By Ron J. Anfuso, CPA, ABV, CFF, CDFA, FABFA
Ron’s Corner
When an attorney who hires a forensic accounting firm fails to promptly deliver all of the essential documents to that firm, it becomes unnecessarily difficult to conduct a thorough investigation and analysis. Thus, it creates a challenge to prepare a valid, thorough report that will be accepted by the court and result in a favorable outcome for the client.
We recently completed work on a case, Loharani versus Loharani, in which the attorney who hired us did not provide the documents we asked for until shortly before the deadline. This occurred despite multiple requests we made to the attorney. Once we received all the documents, we had to scramble like we were in a continuous fire drill to analyze the information and prepare an accurate report. Thankfully, we have a well-trained staff, each with many years of experience handling complex cases, who are skilled at uncovering red flags and conducting investigations. We finished under the wire the night before the mediation was scheduled with accurate findings and a comprehensive report. The result was a positive outcome despite our exhaustion from the long hours our efforts required at the last minute.
Loharani versus Loharani involved a medical practice. Often physicians in private practice have medical ownership interests beyond just the practice. It turned out that this physician had partial interest in three surgery centers, an imaging center, and a partial ownership of an MRI and CT scanner in addition to 100 percent ownership of his pain management clinic. He also had ownership of two rental properties and other investments. Thus, we had considerable work to perform to uncover all of his assets and to determine which were separate or community property. As you will see in the adjacent article, we had to and did overcome a significant challenge.
Making Sure Nothing Is Missed
In issue 71 of Forensic Accounting Today, I outlined the steps we take when receiving a request for services. Once we accomplish these actions, and receive a signed engagement letter, we organize the files and prepare a document request list. I created a template for this purpose and also provided some of the components of our request list in Issue 71. However, Loharani versus Loharani required some customization to ensure an accurate and thorough list so nothing would be overlooked, as is often necessary.
Because this case was settled in mediation, I changed the names of the parties concerned, as well as the amount of money involved and some minor facts associated with the case. If you have questions, I welcome you to contact me.
Ron
Completing All Work and Achieving a Positive Outcome Despite Receiving Documents Alarmingly Late
Marsan Lohranai entered the United States in February 2014 from Pakistan. In June 2015, Arhan Loharani, MD, and Marsan Loharani married in California. The parties entered into a prenuptial agreement that provided entitlement to Dr. Loharani of all his assets acquired prior to the marriage, as well as past, current, and future profits from his pain management practice. A year before their marriage, Dr. Loharani left the anesthesiology group in which he was employed and opened his own pain management practice in Palm Desert, California. Marsan had entered the United States with no appreciable assets. The couple purchased a new home in 2016, with Dr. Loharani providing a $750,000 down payment from his separate property.
The parties separated in December 2022. Shortly thereafter, Marsan filed for divorce. During their marriage, Dr. Loharani was allegedly physically abusive to Marsan on numerous occasions. He considered it essential to settle the case to protect himself from being publicly exposed as a domestic violence offender, which he believed would ruin his practice. Thus, Dr. Loharani was willing to make some concessions to ensure the case would not go to trial.
Facts of the Case
The parties had two children. At the time of separation, their children were four and six years old. Marsan was a stay-at-home mom and had not worked since relocating to California. She completed high school but never attended college or received training of any kind thereafter.
Dr. Loharani established relationships with dozens of potential referring physicians prior to opening his own practice. As a result, he was able to establish a profitable practice early on and enjoyed rapid growth.
Dr. Loharani received a salary of $205,000 for the calendar year 2022. His S-Corporation adjusted net income was $121,224. We calculated his perquisites based on the examination of the financial statements and general ledger for the twelve months ending December 31, 2022. Dr. Loharani had $154,364 in perquisites, most of which were attributed to the business. Among these were a luxury car, life insurance, travel, professional fees, and office equipment. We added back “business expenses” that we determined were for his personal use as perquisites in determining the cash flow available for support.
Dr. Loharani owned two rental properties. Both were separate properties and netted a positive income. To determine the cash flow available for support, we took the reported rental income and added back the non-cash expense of depreciation and subtracted the principal paid on the mortgage to realize the cash flow amount. The total cash flow available for support from these properties was $42,061.
Dr. Loharani was a shareholder in three surgery centers, which provided income of $26,732 available for support. He received no income from other medical investments.
We calculated that his total cash flow available for support was $712,476. Marsan’s accountant’s numbers were similar. Thus, both parties agreed that his average cash flow available for support per month would be $59,373.
The Settlement
The goals of Dr. Loharani were to keep all of the income from his practice as separate property to avoid going to trial due to exposure to domestic violence and the cost of a trial. Therefore, he was willing to make some concessions as long as the prenuptial agreement remained intact. The parties consented to a buyout of spousal support and agreed that spousal support would be based on the half-life of the marriage, 3.25 years, despite Marsan initially requesting 3.5. The amount they agreed on was $7,000 per month, a buyout of $273,000. The total of her share of community property, which did not include profits from the practice, was settled at $1.2 million. This was more than Dr. Loharani wanted to agree to, but it saved him from the risk of going to trial, which also included the potential nullification of the prenup.
Child support was settled at $7,250.
Although not completely satisfied with the outcome, Dr. Loharani was grateful that he avoided trial and understood that consenting to anything less would have caused the case to be decided in court.
