: HSG was hired as an expert by two law firms in their representation of a group of shareholders who felt they did not receive fair value when different classes of shareholdings were combined. Our work demonstrated how compensating shareholders with one class of stock, and later combining that class of stock with other classes of stock, provides the opportunity to basically re-price the initial transaction. Our analysis also found that the board of directors had failed to focus on their duty of fairness to all of the involved shareholders.
Result: A settlement in the high eight-figures was achieved by the two law firms for their shareholder clients.

Overview: HSG was hired by the directors and officers of a failed startup firm.  There were questions of inappropriate actions within the zone of insolvency, waste of corporate assets, excessive compensation and other issues. Our findings established that the startup firm failed because its business model simply did not work.
Result: A favorable settlement was reached.

Overview: In a shareholder derivative action, plaintiffs filed suit in Delaware federal and state court alleging breach of fiduciary duties and fraudulent misrepresentation regarding the award of stock options to certain employees. HSG’s analysis showed that the company had communicated its stock option program openly, and that the audit committee had properly discharged its responsibilities in connection with an earlier award of “”in-the-money”” options. Sensitive to the manner in which those options were awarded, the audit committee worked with its outside accountant and chose to take a conservative approach to recognizing the value of these options.
Result: Favorable settlement was reached for our client.

Overview: The old board of a commodities trading exchange was sued by the new board alleging negligence, self-dealing and misconduct in its oversight of the market. HSG was brought in a specialized consulting assignment to review the board’s actions. We found significant problems with the board’s actions and that its responsibilities were not satisfied.
Result: The matter was subsequently resolved.

Overview: Plaintiffs (major shareholder, banks and other shareholders) charged that another majority shareholder and his two sons, who had served as CEO and COO of the company, unfairly influenced separation of interests in the company in a way that enriched them and damaged the other interests. HSG examined the situation and found that the board did not have appropriate checks and balances in place to insure fair treatment of both parties, allowing family members to manipulate the process in their favor over a two-year period.
Result: Plaintiffs were awarded a nine-figure settlement.

Causation and Damages Analysis Cases

Overview: Insurance companies paid a building owner for losses incurred due to a fire and then sued contractors who previously worked on the building for negligence.
HSG was retained by the contractor firms to determine whether their actions complied with normal and customary business practices and to review the opinions of certain experts engaged by the insurance companies.

HSG’s analyses established the cause of the fire was primarily attributable to the duties for which the building owner and certain of its advisors were responsible.

Result:  The case was favorably settled during trial.

Overview: The SEC alleged that a CEO of a company committed securities fraud through the revenue recognition of a contract that had yet to be approved by a customer’s board of directors and that the CEO did so to avoid busting debt covenants and to meet revenue expectations. If found guilty, the CEO would be prohibited from serving as an officer or director of a public company.

HSG’s assignment was to rebut an expert report that asserted the CEO’s primacy in the propriety and accuracy of company financial statements. HSG’s report demonstrated that management involved in directing and operating the finance function play a far more significant role in assuring the propriety and accuracy of the company’s financial statements; that the CEO and other senior management members are entitled to rely on internal and external advisors; and that a financial restatement is not tied to the certifying CEO’s personal acknowledgment. Shortly before trial, the judge questioned the SEC’s basis for a fraud suit.
Result: The matter settled with no suspension for the CEO and for a monetary amount of approximately fifty thousand dollars.

Overview: The matter filed involved more than a billion-dollar accounting restatement due to improper revenue recognition and allegations of tens of millions of dollars of insider trading by the three executives.
HSG addressed the allegations against the CEO and found that he was not responsible for the organization that made the decision of when revenue could be recognized, nor for the decisions made internally by the organization or its external auditors on when to recognize revenue.
HSG highlighted several important facts that helped dismiss the case against the CEO – that his tenure was only 11 months out of the 57 month restatement period; that the CEO was appointed during a time of a radical reduction in force of 60% of the employees, thus making him out as the hachet man; and importantly, that the prior CEO kept the role of chairman when he stepped aside from his role as CEO and maintained control over the final approval of the revenue recognition decisions through the entire restatement period and was the single member of the company’s Options Committee.
Result: The matter settled satisfactorily with the client being dismissed from the charges.

Overview: The management of a surviving corporation and its advisors had “engineered” a spin-off from a sister company to the detriment of the shareholders of the sister company which subsequently filed for bankruptcy.
Representing the bankrupt plaintiff, HSG assessed the roles and responsibilities of external accounting firms, legal counsel, financial advisors and senior management, and the process used and assumptions developed by the surviving company to determine the fairness of the valuation and separation of the spin-off company.
After a motion to exclude HSG was denied, HSG presented its determination that the spin-off process and the valuations created by the surviving company management and its advisors did not follow customary and ordinary business practices and that outside counsel and the public accountants had conflicts of interest. 

Result: Defendants jointly agreed to and funded a $165 million settlement.

Overview: HSG client (Plaintiff) was a wholesale electric supply company. Its principal competitor responded to client’s market penetration by undertaking a negative campaign to undermine client’s credibility. Competitor instituted litigation, the expense and settlement of which ultimately caused client to cease operation. The client’s insurance company (Defendant) failed to defend client in the stated litigation and client filed a lawsuit for recovery. HSG was retained to examine the business issues associated with the conflict, and to quantify client’s actual damages from insurance company’s failure to defend.
Result: Favorable out-of-court settlement for our client.

Business Consulting

Overview: HSG served as a consultant to a credit union for many years, advising on acquisitions, interest rates, site selection and other major activities. The firm also served as consultant to the credit union CEO in his role on the industry’s national governing/regulatory board.
Result: Sustained growth and successful navigation of troubled times which led to the closure or forced mergers of other credit unions. 

Overview: HSG served as a consultant to the professional services firm (“PSF”) in connection with a proposed roll up. HSG pointed to multiple issues, operational and financial, in the proposed acquisition documents that HSG believed were not in the PSF’s interest.
Result: Successful renegotiation of acquisition terms.

Overview: HSG was asked to re-evaluate the price paid for an acquisition before the final payment as the original goals were not met. Because seven of the acquired company executives were with the acquiree, it was critical to reach an amicable settlement fair to all, including the acquirer’s shareholders. We analyzed the why, how and what behind the missed goals and offered recommendations on how to best resolve the issue equitably.
Result: The final payment was adjusted in a manner satisfactory to all parties.

Overview: HSG was hired by an international services firm to evaluate creation of an infrastructure fund to invest in major overseas projects, weighing the advantages of creating more work against customer concerns of competition with their own funds.
Result: Client put in place an approach which opened growth opportunities for client while protecting customer interests.

Overview: HSG was hired to validate the credibility of an offshore contracting party’s claim that it would file for bankruptcy if HSG client didn’t reduce the amount it was trying to recover under an agreement.
Result: Client utilized analysis to achieve a satisfactory settlement outside of bankruptcy.

Overview: HSG was named financial advisor and real estate consultant to the unsecured creditors committee in a major international bankruptcy involving large retail chains and significant commercial, retail and residential real estate holdings. Work involved sale of various business units, including the parent company, and of individual real estate holdings. We also advised on the creation of partnerships in connection with certain real estate holdings and advised regarding tax planning in connection with the dissolution.
Result: Successful disposal of company holdings and creation of ongoing entities in which the bankruptcy estate continued to participate.

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