Articles By Michael Levensohn

Price Multiples Decline During Third Quarter

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Small business sales during the third quarter of 2019 yielded EBITDA multiples about 26 percent lower than a year before, according to the latest edition of DealStats Value Index. It’s one of several developments noted in the report that point to an emerging buyer’s market.

The median EBITDA multiple – the ratio of selling price to earnings before interest, taxes, depreciation and amortization – slid to 3.7 for transactions completed in the third quarter, down from 4.0 during the preceding quarter and the peak of 5.0 reached during the third quarter of 2018. The EBITDA multiple during the third-quarter of 2018 was the highest quarterly mark since at least 2013.

DealStats is a database of private-company transactions maintained by Business Valuation Resources. The database is used by business appraisers when applying the market approach to valuation. Multiples such as sale price-to-EBITDA can be derived from transactions involving similar businesses and used to estimate the value of a company, subject to adjustments for unique characteristics of the business being valued.

Over the longer term, DealStats notes that EBITDA multiples have generally trended downward since 2017, falling to a six-year low in 2019.

It’s important to bear in mind that DealStats data only reflects transactions reported to the service, and the data is subject to revision as additional sales are reported. For instance, the median EBITDA multiple for the April-June quarter was initially reported as 4.2. That was revised to 4.0 in the latest report. The spike to 5.0 during the third quarter of 2018 was previously reported as 4.4 and 4.5.

The delays in reporting may limit the value of information regarding trends gleaned from the quarter-to-quarter gyrations of multiples.

EBITDA margins decline

Businesses sold in 2019 have tended to be less profitable than those sold in recent years, according to the DealStats data. The median EBITDA margin (measured as a percentage of revenue) was just below 11 percent during the third quarter, up slightly from the second quarter, but down from 12 percent in the first three months of the year. EBITDA margins have generally trended lower since 2013.

A long time to sell

Businesses are taking longer to sell, according to DealStats. The median number of days for private businesses to sell was 221 for deals closed during the first half of 2019. That marked the fifth straight half-year period (dating back to the first half of 2017) where the median exceeded 200. From 2013 to 2016, the median never topped 200 days.

Revenue multiple falls

DealStats reports that the median sale price-to-revenue multiple this year is 0.45, down from 0.49 in 2018 and the lowest multiple in at least a decade. Businesses in the finance/insurance sector garnered the highest multiple, at 1.75, followed by information at 1.70 and professional, scientific and technical services at 0.89.

The highest EBITDA multiple was noted in the information sector, at 11.1, followed by mining, quarrying and oil and gas extraction, at 8.5. The lowest multiple was 2.6 for the accommodation and food service industry.

Business valuation professionals use transactions such as those collected by DealStats to derive a business’s market value. If you have questions about how comparable sales influence the value of your business, or how much your business is worth, please contact us.

Buy-Sell Agreements: What You Should Know

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For many of our clients, their investment in their business is the most significant financial asset they own. Many are baby boomers (individuals born between 1946 and 1964) who have reached or are approaching the transition from working to retirement. As that transition occurs, their small or medium-sized businesses will be sold or otherwise passed on to the next generation of owners.

It is often during these times of transition that the importance of buy-sell agreements becomes evident. Buy-sell agreements spell out the terms for transferring an interest in a business upon the death or departure of an owner. The time to create such an agreement is not during a transition, but rather at the start, when all of the owners are involved and an orderly transition can be planned. In our role as appraisers, we have seen many clients who either don’t have a buy-sell agreement or whose agreement simply doesn’t work as the shareholders expected.

As a shareholder, ask yourself three questions:

  1. Do you have a buy-sell agreement?
  2. Do you know what your buy-sell agreement says?
  3. How is your buy-sell agreement funded?

Even in companies that have agreements in place, we often find that they are not current, have a price determination that isn’t fair or workable for all parties, or lack funding arrangements for events that trigger a transfer. These situations can result in protracted litigation or even the demise of the business. If you have a buy-sell agreement, it may be time to review it.
The four most common ways that business owners exit their privately held businesses are a sale to a third-party, gifting ownership interests to family members, selling to employees and liquidating. Buy-sell agreements can provide guidance in all of these situations. Read your agreement to see if the language delivers the results you desire in each situation. 

A review of your agreement should focus on three key areas: triggering events, pricing and funding.

Triggering Events

The agreement should define the transfer process for triggering events such as shareholder retirement, termination of employment, death, disability, sale, divorce and bankruptcy.

Pricing

Transaction prices in buy-sell agreements are usually defined by a fixed price, a pricing formula or an appraisal.

Fixed prices are easy to understand and easy to set initially, but may be difficult to reset as time passes and interests diverge. The provisions are rarely updated, and inequities are likely to result.

Formula-based pricing provides a mechanism to update the value based on various metrics in the business. However, a formula selected at a point in time rarely provide reasonable and realistic valuations over time. Changes in companies, industries and the local and global economies may impact the true value of an enterprise relative to any set formula. And formulas may be subject to multiple interpretations.

If appraisals are used, all parties will understand the valuation process from the start, and they’ll know what to expect when a triggering event occurs. Appraisers can incorporate key business drivers and risks into the determined value. Periodic appraisals provide a mechanism for keeping a buy-sell agreement up to date, so that all parties know the current value of the business and their interests. An updated valuation provides valuable information for business and personal financial planning, as well.

We recommend clients consider appraisals of their businesses. Though this comes at an additional expense, owners should make the small investment to understand what their business is worth with an annual or periodic valuation. They will potentially save much more in litigation or exit costs later.

Funding

The buy-sell agreement should spell out how transactions will be funded in situations where the company buys shares back from shareholders. Management’s plan should spell out several key points:

  • Who will buy the shares? Other shareholders, the company or a combination?
  • Should the company hold life insurance to fund share purchases if an owner dies?
  • What are the terms of the transaction (down payment, interest rate, security)?
  • Are there any restrictions on share payments under the company’s loan agreements?

We have seen a variety of other deficiencies in buy-sell agreements. Some lack the signatures of current shareholders. Others have not been updated for several years. In others, the level of value is not identified.

As you can see, there are a number of issues which, if handled poorly, could result in your buy-sell agreement creating as many problems as it solves. Used properly, the buy-sell agreement is a great tool to provide guidance for all kinds of triggering events that affect shareholders. We encourage you to discuss these matters with shareholders and your attorney. If you are in need of a current appraisal, please call us.  

WeWork Mess Highlights Perils of Investing in Unicorns

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WeWork has accepted a bailout by its largest investor, SoftBank Group, which will take an 80 percent ownership stake in the company, according to multiple media reports. The rescue package reportedly values the company at about $8 billion, a stunning reversal from its $47 billion valuation in January, based on SoftBank’s infusion of $6 billion at the time.

From a valuation perspective, the rapid deflation of WeWork’s bubble speaks to the hazards of investing in unproven young companies. This year has seen a string of high-profile initial public offerings by companies that don’t make money (most notably Uber and Lyft) and face stern questions about their paths to profitability. Uber in particular has been growing revenue at the expense of profit, while creating unrealistic customer expectations about the actual cost of transportation – or of having a hamburger and fries delivered to your home.

WeWork was built on a similar model, although its results have been even more extreme. The company, which leases office buildings, spends millions sprucing them up, then subdivides them and seeks to fill them with member/lessees, loses more than $5,000 per customer, according to its public filings. The company lost $690 million during the first half of 2019 on $1.5 billion in revenue. Last year, it lost $1.6 billion on revenue of $1.8 billion.

In January, it was valued at $47 billion, or 26 times its 2018 revenue, based on the SoftBank investment. That multiple, it turns out, was too rich for investors. The company’s IPO filing in August inspired a wave of intense scrutiny and criticism, culminating in the withdrawal of the IPO on September 30.

The failed IPO is a reminder that investing in young, money-losing companies marries the prospect of lofty rewards with a high failure rate. As MarketWatch columnist Brett Arends pointed out in his excellent recent piece on Uber, the experts frequently make mistakes in valuing “revolutionary” companies. He notes that powerhouses like Amazon, Facebook and Netflix all faced questions early on about untested management, potential strategic missteps and supposedly rich valuations.

Unlike those companies, WeWork has yet to articulate how it might ever achieve profitability. An early hint regarding the company’s fate came in 2017, when founder and then-CEO Adam Neumann told Forbes, “Our valuation and size today are much more based on our energy and spirituality than it is on a multiple of revenue.”

While it’s important to do your homework before making any investment, betting on an unprofitable young company requires a leap of faith. Unlike Neumann, who will reportedly receive more than a billion dollars to walk away, the rest of us don’t get parachutes.

Court Addresses Stock Compensation in Divorce

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Divorce is almost always complicated, especially when there is a lot at stake. In today’s article, we will explore the handling of stock compensation in divorce proceedings.

Compensation for executives in medium and large corporations often goes beyond standard payroll and perquisites (the special rights that come with the position). It can also include forms of payment to reward the executive for prior performance or to encourage strong future performance. This compensation can take the form of stock options or restricted stock units (RSUs).

In New York (an equitable distribution state for purposes of dividing marital assets) stock options and RSUs acquired during the marriage are presumed to be marital property, unless the holder can prove they were acquired as a gift or inheritance or in exchange for other non-marital property. One can determine if the options were granted as a reward for past services by examining the plan documents, such as the Stock Options Plan and the Options Statement. These documents should address exercise price, expiration date and other terms, including some that may pertain to divorce.

If the stock is publicly traded, its value is based on the fair market value of the stock – the amount at which a share of stock is being traded – usually at the date of trial or the date of the legal action. Valuation of the stock of a privately held company is more problematic, and will necessitate a business valuation. When performing the business valuation, the appraiser examines a host of factors, including the type of business, prior sales of company stock, the future outlook for the company and goodwill.

The non-propertied spouse must be watchful for deception, particularly in smaller companies, where the executive can negotiate, sometimes orchestrate, their compensation package. In other words, were the stock options granted as a reward in addition to normal compensation? Or is the executive receiving the options in lieu of a raise?

The New Jersey Appellate Court recently decided a case regarding how RSU compensation should be evaluated and divided in a divorce. In M.G. v. S.M., the plaintiff’s employer had issued RSUs to the plaintiff over the course of an eight-year period. These RSUs were subject to a vesting schedule established by the employer. After a stated period of time, vesting would occur and the employee would take ownership of the stock.

Although eight years’ worth of RSUs had been granted to the plaintiff, at the time of the filing of the divorce complaint, only three years of the grants were vested. At trial, the judge heard testimony from the plaintiff about the stock units, including the plaintiff’s agreement that the defendant was entitled to share in the value of the vested units.

However, the plaintiff argued that the non-vested RSUs were not distributable to the defendant. The plaintiff submitted evidence that his company issued the RSUs to employees to incentivize future performance and encourage them to remain with the company so that their interests in the RSUs would vest. The trial court’s opinion was that all of the RSUs were “the result of prefiling, marital efforts, and are thus subject to equitable distribution,” regardless of when they vest.

There is a lack of significant guidance in the form of case law with respect to how RSUs are divided in divorce in many states. The Appellate Court explored the possible methods by which to value and divide the assets. The court ultimately deciding to rely on guidance from a Massachusetts case that dealt with the same subject. The New Jersey Appellate Court held that the following is the appropriate analysis to consider when dividing RSUs in a divorce:

  1. Where a stock award has been made during the marriage and vests prior to the date of complaint, it is subject to equitable distribution.
  2. Where an award is made during the marriage for work performed during the marriage, but becomes vested after the date of the complaint, it, too, is subject to equitable distribution.
  3. Where the award is made during the marriage, but vests following the date of complaint, there is a rebuttable presumption that the award is subject to equitable distribution, unless there is a material dispute of fact regarding whether some or all of the award was consideration for future performance.

The Appellate Court went on to state that the party who wants to exclude the assets – i.e. the party to whom the RSUs were granted – must demonstrate that they were issued for work performance after the filing of the complaint for divorce.

Based on the Appellate Court’s decision, it is likely that the plaintiff in M.G. v. S.M. will be successful in excluding at least a portion of the unvested RSUs from equitable distribution of the marital estate, as his trial testimony stated that his employer’s intent in issuing RSUs was to encourage positive future performance.

Therefore, the purpose for which the executive compensation is issued by the employer may also impact the division of those assets in divorce. If you have questions about how your executive compensation package may be valued, contact Advent Valuation Advisors today.

The case is Superior Court of New Jersey Appellate Division Docket No. A-1290-17t1, December 26, 2018. The decision is available here:

https://adventvalue.com/wp-content/uploads/2019/10/MG-vs-SM.pdf

Tax Court OKs Tax-Affecting of Pass-Through Income

Photo courtesy of New York Public Library

The Tax Court recently issued a ruling that addresses the tax-affecting of pass-through entity earnings in valuing a portion of the entity. The case, Estate of Aaron Jones v. Commissioner, involved valuing interests in pass-through entities engaged in the lumber industry for the purpose of determining gift tax.

In valuing the taxpayer’s interest in the companies, the taxpayer’s valuation expert tax-affected projected earnings by 38 percent, because the valuation in question was as of 2009. He then applied a 22 percent premium for holding pass-through entity tax status because of the benefit of avoiding the dividend tax.

The IRS argued that there should be no tax imputed because (a) there is no tax at the entity level, (b) there is no evidence that the entity would become a taxable C corporation, and (c) tax-affecting abandons the arm’s-length formulation of fair market value, “in the absence of a showing that two unrelated parties dealing at arm’s length would tax-affect” the interest’s earnings “because it inappropriately favors a hypothetical buyer over the hypothetical seller.”

The estate’s expert argued that a tax rate of zero would overstate the value of the interest, because the partners are taxed at their ordinary rates on partnership income whether or not the company distributes any cash, and a hypothetical buyer would take this into consideration. He also argued that the hypothetical buyer and seller would take into account the benefit of avoiding dividend taxes.

Interestingly, the court noted that while the IRS “objects vociferously” to the estate expert’s tax-affecting of income, the IRS’ experts were silent on the matter. “They do not offer any defense of respondent’s proposed zero tax rate. Thus, we do not have a fight between valuation experts but a fight between lawyers.”

An emerging path

Taxpayers – and the valuation community – have been fighting the IRS over this issue for years, starting with Gross v. Commissioner in 1999 (TCM 1999-254), which rejected the use of tax-affecting when valuing pass-through entities. Courts have generally sided with the IRS in opposing the tax-affecting of pass-through entities in subsequent cases such as Estate of Gallagher v. Commissioner in 2011 (TCM 2011-148).

Jones is the second notable decision this year in which a court has supported the use of tax-affecting in valuing pass-through entities in cases where additional adjustments were made to address the economic benefits of such entities. The other case, Kress v. United States, was decided in March by the District Court for the Eastern District of Wisconsin (16-C-795). There, as in Jones, the court’s decision relied heavily on the taxpayer’s expert.

In Jones, the court went back to the Gross case, quoting from Gross that “the principal benefit that shareholders expect from an S corporation election is a reduction in the total tax burden imposed on the enterprise. The owners expect to save money, and we see no reason why that savings ought to be ignored as a matter of course in valuing the S corporation.”

The court also referenced Gallagher and Estate of Giustina v Commissioner (TCM 2011-141), stating that all three cases did not question the efficacy of taking into account the pass-through tax status, but rather how to do so.

The court credited the estate’s expert for recognizing both the immediate tax burden posed by a pass-through entity’s income, and the benefit of avoiding the dividend tax. The “tax-affecting may not be exact, but it is more complete and more convincing than respondent’s zero tax rate.”

The case is Estate of Aaron Jones v. Commissioner, TCM 2019-101, Docket No. 27952-13, filed August 19, 2019. See pages 36-42 for pertinent details.

The decision is available here:

Tariffs Take Toll on M&A Activity

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Business brokers say the U.S.’s ongoing tariff battles are taking a bite out of business transactions.

Concerns over the impact of tariffs have compelled some small-business owners to lower their asking prices, while others have chosen not to put their businesses on the market at all, according to the second-quarter edition of Market Pulse, the quarterly survey of business brokers conducted by the International Business Brokers Association and M&A Source.

During the second quarter, 32 percent of lower middle market advisors and 22 percent of “Main Street” advisors reported that one or more of their sellers had been affected by tariff issues, according to Market Pulse. Main Street businesses are defined as those with values of $2 million or less, and lower middle-market ones as those worth $2 million to $50 million.

The brokers reported that some of the affected buyers had reduced their asking prices because of tariff-related concerns, while others decided not to sell as a result of recent changes in trade policy with China, Mexico and Canada, according to the report. Brokers say the timing couldn’t be worse for business owners looking to cash out during what has been a strong seller’s market.

“What’s tragic is that M&A conditions are otherwise extremely strong for sellers right now. However, there is a substantial minority of small business owners affected by tariff issues who can’t take full advantage of this market to exit their business,” Laura Maver Ward, managing partner of Kingsbridge Capital Partners, told Market Pulse. “Many business owners would rather lower their purchase price – reducing their retirement resources and their reward for years of hard work – rather than take a chance on missing their window to sell their company.”

The Market Pulse report echoes findings of a survey conducted early this year by the National Federation of Independent Business. In that survey, 37 percent of small business owners reported negative impacts of U.S. trade policy changes with Mexico, Canada and China. 

Manufacturers hit hard

Several brokers cited in the Market Pulse report said that manufacturing clients have been among those hardest hit by tariffs. While the pace of manufacturing deals has been hampered, activity in the construction/engineering sector has heated up, driven in part by private-equity interest, according to the report.

Market Pulse reported that overall market sentiment fell during the second quarter across all five value ranges tracked in the survey, when compared to confidence levels a year before. That said, 66 percent or more of advisors still see a seller’s markets in each of the three value ranges between $1 million and $50 million. Sentiment in the two value ranges below $1 million are at or below 50 percent.

“It’s still a strong marketplace with more buyers than sellers, and companies, for the most part, are doing well,” Randy Bring of Transworld Business Advisors told Market Pulse. “But tariff issues are popping up, and talk of a recession in the next 12 to 18 months is scaring some buyers away.”

Market Pulse is compiled by the Pepper­dine Private Capital Markets Project at Pepperdine Graziadio Business School. To learn more, go to Pepperdine’s Market Pulse page:

bschool.pepperdine.edu/institutes-centers/centers/applied-research/research/pcmsurvey/market-pulse-reports-overlay.htm

Ex-Owner of Medical Taxi Service Jailed for Medicaid Fraud

The former operator of a medical taxi service in Orange County was sentenced Thursday to one to three years in prison for defrauding Medicaid of more than $200,000. Photo by Bill Oxford on Unsplash

The former owner of a medical cab company in the Town of Wallkill in Orange County, NY, was sentenced Thursday to one to three years in prison for defrauding Medicaid of more than $200,000 by submitting falsified claims for medical transportation services, the Times Herald-Record reported.

Quitoni was arrested in September 2018. The New York State Attorney General’s Office, which prosecuted the case, argued that from 2013 to 2017, Quitoni submitted false claims seeking inflated payments from Medicaid. He was accused of submitting individual mileage claims for each Medicaid recipient traveling together in the same vehicle, instead of submitting group claims for mileage. Medicaid reimburses group trips at a lower rate per client than individual trips because the cost to providers is lower.

Quitoni was also accused of claiming Medicaid’s maximum allowance of $50 in toll reimbursement per trip, even though his vehicles did not incur that amount of toll expense. The Attorney General’s Office noted that there are no $50 tolls in New York and no combination of tolls on trips that Quatroni’s vehicles made which, when aggregated, could have totaled $50.

Continue reading here:

https://www.recordonline.com/news/20190905/ex-owner-of-medical-taxi-service-gets-1-3-years-for-fraud

Bumpy Ride for Business Values

Continued Volatility Seen in Latest Edition of Value Index

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Price volatility continued in the small-business transaction market during the second quarter of 2019, according to the latest edition of DealStats Value Index.

The median EBITDA multiple – the ratio of selling price to earnings before interest, taxes, depreciation and amortization – jumped to 4.2 for transactions completed in the second quarter, up from a median of 3.4 during the first three months of the year. That increase continued a trend of large quarterly swings that began during the second quarter of 2017.

DealStats is a database of private-company transactions maintained by Business Valuation Resources. The database is used by business appraisers when applying the market approach to valuation. Multiples such as sale price-to-EBITDA can be derived from transactions involving similar businesses and used to estimate the value of a company, subject to adjustments for unique characteristics of the company being valued.

Companies that sold during the second quarter were generally less profitable than those sold in the first quarter, according to Value Index. EBITDA represented 11 percent of revenue for second-quarter transactions, down from 15 percent for the first quarter of the year.

In short, transactions reported to DealStats for the second quarter featured companies that were less profitable (as measured by EBITDA) than those sold in the previous quarter, but they sold at higher multiples to the reduced earnings.

Not all sectors are created equal

What’s driving the increase in volatility? DealStats doesn’t offer any theories. One contributing factor could be a shift in the types of businesses sold from one quarter to the next. For instance, much has been written in recent years about consolidation in healthcare. Businesses in healthcare and social assistance sold at a median of 6.3 times EBITDA during the second quarter, among the highest multiples tracked by DealStats. Retailers, in contrast, sold for a median multiple of 3.8. A spate of medical practice mergers could drive up the overall multiple for a quarter. A run of retail acquisitions could drive it down.

The industries boasting the highest median EBITDA multiples during the second quarter were information at 11.1, and mining, quarrying and oil and gas extraction services at 8.3. The lowest EBITDA multiples were reported for transactions in accommodation and food services at 2.6, and other services at 3.0.

Size premium

The smallest of small businesses tend to enjoy the largest profit margins, but they garner the lowest multiples of that profit when they sell. The Value Index tracks this dynamic by dividing transactions into four groups based on net sales (less than $1 million, $1 million-$5 million, $5 million-$10 million and greater than $10 million).

Of those groups, businesses with less than $1 million in net sales have produced the highest net profit margins in each year since 2010, while businesses with sales of more than $10 million have generated the lowest margins in each year except 2011. This isn’t surprising, since the smallest businesses typically have limited overhead, and many are sole proprietorships with little payroll expense.

When small businesses are sold, however, the largest among them generate the highest price multiples. In 2018, the median ratio of selling price to EBITDA for businesses with sales greater than $10 million was a shade over 12, according to the Value Index. For those with sales of less than $1 million, the median was less than 4.

As we’ve noted before, larger businesses typically face less risk because they have more diversified products, vendors and customers. There’s an inverse relationship between risk and value. Larger businesses are rewarded with higher multiples in part because they are less risky.

Click below to read Advent’s recent article about size premiums in business valuation:

To learn more about Advent Valuation Advisors, email info@adventvaluecom.

Adjusting Public Company Multiples When Valuing Private Companies

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One way that business valuation professionals can calculate the value of a business is by comparing it to publicly traded companies whose value has been established by the market. But how realistic is it to compare an independent five-store hardware chain – if such a thing exists these days – to Home Depot and Lowe’s?

In an article first published in the August/September edition of Financial Valuation and Litigation Expert, William Quackenbush, director of Advent Valuation Advisors, explains the process of adjusting a guideline public company’s market multiples when valuing a closely held business. Click the link below to read “Quantitatively Adjusting Guideline Public Company Multiples.”

Father-Son Car Dealers Charged with Tax, Bank Fraud

The father-and-son owners of an Orange County car dealership have been charged with tax fraud and bank fraud. Photo by Bill Oxford on Unsplash

The father-and-son operators of an Orange County used-car dealership have been charged with understating their business’s income on tax returns and overstating it on loan applications, according to the U.S. Attorney’s Office for the Southern District of New York.

Mehdi Moslem and Saaed Moslem, owners of the Exclusive Motor Sports car dealership in Central Valley, are accused of conspiring with a tax preparer and others from 2009 to 2016 to conceal millions of dollars in profits from the IRS.

Prosecutors say that in 2009, Saaed Moslem hired a tax preparer in Rockland County who agreed to lower the yearend inventory value for Exclusive, which increased Exclusive’s cost of goods sold and decreased the net income reported on Saaed Moslem’s personal tax return. From 2010 to 2013 and again in 2015, the defendants directed the tax preparer to use false information in preparing partnership tax returns for Exclusive, according to the indictment. The returns significantly understated gross receipts and underreported inventory, thereby inflating the cost of goods sold. This reduced the business income attributable to the men, resulting in the underpayment of personal income taxes.

The tax preparer is not identified in the indictment, and is referred to as CC-1, short for co-conspirator 1.

Prosecutors say Saaed Moslem used his fraudulent tax returns to conceal his assets from creditors when he filed for bankruptcy in 2015. Both men are from Central Valley.

Bank fraud

Prosecutors say that, from 2011 to 2017, the father and son also conspired to defraud several financial institutions by submitting inflated net worth statements and fabricated tax returns in support of loan applications. They inflated the market value of their real estate holdings and omitted the tax liabilities resulting from the understatement of their income on their personal tax returns, according to the indictment. The loans included a $1.2 million mortgage on the car dealership property on which the men later defaulted.

Mehdi Moslem, 70, and Saaed Moslem, 35, are each charged with one count of conspiracy to defraud the United States and one count of bank fraud conspiracy. Saaed Moslem is also charged with two counts of making false statements to a lender, and one count of concealing assets and making false declarations in a bankruptcy case.  

Read the indictment here: https://www.justice.gov/usao-sdny/press-release/file/1190301/download