A Fortune 500 Company brought suit against a Subcontractor for breach of contract for failure to complete a multi-million-dollar agreement. Through discovery, the Company learned the Subcontractor had several affiliated companies that appeared to operate as a single business with comingled operations. The Subcontractor had transferred funds to the affiliated entities leaving the Subcontractor insolvent. At a prior firm, an HMP executive was engaged to issue an expert report regarding the characteristics of alter ego that were evident at the Subcontractor.
Issues:
- Although there were numerous management agreements between the Subcontractor’s affiliated entities, the terms were not enforced and money freely moved among the parties
- Current audited financial statements for the Subcontractor were not available and the creditability of the internal books and records was questionable
Approach:
- Analyzed the movement of funds from the Subcontractor to the affiliated entities
- Reviewed publicaly available information regarding the formation and ownership structure of the Subcontractor and affiliated entities
- Assisted Counsel with the depositions of the CFO and bookkeeper by providing certain questions that commonly indicate alter ego. Their deposition answers were used in our analysis and report
- Prepared an expert report
Results:
- Favorable settlement of the case before trial which remains confidential
