BVR Logo December 9, 2020 | Issue #219-2

BVWire is your go-to source for the latest in the business valuation profession. Highlights for this week include:

DOL appellate brief pushes back in Vinoskey ESOP litigation

Neither side is letting up in the contentious Vinoskey ESOP litigation that has now moved to the 4th Circuit U.S. Court of Appeals. After the selling shareholder, Adam Vinoskey, recently appealed the district court’s liability and damages findings, the Department of Labor has responded with a spirited defense of the court’s decision.

Backstory: The focal point of the litigation was a 2010 transaction in which Vinoskey and his late wife sold the remaining 52% of stock in their company to an ESOP. Early, in 2004, the ESOP had bought 48% of company stock. For the 2010 transaction, the company hired an experienced, independent ESOP trustee, which retained a valuation advisor to determine the range of fair market value for the company’s stock. The 2010 transaction price was $406 per share. Appraisals in the five years preceding this transaction ranged from $215 per share to $285 per share in 2009. Throughout the litigation, the DOL has emphasized that there was a 40% increase in the share price from 2009 to 2010 “for no business reason.”

District court’s ruling: The crux of the district court’s ruling was that Vinoskey was a knowing participant in the trustee defendant’s ERISA violations and was liable as a co-fiduciary for failing to remedy the trustee’s breaches. The trustee caused the plan to pay more than fair market value, and Vinoskey, the selling shareholder, accepted the price knowing it was inflated.

Post-judgment, the DOL and the trustee settled their case, while Vinoskey decided to appeal the rulings.

‘Reading and understanding’ appraisals: The “assemblage of evidence” supported the district court’s findings, the DOL argues. It asserts that Vinoskey, as a named fiduciary of the ESOP, was a fiduciary as to the contested transaction. For his part, Vinoskey has claimed he was not, having specifically retained the trustee to represent the interests of the ESOP for the purposes of the 2010 transaction. The DOL says that, as a co-fiduciary, Vinoskey had a duty to make reasonable efforts to remedy the trustee’s breach but did not do so.

Vinoskey knew there was overpayment because he was intimately familiar with the company’s financial situation and its value, the DOL argues. He reviewed the ESOP appraiser’s valuation underlying the 2010 transaction and, knowing all of the prior appraisals, he “knew there was no basis for the substantial price increase,” the DOL says. He “participated fully” in the activities preceding the deal. He also knew that company earnings in 2009 had been “lackluster” and agreed that the company only “started to bounce back a little bit in 2010.” He had experience “reading and understanding” appraisals of the company, and he understood “the general approach underlying the appraisals,” the DOL says in response to Vinoskey’s argument that he was not a valuation professional.

Regarding the issue of control, the DOL maintains that Vinoskey knew the ESOP did not acquire complete control but he allowed it to pay a control premium. He was reviewing the draft appraisals before the closing of the transaction. The cover page of the expert report said in all caps that the valuation was conducted on a “controlling interest basis.” Therefore, the DOL argues, he knew or should have known the ESOP was improperly paying for control.

Debt forgiveness irrelevant: Moreover, the DOL contends, the district court was correct in refusing to offset damages with the debt Vinoskey had forgiven the ESOP in 2014. The debt the ESOP took on to finance the acquisition meant it suffered “immediate harm” for paying an inflated price, the DOL brief says. The ESOP overpaid by $6.5 million. Vinoskey’s post-transaction debt forgiveness was unrelated to the original ESOP overpayment. The debt forgiveness was intended to remedy a downturn in the company’s performance rather than the loss to the ESOP, the DOL contends.

The DOL asks the 4th Circuit to affirm the district court’s decision. The response brief does not address the ASA’s amicus brief in support of Vinoskey that argues the district court’s ruling included valuation-related misstatements that required correction so they would not become precedent.

Stay tuned for reporting on further developments in this case.

Digests of the district court’s 2019 decision in Pizzella v. Vinoskey (earlier Acosta v. Vinoskey), 2019 U.S. Dist. LEXIS 129579 (Aug. 2, 2019), and Pizzella v. Vinoskey (II), 2020 U.S. Dist. LEXIS 15464; 2020 WL 476669 (Jan. 29, 2020), as well as the court opinions are available to subscribers of BVLaw.

‘Plenty of room' for new experts in bankruptcy valuations, says Reilly

There is “plenty of room in the bankruptcy discipline for new practitioners,” says Robert Reilly (Willamette Management Associates), who co-presented a session at the recent AICPA FVS Conference with Josh Shilts (Shilts CPA). There are a few caveats, however, such as having the specialized knowledge and experience so you don’t look like an outsider, which clients can spot immediately (a good resource is A Practical Guide to Bankruptcy Valuation, 2nd edition, that Reilly co-wrote with Dr. Israel Shaked). Also, there’s an important choice to make at the outset in terms of deciding who your client should be. A number of parties in a bankruptcy matter are prospective clients, but the choice is not so simple. The upcoming January issue of Business Valuation Update covers the Reilly-Shilts conference session in greater detail.

Assume every valuation will be challenged

“As appraisers, our reputation is our single most valuable asset. The best way to protect our reputation is to practice due diligence and to prepare every appraisal report as if it will be challenged.” Good advice from Sharon Desfor, past ASA international president and chairman of HeliValue$ Inc., writing in the November 2020 issue of the ASA’s Appraisal Review & Management E-Journal. She stresses the importance of information and data in backing up your opinion of value. She recalls a wise instructor of hers who said: “There is no wrong answer in appraising as long as you can defend your position with relevant factual data and logical analysis.” To read her full article, click here. The ASA’s appraisal review and management (ARM) area offers a separate credential that stretches across each of the appraisal disciplines, namely business valuation, machinery and technical specialties, gems and jewelry, personal property, and real property.

Interesting poll results in latest Hitchner pub

The latest issue of Hardball With Hitchner includes the results of some recent polls that reveal what valuation practitioners are doing to reflect the impact of COVID-19 in valuations. Here is a sampling from two polls that asked the same questions months apart—one poll was taken Oct. 29, 2020, and the other on May 14, 2020—it’s interesting to see the changes in responses:

1. Which equity discount rate methods are you now using most for small businesses with COVID-19?

  May October
a) Buildup model 66% 58%
b) MCAPM 7% 6%
c) Both     15% 24%
d) Neither or other 2% 2%
e) Not applicable   9% 10%

2. Have you increased your ERP and/or company-specific risk with COVID-19 known or knowable?

  May October
a) Both 42% 31%
b) Neither 5% 5%
c) ERP only 11% 5%
d) CSR only 23% 38%
e) Not applicable   20% 21%

3. When do you think the economy will recover?

  May October
a) Beginning 2021 45% 31%
b) Beginning 2022 41% 49%
c) Beginning 2023 10% 16%
d) Will not recover 1% 1%
e) Not applicable   3% 3%

Hardball With Hitchner is a new monthly publication written by James Hitchner (Valuation Products and Services). For subscription information, click here.

Easy way to craft content to send clients

The No. 1 handout at BVR’s virtual exhibit booth during the recent ASA International Appraiser’s Conference was the “Grow Your Practice” e-book. It describes how to instantly create business valuation-related content to put on your website, publish a newsletter, send in an e-mail, or post in a blog. The conference attendees who downloaded the e-book know the value of staying in touch with clients and prospects, especially in today’s environment. The trouble is, they simply do not have the time to create the content—and it does take time. Fortunately, BVR has done all that work for you with its content license subscription. You get unlimited use of hundreds of current articles that you can use to craft an effective content marketing program for your practice. You can take a look at a sample package of content you get each quarter if you click here.

Spotlight on pharma firms in KPMG’s 4Q20 valuation brief

COVID-19 continues to dominate a lot of the discussion in KPMG’s Quarterly Brief—International Valuation Newsletter for the fourth quarter of 2020. There’s a discussion of the challenges of valuation in the pharmaceutical and biotechnology sector that points out that many analysts are using probability-weighted cash flow methods and risk-adjusted net present value to deal with these challenges. There is also an update on recent capital market data, including major stock market performances, valuation multiples, current risk-free rates for major currencies, and country risk premiums. The full issue is available if you
click here

BV movers . . .

People: Michael Binz has joined Willamette Management Associates as a managing director in the firm’s Atlanta office; he specializes in the valuation of businesses, business interests, partnership interests, and intangible assets … Tara Marino, ASA, a principal in the valuation advisory services practice at CohnReznick in its Bethesda, Md., office, has joined the firm’s partnership ranks; she has more than 15 years of experience with valuations of entire businesses, business interests, equity securities, and intangible assets for financial reporting, tax, and advisory purposes.

Firms: Houston-based Weaver is the latest member firm of Allinial Global, an association of independent accounting and consulting firms … New York-based Citrin Cooperman & Co. is adding Homes Lowry Horn & Johnson (HLHJ) of Fairfax, Va., expanding its footprint in the Washington, D.C., area to a third office; four partners and 17 staff members will join from HLHJ, which provides tax, audit, and outsourcing work, with specialization in government contracting, professional services, automotive dealers, not-for-profit entities and high-net-worth individuals … Atlanta-based Aprio LLP is bolstering its dental practice by adding dental accounting firm Stowe & Stowe CPAs of Charlotte, N.C. … CliftonLarsonAllen LLP (CLA) is adding Atkinson & Co. of Albuquerque, N.M.; the deal adds nearly 50 team members to CLA’s New Mexico team, which now comprises more than 100 people … Chicago-based BDO USA LLP has acquired registered investment adviser consultant Cosyntris Advisory Network of Denver … In Canada, Calgary-based MNP is merging in Notre-Dame-de-Lourdes, Manitoba-based firm Lise Deleurme Chartered Professional Accountant Inc., which provides accounting and taxation services to small and medium-sized businesses, individuals, and corporations, with particular expertise in the agricultural sector.

Please send your professional and firm news to us at

CPE events

Learn about new research and available data you may need to consider when determining whether the COVID-19 pandemic is impacting company valuations because of changes in risk.

Learn how physician compensation is analyzed in the context of valuation along with various factors that can influence it, both internally and externally, including the pandemic.

We welcome your feedback and comments. Contact Andy Dzamba (Executive Editor) or Sylvia Golden, Esq. (Executive Legal Editor) at:


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