We were the accounting experts for the winning side in the undue influence case brought by Ron Perelman’s daughter against her uncle James Cohen – In the Matter of the Estate of Robert B. Cohen, Deceased, Docket No. BER-C-94-12, New Jersey Superior Court, Chancery Division, Probate Part: Decided June 24, 2014.
In undue influence cases, financial transactions are usually at the heart of the issue. Accounting experts are uniquely qualified to evaluate the propriety of such transactions, however, as underscored in the Cohen matter, the proper role and use of a financial expert is crucial.
Robert B. Cohen (“Robert”) was the patriarch of Hudson News Company (“Hudson News”), a highly successful family business which started out as a newsstand lease secured at LaGuardia Airport and grew into a chain of more than 600 outlets at airports across the nation. James Cohen (“James”), Robert’s sole surviving son, worked with his father at Hudson News and was his “closest business associate for more than 20 years.” James succeeded his father as President of Hudson News and quickly rose to the position of Chief Executive Officer.
On February 1, 2012, Robert passed away after suffering from a physical disorder (Progressive Supranuclear Palsy) for many years. A July 17, 2009 Last Will and Testament of Robert B. Cohen (the “2009 Will”) was admitted for probate. Samantha Perelman, Ron Perelman’s daughter and Robert’s granddaughter, filed an action seeking to invalidate the 2009 Will, seeking to invalidate asset transfers made to James, claiming that James had wrongfully acquired the assets by unduly influencing Robert. The corporate transactions included the 2008 sale of the Cohen family’s Hudson News business to the private equity firm Advent International Corporation for $805 million. Samantha contended that James should be compelled to return to Robert’s estate an estimated $384.4 million from the $600 million cash payment made to James from the Advent acquisition.
In bringing her case, Samantha relied on the report and testimony of a financial expert, Stephen B. Blum (“Blum”), who opined that James was “unfair” or “massively unfair” to his father and that James had executed transfers of business assets his father allegedly “never would have agreed to or approved had he fully understood them . . . .” Through Blum’s report and testimony, Samantha attempted to establish that James failed to provide sufficient consideration to his father in return for ownership transfers in Hudson News, and as result, the transfers were “unfair from a financial perspective.”
James’ expert, Sam Rosenfarb (“Rosenfarb”) of our firm, Rosenfarb LLC, testified that the standard used by Blum for his analysis, “fairness from a financial perspective,” is irrelevant in the context of inter-family transfers, and that he saw no evidence that Robert intended to transfer any less of his business interests to his son James. Rosenfarb further testified that had James received less of his father’s business interests than he did, Robert’s objective of transferring the family business to his son in a tax efficient manner would have been thwarted.
Following significant motion practice and 85 days of trial consisting of over 50 witnesses, on June 24, 2014 the Honorable Estela M. De La Cruz, J.S.C. dismissed Samantha’s claims with prejudice and declared the 2009 Will valid and enforceable and not the product of any undue influence. The court concluded that James and his father “had a remarkably harmonious relationship,” and that it is “very unlikely that James somehow ‘coerced’ or ‘dominated’ his father, or that his father could even be ‘coerced’ or ‘dominated.’” Judge De La Cruz further found that “[t]he evidence shows that James did not dominate his father, but instead his father controlled him.”
The court explained, “[t]he issue . . . is not to determine whether the results of the transfers or transactions were “fair” to Robert, but is to determine the donor’s intent and whether there was any undue influence in the donor’s exercise of his intent.” The court concluded the following: “[Blum’s] overall premise that an inter vivos gift structured specifically to save on taxes must be ‘fair’ to a testator, irrespective of his intent, is simply not based on any binding or controlling law. [That] proposition may have a sensible and perhaps attractive ring to it in a Court of Equity, but there is simply no legal basis for imposing such a proposition in a vacuum without consideration of the donor’s intent. In this context, rethinking and reevaluating a donor or transferor’s transactions, at the request of one who believe [sic] that they were short-changed, is not the endeavor of this Court.”
Based on overwhelming evidence in the record, the court found that James had successfully rebutted the presumption of undue influence not only by a “preponderance of the evidence” but “clear and convincing” evidence.
Even had Samantha produced evidence of undue influence, neither in his report nor testimony did Blum identify or quantify any damages allegedly caused by the wrongdoing, a necessity for the recovery of damages in undue influence cases. As testified by Rosenfarb, not only was Blum’s “fairness from a financial perspective” analysis misplaced as to liability, his failure to identify or quantify damages caused by the alleged wrongdoing rendered his opinion fatally flawed.
Undue influence disputes center on financial transactions. To be successful, a party to such a dispute should retain a seasoned accounting and valuation expert who will opine on financial damages.
At Rosenfarb LLC we produce well-supported, well-reasoned and well-communicated damage calculations that withstand the rigors of litigation. We are a firm of forensic accounting and valuation experts. We understand the litigation process, including the necessity of establishing the elements of a cause of action and quantifying damages to a reasonable degree of certainty. We have keen insights and always connect the dots. We frame the issues simply and in alignment with the litigation strategy. We use logic to support our opinions, while creating compelling stories. We are sincere, professional, and credible. We are accounting experts with legal acumen.
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