2015 Financial Edition

FINANCIAL EDITION 2015

INTERNATIONAL INVESTMENT IN REAL ESTATE

Venture Capital and Private Equity Financing

LEADING SOUTH FLORIDA BANKERS Insurance Trends

PLUS: DWI, Digital Footprints, IRS Summons and more $7.95

[ MASTHEAD ]

PUBLISHER JACOB SAFDEYE JACOB@SFLEGALGUIDE.COM EDITOR IN CHIEF RICHARD WESTLUND EDITOR@SFLEGALGUIDE.COM CREATIVE DIRECTOR SUSEL REYNALDO CREATIVE@SFLEGALGUIDE.COM GUEST CONTRIBUTORS STANLEY I. FOODMAN ANDREW C. HALL ALLAN A. JOSEPH SASHA A. KLEIN STEPHEN C. LANDE JOHN E. LEIGHTON STEPHEN H. WAGNER

SOUTH FLORIDA LEGAL GUIDE VOLUME 16, NUMBER 2, 2015

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[ CONTENTS ]

3 EDITOR’S NOTE 4 PUBLISHER’S NOTE 6 ROUNDTABLE

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6 38 VENTURE CAPITAL AND PRIVATE EQUITY 12 INSURANCE COVERAGE, CLAIMS AND CASES

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LEADING SOUTH FLORIDA BANKERS

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THE IRS “JOHN DOE” SUMMONS AND 30 FORENSIC TAX VALUE – BASED BILLING MODEL 32 UNDERSTAND AND PROTECT YOUR #DIGITALFOOTPRINT!

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BARGAINING FOR CERTAINTY IN THE 36 UNCERTAIN WORLD OF INTERNATIONAL DISPUTE RESOLUTION ENOUGH ALREADY! HOW TO ELIMINATE DRIVING WHILE DISTRACTED (DWD)

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S CORPORATIONS AND CHARITY 40 PROFESSIONAL PROFILES

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SOUTH FLORIDA LEGAL GUIDE FINANCIAL EDITION 2015

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[ EDITOR’S NOTE ]

BEYOND THE FINANCIAL REWARDS

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outh Florida Legal Guide’s annual Financial Edition focuses on the intersection of law, accounting and banking services, and how professionals in these fields team up to serve their clients.

Our feature articles in this issue focus on timely topics in the field of insurance, as well as the role of venture capital and private equity in business ventures. Our roundtable discussion provides a look at trends in the flow of international investment into South Florida’s residential and commercial real estate markets, and the outlook for the coming year.

Attorneys, accountants, bankers, real estate brokers and other professionals are compensated for their ability to help clients resolve problems and achieve their goals.

That might mean structuring a complex merger or acquisition, advising on tax or riskmitigation strategies, or representing a client in a business transaction or litigation. On the personal side, it might mean developing a solid estate plan or managing a family’s investment portfolio.

But experienced South Florida professionals look beyond the fees, commissions and other financial rewards they receive from effectively representing their clients.

Instead, they measure success in terms of the outcome for their clients, such as a positive transaction, investment, settlement or verdict. They also derive a great deal of satisfaction from building their relationships with clients on both a personal and professional level.

In addition, many professionals also enjoy the process of learning from their client engagements. They might work with a company in a new line of business or represent a client in an unusual medical or product liability case. And there are always changes in the financial world from the daily fluctuations in currency to the introduction of new investment products and risk-management strategies.

These are some of the reasons why so many professionals are intrigued by the world of finance. In this issue, you can read what they have to say about timely challenges and opportunities in the legal and financial arenas in our Professional Forum. We have also in-depth Profiles of a select group of our financial and legal professionals.

Once again, we thank our readers, sponsors and advertisers for you support over the past 16 years and invite your feedback as we look to the future.

Editor

SOUTH FLORIDA LEGAL GUIDE FINANCIAL EDITION 2015

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THE MANY FACES OF IMMIGRANTS

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mmigration is one of the most complex and challenging issues facing the United States today. It is an issue with financial ramifications for every sector of our society, from minimum-wage unskilled workers to the professionals who help clients with these issues to the policymakers in Washington, DC, whose decisions on immigration help shape the nature of our society.

Many politicians over-simplify this issue into positions “for” or “against” immigration. That is a disservice for everyone. After all, there are nearly 200 different countries and approximately 7,000 different languages in the world – and many of them are well represented in the United States. In addition to national and language differences, our immigrants bring in their own religions, values and traditions.

Certainly, it is incorrect to say all immigrants are the same, and that is a blessing for our country. It enriches by giving us first-hand exposure to people with different customs and adds to the rich diversity of our people. Let us always embrace immigration, as it is the core of what has made the U.S. a great nation since its founding.

But we must also remember the painful lessons from our nation’s past.

Some of America’s first immigrants came from England, Scotland, France and Scandinavia searching for a new life, new opportunities, freedom from tyranny and freedom of religion. But they also trampled on the rights of the Native Americans who were already here, and supported the cruel and immoral practice of slavery, bringing millions of black Africans here against their will.

Today, many immigrants from around the world see the United States as a land of opportunity. That is a great thing for families, college students, entrepreneurs and professionals who believe in the value of honesty, integrity and hard work.

Unfortunately, there are other immigrants who have a criminal background or seek to exploit others for their own purposes. That is why it is so important to uphold and enforce U.S. laws, regardless of an individual’s political position.

It is baffling to see people come into this country illegally or overstay their visa and then march in the streets and demand they be made citizens. In this case, the ends definitely do not justify the means. If the first act of a would-be immigrant it to break the law, can we really expect them to uphold our laws in the future?

Many say that all immigrants should be welcomed, regardless of legal status,

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SOUTH FLORIDA LEGAL GUIDE FINANCIAL EDITION 2015

because they do tasks that no American citizen wants to do. I beg to differ. Today, we have millions of people out of work, including a large percentage of the unemployed who receive government assistance like food stamps and subsidized housing. While that support may be necessary in cases of personal hardship, it also provides an incentive for a large portion of the U.S. population to avoid work.

I believe that if an undocumented immigrant can bring in enough income to survive (although with hardship) so could millions of Americans doing the same job.

Therefore, the government should enforce current laws such as having employers e-verify their workers and penalize those who do not. This alone would put more people into the workforce and generate more growth in the economy.

To those who advocate leniency for people entering this country illegally, let me ask where you live. Would you like uninvited guest to enter your home, eat your food, and sit in your sofa while enjoying a TV sitcom? I don’t think you’d like that, even if your “guest” took out the trash when leaving the next morning.

In short, I believe in a fair and balanced immigration policy that welcomes newcomers to our country. I also believe in the fundamental rule of law. If we can adhere to those two pillars, we will be well on our way to strengthening our society in facing the challenges of the 21st century.

Jacob Safdeye Publisher

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David Appel, Teresa Kinney, Jonathan Hill, James Shindell,

THE OUTLOOK FOR INTERNATIONAL REAL ESTATE INVESTMENT South Florida Legal Guide’s Financial Roundtable

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ne of the foundations for South Florida’s economy is the inbound flow of global commercial and real estate investments. But how will currency fluctuations, volatility in China and the Federal Reserve’s postponement of a rate hike affect in the decisions of international investors? To address these issues, South Florida Legal Guide held a roundtable discussion on “The Outlook for International Real Estate Investmentâ€? with leading professionals on September 18. Gibraltar Private Bank & Trust hosted this special event for our Financial Edition. Editor Richard Westlund moderated the 90-minute discussion, which featured comments from six participants: • David S. Appel, CPA, senior partner, Marcum LLP • Teresa King Kinney, CEO, Realtor Association of Greater Miami and the Beaches • Harold L. Lewis, partner, Pathman Lewis, LLP • Jonathan Hill, senior vice president and director of investments, Gibraltar Private Bank & Trust • James Shindell, partner and chair, Real Estate Group, Bilzin Sumberg • Ron Shuffield, president and CEO, EWM Realty

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SOUTH FLORIDA LEGAL GUIDE FINANCIAL EDITION 2015

[ ROUNDTABLE ]

Q. Let’s start by giving your individual perspectives on the international real estate market. What trends are you seeing today?

Kinney: Our association has signed agreements with more than 125 foreign associations around the world. We interact with some more closely than others. I just returned from a conference in Brazil where I presented a seminar to 4,000 real estate professionals. Even though the Brazilian real has lost value to the dollar, their interest in Miami is stronger than ever. Many people were predicting that the market would drop off, but people want to get their money out of Brazil and there is more talk about moving here and setting up businesses.

Shuffield: Our company deals mostly in the high-end residential market, so we see many wealthy international buyers.

Over the last three years, there has been a gradual downturn in this market.

Today 27 percent of residential sales in Miami-Dade County – as reported on the multiple listing service (MLS) – are to international buyers. That’s down from 31 percent last year and 35 percent two years ago. One reason is that many foreign currencies have declined against the dollar. For instance, for Canadians it is about 21 percent more expensive to buy

here than it was in 2014. We sell a lot of Broward homes to Canadians, but at the moment they don’t feel an urgency to buy.

We’re also not seeing as much Russian money these days. Buyers from Argentina and Brazil have also seen their currencies decline in value, but that hasn’t been as much of a deterrent as for other countries.

Appel: We work with two segments of the international market. We advise foreign investors who are putting money into condominium development projects or acquiring income-producing properties. There is a considerable amount of commercial funds coming into the U.S., and many international investors are not familiar with our tax system, especially transfer taxes. We are still seeing investors from Russia, the Ukraine, France, Italy and the Asian nations, as well as Latin America. The other aspect of our international practice relates to families who want to immigrate to the United States. They are looking at opening businesses or investing in EB-5 projects.

The largest portion of that market today is coming from China, but there are families from all over the world who want to move here. Miami is an area that attracts international investors because our values are very competitive with other locations as they look at strategies to move money out of their home countries.

Shindell: I work in a commercial law firm, so the evidence I have is anecdotal rather than statistics. But from what I’ve seen, we are still in a very good place.

On the commercial side, there is a steady flow of work from international investors, who are coming from a wide variety of countries. In commercial real estate, equity has never been more available, and it’s a good time to be active in development and the buying and selling of commercial properties. While I read about the possible slowing in velocity, that has not filtered down to our business.

Harold Lewis

Hill: We cater to domestic and international high-net-worth (HNW) individuals and families. On the international side, there are two trends going on. People from troubled countries such as Venezuela are feeling nervous and want to get their money out for security reasons. The other trend is the opportunistic buyer who is looking to purchase a home here at a good

James Shindell

value, including many Europeans and Canadians. A lot of HNW people buying here already have their assets in dollars and currency movements don’t have as large an impact on their decisions.

Lewis: As a small real estate firm with 15 lawyers, we focus on zoning and land use, working with banks, other lenders and developers. Since we have emerged from the recession – and all the litigation from that period – we have seen a great deal of activity on the development and zoning areas. But there is less appetite from banks for construction loans, especially for highrise residential projects. While I am still a believer in Miami’s growth as a worldclass city, we are still subject to the laws of economic supply and demand. So, we are keeping a close eye on things during this phase of the development cycle. In general, we are seeing a lot of buyers from France in high-end developments, and significant volume from Spain as well.

Q. What are you seeing in regards to the Chinese buyers?

Lewis: We aren’t seeing inbound investment from Asia, but that may change with direct flights to and from Miami

SOUTH FLORIDA LEGAL GUIDE FINANCIAL EDITION 2015

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International Airport (MIA). I believe that money from the Middle East and China will find its way here, but am uncertain as to whether it will grow to become a significant volume.

Hill: The devaluation of the yuan was more of a symbolic shift than anything else, as China has been under great pressure to let its currency float more freely. The shock was that the devaluation occurred when it did, as analysts saw that as an indication that the nation’s economy needed a shot in the arm.

Kinney: The Asian Real Estate Association of America (AREAA) has just launched its Greater Miami Chapter. That is a powerful sign of the interest in Miami real estate from the Asian market, particularly China.

Shuffield: We have had many meetings with wealthy Chinese groups.

Recently, I went to dinner with nine prospective buyers from China, and each one was worth at least $100 million. They are interested in big projects, and especially in the EB-5 program. But so far our company’s sales to Chinese buyers have largely been to wealthy younger families who want to get their children into U.S. schools.

Kinney: We are seeing that as well.

A Chinese buyer might buy four or five units in a new condominium building – the kind of sale that doesn’t make the newspapers. But in one case, a Chinese investor who didn’t speak English looked at list of the units in a new condominium. He highlighted four residences and handed the list back to the sales representative. She was very happy thinking that she’d sold those four units. Then, the interpreter told her the buyer wanted all the available units in the building except for those four, which had unlucky numbers.

Q. What else can we do to strengthen those ties?

Kinney: Building stronger educational relationships is very important.

We will be partnering with Florida International University (FIU), which has 4,000 students on two campuses in China offering hospitality and business 8

Jonathan Hill

programs. When those families come to Miami for student orientation, we will give a presentation on Miami real estate.

Already, we’re finding that Chinese buyers may want to purchase a home for their kids, and another for themselves. One parent of a University of Miami student recently bought four properties here. Next year, we will be giving a presentation to 100 top Chinese brokers at the National Association of Realtors convention in San Diego and invite them to spend a week with us in Miami.

Q. Will the Federal Reserve’s recent decision not to raise rates have an impact on international real estate investment?

Hill: Interest rates have been low for a long time and will continue to be low. If you look back at the last 40-50 years, the average has been around 4 to 5 percent, while today the Fed rate is effectively zero.

So a 25-basis-point rise in December won’t derail the housing market here. Anyone with a higher-rate mortgage will probably already have refinanced.

Q. What advice would you give sophisticated international investors with regard to legal, tax and immigration issues?

SOUTH FLORIDA LEGAL GUIDE FINANCIAL EDITION 2015

Lewis: When a foreign buyer contacts our law firm, we emphasize the importance of getting tax and accounting advice. Even if they have made investments here before, they shouldn’t assume that things are the same as the way it was ten years ago.

Immigration issues aside, someone who brings a large amount of money into the U.S. needs that professional advice.

Appel: The U.S. has a complicated legal and tax system that is difficult for foreign investors to navigate. We advise our clients to get educated. When they make direct investments, they are likely going to be subject to a 40 percent estate tax. There are ways to structure an investment, such as creating a trust, to avoid that potential liability. Of course, if a foreign investor structures a transaction in the wrong way, it becomes even more complicated to unravel things.

Shindell: We advise investors to choose their U.S. partners carefully. Spend time with them, and don’t just pick someone from their own country who speaks the same language. Instead, they should look for a partner who is active in the South Florida marketplace and knows it well. A good U.S. partner should also do business in a way that matches the investor’s

[ ROUNDTABLE ]

temperament and culture. Just as we may make the mistake of viewing every Latin culture as the same, an international investor should remember that every U.S. real estate developer is different. Be sure your objectives, value and goals are aligned.

portfolios to the 5 to 10 percent range, which is large by historic standards.

Q. What should be the role of real estate in an investment portfolio?

Shuffield: Yes. We have always had that demand, even though most international buyers pay cash because it’s simple.

Shindell: It should be 100 percent commercial real estate!

Kinney: My Realtor members would totally agree with putting real estate front and center.

Q. Are you seeing any demand for jumbo mortgages and other types of residential financing?

Kinney: They also want to get money out of their native countries. In fact, I was surprised by our survey finding that the highest percentage of all-cash buyers came from France.

Lewis: We are concerned about the buyers who have given a substantial downpayment to a developer for a new condominium. If their currency has been devalued, they may need to finance the balance of the acquisition, even if that was not their original intent. That may need to be filled by the banks or private lenders.

Otherwise, there may a shortfall that could affect the developer, as well as the international buyer.

Hill: Once they make a purchase in cash, they own an asset here. Then, they can take out a loan against that asset, rather than going through the difficult procedure of getting a mortgage loan in the first place.

thirds of its value in the past decade. So far this year, we’ve seen investors from Argentina pay $125 million for 1.25 acres at the Epic East site in downtown Miami and $140 million for a 12-story office building at 777 Brickell, as well as sites on Miami Beach and the Miami River. That shows that even with devaluation, the money is still flowing into South Florida.

For me, what’s even more exciting is to see foreign investors from Asia, Latin America and Europe getting involved in our community. They are bringing fresh ideas from other cities around the world, rather than just parking their money here.

Today, Miami is the epicenter of the flow of creativity.

Appel: For very wealthy families, currency devaluation is not an issue.

Many have already moved money into dollar accounts to avoid the risk of loss of value or currency restriction. But devaluation is a concern for families who didn’t move their money out and have lost their buying power.

Q. Along with finding a safe haven for flight capital or potential returns, what are some of the other motivations of international investors? For example, is the Miami lifestyle a factor?

Lewis: Absolutely. All it takes is one trip to South Beach to realize the appeal of a Miami lifestyle.

Q. What about lending on the commercial side?

Hill: Many clients come to Gibraltar Bank because they want to diversify their portfolio around their real estate holdings.

We don’t discourage real estate investment – after all, Miami real estate has made many people very wealthy – but we try to manage for long-term legacy wealth. We believe in the importance of a diversified portfolio that may include alternative assets and strategies along with stocks, bonds and real estate. We want to smooth out the return stream, and reduce the risk of digging a hole on the low side. We have also increased our cash levels in many

Shindell: There is more equity capital out there today than anyone can remember, and the terms are better, too. CMBS (commercial mortgage-back securities) financing is more available than in the past few years. However, the commercial banks are less involved in construction lending today, partly because it’s harder for them to lay off some of that debt. They also know that once they get into a project, it’s almost impossible to get out. But there is no shortage of cash available, and it’s clear that many foreign investors want to put their money into Miami.

Q. Have currency devaluations affected that flow of commercial investment?

Shindell: We are not seeing that. Take Argentina, whose currency has lost two

Teresa King Kinney

SOUTH FLORIDA LEGAL GUIDE FINANCIAL EDITION 2015

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put your money to work. But is there enough of that flight capital to sustain the current level of development? That is a big question for the coming year, especially with so many currency devaluations.

Shuffield: To me, the big story has been the return of the American buyer. We are seeing an increase in sales to buyers from New York, Chicago, Washington and other major cities. And a lot of young professionals are moving here. As a result, I think we’ll continue to see Miami become a more lively and hipper place to live.

Richard Westlund

Shuffield: From sports teams to restaurants to shopping to cultural facilities, Miami is very attractive to travelers. Just look at the success of PAAM (Perez Art Museum Miami), which attracted far more visitors than expected in its first year.

Kinney: We have a tremendous advantage over many other states because of our lifestyle, weather, pricing and lack of a state income tax. That makes homes a true bargain for buyers from New York, New Jersey, Connecticut and California.

Shuffield: We sometimes don’t realize how much that extra tax means to people. I met a buyer from California who will save $1.3 million a year in taxes after buying an $8 million home here. Now, he’s enjoying that cash flow while dining at Joe’s Stone Crab and taking advantage of everything we have to offer in terms of a lifestyle.

Q. What are the biggest challenges facing our real estate market?

Lewis: I think we need more organic growth in our residential market, where median prices are well above the median income affordability level. That may not be a problem for developers as long as international buyers continue to invest here, but it is a red flag for the long-term sustainability of our city.

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David Appel

Appel: Rising apartment rents are putting a lot of pressure on employee salaries. We are seeing more young professional move to Broward and Palm Beach because rents are cheaper to the north.

Shuffield: Inventories of $1 million-plus condominiums are growing, and the sales pace has declined. There are a lot of new units going into the rental pool, where they compete with new multifamily apartment projects. That means prices are likely to trend down in the condo market, There is a huge investor component in our market, but unlike the previous cycle, this time there is nowhere near as much leverage.

Kinney: Even though we’ve had record-breaking sales for the past four years, prices are still where they were in 2003-04. In Miami-Dade now, we have 5,000 properties listed for sale under $250,000, so we are still one of the most affordable metropolitan areas in the U.S. The problem is that those homes are generally located a long way from our major employment centers.

Q. What do you see happening in 2016?

Lewis: Flight capital will continue to come into the United States, and Miami is the logical beneficiary from wealthy families in Latin America. This is an incredibly safe place to live and

SOUTH FLORIDA LEGAL GUIDE FINANCIAL EDITION 2015

Kinney: The condominium market for resales won’t be as strong as for single-family homes. A lot of international buyers like new construction, and that will continue to be the case. But the better investment next year is likely to be in single-family properties.

Appel: The Internal Revenue Service (IRS) is more aggressive than ever in terms of penalizing taxpayers for noncompliance, especially for international transactions. If matters aren’t handled correctly, the government is quick to assess penalties. That’s not going to change in 2016, and investors need to be aware of our changing regulations and practices.

Hill: The financial markets will always be interesting. The Federal Reserve may hike rates in December and the dollar might rise further against other currencies.

That could well affect the aspirational buyer from the emerging middle class in Brazil and Argentina who may want to buy a condo here in Miami, but find it now priced out of reach.

Shindell: I’m waiting to see the effect that All Aboard Florida (a planned private rail line connecting Miami to Orlando) will do to the north edge of downtown. It’s also fascinating to watch the continued diversification of Miami’s economy. Who would have thought that Turkish money would be flowing into our city or that we would have direct flights to Istanbul? It’s an exciting time to be in real estate.

[ ROUNDTABLE ]

The Outlook for

INTERNATIONAL REAL ESTATE INVESTMENT

ABOUT OUR PANELISTS DAVID APPEL is a senior partner in Marcum’s Tax & Business Services division and National Leader of the Firm’s EB-5 Investor Services Practice Group. With more than 30 years of multidisciplinary experience in domestic and international taxation, Appel focuses his practice on family business tax strategy and consulting services.

JONATHAN HILL, is senior vice president and director of investments, Gibraltar Private Bank & Trust, where his responsibilities include macroeconomic analysis, asset allocation and portfolio construction. Prior to joining the bank, Hill held positions as a trader analyst with the Federal Reserve Bank of New York’s treasury market policy group and cross-market monitoring group. Earlier in his career, Hill spent time as a trader and junior fund manager with BAC Florida Investments in Miami and as an analyst with ABN AMRO in London and New York.

TERESA KING KINNEY is chief executive officer of the 13,000 member Realtor Association of Greater Miami and the Beaches (RAMB), which includes more than 12,000 members in their Residential Association and 1,000 members in its Realtors Commercial Alliance. The association also hosts the largest local International Real Estate Council in the nation, with 2,500 members and has partnerships with over 125 international associations around the world.

HAROLD L. LEWIS is a partner of the Miami law firm of Pathman Lewis, LLP, and is head of the firm’s real estate and banking, corporate, and transactional departments. Lewis is knowledgeable in real property title issues and has written and lectured extensively in such varied areas as loan workouts and commercial contracts. He represents numerous businesses, both large and small, and prides himself on providing practical legal and business advice on the day-to-day issues affecting business owners.

JAMES W. SHINDELL serves as chair of Bilzin Sumberg’s Real Estate Group. His practice involves the representation of developers, owners, private and institutional investors and lenders in a broad range of real estate matters, including acquisitions, sales, financings, leasing, joint ventures, workouts and restructurings. These matters have involved office, retail, hotel, warehouse, industrial, residential, mixed-use, telecommunications and development properties.

RON SHUFFIELD is president and CEO of Esslinger-Wooten-Maxwell Realtors® (EWM), a South Florida-based real estate brokerage firm. EWM is the South Florida exclusive affiliate of Christie’s International Real Estate (CIRE), a division of the Christie’s Art Auction House based in London. Shuffield has been a member of the international advisory board of CIRE since 2001. As a part-owner of EWM since 1984, he sold EWM in 2003 to HomeServices of America, Inc., an affiliate of Berkshire Hathaway. EWM has 800 associates and staff members who are involved in $2 billion of South Florida real estate service transactions annually.

SOUTH FLORIDA LEGAL GUIDE FINANCIAL EDITION 2015

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GROWING THE BUSINESS Helping Venture Capital and Private Equity Firms Finance Promising Companies

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f you’re an investor with deep pockets, there are Florida-based venture capital (VC) and private equity (PE) firms that will put your money to work in the business world. If you’re an entrepreneur, those VC and PE firms can provide the equity capital to grow your company or cash out on your sweat equity.

And there are experienced South Florida attorneys, accountants and other professionals who can help both sides of a

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financial transaction achieve those goals.

“An improving national economy is creating more opportunities for many growth-oriented businesses,” says Daniel H. Aronson, who leads the Corporate, Securities and M&A practice group at Berger Singerman LLP in Miami and chairs the Florida Venture Forum.

“Because debt capital is still hard to get, many entrepreneurs are looking for sources of equity such as venture capital.”

[ VENTURE CAPITAL AND PRIVATE EQUITY ]

Florida’s VC and PE markets have been heating up for the past year, according to John Igoe, partner, Locke Lord in West Palm Beach. “The current trends are very positive for the venture capital market. It’s a sellers market now and there is a lot of merger and acquisition activity.”

But it’s important for business owners and potential investors to understand the different levels of the equity financial markets: • Founders, family and friends. Many businesses start small with capital contributed by the entrepreneur, and partners who have a personal relationship with the owner.

• Angel investors. This might be an individual or a group of investors who pool their resources to support early-stage companies that may need managerial advice along with additional funds to reach a new level of growth.

• Venture capital firms. A company that appears to be gaining traction in the market may attract the attention of a VC firm, which typically takes a minority ownership position and hopes to exit with a positive return in a few years.

• Private equity firms. Unlike a VC firm, a PE firm seeks to acquire companies that can generate significant profits with a larger pool of capital or a different market strategy.

Legal, accounting and financial professionals are needed in all these transactions, from helping to raise funds to drawing up agreements, negotiating deals and finalizing the details.

“Our private equity practice is growing tremendously,” says Scott A. Mager, audit partner, Grant Thornton LLP in Sunrise.

“In today’s financial environment, many investors are looking for PE opportunities that can provide higher returns without the volatility of the stock market.”

LOOKING FOR VENTURE CAPITAL

VC investors from around the world are showing a growing interest in Florida companies, particularly in fields like life sciences, business and financial services, and information technology (IT), according to Aronson. VC deals in the life sciences tend to be larger because new products take longer to develop and may need regulatory approval compared with IT and software companies that may be able to accelerate their growth

curves with smaller injections of funds.

“Florida has seen more IT and software ventures in the past few years as our research universities are spinning out interesting new technology,” adds Aronson, who teaches VC classes at the University of Florida and is the author of “Venture Capital: A Practical Guidebook.”

Aronson notes that it’s not just the availability of potential equity investments, but the health of the exit market that’s important to venture capital funds.

“Higher returns on investments (ROI) make investors happy, and more likely to contribute to the next VC fund,” says Aronson.

A typical VC investment horizon for a new company would be three to Daniel Aronson seven years, and about one to three years for a mature company, says Aronson, For instance, Ballast Point Ventures, a Tampa-based VC firm, recently announced its successful exits from life science companies KBI Biopharma in North Carolina and Innocutis in South Carolina. With Igoe’s assistance, the VC firm also invested $15 million in TissueTech, a Miami regenerative tissue engineering company.

A GROWING DEAL FLOW

While Florida lags behind states like New York, Massachusetts and California, VC funds are actively pursuing deals here. The Money Tree™ Report by PricewaterhouseCoopers and the National Venture Capital Association reported 44 VC deals in Florida in 2014 totaling $865 million. That included a $542 million financing deal led by Google for Magic

Leap, an augmented reality technology company based in Dania Beach. For the first two quarters of 2015, the VC total was 36 deals totaling $238 million.

“That’s a big change from the early 1980s,” says Igoe, who has been active in this field for nearly 35 years. One of the positive steps in recent years was the creation of the Florida Growth Fund in 2009. Using approximately $750 million under management from the state’s pension plan, the fund makes PE investments and co-invests with VC firms in innovative Florida companies with a focus on the technology sector.

Igoe says another supportive program is the Florida Institute for Commercialization of Public Research, which helps startups capitalize on research discoveries at the state’s universities. The institute provides $50,000 to $300,000 in seed funding to

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Troy Templeton

John Igoe

qualified companies that license universitydeveloped research and technology. “It is designed as a matching program, so startups must also obtain private funding from angel investors and groups,” Igoe says. To date, the program has raised more than $35 million and funded more than 40 companies around the state.

THE FLORIDA

VENTURE FORUM

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Some universities are also providing startups with financial and mentoring support through incubators, such as the LaunchPad at the University of Miami and Tech Runway at Florida Atlantic University in Boca Raton. These incubators provide access to mentors, and networking opportunities for potential investment, Igoe says.

“We are also seeing greater interest and a growing deal f low from angel investment groups,” adds Igoe. One example is New World Angels, which has chapters in Boca Raton and Tampa.

Its portfolio of early-stage investments includes Bioceptive, a women’s health company developing innovative medical

MANY SOUTH FLORIDA professionals participate in the Florida Venture Forum, a statewide member-based organization that helps entrepreneurs obtain funding through education, strategic partnering, and effective networking. “The forum’s board includes every member of the eco-system, including angel, VC and PE investors,” says Daniel Aronson, chair. “Our members include CEOs, service providers, technology professionals and representatives of our biggest research universities.”

On January 28-29, 2016, the forum will host its 25th annual Venture Capital Conference at the Renaissance Vinoy Resort & Golf Club in St. Petersburg. The event has helped Florida-based entrepreneurs gain more than $3 billion in funding to date. The forum also hosts an annual Early Stage Conference, which has helped presenting companies obtain over $36 million in funding, and the Statewide Collegiate Business Plan Competition, which has generated nearly $15.9 million in funding for student entrepreneurs.

SOUTH FLORIDA LEGAL GUIDE FINANCIAL EDITION 2015

[ VENTURE CAPITAL AND PRIVATE EQUITY ]

devices for a variety of gynecological procedures.

In the past few years, Aronson has seen a steady growth of Florida-based VC funds, although there are only a few like Ballast Point Ventures with more than $100 million under management. “Most of the angel investments and VC capital comes from outside Florida,” he says.

“However, there are many wealthy seniors and retired entrepreneurs who become limited investors in VC funds. Others become mentors and coaches to early stage companies, becoming true angel investors.”

Another source of funding is through family offices that might involve one or more generations of investors. “They hire professional managers who source, value, negotiate and close their deals,” Aronson says. “Because they have longer time horizons, they are usually not in a hurry to make an exit, and can become part of a longer-term success story.”

In addition, South Florida benefits from its international connections, attracting angel investors and funds from overseas sources. “Many wealthy non-U.S. families have businesses and investments in South Florida,” Aronson says. “They know their own markets and the ecosystem that operates in those fields. As a result, they are often well equipped to invest in new entrepreneurial opportunities.”

THE PRIVATE EQUITY SIDE

Private equity opportunities are particularly attractive to investors in the low-rate financial environment, according to Mager. “While banks are loaning again, they have not gone back to their flexible underwriting,” he says. “That means many business owners must rely on equity capital.”

But there is a large gap between companies that would like to obtain PE or VC funding and the number of potential sources. “South Florida is not well known around the country as a financial service metropolis. There are groups in New York, Boston and Philadelphia that will send their business development executives here to source transactions,” Mager says. “They just don’t open offices here.”

That situation may be changing, as a number of private equity and hedge fund firms have relocated from New York to South Florida in the past few years. “The tax landscape here is perfect for a wealthy individual,” Mager says. “When the CEO of a fund already has a home here,

relocating the office here can be a logical next step.”

In general private equity firms are most interested in technology, healthcare, light manufacturing, restaurants and service companies, Mager says. “There is a great deal of appetite for ventures with disruptive technology.

On the other hand PE firms are less interested in the aviation, tourism and real estate sectors because they are riskier in terms of cyclical ups and down. But there are other real estate funds that look for investment opportunities in commercial and residential properties.

Mager says private equity continues to be attractive to high net worth (HNW) individuals. “They can invest on their own, through a family office, or as limited partners in a fund. They can also do their own research and find a specific investment that appeals to them.”

Scott Mager

A LONG TRACK RECORD

One of South Florida’s successful private equity firms is Trivest Partners in Coral Gables. Founded in 1981, Trivest is the oldest private equity firm in the Southeast U.S., according to Troy D. Templeton, managing partner. “We have never strayed from our strategy of investing in small, privately held businesses and helping them grow,” said Templeton.

Although the pace of private equity deals has slowed this year, Trivest is on track for a record year in 2015 with 10 deals through August, along with several successful exits.

Trivest focuses on founder and familyowned middle market companies with annual revenue between $25 and $250 million. “We have the friendliest model out there for founders to do a deal with a PE firm,” Templeton says. “They can sell and take the proceeds for retirement, estate planning or a host of other reasons.

Or they can reinvest and be a participant going forward.”

One recent addition to Trivest’s portfolio is GetixHealth, a Houston-based healthcare business process outsourcing services (BPO) company serving

providers. “We closed on several add-on acquisitions that complemented the company’s services and have already doubled the size of the business.”

Other Trivest companies include Northstar, an independent pizza distributor in Fort Lauderdale that has grown sales by 50 percent with complementary acquisitions, Templeton says.

For its acquisition Trivest is drawing from a $415 million equity fund (Trivest V) that closed in 2013 with investments from corporate and public pension funds, foundations and universities. It usually takes five or six years to invest a fund of that size, Templeton says.

“Private equity is one of the hottest types of investments today,” says Templeton. “PE returns overall are still 200 to 500 basis points (2 to 5 percent) higher than public equity with less volatility. Because small and middle market companies are the economic engines of the country, they will continue to attract PE investors in the years ahead.”

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INSURANCE COVERAGE, CLAIMS AND CASES Emerging Trends in Florida’s Litigation-Heavy Landscape

Jeffrey Liggio

I

nsurance is all about risks and rewards. Consumers, property owners, businesses and professional firms try to cover their risks by purchasing appropriate coverage – property and casualty, liability, health, windstorm, flood, health, malpractice, and errors and omissions (E&O) policies.

At the same time, insurers strive to offer coverage at competitive rates, while guarding against fraudulent claims and

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SOUTH FLORIDA LEGAL GUIDE FINANCIAL EDITION 2015

unexpected risks that could result in their own financial losses. It’s a high-stakes industry where a devastating hurricane, a medical malpractice claim or a bad faith lawsuit could lead to a multi-million dollar payout by an insurance company.

Meanwhile, new perils and risks are emerging in Florida for both policyholders and insurers in areas like cybersecurity and social media.

The federal Affordable Care Act (also

[ INSURANCE ]

Ronald Kammer

known as Obamacare) has reshaped the nation’s health insurance landscape, and coverage-related cases in many insurance fields are winding their way through the state and federal court systems.

“Because insurance affects almost everything, attorneys need to follow these cases, both for themselves and their clients,” says Brenton N. Ver Ploeg, founder of Ver Ploeg & Lumpkin, P.A., a Miami firm that represents individual or business policyholders.

Here is a look at some of the emerging trends and key cases affecting Florida’s insurance market.

CONSTRUCTION DEFECT CLAIMS

South Florida’s recent surge in residential and commercial development is increasing the number of lawsuits filed over construction and design problems.

“One of the hot insurance coverage issues is who will ultimately be responsible for paying construction defect claims, says Ron Kammer, partner-in-

Fred Cunningham

charge of Hinshaw & Culbertson’s Coral Gables office and national leader of the firm’s insurance practice. “Over the next year, we will continue to see more cases refining what is covered under a commercial general liability policy and what is not covered.”

Kammer, who has been involved in several construction defect cases, says the Florida Supreme Court has issued different rulings in the cases. “That lack of clarity has resulted in a surge in litigation,” he adds. “Hundreds of cases have been filed by major builders seeking to recover money from their subcontractors and the insurers for those subcontractors. Some of those suits also claim that the subcontractors’ insurers also had an obligation to defend the contractor as an additional insured.”

Jeffrey M. Liggio, a partner at Liggio Benrubi, P.A., in West Palm Beach who handles bad faith claims and insurance litigation, says both builders and property owners should pay close attention to

these cases when planning a residential or commercial construction project, since some contracts may exclude coverage for defects caused by a subcontractor.

“A business or homeowner should look closely at the contracts between the general contractor and the subs, making sure that if anything does go wrong their insurance will provide coverage for damages,” Liggio says. “This area is really a minefield for owners and contractors, as you may not know if you have coverage until after the problem has already occurred.”

SORTING OUT THE CAUSE OF A LOSS

Disputes over insurance coverage may also occur when a home or commercial property suffers damage from concurrent causes, such as windstorm and flood during a hurricane. Determining responsibility for coverage – and payment of the claim – can be become even more tangled if the damage would not have occurred without a design or construction defect.

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Brenton N. Ver Ploeg and Hugh Lumpkin

Since the Third District Court of Appeal’s 1988 decision in Wallach v.

Rosenberg, Florida has followed a limited version of the concurrent cause doctrine, says Ver Ploeg. That means the claim would be covered by an all-risk policy as long as at least one of the causes is covered.

However, the Florida Supreme Court is now reviewing a 2013 ruling by the Second District Court of Appeal in Sebo v. American Home Assurance Co. that may change that long-standing doctrine.

The case revolved around damage to Sebo’s home in Naples, which had water

18

leaks during rainstorms due to apparent construction defects and suffered major damage from Hurricane Wilma in 2005.

The owner had an $8 million homeowner’s policy that insured against all risks.

American Home Assurance Co. (AHAC) investigated the claim and denied coverage for most of the losses in 2006. After a series of lawsuits and several settlements, a jury ruled in favor of Sebo – a decision that was appealed by the insurer. “The Second District reversed the award and sent the case back for trial,” said Ver Ploeg. “In doing so, the appellate court stated that

SOUTH FLORIDA LEGAL GUIDE FINANCIAL EDITION 2015

the different doctrine of proximate cause should be applied in this case.”

In brief of amicus curiae for the supreme court on behalf of United Policyholders, a nonprofit organization for consumers, Hugh Lumpkin, partner, Ver Ploeg and Lumpkin, noted that the efficient proximate cause doctrine requires a fact finder to determine the cause of an insured’s loss. “That doctrine introduces nebulous tort concepts into an insurance contract,” he wrote. “The Second District abandoned Wallach in favor of the efficient proximate cause doctrine without any compelling justification.”

[ INSURANCE ]

CYBER SECURITY RISKS

Cyber security is a growing concern for Florida businesses and insurers, with major cases winding their way through the courts. The key issue is whether a traditional commercial general liability policy provides coverage for cyber liabilities, according to Kammer. “Some states have gone one way while others have not,” he says. “Now, many insurers are putting in exclusions to make sure there is no coverage for those types of losses.”

In response to that trend, some insurers have begun offering policies that are specifically designed to protect against losses resulting from a cyber attack, Kammer says. This is a new area of insurance law with only a few reported decisions nationally regarding what may or may not be covered.

“Given the frequency that businesses are experiencing cyber security issues, this will be a hot area nationally and in Florida,” Kammer says. “Businesses need to review their general liability policies; otherwise, they may face unintended exposures. If a company’s confidential records are disseminated via a cyber exposure, the case has the potential to involve significant damages.”

Kammer also advises attorneys, accountants, doctors and other professionals to review their errors and omissions (E&O) coverage every year.

“We are seeing premiums go up for all professionals,” he says. “But these policies are not created equally. Read them carefully, and remember that a little lower premium could have a dramatic impact on the protection you are purchasing.”

HEALTH INSURANCE

Fred Cunningham, founding partner at Cunningham Whalen & Gasparin in Palm Beach Gardens, believes there will be more litigation related to health insurance in the next few years. “There are ongoing questions about coverage and claims under Obamacare, and there will be more litigation over mental health problems,” says Cunningham, a boardcertified trial attorney who focuses his practice on serious personal injury, insurance company coverage and bad faith litigation. “I’ve seen cases where insurance companies have denied the need for in-patient treatment, despite the recommendations of their own physicians.”

Another issue for consumers is the portability of insurance benefits when changing jobs – an issue covered by

FLORIDA: A BATTLEGROUND FOR BAD FAITH LITIGATION

With a large stream of bad faith lawsuits, consent judgments and insurance fraud, Florida is one of the industry’s least popular states. “The Florida insurance market is generally perceived by the industry as a pro-policyholder jurisdiction,” says Ron Kammer. “That makes it more challenging for some insurance companies in the state and makes it more costly for the state’s citizens to obtain insurance.”

For example, many insurers have created special units to investigate potentially fraudulent automobile, healthcare and homeowners claims. “As a lawyer, my experience has been that South Florida jurors recognize a fraudulent claim and have been very fair in their treatment of these types of issues,” Kammer says.

Another reason that insurers don’t like the Florida marketplace is the large number of consent judgments, says Brenton N. Ver Ploeg. If the insurance company won’t defend a claim, a defendant can sign a consent judgment with the plaintiff, protecting his or her interest, while allowing the plaintiff to file a much larger claim against the insurance companies. For insurers, that means a potential $50,000 policy exposure could suddenly become a multi-million case.

But the biggest concern for insurers are the hundreds of bad faith lawsuits filed each year in the state. In the past 15 years, plaintiffs’ attorneys have become more attuned to insurers’ treatment of the clients, so more bad faith cases are being filed, says Fred Cunningham.

“The increase in cases is also attributable to insurance companies not paying claims as promptly as they should or not meeting the terms of a settlement.” Cunningham adds that the number of bad faith filings also correlates with the economic cycle. “During the recession, there were fewer complaints about the delayed payment of claims,” he says.

In his 27-year career, Cunningham has handled a number of noteworthy cases, including the first bad faith case without a settlement demand letter by the injured party (Snowden v.

Lumberman’s Mutual Insurance Company, 2001).

More recently, Cunningham represented the estate of Judge Stephen D. Levine who was killed in a traffic accident by a drunk driver with a $10,000 policy from United Automobile Insurance Company. “The insurer offered to pay but sent an overly broad release form with the check for the policy,” he says. The case went to trial, resulting in a $6.8 million verdict for the plaintiff that was affirmed by the Third District Court of Appeal in 2011.

“I am very proud that we won the case, which sent a message regarding the bad faith handling of the claim.”

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Susan R. Kent

the Health Insurance Portability and Accountability Act of 1996. “We have a long-standing class action suit against Florida Blue for denying individual coverage to individuals who had prior coverage,” Ligio says. Several motions in the case are now pending in Palm Beach County Circuit Court.

Ligio adds that many Americans were hoping that the passage of Obamacare would reduce disputes over coverage of preexisting conditions, failure to pay claims or the improper cancelation of policies. “But based on our practice, insurers are still looking for reasons to deny medical claims, such as saying a generic drug is sufficient, rather than covering a more expensive prescription 20

drug, “ Ligio says. For example, Ligio is representing a patient with a serious illness who took out a supplemental policy to pay for needed medication.

“The insurance company sent him a letter canceling his policy because he had ‘similar coverage’ under Obamacare,” Ligio says. “The issue we are litigating is whether that similar coverage provision applies to insurance polices that are not at all similar in terms of benefits.”

OTHER TRENDS

Insurance companies are asking outside counsel to assist them in more pre-suit evaluations, says Susan R. Kent, an attorney at Vernis & Bowling of Palm Beach, P.A. whose practice includes

SOUTH FLORIDA LEGAL GUIDE FINANCIAL EDITION 2015

insurance coverage and litigation matters, primarily on the defense side.

“One of my roles is to help in that evaluation process and now increasingly that process begins even before they enter pre-suit negotiations.”

Kent adds that insurers are increasingly tailoring their litigation strategies to gather specific facts, rather than taking a broader approach,” she says. “For example, they may want to know what an MRI showed or what a surgeon did or didn’t find during a procedure. This leads to a more focused discovery, and assists them in resolving the case sooner without the risks or expense associated with going to trial.”

Another timely issue is the increasing ability of defense firms to explore the relationships between plaintiffs’ attorneys and the doctors treating their clients, Kent says. “In a Tampa case, a court ruled that details regarding the referral relationship is discoverable, despite the fact that that information was historically regarded as being protected from discovery under the attorney-client privilege.”

As far as new trends, social media is playing a bigger role in litigation.

Social media postings can reveal what a claimant is doing and can help play a role in determining the validity of a claim, Kent adds. “One young lady posted photos on Facebook that contradicted her testimony about what she could and could not do after an accident, and we downloaded that information before she removed it from her Facebook page. Of course, social media postings work both ways, and can also favor a plaintiff in a suit.”

While more than 95 percent of cases are resolved pre-trial, insurers are still more than willing to try cases involving fraudulent claims, Kent says. “When independent witnesses testify under oath to facts which are significantly different than those reported by a claimant, insurers are very willing to try those cases.”

[ LEADING SOUTH FLORIA BANKERS ]

LEADING SOUTH FLORIDA BANKERS

PROFILES IN BANKING NOT ALL SOUTH FLORIDA BANKS FOCUS ON SERVING LAW FIRMS, ATTORNEYS, ACCOUNTING FIRMS AND OTHER PROFESSIONALS. HERE ARE PROFILES OF THE LEADERSHIP AT FOUR BANKS - SABADELL UNITED BANK, STONEGATE BANK, SUNTRUST BANK AND TD BANK – THAT PLACE A SPECIAL EMPHASIS ON REACHING OUT TO SOUTH FLORIDA’S PROFESSIONAL COMMUNITY.

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THE LAWYERS’ BANK Dwight Hill Leads Sabadell United Bank’s Professional Team

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young South Florida attorney starting her practice might need financial advice and assistance to launch an effective advertising or public relations program. An older attorney nearing retirement might want financial guidance about “cashing out” his equity in the law firm and investing the proceeds.

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“For more than 35 years, we have served as a trusted advisor for attorneys, accountants and other professionals facing important financial decisions,” says Dwight L. Hill, president of Sabadell United Bank, N.A., Miami. “That’s why many of our banking clients have been with us for decades.”

[ LEADING SOUTH FLORIA BANKERS ]

At Sabadell, Hill leads a growing professional team that works with startup firms, merging firms and growing firms that need support with their transactions, working capital and longerterm financing. “I find that attorneys are intelligent, hard working and very motivated to be successful,” he says.

“However, they tend to focus their energy on serving their clients, and often need support on the business and financial aspects of their practices.”

Having worked with attorneys throughout his banking career, Hill says South Florida law firms have a wide variety of financial needs. In a recent talk to the Florida chapter of the American Board of Trial Advocates, Hill outlined the differences between plaintiff’s and defense litigation firms. “A plaintiff’s firm needs financing to carry its cases and overhead until those matters are resolved,” he says. “On the other hand, defense firms can expect to receive a steady paycheck, but need to maintain some form of cash reserve in case the client delays payment.”

Hill adds that Sabadell educates and trains its banking representatives to understand the differences among family law, real estate, trusts and estate and other types of practices. As he says, “That is one of the things that really sets us apart in the marketplace.”

DEEP ROOTS IN FLORIDA

Back in the 1880s, Hill’s grandfather Charles F. Blackburn and his great-uncles came from England to become cattle ranchers in Florida. “He found a higher calling and became a Methodist preacher who covered the southeast coast,” Hill recalls. “Later, he founded First United Methodist Church in Miami, where Hill’s mother was born.

Raised on the state’s Gulf Coast, Hill grew up in Sarasota, where his father Dwight had been a practicing lawyer.

“My family wanted me to be a preacher or a lawyer, but neither really fit my personality,” Hill says. “I always liked business, and that’s the direction I took.”

Hill wound up earning a bachelor’s degree in business from the University of Florida in 1978, and planned to become an entrepreneur. After graduation he met and married Mary Kennerk, a Miami native.

While in college, Hill took a summer job with Ellis Banking Corp. in Sarasota and enjoyed the experience. “I realized that becoming a banking professional would

allow me to meet and learn about many different types of businesses,” he says.

In the early 1980s, Miami was the place to be in Florida banking, Hill says. After graduation, he joined Pan American Bank, working with longtime South Florida banking leaders Bill Allen and Bill Morrison. “It was a great way to get into banking,” he says. “I learned something new every day.”

But by 1984, Hill was ready for a change. He was considering a job offer from Southeast Bank, at the time the largest Miami-based bank, when he got a call from community bankers Gerald Katcher and Howard Scharlin.

They invited Hill to join them at United National (the predecessor to Mellon United and Sabadell), which they had founded in 1978. “I liked their approach to the market, and joined them in 1984,” Hill says. “It turned out to be best career move I ever made.”

United National’s founders had a vision of growing a small bank by providing a higher level of service. “They realized that people whose time was really valuable – like lawyers and other professionals – didn’t want to waste a lot of time and energy doing their banking,” Hill says.

United National soon became known as “The Lawyers’ Bank” and began building a professional clientele.

“Back in the 1980s, banking was conducted face-to-face or on the phone,” Hill says. “We would also use courier services to pick up deposits from our busy professional clients. Through the years, we have invested in all the technology options, so clients can choose how to interact with us, including online and mobile banking. But we still make it easy for our clients to talk with us, and I have my mobile number printed on my business card.”

When not at work or talking with clients, Hill enjoys spending time with his wife and their three daughters in the Keys enjoying the water. “I used to sail, but now spend time fishing,” Hill says.

“Florida’s great environment has always been important to our family. As a child, I remember my uncles taking me to state parks to count birds and check the alligator population, and I still like being outdoors.”

Hill has also been active in the community, he served as chairman of the American Red Cross of Greater Miami & The Keys and as a board member of the Children’s Home Society and CarrFour

Supportive Housing. He is now a member of the board of WLRN, helping the public television and radio station stay connected and relevant to the needs of the South Florida audience. He is also a member of the Florida Bankers Association.

A GROWING REGIONAL BANK

Since the 1980s, United National has gone through several changes of ownership, while retaining its core banking team. When Pittsburgh-based Mellon bought the bank in 1997, and renamed it Mellon United National Bank, the company kept then president Mario Trueba in place, along with Hill and other United National executives. Katcher also stayed on, serving as chairman until 2009.

The next year, Banco Sabadell, one of Spain’s largest banks, finalized its acquisition of Mellon United National Bank following its initial entry into the South Florida market with TransAtlantic Bank (2007) and BBVA’s private banking business (2008).

Since 2010, Sabadell United Bank has continued to grow, and now has nearly $5 billion in assets, with 500 employees in 26 offices in six Florida counties. One of the bank’s key business units is Sabadell Bank & Trust, which provides investment management, private banking, and fiduciary services. Banco Sabadell also has a full-service international branch in Miami serving non-resident high-networth individuals, families and businesses.

Looking ahead, Hill says Sabadell United Bank has been given some “strong challenges” from its parent. “We want to become one of the largest Floridabased banks by the end of the decade,” he says. “That might mean looking at new markets in the state or acquiring other banking operations.”

At the same, time, Hill wants to ensure that the bank has the people and systems in place to deliver personalized service to its clients. “Fortunately, Banco Sabadell has the resources that allow us to compete with the giant national banks, while our team understands the importance of being as efficient and nimble as a community bank,” he says.

Hill adds the vision of the bank’s founders is still very much a part of Sabadell’s culture. “We treat our clients like partners in the firm,” he says. “We believe in the concept of the banker as a trusted advisor, and we try to deliver that support every day.”

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AMERICA’S MOST CONVENIENT BANK Val Perez Guides TD Bank’s South Florida Region

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al Perez is a strong supporter of economic development, education and non-profit organizations throughout South Florida. “We believe it’s important for us to focus on the communities we serve,” says Perez, who is retail market president for TD Bank, known as “America’s Most Convenient Bank.” As a board member of the Business Development Board of Palm Beach 24

SOUTH FLORIDA LEGAL GUIDE FINANCIAL EDITION 2015

County and chair of the Education Foundation of Palm Beach County, Perez provides his ideas and suggestions on key issues facing the region.

“We also strive to build lasting partnerships with the professionals in our community,” adds Perez. “Our bank has extensive knowledge and experience in meeting the banking

[ LEADING SOUTH FLORIA BANKERS ]

needs of South Florida’s law firms, attorneys, CPAs and other professionals.

For example, our bank recently hosted two half-day continuing education seminars for CPAs.” TD Bank has a robust private banking arm serving professionals, executives, entrepreneurs and other high-net-worth individuals in Miami-Dade, Broward and Palm Beach Counties. “Along with highly personalized service, we can offer jumbo mortgage loans to our clients,” Perez says.

“That’s helped us grow at a time when many other banks have pulled back from residential lending.”

For attorneys, accountants and their firms, TD Bank takes a full-service approach. “We bring the whole bank to our customers,” Perez says. That includes credit and transactional services for the firm, mortgages and personal loans for young associates, and private banking and wealth management services for senior partners. As Perez says, “We are one bank – not only a retail, private or commercial institution – with a coordinated team approach to making sure we meet our customer’s financial needs.”

A DIVERSE BANKING BACKGROUND

Perez brings more than 26 years of banking experience to his role as market president for TD Bank’s operations in 85 offices from Homestead to Vero Beach. In addition to extensive retail experience, his career includes marketing, bank integrations, international private banking, domestic private banking and mortgage lending.

Perez grew up in Kingston, New York, before moving to South Florida with his family. “We had friends who were involved in banking, and it seemed like a natural career choice for me,” he says. Perez started his career in 1985 as a teller in the Boca Raton office of AmeriFirst Savings & Loan. He soon joined the management training program, learning how to analyze corporate balance sheets. “I became a credit analyst and then a commercial relationship manager,” he says.

Next, Perez moved into retail banking, managing a branch in Palm Beach County for C&S, which was acquired by NCNB which became NationsBank. Perez became a regional branch manager for NationsBank’s western Broward offices.

Then came an unusual step in a banking career. “I was asked to move to Charlotte [headquarters of NationsBank] to be part

of a strategic think-tank for the company,” he says. “We shared our thoughts on sales and service strategies, developing some best practices for the bank, while looking ahead to future trends.”

After that role, Perez returned to Florida, and played an active role in NationsBank’s 1997 acquisition of Jacksonville-based Barnett Bank, the largest bank merger in U.S. history at that time. In 1998 NationsBank acquired Bank of America and kept the name.

Perez then became statewide marketing manager for Bank of America in Jacksonville.

In the early 2000s, Perez came back to South Florida, taking on several management roles for UnionPlanters Bank. After the bank’s merger with Regions Bank, Perez became regional market president in Palm Beach County.

He was then recruited by Citibank to re-engineer its small business lending program in a seven-state area.

In 2012, TD Bank hired Perez as regional vice president of commercial banking for Palm Beach County, and he assumed his current role last fall.

On the personal side, Perez and his wife Denise Groo enjoy golf, tennis, travel and spending time with family and friends.

He adds, “I am passionate about my role as a banker, and it is exciting to work with professionals and business leaders who are also passionate about their careers.”

A CANADIAN BANKING COMPANY

Perez’ diverse banking experience – including working closely with mergers and acquisitions – has provided a solid foundation for his leadership role at TD Bank, which has deep roots in U.S. and Canadian history. The company first opened its doors in Maine in 1852 as Portland Savings Bank. In 2007, TD Bank Group of Toronto, Canada, a top 10 financial services company in North America, acquired the company’s successor, Banknorth, followed by New Jersey-based Commerce Bank, and rebranded its U.S. affiliate as TD Bank.

In 2010, TD Bank entered the Florida market with the acquisition of Riverside National Bank of Florida, First Federal Bank of North Florida, and AmericanFirst Bank from the Federal Deposit Insurance Corporation (FDIC).

Today, TD Bank is one of the ten largest banks in the U.S. with 1,300 offices from Maine to Florida. Based in New Jersey,

TD Bank and its subsidiaries offer private banking and wealth management services through TD Wealth.

“Many of our retail branches are open seven days a week,” Perez says. “We have also added family- friendly interactive features like our Penny Arcade, where kids can bring in their coins and get a receipt for their savings account.”

SERVING PROFESSIONALS AND COMMUNITIES

Along with helping young savers put their pennies to work, Perez enjoys meeting the financial needs of attorneys, accountants and other professionals.

“With the growth of technology, attorneys have a tremendous amount of information they need to digest each day,” he says.

“They are also juggling multiple priorities, from their clients to the firms to their personal lives. Our role as bankers is to take the time to understand their goals, operations and challenges so we can provide sound financial advice. Everyone talks about providing full services, but with our non-silo model, we can deliver on that promise.”

For example a South Florida law firm with international clients may receive significant payments from overseas sources. “Anti-money laundering and bank security regulations are a big part of our world these days, and it’s very important for a law firm to understand those types of transactions,” Perez says.

“We can explain these security issues to attorneys and their clients, and guide them through a complex transaction.”

Perez also believes attorneys and accountants should pay close attention to the region’s economic development activity – a feeling shared by his colleague Ernie Diaz, TD Bank regional president for Metro Florida and incoming chair of Miami-Dade’s Beacon Council. “Being involved gives you a good perspective on what may be happening two or three years down the road,” he says.

In addition, Perez is an advocate for volunteer service. He serves as chair for Homesafe, which supports victims of child and domestic abuse, and leads the bank’s “Bring Change” program, which provides financial support for the region’s smaller non-profits. He says, “As lawyers, accountants and bankers, we should all give something back to our communities.”

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A PRIVATE BANK FOR BUSINESS David Seleski Directs Stonegate Bank’s Rapid Growth

W

hen David Seleski, president and CEO of Stonegate Bank, gets a call from a journalist these days, the conversation usually revolves around Cuba. After all, Stonegate made history on July 21 by establishing the first U.S. correspondent banking relationship with Cuba in more than five decades.

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[ LEADING SOUTH FLORIA BANKERS ]

“This is another step in terms of normalizing commercial relations between the U.S. and Cuba,” says Seleski.

“The ability to move money easily between the two countries will only increase trade and benefit American companies wishing to do business in Cuba. We are very proud to be a part of this process that is going to benefit both countries in the future.”

But Stonegate is much more than a new player in the intricate dance of U.S.-Cuba relations. Under Seleski’s leadership, the 10-year-old bank has grown swiftly through expansions and acquisitions, while staying focused on serving attorneys, accountants, physicians and other professionals.

“Our mission is to be recognized as the premier ‘Private Bank for Business in Florida,’” says Seleski. “We provide innovative solutions tailored to each client’s needs, along with unsurpassed service, while building a nimble and responsive banking organization that is accountable to the communities we serve.”

A VARIED BANKING CAREER

A South Florida native, Seleski earned his bachelor’s degree in history at the University of Florida, followed by graduate work at the University of Virginia. Deciding on a career in banking, he joined Southeast Bank in 1989. He worked in West Palm Beach and Fort Lauderdale, where he received his formal credit training and served as a credit analyst and commercial lending officer.

In 1991, Seleski joined Enterprise National Bank in Palm Beach Gardens as a commercial lender, and moved to Compass Bank in 1992. In his six years with Compass Bank, Seleski focused on retail banking, ultimately managing five branch offices with assets totaling more than $250 million.

Next, Seleski served as vice president and manager of private banking for SunTrust for Miami Beach and Bal Harbour, and as regional manager of private banking for Southeast Florida for SouthTrust, where he started the private banking division. In 2002, he became president and chief executive officer of the Southeast Florida division of Florida Bank, N.A., until its sale in 2004 to The South Financial Group, Inc. FOUNDING A NEW REGIONAL BANK

With his experience in commercial lending, retail, private banking and

overall leadership, Seleski founded Stonegate Bank in 2005 after raising $40 million for the new venture, the state’s second largest capital raise for a bank at that time.

“We are really a Wall Street bank, as 60 percent of our ownership is institutional,” he says, noting that Stonegate’s shares are traded on Nasdaq as SGBK. “Those resources allow us to compete very well with the regional and national banks, while giving our customers the high level of service they expect from a community bank.”

Seleski’s long-term strategy was to build Stonegate into one of the state’s leading commercial banks by understanding its customers’ businesses and moving quickly in response to their requests. “We take a retro approach, and strive to be a financial consultant to our clients, advising them on decisions to open new offices or launch a new business,” he says. “That deep knowledge is one of the strengths we bring to the table for our clients.”

During the economic downturn of 2008-09, Stonegate’s strong balance sheet enabled the bank to grow through acquisitions, while continuing to lend to its commercial customers. “Even when the recession was at its worst, we were helping to finance our clients’ needs,” Seleski says. “As Florida’s economy has recovered, we are seeing very healthy organic loan growth, as well as increased demand for private banking and real estate-related services.”

Stonegate’s most recent expansion was its merger last January with Community Bank of Broward. Today, the bank has $2.2 billion in assets with 22 offices in MiamiDade, Broward, Palm Beach, Collier, Lee and Hillsborough Counties. “Over the years, we have learned how to integrate both the technology and the people into our organization,” Seleski says. “It takes time to change a corporate culture.”

One of the unifying themes is support for the Stonegate Bank Foundation, which provides college scholarships to high school seniors. On Fridays, staffers “contribute” for the privilege of wearing blue jeans, and make direct donations throughout the year. “A bank is always built around its people, and we have great staffers on our team,” Seleski says.

Seleski is also active in the state’s banking circles and was recently appointed to the Community Bank Advisory Board for the Federal Deposit

Insurance Corporation (FDIC). On the personal side, Seleski and his wife Malaea enjoy traveling and spending time with their dogs. “I am an avid reader of books on European history,” Seleski says. “I find that biographies are often the most entertaining – and most distorted – accounts of important events and periods in history.”

SERVING ATTORNEYS AND LAW FIRMS

Right from the start, Stonegate has served attorneys, accountants and other professionals and their firms. “The legal community is very important to us, and we understand the cash flow and financing issues they face,” he says. “We also see differences between the local markets we serve, as the dynamics in South Florida are different from Tampa Bay or Naples.”

Seleski says many law firms downsized their staffs during the recession, and are weighing the pros and cons of adding more people in today’s stronger economy.

“Some firms believe that bigger is not better, and that’s a different mindset than we saw in 2005-06.”

Another trend in the legal market is the aging of the Boomer generation. “Some partners contemplating retirement are deciding to work longer in today’s lowrate investment environment,” he says.

“In general, they are being more cautious in their plans, while looking for ways to improve their returns without taking on undue risk.”

Looking ahead to the next decade, Seleski is bullish about Florida’s future – including the potential business opportunities in Cuba. As the U.S. correspondent bank for Cuba’s Banco Internacional de Comercio S.A. (BICSA), Stonegate hopes to facilitate the flow of funds between the two nations. “We are striving to support U.S. firms that want to do business in Cuba,” he says.

“We are seeing activity from travel and agricultural companies that have been serving that market, as well as other businesses that are now exploring the possibilities.”

Overall, Seleski feels that Florida has “a long runway” for future growth. “With our great lifestyle, low taxation and diversity, people will continue to come to Florida,” he says. “That means new opportunities for attorneys, accountants and bankers to provide valued professional services.”

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Steve Allen, Manuel Perez-Carrillo, Margaret Callihan

LIGHTING THE WAY Margaret Callihan Guides SunTrust’s Regional Team

M

argaret L. Callihan believes that banking is all about people – understanding a client’s financial needs and finding the appropriate solutions for individuals, families and firms. “In today’s complex world, no one banker can provide all that a client needs,” says Callihan, who is president, Miami/South Florida Division, SunTrust Bank in Fort Lauderdale. “It takes a team approach, led by a quarterback, to be sure everything is covered.”

With a legal specialty group, a private wealth management group and a full array of retail and commercial services delivered through 115 branches in six South Florida counties, SunTrust Bank has the resources – both people and technology – to serve the region’s attorneys and their clients. Headquartered in Atlanta with approximately $190 billion in assets, SunTrust Banks, Inc. is dedicated to “Lighting the Way to Financial Well-Being” for its clients and communities.

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[ LEADING SOUTH FLORIA BANKERS ]

“We believe the key to serving law firms and attorneys is to understand their practices, their cash flows and their goals,” Callihan says. “Once we know where the firm is, then our team can chart a solid path for them.”

A DIVERSE BANKING CAREER

Callihan earned her bachelor’s and MBA degrees at Vanderbilt University, and started her banking career in 1978 at Third National Bank in Tennessee.

“After I graduated, I went to work for the Country Music Foundation, which has a tremendous archive of music and memorabilia right on Nashville’s Music Row,” she recalls. “I really enjoyed the music industry, but wanted to do something else with my career, so I joined Third National Bank.”

In the early 1980s, Callihan and a former colleague created a specialty banking practice at Third National Bank – which merged with SunTrust Bank in 1986 – that focused on serving musicians, songwriters, producers and other members of Nashville’s music industry. The experience of building a specialty banking practice helped open doors for Callihan, who later became business manager for retail and private banking for Tennessee and Alabama, and then chief executive officer of the Chattanooga region. Callihan moved to Florida in 2005 as president of SunTrust’s Southwest Florida region, and assumed her current position in South Florida in January 2013.

“I have enjoyed every place I’ve worked, and always made it a point to get involved in my community,” says Callihan. She currently serves on the boards for United Way of Broward County, Channel 2 -WPBT, Broward Performing Arts Foundation and the Museum of Discovery and Science. “In keeping with our purpose of lighting the way to financial well-being, we partner with not-for-profits and community organizations that are helping to advance financial education for all groups in South Florida,” she says.

Her diverse experience has made Callihan keenly aware of the benefits that specialized banking delivers. “Allowing teammates to focus on a distinct client segment or industry allows them to develop deep industry knowledge that translates into value that clients recognize and leads to a much richer client experience,” says Callihan.

WEALTH MANAGEMENT SERVICES

In keeping with SunTrust’s team approach, the bank’s South Florida region offers wealth management services to high-net-worth individuals and families from Miami to Vero Beach. “Our local wealth management teams work closely with South Florida attorneys, accountants and other advisors in developing financial strategies for our mutual clients,” says Manuel (Manny) Perez-Carrillo, executive vice president and head of South Florida’s Private Wealth Management business.

Perez-Carrillo, who is based in Coral Gables, has more than 33 years of banking experience and oversees the 75-person division with eight offices in the region.

Perez-Carrillo says SunTrust hosts an educational program for South Florida attorneys and accountants, including “lunch-and-learn” sessions for continuing education credit. One recent event featured a talk by Akerman partner Richard Milstein on the latest legal developments relating to gay marriage.

In addition to its general wealth practice, SunTrust Private Wealth Management has specialty verticals that serve the unique needs of certain clients.

The SunTrust Medical Specialty Group serves physicians and medical practices, the Sports and Entertainment Group works with athletes, musicians and members of the entertainment industry, and the International Wealth Management Group assists clients who have invested in the U.S. economy but are not U.S. residents or citizens. As Perez-Carrillo says, “Our clients are seeking a high level of expertise and industry knowledge, and those specializations allow us to deliver that service.”

A LEGAL SPECIALTY GROUP

SunTrust takes a full-service approach to serving attorneys and law firms of all sizes, according to Steve Allen, managing director and head of the Private Wealth Management Legal Specialty Group. “Our chief focus is the middle-market law firms with $5 to $100 million in revenue,” he says. “We have a great one-stop value proposition for them.”

Since launching the legal specialty group in 2005, SunTrust has built a model designed to serve four types of clients: the law firm, the partners (attorneys with an ownership stake), the associates (attorneys without an ownership share) and the staff members, including the chief executive or chief operating officer.

At the firm level, SunTrust provides lending, depository, treasury management, and 401(k) advisory services, says Allen. Partners can benefit from financial planning, investment and insurance advice, mortgage and home equity loans, and wealth management services. “Associates may need advice on buying homes, replacing cars or setting up a repayment plan for their law school debt,” Allen adds.

“We also work closely with our retail branches to deliver at-work services to the staffers, associates and partners.”

Allen adds that SunTrust’s ability to offer a full package of financial services can also be a recruiting and retention tool for law firms’ human resource departments. “Having convenient access to financial planning and wealth management services is a major benefit for junior and senior partners,” he adds.

“We know how to help them monetize their professional careers.”

Allen says that most attorneys today are under-insured. For instance, a typical group life plan might offer $1 million in survivor benefits, but a multi-million dollar policy might be necessary to protect a family with a comfortable lifestyle. “I’m always surprised by the number of our new attorney clients who don’t have wills,” Allen adds. “We can come into a firm, identify those kinds of financial needs and offer solutions that provide greater financial security.”

To help attorneys make sound decisions regarding retirement, SunTrust’s advisors use SunTrust SummitView®, the bank’s financial planning. “SummitView allows clients to work with their advisor to create a goals-based financial plan,” says PerezCarrillo. “Clients can then track their progress and run scenarios to stress-test their financial plan against a variety of factors, including market volatility, the impact of outsized medical expenses and the possibility of living to 100.”

With SummitView, SunTrust also offers attorneys and clients a “virtual vault” with highly secure cloud-based storage of wills, financial plans, life insurance policies, passports, birth certificates and other key documents.

As Callihan says, “This is one of the ways SunTrust Bank brings technology and people together to provide highvalue services to law firms, attorneys, staffers and other professionals.”

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THE IRS “JOHN DOE” SUMMONS AND FORENSIC TAX

By Stanley I. Foodman

A

“John Doe” summons is an IRS investigative tool available to IRS through federal court approval. IRS uses it as an investigative tool when casting a wide net to locate the names of U.S. taxpayers who would otherwise be unknowable to IRS. To issue a “John Doe” summons, IRS must satisfy a federal court that the information IRS seeks is not readily available from other “regular” sources of information and that a reasonable basis exists for believing that U.S. taxpayer(s) may have failed to comply with U.S. tax laws.

CORRESPONDENT BANKING ACCOUNTS

Most U.S taxpayers don’t realize that all financial transactions taking place in a correspondent account generate footprints. That means these transactions consisting of wires, checks and deposits will lead the IRS directly to the beneficial owner of the account.

A correspondent account is the U.S. bank account of an offshore bank that the offshore bank uses to conduct transactions in U.S. currency without having a U.S. presence. The account is “nested” within a U.S. bank giving the offshore bank access to the U.S. banking system, which would not otherwise be available to it. For foreign banks not subject to U.S. jurisdiction and a “John Doe” summons, IRS has developed the alternative method of issuing a “John Doe” summons to a U.S. bank that maintains a correspondent account for a targeted offshore bank.

Using the summons requirements outlined above, IRS recently convinced a U.S. federal court to authorize the service of a “John Doe” summons on Bank of America NA and Citibank NA. It was seeking information about their Belize Bank International 30

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Ltd (BBIL) correspondent accounts for the years 2006 through 2014. The BBIL records provided to the IRS in response to the “John Doe” summons will probably reveal the identity of U.S. taxpayers with unreported accounts at BBIL. In other words, the names and other identifying information of U.S. taxpayers with unreported bank accounts at BBIL will soon be revealed to the IRS. The summons will also permit IRS to identify other offshore banks exploiting BBIL’s correspondent accounts at Bank of America NA and Citibank NA to service their U.S. clients. U.S. banks and companies and noncompliant taxpayers should be aware of this investigative mechanism used by the IRS to uncover potential tax evaders and those that assist them.

This tool was an integral part of the IRS investigation of UBS AG that resulted in UBS entering into a deferred prosecution agreement with the U.S. and its payment of $780 million in penalties, interest and restitution.

To obtain its “John Doe” summons for BBIL, IRS again tapped data obtained through the Offshore Voluntary Disclosure Program (OVDP) to provide part of the reasonable basis that convinced the U.S. federal court to permit IRS to issue the summons. As part of its tax and criminal prosecutions involving a BBIL account, IRS reviewed information provided in taxpayers’ OVDP submissions and interviewed five taxpayers who had enrolled in the OVDP in order to disclose their BBIL accounts. Each OVDP enrollee interviewed by IRS had previously undisclosed accounts at BBIL, requested a “hold mail” account arrangement with BBIL and failed to report income earned in the accounts to IRS. All but one of the five formed a

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Belize corporation to open the account at BBIL, and failed to report the foreign corporation on their U.S. tax returns. This information was the reasonable cause basis used by IRS that convinced a U.S. federal court in Miami to authorize the IRS “John Doe” summons.

In April 2013, IRS also served a “John Doe” summons on Wells Fargo NA. It was looking for information about Canadian Imperial Bank of Commerce’ First Caribbean International Bank (FCIB) correspondent account at Wells Fargo. The “reasonable basis” for this summons was information provided by 120 OVDP taxpayer participants who had disclosed their FCIB accounts through the Program. OVDP is a partial “amnesty” program offered by the IRS permitting U.S. taxpayers who successfully enroll in the program to reveal their previously undisclosed foreign financial assets, pay all unpaid taxes, interest and penalties, and pay a separate offshore penalty.

Acting Assistant Attorney General Caroline D. Ciraolo of the U.S. Department of Justice (DOJ) has said that DOJ will continue using the “John Doe” summons to further its goal of pursuing taxpayers with unreported foreign accounts and that the time to come clean is now before DOJ knocks on your door.

From the banker’s perspective, although it is not alleged that they engaged in any wrongdoing, Bank of America and Citibank will probably experience significant costs responding to the summons, including devoting time and resources to gather and produce information and documents about BBIL. Furthermore, this IRS tool has wideranging uses. In 2014, IRS served a “John Doe” summons on certain shipping and handling companies seeking information concerning an entity that used those companies to send information to U.S. taxpayer individuals regarding setting up foreign companies used to conceal offshore banking activity.

OVDP

For U.S. taxpayers participating in or considering participating in OVDP, a Quid Pro Quo for successful completion of the OVDP program is an agreement to cooperate with IRS when it requests information. This could include being interviewed by IRS about offshore financial activities, which the IRS may use to pursue the foreign bank or other

taxpayers. Furthermore, the price of admission to the OVDP increases as the number of foreign banks targeted by the IRS and DOJ grows. The OVDP penalty levied on the highest balance in an undisclosed offshore account held at a targeted foreign bank jumps from 27.5 percent to 50 percent.

undeclared accounts, as well as the banks and bankers suspected of helping clients hide their assets overseas. The IRS works closely with the Department of Justice to prosecute tax evasion cases.

The use of a “John Doe” summons is just one of the bullets in its gun. FATCA reporting is the next large caliber bullet that IRS will use to enforce U.S. tax collections.

FORENSIC TAX

A “John Doe” summons and its effects can have far reaching consequences for U.S. taxpayers. According to the IRS webpage entitled “Offshore Tax-Avoidance and IRS Compliance Efforts,” at least 50 of the first U.S. taxpayers whose names were supplied to IRS through complying with a “John Doe Subpoena” have been prosecuted, paid taxes, penalties and interest of at least $250 million.

The more than 50,000 U.S. taxpayers who have successfully entered into the OVDP to avoid the risks of criminal litigation have paid back taxes, penalties and interest exceeding $7 billion. Because OVDP is managed through IRS Criminal Investigations, the documents that Foodman CPAs & Advisors has prepared for the large number of U.S. taxpayers whom we were retained to represent were prepared under the same attorney-client privilege that would be utilized for a criminal tax defense matter.

Stanley I. Foodman is CEO of Foodman CPAs & Advisors and a recognized forensic accountant and litigation support practitioner. Specializing in complex domestic and international tax matters, Foodman has served as an expert witness and forensic accountant for some of the nation’s most challenging, high-profile economic crime cases. Foodman and his team of accountants also assist clients with a full range of accounting matters including compliance, voluntary disclosure, corporate and individual taxation, family law litigation, estate and trust tax and wealth planning. Consistently ranked as one of the top accounting firms in South Florida, Foodman CPAs & Advisors assists clients locally, nationally and internationally.

(305) 365-1111 www.foodmanpa.com

CONCLUSION

Don’t become a victim of your own making. In February 2015, IRS said that avoiding taxes by hiding money or assets in unreported offshore accounts remains on its annual list of tax scams known as the “Dirty Dozen” for the 2015 filing season. The IRS remains committed to its priority efforts to stop offshore tax evasion wherever it occurs. Even though the IRS has faced several years of budget reductions, the IRS continues to pursue cases in all parts of the world, regardless of whether the person hiding money overseas chooses a bank with no offices on U.S. soil.

Over the years, numerous individuals have been identified as evading U.S. taxes by hiding income in offshore banks, brokerage accounts or nominee entities and then using debit cards, credit cards or wire transfers to access the funds. Others have employed foreign trusts, employeeleasing schemes, private annuities or insurance plans for the same purpose.

The IRS uses information gained from its investigations to pursue taxpayers with SOUTH FLORIDA LEGAL GUIDE FINANCIAL EDITION 2015

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ADOPTING A VALUE-BASED BILLING MODEL FOR BETTER CLIENT SERVICE AND ENHANCED PROFITABILITY

By Andrew C. Hall

T

he lasting impact of the economic crisis over the past several years has left some of its effects on the tolerance for fees charged by our profession. When mergers and acquisitions became less frequent, demand for transactional lawyers declined. As real estate transactions all but stopped, many clients bypassed litigation, citing its discretionary nature and forced many attorneys to work outside their specialty area. As a consequence of that upheaval, our profession adapted the way we did business and marketed our services to remain competitive and profitable.

The hourly rate had been historically the most widely used and straightforward method for legal billing. Over time, a “cycle of the willing” had taken shape. The major law firms increased their standard hourly rates, in turn setting an acceptable threshold for lawyers across the country. That trend produced a price model that resulted in exorbitant fees. This model ran counterintuitive to the client’s desire for a swift resolution. A number of firms adopted a value-based billing model that provided incentives for efficiency and results, and at the same time incorporated a certain level of risk if expectations were not met.

The practice of hourly billing had been the subject of scrutiny by clients and those within the profession for decades.

Yet the economic crisis brought a new sense of urgency to the topic, leading some attorneys to devise acceptable alternatives.

Client dissatisfaction with hourly billing still often results in uncertainty because the client is expected to pay for as many

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hours of lawyer’s time as necessary to complete the task.

Efficiency is assumed, but seldom provided. As a matter progressed and grew more complex, more lawyers were assigned to a case and fees began to spiral out of control.

When the matter was resolved, clients often viewed their ultimate fee as incongruent with the services provided.

When a client challenges fees, a standard response is that there is no way to predict how much time is required before a case takes shape. Another method for justifying fees is pointing to outputs created, such as memos that address legal issues relevant to the case. Because an attorney has limited tools available to quantify his/her work, these explanations may appear to be reasonable and appropriate measurements for fee determination. However, clients often find them convoluted and irrelevant.

In the hourly rate billing process, our profession has overlooked a key ingredient in delivering professional services: value. We do so because we are afraid to (1) accept the risks involved in estimating fees at the inception of a client relationship; (2) seek appropriate incentives for results and efficiency; and (3) hold to the estimate even if the fee estimate was understated. To change course, the legal profession needs to review the billing process and adopt a new approach that addresses client expectations and ensures sufficient compensation.

First and foremost, we must identify how much capital a firm would need to acquire if billing is structured on the basis of value. Any new lawyer thinking about starting his or her practice

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is sensitive to the amount of money that must be invested in a law ďŹ rm before the cash ow cycle can support the ďŹ rm.

Personal injury lawyers understand this concept in the clearest terms. They must advance sufďŹ cient costs and funds to carry their case from the initial client interview through settlement or trial, and perhaps through the appeal process.

This would exceed a sum equal to 12 months of operating expenses or more.

A similar reserve must also be created for cost advances. This capitalization is greater than the capital required to carry the traditional hourly rate practice, which operates on a 120-day cycle from the time that legal services are provided until billing and collection.

There are a variety of value-based billing options available. Arguably, the simplest model has always been the contingent fee. However, that fee cannot be used in every situation. An alternate method is the at fee, paid in advance.

This has been the traditional method of payment in a criminal case. It applies equally well to real estate transactions, or any other matter where the lawyer has sufďŹ cient experience to predict what level of service will be required. Advance payment alleviates the cash ow problems associated with other forms of billing, but it also exposes the ďŹ rm to risk if unforeseen problems arise. This risk can be mitigated by providing for adjustments for unforeseeable contingencies.

In instances where the client is unable to pay the entire fee in advance, a at fee can be paid in installments with additional premiums for an early resolution or pre-deďŹ ned results that surpass base expectations. Similarly, the parties can and should consider termination premiums in the event that a client abandons the project midstream or, having learned their lawyer’s strategy, opts to engage less-expensive counsel.

Another value alternative is a nonrefundable retainer paid in advance, with additional payments due at agreed upon steps in the matter. For example, a complex real estate transaction could be broken into smaller component parts with incremental payments. One fee would be charged for the ďŹ rst draft of the contract and additional fees would be paid for revisions, negotiations, and other tasks on an as-needed basis. A ďŹ nal fee would be charged for closing, and a result-oriented premium fee would be added if the closing is advanced.

The “bottom lineâ€? should be clear. In other areas, whenever we contract for services, we always expect the provider to set a price and stick to it. Even in litigation, we can set agreed upon fees by event pricing that can be added together and reviewed for value. For example, a memorandum in support of a motion to dismiss should be predictable. That same memorandum can be “reusedâ€? to some degree at summary judgment, for jury instructions and for a motion for a directed verdict. Obviously, new information will be available and require extra effort. While charges for this extra work should be included, the end price should reect the fact that the initial effort was already paid for.

Consequently, there is no reason why we cannot — or should not — charge for litigation in phases, with enhancements for moving the case faster or for

delivering a better-than-expected result.

A shift to billing based on true value to the client will be well received by the client and, when done correctly, can actually function to increase our fees. There will always be room for the hourly rate, but the time is at hand for alternatives that are creative and attractive to both lawyer and client alike.

By tying payment to outcomes, rather than outputs, we can put ourselves in the best position to better service our clients and strengthen our own proďŹ tability.

Andrew C. Hall is the founder and managing partner of Hall, Lamb and

specializing in complex corporate, business and securities litigation. Hall can be reached at 2665 S. Bayshore Dr., PH 1 Miami, FL 33133 (305) 374-5030

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UNDERSTAND AND PROTECT YOUR #DIGITALFOOTPRINT!

By Sasha A. Klein

W

e clearly live in a digital age. There are more than 2.4 billion users of the Internet worldwide, up 566% since 2000. Among Americans, 85% of adults and 95% of teenagers use the Internet. Of those Americans, two-thirds

of them engage in social media and more than 40% receive paperless credit card and bank statements. Social media absorbs more than 25% of all time spent online! More than 50% of American seniors are online and a surprising 92% of children under the age of two have a digital presence.

WHEN YOU HEAR DIGITAL ASSET – THINK ELECTRONIC RECORD! Computers & their Content (including documents, PDFs and spreadsheets).

Tablets / Phones & their Content Social Media, e.g., Facebook, Twitter, Linkedin Photos / Videos /YouTube Websites / Domain Names Contact Lists / Address Books / Calendar Streaming Video Accounts, e.g., Netflix, Vimeo Online Accounts, e.g., Amazon, iTunes

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Online Stores, Shopping, e.g., Amazon Emails Music accounts, e.g., iTunes Electronic Library, e.g., Kindle, Nook, iBooks Electronic Financial Accounts & Records Electronic Medical Records Documents Stored in the Cloud, e.g., Dropbox Blogs Virtual Currencies, e.g., Bitcoin

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Digital assets are exploding in size, nature and value. Documents are stored in the cloud, photographs are uploaded to websites, conversations are now text messages and stacks of letters are now email folders. Digital assets have changed the way we interact and conduct business.

PRESENTLY, EVERY 60 SECONDS:

• 168,000,000 emails are sent/received.

• 695,000 Facebook accounts are updated/posted.

• 600 digital videos are added to YouTube.

• 320 new Twitter accounts are created.

• 100 new people join LinkedIn. • 6,600 photos are uploaded to Flickr.

According to a 2014 global survey (McAfee), the average person has digital assets worth approximately $35,000. Even though digital assets may not be your most valuable assets, they can be some of the most cherished, e.g., family digital photos/ videos.

access, control and manage your digital assets, while maintaining your privacy and intent. Longstanding fiduciary law exists that allows a representative, a/k/a fiduciary, to stand in your shoes after death or incapacity to manage your real or tangible property. The act is meant to clarify those same laws and apply them to digital property. In other words, the act fills a void by creating a legal right where none had existed.

The act is model legislation that can be enacted by state, not federal, legislatures and does not become law until approved and enacted by such states. This act has been introduced but not enacted in the state of Florida. It is on the docket (again) for the 2016 Florida legislative session.

death or incapacity, (ii) prevent identity theft, (iii) prevent financial loss, and (iv) protect your digital assets with sentimental value (e.g., photographs, videos, blogs).

Treat your password like your toothbrush. Don’t let anybody else use it, and get a new one every six months!” – Clifford Stoll.

PLAN!!

THE ISSUE

We as a culture are amassing significant digital assets. Our smartphones, computers and online accounts have accumulated valuable and significant electronic data.

From Facebook to banking, we use password-protected sites to complete daily affairs for business and pleasure alike, with a reliance on the security of access promised. But what happens to that promise of security when one dies or becomes incapacitated?

The growth of digital assets has outpaced the state and federal laws governing them. Terms of service agreements (those pesky “small print” documents that pop up when establishing an account that people typically check “agree” without reading), as well as those federal and state laws, do not contemplate that death or incapacity may prevent access to digital assets. Knowing their prevalence, access to your digital assets after death or incapacity is a must. However, without proper planning, administering them can be a nightmare.

A SOLUTION – THE MODEL ACT

The legal world took notice of the obstacles an executor and other fiduciaries face and created a model act called the “Uniform Fiduciary Access to Digital Assets Act.” The act’s primary purpose is to grant your fiduciaries the authority to

Amidst the developing legal landscape, it is important that you take a proactive planning approach to secure and protect your digital footprint by: (1) Inventory/Roadmap - Keep an updated list of valuable and significant digital assets, including accounts, usernames, passwords, etc. It can be written, stored electronically or hybrid.

(2) Tangible Media Regularly back up data, e.g., digital photos, to a local storage media (computer’s hard drive, DVD, USB flash drive, etc.).

(3) Online Tool - Use an online tool where available, e.g., Google Inactive Account Manager or Facebook’s Legacy Contact, to name another person to manage and have access to your account after death or incapacity.

Estate Plan – Include specific language in your estate planning documents authorizing websites to release data to your fiduciary during incapacity or death.

Such a plan is essential to (i) make a transition easier (or perhaps possible) for your family or fiduciary in the event of

Sasha Klein is a Senior Vice President and Director of Trusts and Wealth Services for Sabadell Bank and Trust, the exclusive private wealth department of Sabadell Bank United for high net worth individuals. She oversees

!

" # $ services group for Southeast Florida.

Klein is responsible for providing wealth and advisory services for high-net-worth individuals and families. Klein can be reach at (561) 653-2058 sasha.klein@sabadellbank.com

SOUTH FLORIDA LEGAL GUIDE FINANCIAL EDITION 2015

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BARGAINING FOR CERTAINTY IN THE UNCERTAIN WORLD OF INTERNATIONAL DISPUTE RESOLUTION SOUTH FLORIDA AS THE OPTIMAL FORUM FOR INTERNATIONAL ARBITRATION

By Allan A. Joseph and Stephen H. Wagner

L

itigation is fraught with uncomfortable uncertainty.

Adding in the exponentially increased unknowns visited by cross-border disputes can lead to a corporate stroke. As a result, many cross-border agreements now incorporate game-changing alternative dispute resolution (ADR) provisions that provide for an agreed dispute resolution process. Yet, most of these clauses contain basic, simplistic language that effectively deprives both parties of ensuring a predictable resolution procedure.

The very essence of an agreed-upon alternative dispute clause is to afford the contracting parties control over how and where a future, hypothetical dispute will be resolved. The optimal time to decide such rules is before

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there is a dispute, when neither party believes a dispute will ever arise. It is during this time that the parties may agree upon an unlimited array of issues that add a level of predictability for the process, including where the process will take place.

WHY ARBITRATION?

Arbitration has long been favored over conventional litigation in international commercial disputes. Generally, arbitration is more efficient than a courtroom because of limited appellate rights, restrictions on open-ended discovery, and an agreed trial schedule. Yet, international arbitrations can also pose difficulties for parties.

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Resolution of these difficulties may be addressed through careful and deliberate drafting of the arbitration clause, which may define an array of rules and procedures limited only by the imagination of the parties, including: the locale for arbitration; specific organizations and rules to conduct the proceeding; the confidentiality of the proceedings; what and how information may be disclosed during the discovery phase; how long the proceedings will last; who and/or how many arbitrators will decide the case (and the qualifications of such arbitrators); the time for the arbitrator(s) to render the award and the level of specificity which must be included in the award; the appellate rights, if any; the choice of language for the proceedings and award; the place(s) where the award may be confirmed and enforced; the currency of the award; the interest rates to be applied; and which party should be responsible for paying the arbitration costs and/or attorneys’ fees incurred in the proceedings.

THE LOCALE

Perhaps the most overlooked clause is the place where the proceedings are held and administered. Typically, the forum must have some connection to the dispute.

But what happens when two cross-border companies prefer the resolution forum to be outside the eyes and ears of their boundaries? It is not a secret that many foreign companies would flock to U.S. courts, if they could, to take advantage of a relatively stronger, more reliable and predictable legal framework than exists in many countries. Still, the U.S. courts are not open to just any dispute – there generally must be a logical nexus for a court to be open. There is, however, an exception – if the dispute qualifies as an international dispute under Florida’s International Commercial Arbitration Act (FICAA). Under FICAA, the parties may still contractually agree to have private arbitration in Florida, even if there is no nexus with Florida. In fact, choosing Florida as the forum is not only permitted, it is openly encouraged. As a result, the Sunshine State -- South Florida in particular -- has become the “go-to” forum for international arbitration.

FLORIDA INTERNATIONAL COMMERCIAL ARBITRATION ACT

In 2010, the Florida Legislature enacted FICAA, Fla. Stat. §684.0001, et seq.,

which is modeled after the United Nations Commission on International Trade Law Model Arbitration Act (UNCITRAL). The passage of FICAA resulted in South Florida fast-becoming a leading forum for resolving international commercial disputes.

Recognizing the intrinsic value of being the preferred forum for international dispute resolutions, and thus a leader in international trade, the leaders of Miami presciently formed the idea to create a special court to facilitate the international arbitration process held in Miami. In December 2013, Miami-Dade County announced the establishment of the International Commercial Arbitration Court (ICAC), which is staffed by specially trained judges to exclusively address international commercial arbitration matters. Likewise, The Florida Bar rules were amended to allow lawyers from any country in the world to participate in international arbitrations in Florida without many of the restrictions placed by other states. See, e.g., R. Regulating Fla. Bar 1-3.11. Equally significant is the fact that the ICAC has built-in mechanisms to not only compel the arbitration process but quickly confirm the award.

Correspondingly, the South Florida community is replete with competent and qualified multi-lingual, multi-cultural arbitrators. Compelling South Florida even further is the demographic realities that Miami enjoys comparatively lower costs than its arbitral competition, and the convenience of Miami’s central geographic nexus to Latin and South America along with the infrastructure that affords efficient transportation to Europe and Asia.

The result of these efforts is that Florida is now lauded as one of the most arbitration-friendly states in the world, and Miami has become a top-five forum for such disputes. The success of South Florida as a hub of international arbitration has resulted in Miami’s selection as the forum for several high profile, multi-billion dollar actions.

Indeed, the volume of recent filings convinced the International Center for Dispute Allan A. Joseph Resolution (ICDR)

to open a new Miami office in order to respond to the onslaught of Miami-based international arbitrations.

CONCLUSION

It is a fact of international commerce that deals go sour, disputes arise, and aggrieved parties must be made whole.

Carefully drafted arbitration clauses provide a modicum of predictability for the dispute resolution process. As part of the bargaining process, parties should consider Miami as their agreed forum.

While international dispute resolution is never easy, Florida’s cutting edge arbitration statute supplemented by the support of its specialized courts and its Bar have rendered South Florida the ideal hub for the chosen dispute resolution forum between international parties.

Allan A. Joseph is a founding member of Fuerst Ittleman David & Joseph, PL. Since 1991, Joseph has concentrated his practice on business-related disputes, including Complex Commercial Litigation, Business Litigation, Business Torts, Insurance Litigation, Real Estate Litigation, Shareholder and Member Derivative Actions, Intellectual Property Law, Alternative Disputes Resolutions Practice, International Law Litigation, Professional Malpractice Litigation, Civil Litigation, and Domestic Relations Litigation.

Stephen H. Wagner is a Partner with Fuerst Ittleman David & Joseph, PL. He practices primarily in the area of international business transactions, representing clients with trade and customs issues as well as corporate law matters. Joseph and Wagner can be reached at 1001 Brickell Bay Dr., 32nd Floor Miami, FL 33131 or (305) 350-5690 www.fuerstlaw.com

Stephen H. Wagner

SOUTH FLORIDA LEGAL GUIDE FINANCIAL EDITION 2015

37

ENOUGH ALREADY! HOW TO ELIMINATE DRIVING WHILE DISTRACTED (DWD)

By John Elliott Leighton

I

n the face of mounting deaths and daily news stories about distracted drivers striking pedestrians, Americans continue to cling to their iPhones and steering wheels simultaneously. Our streets and highways are littered with bodies from cars whose drivers were too distracted to focus. The continued effect of driving while distracted (DWD) is a body count that increases each year and which is probably grossly understated at 424,000 Americans injured each year from DWD. Perhaps because there are over 153 billion text messages sent each month in this country, or the fact that at any moment 660,000 drivers are using their phone or electronic device while driving, or the fact that each new generation of cars has more and more electronics (some are now equipped with Wi-Fi!), the problem of distracted driving is only getting worse.

Americans are habituated (“addicted”) to glancing

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at their phones when it rings or vibrates. This happens even when we are driving. Like Pavlovian-mammals at the wheel, we cannot resist the temptation to look and respond. And many who believe that hands-free cell use is the answer are wrong.

This results in a phenomenon known as inattention blindness, which is a psychological lack of attention.

It is an inability to perceive something that is within a driver’s visual field.

Texting while driving, recognized by most everyone as hazardous, continues. Sending a text message while operating a car causes the driver to take their eyes off the road for an average of 5 seconds. At 55 mph that’s the equivalent of driving the length of a football field blindfolded.

Experts have concluded that all the technology in the world will not solve this problem unless the user wants

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to. The commissioner of the California Highway Patrol had a suggestion that should be strongly considered: Think of driving as we do ying, and have a set period of travel time that is free from calls, texts and emails. Most experts feel that eliminating cell phone distraction requires regulation, education and enforcement, much like getting the public to use seat belts.

SO HOW DO WE ADDRESS THIS PROBLEM?

One aspect of the solution is technology. There are hardware and software solutions that can be applied to help inhibit distracted driving. Some work with cellular phones where a controller installed in a car wirelessly notiďŹ es phone service carrier networks once the car begins to move faster than ďŹ ve miles per hour, interrupting texting and other social media updates (as programmed by the phone subscriber) to the phone. AT&T has a somewhat similar app-based system called DriveMode, thought DriveMode kicks in at 15 mph and can be turned off (though it can also notify parents, for example, if teen users disable the app). There are things like iSpeech apps that read text messages aloud for drivers while on the road. Of course that does not solve the inattention blindness problem. There is an app called iZup that sends calls to voicemail and text and data until user is no longer in transit.

But in reality most apps are voluntary or can be defeated. Until vehicles are manufactured that block all cellular and Internet activity while a car is in motion without capability of defeat, these technologic ďŹ xes are inadequate.

Attempts to curb texting and driving by social pressure thus far have been unsuccessful. The “need� to stay connected to social media, talk to friends or answer work-related calls has proved too strong. Thus the requirement for stronger tools.

The criminal and civil justice system must be employed to create strong disincentives for such behavior. To do so requires legislative and judicial action.

In order to effectively curb the DWD problem, the justice system must act swiftly. It was bad enough that Florida was among the last major states to ban texting while driving (2013), yet the statute still only makes it a secondary violation (the police must have another

reason as the primary basis for pulling over the driver).

To change this behavior, Florida Statute 316.305 should be amended to delete current subpart (5), which makes texting while driving a secondary offense.

In its place there should be two new parts: (5) (a) A violation which causes or contributes to a collision with a vehicle or person resulting in bodily injury or property damage in excess of $2500 shall be a ďŹ rst degree misdemeanor; (5) (b) A violation which causes or contributes to a collision with a vehicle or person resulting in death shall be a third degree felony.

(6) A ďŹ nding of violation of this section shall be prima facie evidence of negligence in a civil action.

Next there must be a statutory right to punitive damages for DWD. This only makes sense since distracted driving makes a driver as inattentive as one who is intoxicated (and worse in many studies) and is always voluntary in nature. The purpose behind punitive damages is and always has been to punish and deter.

Similarly the only way to eliminate the highly dangerous behavior of texting while driving may be to criminalize it and provide for civil punitive damages to deter others.

immediate social change which has been previously impossible, it is seemingly the last best chance. To fail to act leaves the status quo: thousands dead and almost half a million Americans injured. All because the text couldn’t wait.

THEREFORE THE FOLLOWING NEW FLORIDA STATUTE SHOULD BE ENACTED:

768.7361. Punitive damages; exceptions for driving while distracted Sections 768.725 and 768.73 do not apply to any defendant who, at the time of the act or omission for which punitive damages are sought, violated Florida Statutes 316.305 (“Florida Ban on Texting While Driving Law�). Any person who is found by a preponderance of the evidence to have been committing a violation of 316.305 shall be subject to punitive damages.

Although it may be naĂŻve to believe that reforming these laws will bring about

John Elliott Leighton, of Leighton Law,

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SOUTH FLORIDA LEGAL GUIDE FINANCIAL EDITION 2015

39

ADVISING YOUR CLIENTS ON PHILANTHROPY: S CORPORATIONS AND CHARITY

By Stephen C. Lande

T

he S Corporation Association of America modestly asserts that, “Small businesses are the cornerstone of the American economy and S corporations are the cornerstone of America’s small business community.” It describes the S corporation as the most popular corporate structure in America and declares the enactment of subchapter S of the tax code in the midst of the high-tax era of 60 years ago as nothing less than a boon to private enterprise.

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SOUTH FLORIDA LEGAL GUIDE FINANCIAL EDITION 2015

A business corporation avoids double taxation (first to the corporation and then to its shareholders) by electing to be treated as an S corporation. The financial liability of the business for which S corporation shareholders are responsible continues to be limited, while only its shareholders are taxed.

Many of your clients may be small business owners.

Accordingly, most of their assets may be tied up in an S corporation and it may be their primary source

[ GUEST CONTRIBUTOR ]

of income, or they may hold specific investments in this manner. Charities have a special affinity for these individuals and families who often contribute great wisdom, leadership and an entrepreneurial spirit to the charities they favor, along with their generous financial support.

Remember, it used to be that only individuals were allowed to own S corporation stock, which meant that the contribution of such shares to charity resulted in dire consequences for the S corporation. The Small Business Job Protection Act of 1996 fixed that, and charities are now permitted to own and hold S corporation stock. My reference here is to public charities, not private foundations, because of the likelihood of an IRC Section 4943 excess business holdings problem.

In the process of planning, you and your clients may come to the conclusion that their S corporation holdings present a prefect opportunity for charitable gift planning, tax and estate, and maybe even business succession planning all rolled into one. When this occurs, it is usually accomplished in one of two ways. Here’s a brief overview.

Gift of S corporation stock to charity by the donor: A charitable contribution of S corporation stock happens in the usual way. The stock is transferred to the charity, a qualified appraisal by an independent appraiser must be obtained, and the gift is appropriately documented.

The value of the donor’s charitable deduction will no doubt be reduced if the gift represents a minority interest, and there are some special rules that apply to these gifts. The amount of the donor’s charitable deduction must be further reduced by any portion of the value of the stock that is attributable to appreciated assets owned by an S corporation the sale of which would generate ordinary income, if any. Also, any income that flows through to the charity is unrelated business income and tax must be paid.

This will be a concern to the charity, but the corporation may make distributions to cover the tax. Capital gains tax must be paid on the disposition of any of the shares, and it may even work out better for the donor to sell the S corporation stock and donate proceeds.

Direct gift of corporate assets to charity by the S corporation: An S corporation may make a direct

charitable contribution of its assets. A contribution of cash, liquid investments or real estate may accomplish all of your client’s charitable and other planning purposes for the gift while avoiding unrelated business income to the charity. S corporations are not subject to the C corporation 10% giving limitation. Such direct contributions are deductible proportionately by all the S corporation’s shareholders, which means, as a practical matter, that all must agree to the gift. The individual shareholder’s contribution deduction is subject to the individual giving limitations, and may not exceed his/ her basis in the stock. Carryover is an option. These gifts may even work to establish split-interest trusts, which can’t own S corporation stock.

This brief article is not intended to be an exhaustive review of the subject of S corporation contributions. The hope is that shareholders contributing S corporation stock or S corporations contributing assets directly to charity will be a consideration as you advise and plan for clients that hold S corporation shares. We urge you to run the numbers.

And note that with all the rules, tax considerations and limitations, there are even situations when selling the property and donating the proceeds can yield a more favorable result.

S corporation stock represents only one example of an illiquid asset. Others include closely held stock, restricted

stock and stock options. Each holds its own possibilities and can be used to fund endowments or donor advised funds. The rules are different for gifts to private foundations, and they aren’t covered here.

S corporation stock may not be held by charitable remainder trusts but they can receive gifts of its property.

The resources of The Foundation of the Greater Miami Jewish Federation are available to you and your clients in complete confidence and without obligation as you consider gifts of S corporation stock and other closely held assets. These gifts may offer your clients the opportunity to fulfill their charitable objectives in a tax-wise manner, inspire and engage the next generation of their families and create a lasting legacy.

For more information, please contact Foundation Director Steve Lande at slande@gmjf.org, or 786-866-8623, or consult jewishmiami.org.

Steve Lande is director of The Foundation of the Greater Miami Jewish Federation and serves as Federation’s Authorized House Counsel. Prior to joining the Greater Miami Jewish Federation, he directed the Jewish Federation of Greater Pittsburgh’s endowment program for 18 years. A native of Iowa, Lande earned a law degree from Drake University and practiced law in Des Moines before joining the professional staff of the Pittsburgh Jewish Federation.

SOUTH FLORIDA LEGAL GUIDE FINANCIAL EDITION 2015

41

[ GUEST CONTRIBUTOR ]

of income, or they may hold specific investments in this manner. Charities have a special affinity for these individuals and families who often contribute great wisdom, leadership and an entrepreneurial spirit to the charities they favor, along with their generous financial support.

Remember, it used to be that only individuals were allowed to own S corporation stock, which meant that the contribution of such shares to charity resulted in dire consequences for the S corporation. The Small Business Job Protection Act of 1996 fixed that, and charities are now permitted to own and hold S corporation stock. My reference here is to public charities, not private foundations, because of the likelihood of an IRC Section 4943 excess business holdings problem.

In the process of planning, you and your clients may come to the conclusion that their S corporation holdings present a pHrfect opportunity for charitable gift planning, tax and estate, and maybe even business succession planning all rolled into one. When this occurs, it is usually accomplished in one of two ways. Here’s a brief overview.

Gift of S corporation stock to charity by the donor: A charitable contribution of S corporation stock happens in the usual way. The stock is transferred to the charity, a qualified appraisal by an independent appraiser must be obtained, and the gift is appropriately documented.

The value of the donor’s charitable deduction will no doubt be reduced if the gift represents a minority interest, and there are some special rules that apply to these gifts. The amount of the donor’s charitable deduction must be further reduced by any portion of the value of the stock that is attributable to appreciated assets owned by an S corporation the sale of which would generate ordinary income, if any. Also, any income that flows through to the charity is unrelated business income and tax must be paid.

This will be a concern to the charity, but the corporation may make distributions to cover the tax. Capital gains tax must be paid on the disposition of any of the shares, and it may even work out better for the donor to sell the S corporation stock and donate proceeds.

Direct gift of corporate assets to charity by the S corporation: An S corporation may make a direct

charitable contribution of its assets. A contribution of cash, liquid investments or real estate may accomplish all of your client’s charitable and other planning purposes for the gift while avoiding unrelated business income to the charity. S corporations are not subject to the C corporation 10% giving limitation. Such direct contributions are deductible proportionately by all the S corporation’s shareholders, which means, as a practical matter, that all must agree to the gift. The individual shareholder’s contribution deduction is subject to the individual giving limitations, and may not exceed his/ her basis in the stock. Carryover is an option. These gifts may even work to establish split-interest trusts, which can’t own S corporation stock.

This brief article is not intended to be an exhaustive review of the subject of S corporation contributions. The hope is that shareholders contributing S corporation stock or S corporations contributing assets directly to charity will be a consideration as you advise and plan for clients that hold S corporation shares. We urge you to run the numbers.

And note that with all the rules, tax considerations and limitations, there are even situations when selling the property and donating the proceeds can yield a more favorable result.

S corporation stock represents only one example of an illiquid asset. Others include closely held stock, restricted

stock and stock options. Each holds its own possibilities and can be used to fund endowments or donor advised funds. The rules are different for gifts to private foundations, and they aren’t covered here.

S corporation stock may not be held by charitable remainder trusts but they can receive gifts of its property.

The resources of The Foundation of the Greater Miami Jewish Federation are available to you and your clients in complete confidence and without obligation as you consider gifts of S corporation stock and other closely held assets. These gifts may offer your clients the opportunity to fulfill their charitable objectives in a tax-wise manner, inspire and engage the next generation of their families and create a lasting legacy.

For more information, please contact Foundation Director Steve Lande at slande@gmjf.org, or 786-866-8623, or consult jewishmiami.org.

Steve Lande is director of The Foundation of the Greater Miami Jewish Federation and serves as Federation’s Authorized House Counsel. Prior to joining the Greater Miami Jewish Federation, he directed the Jewish Federation of Greater Pittsburgh’s endowment program for 18 years. A native of Iowa, Lande earned a law degree from Drake University and practiced law in Des Moines before joining the professional staff of the Pittsburgh Jewish Federation.

SOUTH FLORIDA LEGAL GUIDE FINANCIAL EDITION 2015

41

IDALBERTO DE ARMAS

STANLEY I. FOODMAN

SABADELL UNITED BANK 1111 BRICKELL AVENUE, 30TH FLOOR MIAMI FL 33131 305-376-2461 IDALBERTO.DE.ARMAS@SABADELLBANK.COM WWW.SABADELLBANK.COM

FOODMAN CPAS & ADVISORS 1201 BRICKELL AVE., SUITE 610 MIAMI, FL 33131 305-365-1111 STANLEY@FOODMANPA.COM WWW.FOODMANPA.COM

SENIOR VICE PRESIDENT

Idalberto “Bert” de Armas is a senior vice president at Sabadell United Bank’s Sabadell Financial Center. Armas is with the Private Banking and Wealth Management division and serves as both a trusted advisor to professionals and a business development officer focusing on professional, commercial and real estate opportunities. He has been serving the Miami-Dade community professionally for more than 30 years. He also has over 20 years of International banking experience, having traveled extensively and served customers in Central America, South America, and the Caribbean. Hs current customers include major law firms and their partners, entrepreneurs and their companies, and owners of incomeproducing properties. He holds a master of international affairs degree with a concentration in finance from Columbia University and a BA from Florida International University. Armas has actively contributed to his community as director of the South Florida YMCA, treasurer of Leadership Florida, director of the Executive Association of Miami and director and chair of the Make a Wish foundation. He is also actively involved with the University of Miami’s Citizen’s Board and is a past director of the Latin Chamber of Commerce (Camacol). Armas is a native Spanish speaker who came to this country from Cuba at a very early age and has enjoyed seeing Miami grow economically as well as culturally.

MITCHELL S. FUERST

TAX, TAX LITIGATION, ADMINISTRATIVE LAW

FUERST ITTLEMAN DAVID & JOSEPH, PL 1001 BRICKELL BAY DRIVE, 32ND FLOOR MIAMI, FL 33131 305-350-5690 MFUERST@FUERSTLAW.COM WWW.FUERSTLAW.COM

Mitchell S. Fuerst is a founding member of Fuerst Ittleman David & Joseph, PL and the firm’s managing partner. His practice is focused in the areas of tax law and tax litigation, international business transactions, complex commercial litigation, regulatory and administrative law, food and drug law, and white collar criminal litigation. Fuerst’s practice is primarily devoted to the comprehensive representation of both domestic and international businesses. His ability to thoroughly analyze the strategies and goals of corporations, coupled with more than 35 years of diverse legal experience, places him in a unique position to effectively guide businesses through the complexities of governmental regulations and corporate compliance requirements, while consistently maximizing shareholder value. As a world-renowned tax attorney, Fuerst must become intimately familiar with every facet of a corporation’s business practices in order to effectively guide that business or represent it in front of state, federal and international taxing authorities. Originally from New York City, Fuerst has a diverse legal background having served as an attorney with the Internal Revenue Service, as in-house counsel for both large and small corporations, and having taught taxation in law schools.

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SOUTH FLORIDA LEGAL GUIDE FINANCIAL EDITION 2015

TAXATION, LITIGATION SUPPORT

Stanley Foodman, CEO of Foodman, CPAs & Advisors, is a recognized forensic accountant and litigation support practitioner, specializing in complex domestic and international tax matters and economic crime. He is bilingual (English/Spanish) and provides hands-on expert assistance to clients on matters including corporate and personal taxation, compliance, voluntary disclosure, estate and trust tax and wealth planning. He has served as an expert witness and forensic accountant for some of the nation’s most high-profile economic crime cases. Foodman is a former auxiliary special agent for the Florida Department of Law Enforcement with specialization in economic crime – money laundering, bank fraud, public corruption and discovery of hidden assets. He is also a former consultant to the Miami office of the U.S. Attorney for civil RICO money laundering recoveries.

Foodman received the 2010 Key Partners Award from the South Florida Business Journal. A frequent speaker on tax matters, he has also been named one of the “Top CPAs in South Florida” by South Florida Legal Guide every year from 2007-2015.

ADAM S. HALL BUSINESS LITIGATION

HALL, LAMB AND HALL, P.A. 2665 S. BAYSHORE DR., PH 1 MIAMI, FL 33133 305-374-5030 ADAMHALL@HLHLAWFIRM.COM WWW.HLHLAWFIRM.COM

Adam S. Hall handles matters involving complex corporate and business litigation. In addition to commercial litigation, Hall focuses his practice on cases involving disputes between businesses, professional malpractice, securities, real estate, and probate disputes. Recognized for his relentless advocacy on behalf of clients, he has litigated cases involving brokerdealer disputes, will contests, breach of fiduciary relationships, construction disputes, and malpractice disputes involving law firms or accounting firms. Beyond his legal work, Hall is actively involved in the South Florida community. Hall currently serves on the Greater Miami Jewish Federation South Dade Branch Board of Directors. Hall has also served on the board of directors for the United Way of Miami-Dade County and has been a member of the executive committee for the United Way’s Young Leader division, including service as its chairman. Hall also maintains strong ties to the University of Florida, where he earned his law and bachelor’s degrees with honors. He is currently a member of the University’s Levin College of Law Alumni Council and serves on the alumni advisory board for Florida Blue Key, of which he was previously a member.

[ PROFESSIONAL PROFILES ]

ANDREW C. HALL

ADAM J. LAMB

HALL, LAMB AND HALL, P.A. 2665 S. BAYSHORE DR., PH 1 MIAMI, FL 33133 305-374-5030 ANDYHALL@HLHLAWFIRM.COM WWW.HLHLAWFIRM.COM

HALL, LAMB AND HALL, P.A. 2665 S. BAYSHORE DR., PH 1 MIAMI, FL 33133 305-374-5030 ALAMB@HLHLAWFIRM.COM WWW.HLHLAWFIRM.COM

BUSINESS LITIGATION

Attorney Andrew C. Hall has tried cases arising from some of the nation’s most significant historical events. From the Watergate trials in the 1970s to the Ohio savings and loan crisis in the late 80s, to the 2000 terrorist attack on the USS Cole, Hall’s trial skills are recognized as among the top echelon of litigators in the nation.

Recently, Hall secured a $2.8 billion judgment on behalf of a Cuban expatriate for damages stemming from the continued terror attacks launched against his family by the Cuban government. He has been recognized as one of “The Best Lawyers in America” by Best Lawyers for over 10 years. Additionally, he is regularly featured in Super Lawyers and Florida Trend’s Legal Elite as among the top commercial litigators in the state. He has been recognized as a “Most Effective Lawyer” by the Daily Business Review for the past three years. He is AV rated by Martindale Hubbell, the highest independent peer-based rating available to an individual lawyer.

BUSINESS LITIGATION

Adam J. Lamb is a partner at Hall, Lamb and Hall whose practice is focused on commercial litigation including shareholder and partnership disputes, intellectual property litigation, legal malpractice, and real estate litigation. Lamb has been recognized by a number of publications, including the South Florida Legal Guide, and has received the highest AV peer review rating by Martindale Hubbell. An active member of the legal community, he is a member of the American Bar Association, the Miami-Dade County Bar Association, the American Association for Justice, and the Greater Miami Chamber of Commerce. Lamb received his bachelor’s degree from the University of Pennsylvania and his juris doctorate from the University of Florida. Lamb is a member of The Florida Bar and is admitted to the U.S. District Court, Southern District of Florida. Additionally, he has litigated various federal and state cases under pro hac vice status in New York, New Jersey, Michigan, and the District of Columbia.

NICOLE SAQUI MEISNER

JULIAN MESA

ANTI-MONEY LAUNDERING AND FINANCIAL SERVICES COMPLIANCE; ADMINISTRATIVE LAW

EXECUTIVE VP-DOWNTOWN MIAMI

FUERST ITTLEMAN DAVID & JOSEPH, PL 1001 BRICKELL BAY DRIVE, 32ND FLOOR MIAMI, FL 33131 305-350-5690 NSAQUI@FUERSTLAW.COM WWW.FUERSTLAW.COM

SABADELL UNITED BANK 1111 BRICKELL AVENUE, 30TH FLOOR MIAMI FL 33131 305-347-4152 JULIAN.MESA@SABADELLBANK.COM WWW.SABADELLBANK.COM

Nicole Saqui Meisner is an attorney with Fuerst Ittleman David & Joseph, PL. She concentrates her practice on anti-money laundering and financial services compliance, administrative and regulatory law, and white collar and regulatory enforcement. Her practice focuses largely on the financial services industry where she advises banks, money services businesses (MSBs), and other financial institutions on federal and state regulations. Meisner also represents regulated entities and individuals that are under investigation or involved in disputes with state or federal regulatory agencies or the U.S. government. In those cases in which litigation is unavoidable, Meisner represents her clients in both criminal and civil enforcement actions and related proceedings. Meisner has a background in commercial financial fraud litigation. Notably, she was part of a legal team that represented more than 80 investor victims in a historic Ponzi scheme litigation, and succeeded in achieving hundreds of millions of dollars in recoveries for those investors. Meisner is a Certified Financial Crime Specialist and is currently working to complete a master of business administration for financial services professionals.

Julian Mesa is an executive vice president and head of MiamiDade County Business Branches at Sabadell United Bank. In this role, he contributes to professional and business development and supervises all Miami-Dade County branches. Among his responsibilities are ensuring that the Miami-Dade branches provide excellent customer service, meeting with customers and prospects, evaluating his team’s loan opportunities and formulating adequate loan structures, evaluating loan and deposit products with senior management, and being a resource to our customer base in real estate and compliance matters. Mesa earned his bachelor of science in accounting from Florida Atlantic University (with honors) in 1973 and has been a certified public accountant since 1976. He has over 30 years of banking experience in many capacities, including president of Transatlantic Bank (until the acquisition by Sabadell).

Prior to banking, Mesa was involved in many private enterprises (domestic and foreign) both as a CPA and a principal. In his spare time, Mesa enjoys boating, history, traveling and reading.

SOUTH FLORIDA LEGAL GUIDE FINANCIAL EDITION 2015

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MAX N. PANOFF

ANTONIO “TONY” ROJAS

PERSONAL INJURY AND WRONGFUL DEATH (PLAINTIFF) MEDICAL MALPRACTICE (PLAINTIFF)

SENIOR VICE PRESIDENT, BANKING DIRECTOR

LEIGHTON LAW, P.A. 1401 BRICKELL AVE., SUITE 900 MIAMI, FL 33131 121 ORANGE AVE., SUITE 1150 ORLANDO, FL 32801 888-395-0001

SABADELL BANK & TRUST 1111 BRICKELL AVENUE, 30TH FLOOR MIAMI, FL 33131 305-347-4174 ANTONIO.ROJAS@SABADELLBANK.COM WWW.SABADELLBANK.COM

Max N. Panoff is a trial lawyer with a passion for helping victims.

After graduating from the University of Miami School of Law and receiving the John F. Evans Scholarship for excellence in trial, Panoff began representing victims of negligence and medical malpractice at one of Florida’s most respected trial firms. Panoff has written numerous publications, including “Black Tie Optional: How the NBA Dress Code Violates Title VII,” University of Virginia Sports and Entertainment Law Review, and co-authored “Life Expectancy Evidence: Laying the Strong Foundation for Plaintiff’s Favorable Evidence and Debunking the Defense Position on Life Expectancy,” and “Vanity Insanity – Trending Malpractice Issues Involving Cosmetic and Related Procedures.” In 2015 he joined Leighton Law and immediately began litigating high profile and high value cases on behalf of victims. He has been instrumental in obtaining outstanding recoveries for victims of medical mistakes, rapes, falls and vehicle crashes. Panoff is a member of The Florida Bar (Trial Lawyers Division, Young Lawyers Division), the U.S. District Court, Southern District of Florida, American Association for Justice and the Miami-Dade County Bar Association.

Antonio Rojas is a senior vice president and banking director at Sabadell Bank and Trust in the Miami-Dade County office.

Rojas is responsible for advising high-net-worth clients on matters involving risk, asset management, credit structures as well as strategic guidance on other financial instruments and wealth planning solutions. Additionally, Rojas provides guidance and assistance with traditional banking services including complex treasury management relationships, depository services as well as consumer, commercial and commercial real estate credit facilities.

Rojas has a vast amount of experience in the banking industry and previously worked at Lydian Bank & Trust, Northern Trust Bank and Wells Fargo prior to arriving at Sabadell in 2012. He was a founding member of the Lydian Bank and Trust, Miami-Dade County regional offices where he served as senior vice president and banking director, responsible for all banking functions for the region. Rojas received his BBA from Florida International University with a concentration in finance. He is a native to South Florida and his interests include golf, fishing and traveling.

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www.finatavola.com info@finatavola.com T: 305.409.8090

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SOUTH FLORIDA LEGAL GUIDE FINANCIAL EDITION 2015

DWIGHT HILL, President of Sabadell Bank 305.808.2168 | dwight.hill@sabadellbank.com PERSONAL BANKING | COMMERCIAL BANKING | WEALTH MANAGEMENT* | INTERNATIONAL BANKINGâ&#x20AC; SabadellÂŽ

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