Monthly Archives: February 2013

Building a business resource network

Nick Augustine is a freelance writer, broadcaster, publicity and marketing strategist, and he teaches SEO and social media. Nick writes legal industry columns for Chicago Lawyer magazine regarding business and career development. Nick is an alumnus of Marquette University and The John Marshall Law School, where he is an active alumni board member. Connect via @NickAugustinePR, @APIFCharity and Nick Augustine PR.

What makes an attorney successful? Many noble lawyers define success by their impact on their clients. In business, growth and profit show success. Law practice is a service industry business and profit pays the bills. Lawyers with business backgrounds have an advantage in law practice if they know how to manage a business and make money. If you do not have the business background and want to learn additional skills to build your law practice, there are methods you can use to increase business skills sets. Building a business resource network is one way to learn from others.

The premise is simple. Invite a few strategic businesspeople to join your business resource network to exchange ideas and trouble-shoot challenges in service industry professions. Referrals can also arise from building trusted relationships with the members of your group. Some small groups meet on the phone and others get together in person. Establish a routine and meet frequently enough to “check in” but not so often it becomes a scheduling burden.

Invite people to your group who can offer diverse perspectives and experiences.

  1. Financial product dealers are valuable to any professional who wants to attract more clients. Many investment representatives knock on doors and call friends and neighbors to offer entry-level products such as life insurance. Of course, ethics rules address direct solicitation by attorneys; nevertheless, the experienced salesperson cannot teach a lawyer some new skills in speaking to groups and positioning to receive new business and referrals.
  2. Marketing professionals who can sell their value to a client, know how to identify the needs of a prospect, and can create a strategy to satisfy needs. Like the financial and insurance representatives, a marketing individual probably attends local chamber of commerce meetings and continuing industry education seminars highlighting new products and tools to develop and marketing campaigns. The competition is fierce in marketing, just like law, so a marketing consultant or provider can share insight with an attorney taking advantage of allowed marketing practices.
  3. Staffing and human resource consultants are helpful if you ever have questions about employment matters and managing staff. Using talent effectively and appreciating valuable skills sets takes time to learn, and a business resource network member who can answer questions will save everyone time and money.

Your network of business resource friends can include members of several other professions and industries. Developing a manageable network takes time and is worth the investment.

Advertisements

Caveat emptor: Forensic investigations and due diligence

Jim Martin and John Alfonsi are managing directors at Cendrowski Corporate Advisors.

In August 2011, Hewlett-Packard acquired the British software company Autonomy for $11.1 billion, a 58 percent premium over the target company’s share price. HP believed the acquisition of Autonomy would be the perfect complement to its existing technology. 

However, less than 15 months later, HP announced an $8.8 billion write-down. HP claimed it discovered accounting improprieties, misrepresentations and disclosure failures which inflated the value of Autonomy. These irregularities were allegedly undetected during HP’s due diligence phase of the acquisition.

Given the current challenging economic environment, mergers and acquisitions are seen as a means by which companies can achieve faster top and bottom-line growth as well as increased shareholder value. M&A activity and the heightened scrutiny of the marketplace have created a need to incorporate forensic investigative tools into the due diligence process.

Forensic tools should be incorporated into both the negotiation and examination phases to detect potential management misrepresentations and fraudulent activities. These forensic tools consist of applying professional skepticism, performing risk assessments and applying various financial analytical tools – among other forensic techniques – to verify and corroborate information obtained during the due diligence process. 

The negotiation process itself is somewhat arbitrary and can place the acquirer at a disadvantage. A seller can attempt to “polish the apple” when presenting its offer, and an acquirer is often forced to rely on financial statements or information prepared by, or under, the direction of the seller.

Therefore, a prudent acquirer needs to approach a potential transaction with a certain sense of “professional skepticism” to mitigate the risk of distortions.  This forensic technique consists of relentlessly asking questions, making critical assessments, and challenging all assumptions, especially with regards to the veracity of the seller.  

Not only should a buyer incorporate forensic tools during the negotiation phase, but they should also incorporate such skills during the examination phase of the company.  According to a Association of Certified Fraud Examiners report, the typical organization looses 5 percent of its revenue to fraud each year. By a wide margin, the ACFE report identified strong internal controls as the most effective measure for the prevention of fraud. Thus, as part of the due diligence process, the acquirer should forensically examine the in-place controls and identify any weaknesses that could allow erroneous or unauthorized transactions. A common method to identify potential internal control weaknesses is to perform an internal risk assessment, which helps to recognize and understand risks that might not appear obvious. 

An acquirer should also perform forensic analytics on the company’s financial statements.  There are a number of different analytical tests that can be performed in conjunction with financial due diligence procedures. When developing analytical tests, the acquirer should note current and past events within the organization and the industry in order to isolate anomalies from known events.   

Incorporating forensic techniques in the due diligence process will help expose or isolate areas of potential fraud, misrepresentation and/or irregular activities and ensure confidence before the acquirer consummates a deal.

Witness rulings in Klingelhoets v. Charlton-Perrin

Marty Dolan, principal at Dolan Law, and his associate, Karen Munoz, represent victims of wrongful death and personal injury. His column “Law and Wellness” appears in Chicago Lawyer magazine and her column appears regularly in the Chicago Daily Law Bulletin. This blog is written by Karen Munoz.

The case of Klingelhoets v. Charlton-Perrin, 2013 IL App (1st) 112412, will be further discussed in this week’s blog entry due to the range of issues in the Appeals Court opinion.

The defendant’s appeal contended that the trial court had erred in not allowing the defendant to call a coworker as a witness. The plaintiff took the evidence depositions of two of her coworkers who were present when the accident occurred. But one of these witnesses did not see the accident actually occur.

After the defendant admitted liability, the plaintiff withdrew the colleague who had not witnessed the incident. The defendant then asked if she could call the withdrawn witness in the event that the plaintiff did not. Her request was denied.

The defendant argued that the trial court erred in making this decision as this witness’ testimony was key to defendant’s case as she had information as to whether the plaintiff was thrown in the air, where she landed and if she lost consciousness.

The trial court noted in some detail that the defendant had no legal basis to call this witness as the defendant had not disclosed her in her Rule 213(f) disclosures.

In examining the trial court’s decision not to allow this witness to be called, the court considered factors such as surprise to the opposing party, the prejudicial effect of the witness’ testimony, the nature of the testimony, the diligence of the adverse party, the timeliness of the objection and the good faith of the party offering the testimony. The Appeals Court ultimately rested its decision to uphold the trial court’s ruling on the fact that because defendant had not disclosed the plaintiff’s coworker as a Rule 213(f) witness, she could now call her as a witness.

The defendant also claimed that the trial court had erred in not granting the defendant’s motion to bar the plaintiff’s friend and coworker, Carol Heerema. Heerema knew the plaintiff as a high-functioning, intelligent and confident person. When Heerema met the plaintiff at a conference 10 days after the accident, she noted that plaintiff was confused, having trouble mentally and was not “acting like herself.” In later meetings, Heerema noted that plaintiff was slower to respond, made mistakes, had memory difficulties and lacked confidence.

The defendant attempted to bar this evidence on the basis that Heerema was unqualified to express an opinion as to the plaintiff’s mental status. The Appeals Court ruled that a lay witness can express an opinion on an issue as long as the opinion is based on the witness’ personal observations, is one that a person is generally capable of making, and is helpful to a clear understanding of an issue at hand.

The Appeals Court found that Heerema’s testimony was based solely on her observations as someone who had known plaintiff for 25 years.

The judgment of Court of Appeals in Klingelhoets provides us with a useful roadmap on how to prepare for a trial.