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Content

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Editor’s Note

5

Publisher’s Note

6

Guest Opinion

7

Managing Partners

12

Banking

15

Healthcare

18

Top South Florida Financial Professionals

42

15

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SOUTH FLORIDA LEGAL GUIDE FINANCIAL EDITION 2012

34

22

Bank Secrecy Act

24

26

Whistle-Blower Program

28

Maritime

30

CPAs Should Count on Selling

32

Securities Fraud

34

36

Choosing a Proper Fiduciary

38

State of Estate Planning in 2012

40

Moving on up to the East Side

42

Minority Mentoring

45


Editor’s Note

Providing Valuable Information for Our Readers One

of the most satisfying aspects of serving as editor of South Florida Legal Guide is the ability to provide valuable information to our readers: attorneys, accountants, banking and wealth management professionals. This new issue of our Financial Edition continues that tradition. Since virtually all types of legal matters – from transactions to litigation, from family law to estate planning – involve finances, there is plenty of ground to cover. For this issue, we have chosen to focus on two of the biggest issues facing our region: the impact of healthcare reform and the ongoing flood of banking-related litigation. We hope that the insights from leading professionals will provide you with fresh perspectives on these two very timely topics. With this issue, we are also looking at how managing partners of several Top Law Firms are preparing for the future. After the past four years of economic and financial turmoil, it appears that our region is slowly getting back to normal in terms of business activity – even though the recovery has been slower than expected. This special feature will look at some of the ways, law firms are drawing on their financial and their human capital to take advantage of opportunities in today’s marketplace. Our Financial Edition also includes a feature on an important career-building initiative for minority law students, and profiles of several of South Florida’s leading financial professionals, who can help attorneys and other professionals achieve their personal goals. To round out this issue, several guest columnists contributed their thoughts on financially related topics, including the Bank Secrecy Act (BSA), Foreign Account Tax Compliance Act (FATCA), securities fraud, choosing a fiduciary, intellectual property assets, trade secrets, trust and estate planning, and protecting maritime businesses. We hope you find the information in this Financial Edition to be helpful in thinking about the future and making strategic decisions. As our readers understand, all South Florida Legal Guide’s publications serve the legal and business community, rather than a general consumer audience. Our goal is to be a valued resource for our growing tri-county audience. We thank our contributors, advertisers and our readers for your ongoing support.

Richard Westlund Editor

SOUTH FLORIDA LEGAL GUIDE FINANCIAL EDITION 2012

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Masthead

PUBLISHER JACOB SAFDEYE

EDITOR IN CHIEF RICHARD WESTLUND CREATIVE DIRECTOR SUSEL REYNALDO

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Publisher’s Note

We did not build this OURSELVES By

the time this edition arrives in your hands, the presidential elections will be just a few weeks away. It seems that the country is quite divided along party lines and the outcome of the national races may be very close. Given those circumstances, I encourage you to make an educated decision about the candidates for President and Congress, as well as the upcoming state and local races. Certainly, whoever is sworn in as President on January 20, 2013, will have a daunting task ahead in dealing with the economy. Of course there are other issues to consider as well. It is probably natural instinct that leads us to be passionate about certain “rights” we feel are “absolute.” That could be the right to bear arms, the right to abortion, the right of freedom of expression, the right to partner with whomever, and probably hundreds of other rights out there. But no matter what rights you feel passionate about, nothing is and should be more relevant to this election than the economy. If we don’t get the “right” economy, all other rights are in peril. So, I encourage you to go out and vote for the right people and demand that they understand that they are elected to office to serve the people, not the other way around. Looking past the election, it is my pleasure to announce that we plan to launch a fourth publication during 2013. This spring we will publish a new South Florida Legal Guide Spanish-language edition. This edition will circulate among the growing and diverse Latin population in the tri-county region. It will include our top listings and well as features and stories presenting leading attorneys, CPAs and financial professionals to a broad Spanish-speaking consumer audience. I invite you to accompany us as we take another step forward on our journey. In the meantime, all of us at South Florida Legal Guide will continue to work hard on your behalf and strive to do a better job each day. As the headline for this column indicates, our staff has not been alone in building a strong family of publications. For the past 13 years we have had incredible support from South Florida’s attorneys, CPAs and the financial community. We greatly appreciate the support from our guest contributors, advertisers, legal organizations and most importantly our readers. To all, a big thank you! Jacob Safdeye Publisher

SOUTH FLORIDA LEGAL GUIDE FINANCIAL EDITION 2011 2012

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Guest Opinion

Parasailing Industry Must Be Regulated By John Elliott Leighton

On

August 15, Elizabeth Miskell and her husband Stephen decided to take a ride in a sideby-side parasail during their Florida vacation. Her harness malfunctioned and she fell 200 feet into the Atlantic Ocean off Pompano Beach. The parasailing boat captain found her floating face down in the water. The Broward medical examiner determined that she died from “asphyxia due to drowning and multiple blunt force injuries.’’ The Florida Legislature, however, must bear the much of the blame for this tragic and needless death. For the past five years, a broad coalition of safety advocates and parasailing victims has urged the legislature to take action and regulate the state’s parasailing industry. Our goal is to prevent further deaths and injuries 6

through legislation, rather than strive to compensate victims and their families via litigation. Our efforts are supported by the Professional Association of Parasail Operators (PAPO), a responsible trade organization that recognizes the need for safe, reasonable precautions to create a safe experience. State Senator Gwen Margolis (D-Miami) will be leading the effort to enact the “Amber May Act” in the next legislative session. Named for the deceased daughter of our client, the law would require the owners of vessels engaged in commercial parasailing to carry liability insurance, establish minimum standards for equipment, and prohibit parasailing under unsafe conditions. There would also be criminal penalties for violations of the act. That’s not a heavy burden for responsible parasailing operators to bear. This is particularly so in a state where the largest industry is resort tourism. There is no question that this type of regulation could save lives. An equipment inspection, for example, might have revealed the problems with Mrs. Miskell’s harness and prevented her death. Likewise in 2007 when Amber May White and her sister Crystal were parasailing off the same beach that took Mrs. Miskell’s life, such a regulation would likely have prevented the same tragedy. Passage of such minimum standards could also help the parasailing industry repair its badly tarnished image. Presently, no state or federal laws specifically regulate commercial parasailing activities. The only requirements for operating a parasail business in Florida are a U.S. Coast Guard approval of a vessel and possession of a boating license. Today, there is no state or federal agency

SOUTH FLORIDA LEGAL GUIDE FINANCIAL EDITION 2012

responsible for verifying that the operator’s parasail, harness and tow lines are in good condition. Without regular inspections, an irresponsible operator can try to save money by using defective or worn-out equipment. In addition, there is no requirement for operators to stop offering rides during high winds, stormy seas or thunderstorms, or other adverse conditions – a step that might have saved the life of Amber May White. In 2007, 15-year-old Amber and her 17 yearold sister Crystal were parasailing off Pompano Beach in stormy weather. High winds pushed the parasailing boat close to the shore. The parasail’s winch stopped working and the tow line snapped. The girls slammed into a hotel roof at more than 50 miles per hour, then into the trees. Amber died and Crystal suffered severe head trauma. I represented their mother, Shannon Kraus, in the ensuing litigation. But what’s needed now is legislation, not litigation. Today Shannon Kraus is among the growing number of Floridians who believe it’s time for the Legislature to regulate this industry and put the rogue operators out of business. In a recent CNN interview she said, “The people are simply fed up with this situation. The parasailing industry should be held accountable. No one else should be injured or killed. It’s time to take action.” To sign an electronic petition go to www.AmberMayLaw.com. Sometimes legislation is more important than litigation. John Elliott Leighton is the managing partner of Leighton Law, P.A., a personal injury trial law firm with offices in Miami and Orlando. A board certified trial lawyer, his practice is focused on the representation of severely injured victims, primarily due to the failure to maintain reasonable or adequate security at commercial premises, Resort Torts™, medical malpractice and consumer product liability. He is the author of the book, “Litigating Premises Security Cases (West Publishing)” and Chairman of the Academy of Trial Advocacy.


Managing Partners

Preparing for the Future: Managing Partners Focus on Building Financial and Human Capital As South Florida

continues its economic recovery, law firms throughout the region see new opportunities on the horizon. “Although we have all seen several cycles in the economy over the years, the recent downturn was clearly the most severe,” said Geoffrey S. Mombach, managing partner, Mombach, Boyle & Hardin, P.A. in Fort Lauderdale. “On the bright side, however, we believe that the business community perceives that the worst is now over and expansion is in the offing.” Other managing partners agree and are looking at strategies to increase revenue,

enhance profitability and deploy their financial and human capital most effectively. In candid interviews with South Florida Legal Guide, they discussed key strategic issues from marketing and technology investments to succession planning. Here some of the ways leading firms are preparing for the future. WICKER, SMITH, O’HARA, MCCOY & FORD, P.A. Wicker, Smith, O’Hara, McCoy & Ford, P.A. does a substantial amount of high-end tort defense, either directly or indirectly

SOUTH FLORIDA LEGAL GUIDE FINANCIAL EDITION 2012

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Managing Partners

Nicholas Christin

Dennis Eisinger

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SOUTH FLORIDA LEGAL GUIDE FINANCIAL EDITION 2012

though insurance companies, says Nicholas E. Christin, managing partner of the Miami office. “Therefore, our work has been relatively steady all through the downturn. Of course, that also means we aren’t as affected by an economic boom.” In the past two years, the seven-office firm has grown from 120 to 145 attorneys. “Our challenges include getting the right lawyers in place, along with the right mix of assistants and support staff to provide a high level of service to our clients,” he said. “Our most successful lawyers understand they are part of a team. We focus on that approach, rather than the superstar model.” Christin says each of Wicker Smith’s offices was opened by transferring a lawyer from another office. “We have never acquired a smaller firm,” he added. “Our clients expect us to litigate a case in a certain way, and we want to be sure to have the same philosophy – and the same consistent service – in all our offices.” While Wicker Smith doesn’t have a formal succession plan, the firm’s four managing partners make it a priority to monitor the development of office and divisional managers. “We can all get a good view of who’s doing a good job and might be our next managing partner,” he said. “We track financial performance carefully and see who is efficient in operating their segment. We know that that’s a separate set of skills compared with rainmaking activities.” To boost efficiency, the firm uses case management software that provides a paperless office workplace and electronic billing service. “We want our lawyers to look at a file at their desks and see everything that’s happened to date,” Christin said. “I believe that law firms need to use technology effectively, especially in regards to e-discovery. We have made investments in our IT staff, who assist our lawyers with searching and the production of documents. We want to be on the cuttingedge here.”

EISINGER, BROWN, LEWIS, FRANKEL & CHAIET, P.A. Eisinger, Brown, Lewis, Frankel & Chaiet, P.A. is known as a boutique law firm with respect to community association representation, developer representation, real estate, and related commercial litigation. “It is very important for us to monitor all recent developments and trends regarding our areas of expertise,” said Dennis J. Eisinger, managing partner of the nineattorney Hollywood firm. “Since the practice of law is not static, we must also be prepared to address societal and legal trends and to pursue opportunities in new areas when appropriate.” To prepare for the future, Eisinger says the firm tries to stay at the cutting edge with respect to technological changes, social media and other tools. Another strategy is to add paralegals who assist the firm’s attorneys and provide costefficient services to clients. “We presently employ approximately 10 paralegals and I fervently believe that we have been able to grow our practice, enhance profitability, and better serve our clients through this strategy.” In addition, the economic downturn has stimulated the firm to closely examine its costs and to “cut out the fat” where appropriate, added Eisinger. “But because of our particular expertise and representation of approximately 600 community associations, we have maintained profitability throughout the downturn.” As for financial capital, Eisinger says the firm has never borrowed money, nor does it intend to. “We do not rely upon services and support from any banker or lender – except for the terrific service that we receive from our banker with respect to our rather active escrow accounts,” he said. “With respect to an accountant, our firm is no different than other law firms and other businesses. We rely upon our CPA to guide us appropriately with respect to both financial and tax reporting.” With five equity partners ranging in age from 55 to 42, the firm has a natural succession plan, according to Eisinger. “We also employ a


Managing Partners

encourage them to leverage our services more – not less – in the near term. The best way to do this is to be consistent with our service and not increase price.” To develop new relationships, Waldman said the firm uses marketing professionals who keep Heller Waldman in the news. “That has traditionally led to new business opportunities,” he added. Waldman sees profitability enhancement as an outgrowth of those business development efforts. “An increase in work requires us to bring on additional attorneys, first on a part-time hourly basis, while we insure that the demand remains constant,” he said. “Then, we add more full-time attorneys, which enhances profitability based on greater billing units and hours.” In addition, the firm’s solid revenue base opens the door to taking on a contingency case with a large upside, Waldman added. “Success in such a matter, would of course have a significant impact on the bottom line, while we continue to have a consistent revenue stream from our core client base.” Waldman notes that the firm has no debt, but relies on its bank for excellent day-to-day service. “We also meet with our CPA regarding proper methods of accounting but due to the size of the firm, most of the key economic decisions are made in-house,” he said. Waldman says the firm has already implemented a succession planning program. “Eleanor Barnett, my younger partner, is assuming more of a leadership role with the firm at large and taking on greater responsibilities,” he said. “It is my expectation in time that she will assume many of the roles as leader of the department while I continue to be the primary business generator.” Looking ahead, Waldman said, “We believe service to our clients is at the forefront of our success model, and we do not want to do anything to jeopardize that level of service.”

Glen Waldman

couple of terrific associate attorneys who undoubtedly will eventually become equity partners with our firm.” Overall, what distinguishes the 25-employee firm is its family atmosphere, according to Eisinger. “We try very hard to foster a happy and friendly environment for our staff, both during the workday and for special events,” he said. “We know that having employees who are both skilled and happy at work is the key to success in any business.” HELLER WALDMAN, P.L. Known for providing personalized legal services to business and individual clients, Heller Waldman concentrates on complex commercial litigation and estate and tax planning. “In preparing for the future, we have taken two primary steps,” said Glen H.

Waldman, managing partner of the Coconut Grove firm. “First, we have solidified our dual-language capabilities in our core lawyers to be flexible to continue to handle the influx of business from the Americas. Second, we have embarked on a strong educational program for our attorneys in the area of employment litigation, as we believe this will be a strong growth area of business for the firm in the next few years.” Waldman says the firm’s growth strategy focuses on expanding current relationships and developing new ones. “With regard to current relationships we have made a conscious decision to not increase rates in the foreseeable future,” he said. “ We understand the challenges that businesses are facing and will face in this economic environment. By continuing to be properly priced we want to

CANTOR & WEBB P.A. Cantor & Webb is focused on providing concierge-like legal services to wealthy multinational families/individuals who have cross border tax and estate planning issues, says Steve L. Cantor, managing partner of the Miami firm. In that regard, the firm helps clients with tax compliance, pre-residency tax planning and a wide range of other matters. “Over the last five years, we have been able to grow despite the downturn,” said Cantor. During that period, the firm has expanded from three to six attorneys with further growth expected in the near future. On the financial side, Cantor said 2009, 2010 and 2011 have been the three best years in the firm’s history. “We are hoping to beat those records in 2012,” he added.

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Managing Partners

Steven Cantor

Cantor’s growth strategy has focused on building a global network of personal contacts and referral sources, and playing an active role in high-profile global organizations like the Society of Trusts and Estates Practitioners (London) and Geneva Group International (GGI), a network of law firms, accounting firms and business consultants now entering the U.S market. Cantor is head of GGI’s global trust and estate planning practice group and the firm hosted a GGI regional event in June. “We also speak before professional groups and visit major foreign financial institutions that refer us work,” he added. As for succession planning, Cantor said, “For me, retirement isn’t even on the horizon,” he said. I really enjoy helping our clients.” Noting that name partner Hal Webb is 20 years younger, Cantor said, “We also have many longtime staffers who have great institutional knowledge and contribute to our success.” Financially, Cantor said the firm’s policy of “dinero primero o no trabajo” [money first or no work] means there aren’t any serious collection problems. Cantor adds that the firm has a close relationship with its CPA. “We have 10

Geoffrey Mombach

quarterly meetings to look at the financial side and see what issues we need to consider looking ahead,” he said. “A few years ago, we terminated a long-time banking relationship and are glad we made the change. Being friends with the head of the bank makes a real difference in our field. We can pick up the phone and they know our voices. I’d hate to be in a situation where you had to call an 800 number and press 1 or 2 for service.” In preparing Cantor & Webb for the future, Cantor says the rise in affluence and stronger economies in the developing world, coupled with easy air transportation to South Florida, are likely to increase demand for cross-border legal services from high-networth clients. As he says, “That’s a wave that hasn’t crested yet.” MOMBACH, BOYLE & HARDIN, P.A. Mombach is optimistic about the future of South Florida’s business environment and his firm’s prospects for growth. “We are one of the oldest continuously operating law firms in the area,” he said. “We are prepared to grow without sacrificing the commitment to excellence and personal service that has been the key to our success over the years.”

SOUTH FLORIDA LEGAL GUIDE FINANCIAL EDITION 2012

Mombach, Boyle & Hardin, P.A. now has eight attorneys with recent growth in its litigation department in response to clients’ needs, according to Mombach. He added that several staff members have been with the firm for more than 10 years. “This consistency is appreciated by our clients and allows us to function with greater efficiency,” he said. Mombach believes that technology will have an increasingly greater impact on the delivery of legal services. “With that in mind, we have recently upgraded all of our IT systems as we move towards e-filing in all courts and digital storage of transactional documents,” he said. “Technology, although essential, cannot replace personal service and we continue to emphasize the service nature of our profession.” As the firm prepares for the future, Mombach said, “We strongly believe that the personal and partner-intensive service we provide to sophisticated business and banking clients, combined with committed and experienced attorneys, paralegals and legal assistants, allow us to be consistently rated among one of the top firms in the area.”


Managing Partners

A BANKER’S PERSPECTIVE.... As

South Florida law firms prepare for the future, it’s important to address the key financial and human capital issues that can make the difference between success and failure. “One of the best things attorneys can do is develop a team of advisors, including a CPA, banker, insurance expert, marketing specialist and investment manager,” said Dwight Hill, executive vice president at Sabadell United Bank in Miami. “Professionals should also plan ahead for achieving a financially secure retirement – on their own terms.” In a recent interview with South Florida Legal Guide, Hill talked about some of the options available for law firms embarking on growth strategies. “There are several possible sources of new capital,” he said. “For instance, the partners can retain profits from the firm, inject capital from their own personal wealth, bring in new partners, or approach a bank to borrow the money,” Since many firms lack surplus capital and the shareholders may be reluctant to bring in a new partner and diminish their equity interest, a bank loan can be an effective option even in today’s tighter credit market. “One suggestion is to visit your banker and discuss how you can borrow against your receivables or cases in inventory,” said Hill. FINANCING A FIRM’S GROWTH Lack of capacity is another of the challenges facing many South Florida law firms. “If the firm has a growing number of clients and cases to service, the partners may want to consider bringing in new lawyers,” Hill said. “But whether it’s an experienced lateral hire or a young associate, it takes time before that newcomer becomes cash flow positive and then becomes profitable for the firm.” While a new attorney may start working on cases on his or her first day, it may take 30 to 60 days to generate the first invoice, and another 30, 60 or 90 days to receive payment. The firm also needs to factor in the support staff for the new hire, as well as any additional space requirements. “That means you have to cover several months of overhead before you start seeing a return,” Hill said. “However, a banker can easily understand that type of situation and provide financing to support the firm’s investment in new people.” For firms that operate on a contingency basis, having a bank line of credit to support those cases is essential, according to Hill. “You don’t want to have to say no to a new case because you don’t have the liquid capital to invest in the matter,” he said. “A savvy banker can look at your cases in the pipeline and provide appropriate credit so the firm can carry its overhead and pay its bills while still maximizing recovery for the client.” Along with adding attorneys and staffers, finding the right office space is another financial challenge for firms. “In our current market, we’re seeing new start-ups, as well as expansions and mergers,” Hill said. “Other firms have mature leases and are exploring opportunities to move to new quarters.” When firms need to build out the office space with new furniture and equipment, term loans are available to cover those outlays, Hill added. Once the right space has been located, many firms are

Dwight Hill

finding that the prospective landlords are asking for some form of security, such as a personal guarantee from the partners. Hill suggests talking with a banker about obtaining a letter of credit as an alternative. “The partners would still have a personal guarantee to the bank, but the amount would be smaller since a letter of credit typically only covers a portion of the lease, not the entire amount, and over time the partners’ exposure will gradually be reduced.” PLANNING AHEAD In addition to dealing with immediate challenges, South Florida attorneys and their firms should also plan ahead for an eventual retirement or exit strategy. “It’s important for a sole practitioner or a partner in a smaller firm to look at how to maximize the value of a practice that has been built through a lifetime of work,” Hill said. “I know many great attorneys in their 50s and 60s who don’t have a succession plan, such as bringing in a younger partner.” Other highly successful attorneys rely on income from their practices to support an expensive lifestyle, and don’t stash away enough of that money for retirement. “Without those savings, it’s very hard to get off the merry-go-round,” Hill said. “I talk to attorneys who say they never want to retire. But they should have the financial security so that they don’t have to go into the office and move those cases every day. On a personal and professional level, planning ahead is the key to achieving your goals.”

SOUTH FLORIDA LEGAL GUIDE FINANCIAL EDITION 2012

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Banking Litigation

Addressing Today’s Bank Litigation Issues: Fraud Schemes,LENDER LIABILITY DISPUTES, and Loan Agreements

From Ponzi schemes

to simple frauds to lender liability claims and disputes over loan agreements, South Florida banks are facing a host of challenging legal and compliance issues. It’s also a tough economic climate for banks seeking to make new loans, while dealing with loan defaults, workouts, bankruptcies and other problems of the past five years. With the influx of banking litigation, South Florida Legal Guide asked several experienced attorneys to discuss what banks and other institutional lenders should do to avoid the legal minefields, while fulfilling their client obligations and complying with regulatory requirements. “Many institutional lenders have downsized their workout/troubled asset departments, and may not realize that certain loan practices could expose them to potential liability,” said Paul Singerman, chair of the Miami firm Berger Singerman. “In other cases, banks are unwitting players in their borrowers’ misconduct or have been accused of turning their head in the face of red flags because of the revenue opportunities.”

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SOUTH FLORIDA LEGAL GUIDE FINANCIAL EDITION 2012

Philip Hudson FRAUD SCHEMES When victims of Ponzi schemes and other frauds file a lawsuit, one of the goals may be to recover funds from the bank or banks used by the criminals. “The key questions in these cases are whether the bank had knowledge of the schemer’s wrongdoing and whether


Banking Litigation

Paul Singerman

the bank aided and abetted this misconduct,” said John H. Genovese, partner and head of Genovese Joblove & Battista’s reorganization and insolvency practice. A related issue is whether a bank has a fiduciary duty to defrauded investors who are not its customers. “The courts have struggled with this issue of extending liability to a third party,” Genovese said. “In criminal law, an accomplice can be charged with aiding and abetting a robbery. In civil law, someone who knows a fraud is being perpetrated has the same liability as the fraudster. But in the banking world, it’s not always clear.” In cases of fraudulent transfer of funds, a bank can argue that it served only as a conduit and acted in good faith as an innocent participant, and it is not subject to liability. In negligence cases, the courts have ruled that a bank owes a duty of care to its customers only. Over the years, a number of federal regulations have been put into place requiring banks to know their customers (KYC) and comply with a wide range of laws. In effect, banks have been asked to perform the role of gatekeepers for the government, alerting regulators of potential frauds, money laundering schemes or filing of SARs (suspicious activity reports) for large cash transactions. “Now the courts are trying to reconcile that obligation with the rights of individuals who have been harmed by banks failing to do their job,” Genovese said. “The big question is how much responsibility banks should have for the harm done to individuals.” In recent years, the courts have limited the

ability of trustees to go after the banks for these types of liability issues, according to Paul Battista, partner, Genovese Joblove & Battista, who focuses his practice on bankruptcy, business litigation and insolvency. Battista points to a recent ruling – Lawrence v. Bank of America, N.A., 455 F. App’x 904, 906 (11th Cir. 2012) – that stated a bank must have “actual knowledge of fraudulent activities” in order to be held liable for aiding and abetting a criminal scheme. The ruling noted that a cause of action for aiding and abetting requires (1) an underlying violation on the part of the primary wrongdoer, (2) knowledge of the underlying violation by the alleged aider and abettor, and (3) the rendering of substantial assistance in committing the wrongdoing by the aider and abettor. “Even though a bank may be aware of suspicious activity – with millions of dollars flowing in and out – the bank does not have an obligation to look further,” Battista said. “So who is looking out for the victims? Right now, federal prosecutors are overburdened and underfunded. I think our banks need to be more vigilant and take proactive steps to deter fraud.” Genovese agrees, noting that accountants, attorneys and auditors are subject to malpractice lawsuits if they take advantage of their advisory roles or fail to fulfill their fiduciary requirements to clients. “On a national level, laws like Sarbanes Oxley clearly reflect a national desire for a higher level of responsibility from corporate officers and outside auditors,” he added. “But there has not yet been a major shift in banking law to impose a broader liability on banks.”

LENDER LIABILITY When a lender’s expectations of payment are frustrated or disappointing, banks seeking to maximize their recovery, sometimes react in ways that exposes them to liability, according to Singerman, whose practice focuses on troubled loan workouts, insolvency matters and commercial transactions. “In general, lenders get into trouble by over involvement,” he said, “and there are many variations on that theme.” Singerman points to a landmark 1983 South Florida case – Atrio [Consol. Indus., Inc. v. Southeast Bank, 434 So. 2d 349 (Fla. 3d DCA 1983) – which involved an asset-based line of credit and a financially distressed borrower. “In this case there was a lot of acrimony between the lender and the company management,” Singerman said. “In discovery a memo was produced from the bank’s files that said ‘We’re going to take this company down when it hurts the most.’ After the bank sued to foreclose, the borrower counter-claimed for lender liability and won a judgment in the courts.” Other types of lender liability claims can arise if a bank encourages another institution to take a problem loan off its hands. In one seminal case, a Florida bank encouraged a second customer to buy the loan or do business with the borrower to improve its cash flow, but withheld information about the first loan being troubled, Singerman said. “In my practice areas, I see the same mistakes being repeated that resulted in bank liability cases in the 1980s,” Singerman said. “Lenders that are nervous because

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Banking Litigation

John Genovese

their institutions are not as stable as they were in the past, and are anxious to resolve a cited asset or a write-off.” That situation is compounded by the fact that fewer lenders are making middle market loans, making it harder for troubled borrowers to refinance out of a loan. As a result, Singerman said, borrowers have less maneuvering room today and creditors may be feeling desperate as well. Singerman has some suggestions for lenders facing a troubled loan: “Are you adequately represented? is there an animus between the loan officer and the borrower? Is the loan officer feeling defensive about having booked the loan or made earlier decisions about the workout? If so, separate those people from the problem at the earliest opportunity.” A lender should also look at its in-house legal team, Singerman added. “Have they erred in a documentation issue that is motivating them to take a harder line? Are the lawyers behaving in a manner that encourages or discourages a negotiated settlement? Can additional litigation be avoided?” Most importantly, the lender must resist the temptation to get involved in the borrower’s decisions, including the selection of lawyers, financial advisors or which bill will be paid. As he said, “Those are the types of actions that the borrower and other creditors will say caused them harm for the benefit of the lender.” LOAN AGREEMENTS When it comes to loan agreements, lenders need to be sure to put everything in writing, according to Phillip M. Hudson, III, partner

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Paul Battista

in the Miami office of Arnstein & Lehr LLP, whose practice concentrates on commercial litigation, bankruptcy and insolvency. “The Florida Legislature has beefed up legal defenses for bankers,” said Hudson, who represents financial institutions. “If you have a loan agreement in writing and a borrower alleges an oral modification that modification will not be enforced. That’s a substantial benefit to the lender community.” Because of the importance of written documentation, prenegotiation letters have come into vogue, said Hudson. “Most institutions now require borrowers and lenders to sign a statement that just because the two sides are negotiating doesn’t mean there is a deal.” Hudson adds that the “paper trail” also needs to be very clear in workout discussions or negotiations about restructuring loans. For example, an email message should say, “This is not binding until signed by both parties in writing.” Another solid line of defense is a good set of loan documents, Hudson said. “Too often, those documents are not consistent or complete. We also advise lenders to review their documents and update them from time to time to reflect changes in the laws and regulations.” STAYING OUT OF TROUBLE Many South Florida banks have had an opportunity to “catch their breath” after the financial recession of 2008-09, according to Hudson. “Now lenders are being more aggressive in terms of their compliance measures, documentation and other

SOUTH FLORIDA LEGAL GUIDE FINANCIAL EDITION 2012

regulatory requirements,” he said. Those steps are vital to avoiding liability litigation, added Battista. “There are plenty of regulations out there,” he said. “The banks need to comply with the rules, rather than cut corners and relax their standards.” Hudson says one of the best ways for banks to stay out of trouble is to “touch the files.” That means getting out of the office to meet borrowers and maintain those relationships. “In most cases, when there’s a problem loan, the borrowers aren’t entirely truthful about the situation,” he said. “It’s harder for someone to lie to your face than to send a text.” Genovese agrees, adding that a lender can best assess the legitimacy of a borrower’s operations by meeting the client at the workplace. “It may be easier to look at the data on your computer, but it’s not the same thing as going there in person,” he said. Strong internal checks and balances need to be in place regarding account information, fund transfers and other transactions to protect against “insider” criminal actions, Genovese added. “An institution can never defend itself completely against the risk of corruption. That’s why cross checking and auditing functions are so important when it comes to internal reports.” A final bit of advice from Hudson. “Banks should stick to the basics. You can’t always prevent fraud or liability lawsuits, but you can reduce your risks by complying with regulations, making sure you have good documents on hand and engaging experienced professional representation when needed.”


Healthcare

Navigating Healthcare’s Changing Financial Landscape Top Lawyers look at impact on providers, payers and investors Since passage of the

federal Affordable Care Act (ACA) in 2010, South Florida healthcare attorneys have been helping their clients navigate the industry’s changing landscape. Now, the pace is accelerating, as state and federal regulators move to implement the ACA following the U.S. Supreme Court’s 5-4 decision in May upholding the act’s constitutionality. “I’m a big supporter of the healthcare reform act,” said Sandra Greenblatt, of Sandra Greenblatt, P. A. in Miami, one of four Top Lawyers in healthcare law interviewed by South Florida Legal Guide. “It’s a wonderful step for the people of our country who need

universal coverage. Despite the rhetoric, it’s not a government-run program, and it retains the private insurance market. With increased coverage, more people will be able to access primary care and preventive services appropriately, rather than going to the emergency room when they get sick.” To date, much of the public attention has focused on the expansion of the nation’s healthcare delivery system, including the possibility of a Republican President and Congress repealing the law after the November election. Meanwhile, South Florida’s healthcare lawyers are also looking at the financial implications for providers –

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Healthcare

Ira Coleman

Joseph Zumpano

including physicians, therapists, hospitals and health systems – and health plans, such as HMOs (health maintenance organizations) and PPOs (preferred provider organizations) that pay the providers. Ira Coleman, partner, McDermott Will & Emery LLP, in Miami, notes that the reimbursement paradigm is changing: “In the past, if doctors or hospitals had high-acuity patients who required numerous services, they could bill for those services,” he said. “Now, if they manage those patients in a way that keeps them healthier, they should do better financially.” One of the biggest dollars-and-cents issues is how the flow of federal reimbursement money will be impacted by healthcare reform. The Centers for Medicare & Medicaid Services (CMS) administers Medicare, for instance, through contracts with insurance companies, carriers or other fiscal intermediaries. “Although the federal government sets

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regulations, it’s not in the healthcare business,” said Lee F. Lasris, of Florida Health Law Center in Davie. “It’s in the payment business to be sure funds are there to pay for Medicare and Medicaid, which is a joint venture between the federal and state governments.” The ACA also provides incentives for the creation of accountable health organizations (ACOs), where groups of physicians, hospitals and other providers team up to provide more collaborative, consistent and higher quality patient care. Rather than the traditional feefor-service billing model, ACOs collect the funds, like a joint business venture, and then divide them among the participating providers. “There are various ways to split the pie in a way that respects the government’s incentives,” said Lasris, whose firm represents providers and some managed care clients, and deals with regulatory and contract matters. “Ideally, that leads to a lower total cost for the government and high-quality outcomes for the patient.”

SOUTH FLORIDA LEGAL GUIDE FINANCIAL EDITION 2012

ADDRESSING FINANCIAL DISPUTES Joseph Zumpano, founding partner, Zumpano Patricios & Winker (ZPW) in Coral Gables, expects to see increased financial conflicts between providers and health plans following the Supreme Court decision upholding the ACA. The justices ruled that the states could not be compelled to expand Medicaid programs for the poor, and Governor Rick Scott responded to the ruling by saying there would be no expansion in Florida. “Those two dynamics are likely to fuel additional disputes between hospital systems and managed care payers like HMOs,” said Zumpano, who represents providers in complex managed care disputes, and with his team has recovered more than $100 million for hospitals and other clients. “First, the ACA puts increased financial pressure on payers, such as the requirement for health plans to accept patients with preexisting conditions. However, the health plans may not get the volume of Medicaid patients they are expecting. That means payers may further increase their financial pressure on hospital systems and other providers.” Zumpano, whose cases have established important precedents and novel arguments in the area, says the rising level of tension between providers and payers can result in payer strategies that may include: s 3TEERAGE OF PATIENTS TO CERTAIN LOWER COST providers, in disregard of contractual provisions.


Healthcare

s )NCREASED hGAMING THE SYSTEMv IN VIOLATION OF CONTRACT PROVISIONS &OR EXAMPLE A PAYOR MIGHT ATTEMPT TO MERGE SEVERAL SEPARATE SERVICES INTO ONE BILLING CODE REDUCING THE TOTAL REIMBURSEMENT TO THE PROVIDER s -ODIFYING THE PAYER S POLICIES AND PROCEDURES IN AN ATTEMPT TO OBTAIN lNANCIAL ADVANTAGE IN DISREGARD OF CONTRACT PRINCIPLES s 0AYMENT OF PLANS UNDER LOWER CONTRACT RATE SCHEDULES RATHER THAN THE APPROPRIATE HIGHER RATE SCHEDULES IN VIOLATION OF THE CONTRACT h#ERTAINLY HEALTHCARE REFORM HAS CREATED A PRESSURE COOKER FOR MANAGED CARE PLANS v ADDS :UMPANO WHO IS AN OPPONENT OF hPAYER UNILATERALISM v A TERM HE USES TO CHARACTERIZE ONE SIDED BEHAVIOR BY MANAGED CARE PAYERS IN VIOLATION OF AGREEMENTS WITH PROVIDERS OR APPLICABLE LAW )N Adventist v. Blue Cross :UMPANO AND HIS TEAM ADVOCATED AGAINST (-/S UNILATERALLY SETTING PAYMENT RATES FOR EMERGENCY SERVICES AND CARE RENDERED BY A NON CONTRACTED HEALTH CARE PROVIDER ESTABLISHING THE PRINCIPLE THAT A HEALTHCARE PROVIDER WOULD HAVE A PRIVATE CAUSE OF ACTION AGAINST AN (-/ UNDER THE APPLICABLE &LORIDA 3TATUTE INVESTING IN HEALTHCARE 4HE NEW HEALTHCARE ENVIRONMENT IS ALSO SPURRING A WAVE OF MERGERS ACQUISITIONS AND NEW INVESTMENT ACTIVITY ACCORDING TO #OLEMAN WHO FOCUSES HIS PRACTICE ON HEALTHCARE MERGERS AND ACQUISITIONS AND HEALTHCARE PRIVATE EQUITY h) BELIEVE WE LL SEE AN ACCELERATION OF THE CONSOLIDATION TREND IN THIS SECTOR v SAID #OLEMAN h (EALTH SYSTEMS ARE BUYING PHYSICIAN PRACTICES ESPECIALLY IN PRIMARY CARE TO MEET THE DEMANDS OF BECOMING AN !#/ 4HE LARGER HEALTH SYSTEMS WILL CONTINUE TO GROW AND ) THINK YOU LL SEE MANY OF THE PHYSICIAN OWNED GROUPS GETTING BIGGER AS WELL ADDING TO THEIR NEGOTIATING AND PURCHASING POWER v 'REENBLATT WHO REPRESENTS PHYSICIANS PHARMACIES AND ANCILLARY PROVIDERS SAYS SHE HAS SEEN MORE PHYSICIANS WANTING TO FORM NEW GROUPS OR JOIN EXISTING LARGE GROUPS h-ANY PHYSICIANS ARE AFRAID TO REMAIN SOLO BECAUSE OF CONCERNS THAT THEY WON T BE ABLE TO ACCESS DECENT MANAGED CARE CONTRACTS v SHE SAID h7ITH !#/S ALREADY FORMING ) THINK THE LARGER GROUP MODEL WILL HAVE A BETTER CHANCE OF SUCCESS THAN IT HAS IN THE PAST v (OWEVER #OLEMAN THINKS THERE WILL STILL BE ROOM FOR THE SOLO PRACTITIONER AND THE SMALL GROUP PRACTICE IN THE NEW HEALTHCARE SYSTEM &OR EXAMPLE AFmUENT PATIENTS MAY WELL BE WILLING TO PAY A PREMIUM FOR hCONCIERGE TYPEv MEDICAL SERVICES (OWEVER SMALLER PROVIDERS COULD WIND UP LEAVING REIMBURSEMENT MONEY

ON THE TABLE IF THEY RE NOT CAREFUL h)F A SOLO PHYSICIAN CAN T HIRE A SKILLED INSURANCE PERSON TO HANDLE CLAIMS MOST LIKELY THE DIFlCULT ONES WILL GO TO THE BOTTOM OF THE PILE AND THE PROVIDER MAY NEVER COLLECT v #OLEMAN SAID 3INCE THE 3UPREME #OURT RULING #OLEMAN HAS SEEN INCREASED INTEREST FROM PRIVATE INVESTORS IN PHYSICIAN PRACTICES /THER INVESTMENT TARGETS INCLUDE THE TECHNOLOGY COMPANIES THAT ARE DEVELOPING ELECTRONIC MEDICAL RECORDS %-2 AND ELECTRONIC HEALTH RECORD %(2 SYSTEMS THAT ARE INCREASINGLY IMPORTANT FOR PASSING PATIENT DATA FROM ONE PROVIDER TO ANOTHER h)NVESTORS ARE FOLLOWING THE MACRO TRENDS AND LOOKING FOR PRACTICES THAT HAVE SHOWN THEY CAN BEND THE COST CURVE WHILE STILL KEEPING QUALITY HIGH v HE SAID h4ODAY THE MOST ATTRACTIVE PRACTICES UNDERSTAND THE CHANGING LANDSCAPE AND ARE ABLE TO GET HIGH SCORES IN TERMS OF RESULTS AND PATIENT SATISFACTION v #OLEMAN NOTES THAT -EDICARE IS NO LONGER PAYING THE SAME AMOUNT FOR EVERY PATIENT WITH THE SAME CONDITION h)F YOU TREAT A PATIENT WITH A HIGHER LEVEL OF ACUITY OR CO MORBIDITIES YOU SHOULD BE PAID MORE v HE SAID h)T SHOULD BE OBVIOUS FOR A DOCTOR TO DO THIS BUT THEY NEED TO UNDERSTAND THE QUESTIONS TO ASK THE PATIENT AND OBTAIN THE HISTORY AND THAT CAN BE A WHOLE NEW LEARNING CURVE v OTHER FINANCIAL TRENDS 5NDER THE NEW hHOLISTICv MODEL TO PROVIDING HEALTHCARE SERVICES 'REENBLATT EXPECTS TO SEE INCREASED DEMAND n AND POTENTIALLY HIGHER REIMBURSEMENT n FOR PRIMARY CARE PHYSICIANS h(OSPITALS COULD DO BETTER lNANCIALLY IF THEY CAN USE THEIR EMERGENCY ROOMS FOR APPROPRIATE CASES v SHE ADDED h)F THERE ARE STILL A LOT OF UNINSURED PEOPLE WHO GO TO THE %2 FOR PRIMARY CARE YOU HAVEN T REALLY HELPED THE HOSPITAL v ,ASRIS SAYS THAT CHANGING COMPENSATION MODELS WILL ENCOURAGE MORE PHYSICIANS TO GO INTO PRIMARY CARE AND PEDIATRICS AND HELP ADDRESS A SHORTAGE OF DOCTORS IN THOSE lELDS )N THE MEANTIME THERE WILL BE GREATER USE OF PHYSICIAN EXTENDERS SUCH AS NURSE PRACTITIONERS AND PHYSICIAN ASSISTANTS 0!S TO HANDLE THE SIMPLER CASES h7E NEED TO MAKE SMARTER USE OF OUR PHYSICIAN RESOURCES v ,ASRIS SAID h&OR EXAMPLE AN ONCOLOGY PATIENT WITH NO PROBLEMS COULD BE SEEN BY A PRIMARY CARE DOCTOR OR 0! RATHER THAN THE CANCER SPECIALIST ON A FOLLOW UP VISIT ,IKE THE OTHER ATTORNEYS ,ASRIS EXPECTS CONTINUING CHANGES IN THE HEALTHCARE SECTOR IN THE COMING MONTHS h7HEN -EDICARE WAS CREATED IN THE S IT WAS NOT FULLY FORMED v HE SAID h/VER THE YEARS IT GREW FROM ONE

Lee Lasris

Sandra Greenblatt

VOLUME OF REGULATIONS TO AN ALMOST COUNTLESS NUMBER 2IGHT NOW WE HAVE THE SKELETON OF A NEWLY INVENTED HEALTHCARE PROGRAM AND IT WILL TAKE TIME TO MATURE v 'REENBLATT AGREES THAT THE !0! IS A hlRST STEPv TO CHANGING THE NATION S HEALTHCARE SYSTEM AND ALSO EXPECTS NEW RULES AND REGULATIONS COMING DOWN THE ROAD FROM 7ASHINGTON 3UMMING UP THE CURRENT CLIMATE #OLEMAN SAID h4HIS IS AN EXCITING TIME TO BE A HEALTHCARE ATTORNEY )T S FUN TO BE PART OF THE SOLUTION THAT HELPS GET CLIENTS THROUGH THESE CHALLENGING TIMES v

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Financial Professionals

Top South Florida Financial ProfessionalS Leading wealth management and banking professionals WORK CLOSELY WITH ATTORNEYS IN HELPING THEM achieve their personal and business goals.

LOUIS CHIAVACCI - MERRILL LYNCH Louis Chiavacci believes that wealth managers need to listen carefully to their clients in order to understand their hopes, dreams, fears and goals. “A good wealth manager also needs to be able to deliver difficult news,” said Chiavacci, an international private wealth manager with Merrill Lynch in Coral Gables. “Too many advisors will tell clients what they think they want to hear instead of what they need to hear. In my experience, clients will almost always respect you for delivering your true feelings about an issue, even if they don’t agree with you.” Drawing on his 26 years of experience, Chiavacci says a good wealth manager should become an valued partner with a successful attorney, accountant or other professional, providing suggestions and advice. “That partnership is important, because most successful professionals possess an investment bias based on how they accumulated their wealth,” he said. “For example, a successful real estate broker may have a difficult time initially understanding why she should be investing in anything other than real estate. The same can be said for high-tech entrepreneurs, and small business owners, among others.”

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SOUTH FLORIDA LEGAL GUIDE FINANCIAL EDITION 2012


Financial Professionals

Louis Chiavacci

In fact, many investors tend to “fall in love” with an asset class or even a single stock position, according to Chiavacci. “This bias can sometimes stand in the way of the professional and his or her family accomplishing their goals, such as financial independence, wealth transfer or

a philanthropic legacy, because it places an unneeded degree of risk on their investments.” While many busy professionals are comfortable making quick decisions, important wealth management issues, such as building a portfolio, and tax and charitable planning often require careful consideration and a methodical approach, Chiavacci said. “Sometimes, successful professionals will become frustrated that everything can’t be accomplished in one 30-minute meeting. But it’s important not to give up at that point and continue moving ahead.” Chiavacci believes that a good wealth manager has a thorough understanding of the markets as well as the client’s goals and personality. “When interviewing a prospective wealth manager, you should ask plenty of questions, and pay particular attention to his or her investment philosophy,” he said. “We suggest peeling away the layers of the onion in an effort to understand exactly what you are getting.” Chiavacci got his start in investing in the late 1970s by following news articles on Federal Reserve actions regarding money supply, and continued under the guidance of a retired U.S. Navy commander with Merrill Lynch in St. Petersburg. After earning an MBA, he joined Goldman Sachs in New York, and moved to

Merrill Lynch with his team in 1997. “Most of my clients are first-generation wealth creators, such as entrepreneurs, corporate executives and private equity and hedge fund managers,” he said. For example, Chiavacci recently helped a client who had sold his business in exchange for stock in a thinly traded company develop a more diversified portfolio and achieve his other personal goals. “Our team enjoys helping families achieve their goals while taking on as little risk as possible,” Chiavacci said. “We also thrive on the psychological challenges of the markets intersecting with the challenge of decision making under times of uncertainty and economic stress.” Louis Chiavacci is an international private wealth manager with Merrill Lynch in Coral Gables who has provided wealth management advice to affluent families since 1986. He has been recognized by Barron’s as one of the nation’s top 100 financial advisors from 2004 – 2011, and was the #1 advisor in Florida in 2009. He is a member of the Private Wealth Management Advisory Council to Merrill Lynch Management, and an adjunct professor at the University of Miami School of Law.

JAY PELHAM - GIBRALTAR PRIVATE BANK & TRUST Jay Pelham believes that the delivery of banking services to professionals will evolve into two distinct categories of providers in the near future. “There will be boutiquetype providers distinguished by a reliance on higher service levels but with limited locations,” said Pelham, who is executive vice president, managing director of private banking for Gibraltar Private Bank & Trust. “These service levels will be possible due to specialized knowledge, customized products and flexibility in delivery of services.” At the other end of the spectrum are larger financial institutions characterized by a wide network of service locations, lower pricing as a result of economies of scale, and clearly defined “off the shelf ” product offerings. “The larger providers may maintain specialty units that cater to the professional markets,” Pelham said. “However, they will need to function within the framework of a big company.” Pelham also anticipates a “leveling of the playing field” in terms of technology-based services for professional clients as the cost of implementation continues to decline for smaller companies at a more rapid rate than large ones. “In some cases, a small bank with an outsourced provider for electronic banking services may actually be able to introduce a service more rapidly as there is not an overhead

factor associated with increasing the ‘back room’ to support that service,” Pelham said. For some attorneys, accountants and other professional firms (such as those with international offices), a large bank provider may be a necessity, Pelham added. Other firms may choose to split the relationship to benefit from both types of providers, such as utilizing a large bank to send international wires, and a boutique provider for other day-to-day issues. When considering a prospective banker, Pelham suggests asking the following questions: s Does the bank make all of its decisions in the local market? For example, is a central underwriting department in the Midwest reviewing a loan request for a maritime law firm in South Florida? s Does the bank offer any type of relationship pricing? There may be opportunities to benefit from having both business and personal services with the same bank s Are legal, accounting and medical professional firms – and their members – a large portion of a bank’s client base? That can make a difference in terms of the bank’s culture, responsiveness to requests and experience in dealing with common issues. Pelham adds that one of the biggest mistakes law firms make when dealing with their bankers is not having open and ongoing

Jay Pelham

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Financial Professionals

communications. “If you are a borrowing client, be sure to keep your banker informed of developments – both good and bad – in your business, including new hires and new offices,” he said. Professionals also need to understand the bank’s processes, deadlines and other requirements. “Borrowing clients need to provide financial statements on a regular basis,” Pelham said. “Also, the Federal Reserve will not send wires after a certain time of day, and access to a bank vault may be restricted to certain times. “In many cases,

these processes can result in limits on how transactions can be accomplished.” As for what makes a bank of any size successful in serving attorneys and other professionals, Pelham says the answer is simple. “It’s the people,” he said. “The bank’s staff needs to understand the client base, be involved in their organizations, and be passionate about helping the customer. As long as the bank has the right people with the right mindset, a financial institution can be successful regardless of size, technology, or products.”

Jay Pelham, CFP®, is Executive Vice President and Managing Director of Private Banking for Gibraltar Private Bank & Trust in Coral Gables. He joined Gibraltar in 2008 following a distinguished 20-year career in commercial and private banking, working for SunTrust and BankUnited, where he created a successful private banking division. At Gibraltar, his duties include managing the day-to-day activities of all eight offices, and overseeing approximately $1 billion in deposits.

ANDREW SCHULTZ - MORGAN STANLEY SMITH BARNEY Andrew Schultz says successful professionals are prone to two common mistakes. “Many people think that because they are good at making money in their profession, they will also be good at managing it,” said Schultz, a financial advisor/private wealth advisor with Morgan Stanley in Aventura. “The second mistake is waiting for an economic catalyst to trigger an investment. Now is always the best time to invest. If you diversify correctly, trying to time things is irrelevant.” When it comes to managing money, Schultz believes there is no substitute for experience. “What we do cannot be taught in any classroom,” he said. “Developing an

understanding and respect for the markets, and knowing how to help a wealthy investor navigate them only comes from years of riding its wild waves. So your first question should always be, ‘How long have you been a financial advisor?’” It’s also important to look for an advisor with a long tenure at the same firm, Schultz added. That’s because it takes time to build deep relationships with traders, money managers, analysts, and the firm’s management. “Many advisors seem to switch firms on a regular basis, making it harder to forge those longstanding relationships,” he said. “While there might be very legitimate reasons to switch firms, too many do it for the large upfront bonuses paid to move. In my opinion, that may mean the advisor is putting his or her own interest ahead of the client.” Schultz says another good question to ask a prospective financial advisor is “Please tell me about your investment philosophy?” That’s a good way to know if you and the advisor have a similar approach – or not. Finally, Schultz believes it’s essential for an advisor to listen to a client before suggesting potential investment options. He said, “I have two ears and

one mouth, and I try to use them in that proportion whenever possible.” As for his own practice, Schultz focuses on high net worth clients who have amassed their savings through hard work. “They are conservative, family-oriented people who would much rather hit consistent singles than swing for the fences,” he said. “They do not come to me to get wealthy, because they have achieved that goal. They come to me to help protect their wealth, harness their wealth for income in retirement, and in many cases make sure it passes on correctly to the following generations.” Now in his 21st year as a financial advisor, Schultz started with the firm, then called Dean Witter, in its Hallandale branch. “My manager, Donny Schwartz, may he rest in peace, gave a chance to young kid with a strong work ethic, an ability to sell, and a desire to learn,” he said. “I have been here ever since and I am ever grateful to him for this great opportunity. What I enjoy most are the incredible relationships I have forged with my clients. Each client has a unique story and every one of them have become like family to me.” Andrew Schultz is a financial advisor/private wealth advisor with the Wealth Management division of Morgan Stanley in Aventura. He is the founding member of the Schultz Group at Morgan Stanley, and was named as one of Barron’s Top 1,000 Financial Advisors since 2009 and Barron’s Top 100 Financial Advisors since 2010.

THEY DO NOT COME TO ME TO GET WEALTHY, BECAUSE THEY HAVE ACHIEVED THAT GOAL. THEY COME TO ME TO HELP PROTECT THEIR WEALTH, HARNESS THEIR WEALTH FOR INCOME IN RETIREMENT, AND IN MANY CASES MAKE SURE IT PASSES ON CORRECTLY TO THE FOLLOWING GENERATIONS. Andrew Schultz

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Financial Professionals

HANDLING STRUCTURED SETTLEMENTS Gene Sulzberger says some South Florida attorneys make the mistake of putting everything in a structured settlement when negotiating for their clients. “Having at least part of a settlement in a lump sum can assist clients with larger purchases like a home or a car,” he said. “Clients who enter into structured settlements face the problem of not being able to borrow against the future payments. They then become more likely to want to sell their structured settlement, which is rarely the best scenario.” Gene Sulzberger

GENE C. SULZBERGER - PRS INVESTMENT ADVISORY When choosing an investment manager, Gene Sulzberger believes there’s no substitute for visiting a financial professional in the firm’s office. “You can learn a lot about a company from seeing behind the scenes and meeting the people who work there,” said Sulzberger, senior vice president and chief research officer for PRS Investment Advisory in Miami. “It’s a good idea to interview different investment management firms, such as trust companies, brokerage firms and registered investment advisors and get to know how they operate and their investment styles,” he added. “Get the biographies of those people who will be working on your account and understand their backgrounds. When you go to the office, try to get a sense of whether people enjoy working there, and ask to see the back offices along with the client meeting room.” To make it easier to compare prospective wealth managers, Sulzberger recommends asking a series of questions about the firm’s investment philosophy and processes, such as: s How does the firm make investment decisions? s What are the differences between a discretionary or non-discretionary account? s Does the investment firm adhere to a

fiduciary standard of care (the highest standard) to the client? s What are a client’s investment options? For example, do investments include proprietary funds, index or actively managed funds, individual securities and/or mutual funds and alternative asset classes? s What are the minimums for different types of investments? s What are the fees associated with an account? That might include management and administrative fees, advisory or trust fees, custody fees, front or back end loads, 12b1 fees, account closing fees, wire fees, etc. s How is the wealth manager paid: fee only, commissions or a mixture of the two? s Who holds custody of the assets? Is there a separate custodian or does the firm hold its own assets? s What checks and balances are in place to ensure the safety of client assets? Once an investment management relationship is in place, it’s important for attorneys, accountants and other professionals to stay in close touch with their advisors. Sulzberger also points to the importance of staying focused on long-term objectives, rather than responding to the daily ups and downs of the markets.

“Even successful professionals can fall victim to their emotions, resulting in panic selling or simply a lack of patience,” he said. “Often times panic selling occurs when the markets have had a large shift downward. The news stories reach a crescendo and panic sets in. But patience can be a true virtue in the investment world.” Sulzberger says it’s also a mistake trying to wait for an upward movement before making an investment. “In my opinion, it’s impossible to time the markets,” Sulzberger said. “Studies indicate that more than 90 percent of a portfolio’s return is attributable to asset allocation decisions, not by market timing or security selection.” Gene C. Sulzberger is senior vice president and chief research officer, PRS Investment Advisory, in Miami. He is member of The Florida Bar, a Certified Financial Planner and a Registered Trust and Estate Practitioner who works with U.S. and international high net worth clients. Sulzberger, who has more than 20 years of trust and investment experience, joined the registered investment advisory firm in 2008. PRS is wholly owned by EFG International of Switzerland, with offices and affiliates in 30 countries.

Editor’s note: The views expressed on these pages are those of the authors and may not necessarily reflect the views of their firms. SOUTH FLORIDA LEGAL GUIDE FINANCIAL EDITION 2012

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Guest Contributor

BANK SECRECY ACT Financial institution inquiries regarding your trust account transactions By Lewis R. Cohen

The

Financial Recordkeeping and Reporting of Currency and Foreign Transactions Act of 1970 (31 U.S.C. 5311 et. seq.) is referred to as the Bank Secrecy Act (“BSA”). The BSA requires U.S. financial institutions to maintain specified records involving currency transactions and the financial institution’s customer relationships. In particular, U.S. financial institutions are required to develop and maintain knowledge of the institution’s customers and develop systems that predict the type and frequency of transactions in which its customers are likely to engage. When account activity varies from a customer’s profile (e.g., significant increases in the number or amount of transactions) the financial institution must ascertain whether the transaction has a legitimate and lawful purpose, and keep a record of its due diligence for examination by regulators. Many attorneys have received BSA inquiries from their banks regarding trust account activity involving large or frequent transactions.

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Rule 4-1.6 of the Rules Regulating The Florida Bar provides that “a lawyer shall not reveal information relating to the representation of a client.” The rule’s commentary makes clear that an attorney’s ethical duty of confidentiality is broader in scope than the well-founded principle of attorney-client privilege, and extends not merely to matters communicated in confidence by the client to the attorney, but “to all information relating to the representation of the client, whatever its source.” A financial institution’s BSA inquiry into an attorney’s account activity, including trust account activity, often gives rise to concerns regarding attorney-client privilege and confidentiality. Transactions that are lawful but deviate from an attorney’s normal account activity patterns may trigger the filing of a Suspicious Activity Report (SAR) with the federal government, unless the financial institution can satisfactorily complete and document its due diligence and establish a reasonable explanation for


Guest Contributor

the account activity. Failure to detect “out of profile” activity and to conduct and document its due diligence can result in severe penalties for the financial institution. Federal regulatory agencies and bar associations have been less than sympathetic to each another’s positions with respect to the potential conflict between a financial institution’s duty to inquire and an attorney’s duty to maintain confidentiality. As a result, attorneys and financial institutions alike may find themselves in a quandary regarding how to enable a financial institution to document that a flagged transaction has a legitimate and lawful purpose while at the same time allowing an

attorney to comply with his or her obligation to maintain the confidentiality of information relating to the representation of a client. Federal case law regarding attorney disclosures has generally favored federal law over state law or custom, and has frequently involved a “balancing of harms” test in weighing both the benefits and harm of disclosure, and the public policy implications involved. See, for example, United States v. Goldberger & Dubin, P.C. 935 F.2d 501 (1991). A similar “balancing of harms” approach was taken by The Florida Bar when, in Ethics Opinion 93-5 {October 1, 1994) {revised 8-2411) the committee stated:

“An attorney who is an agent for a title insurance company may not permit the title insurer to audit the attorney’s general trust account without consent of the affected clients. The attorney, however, need not obtain client consent before permitting the insurer to audit a special trust account used exclusively for transactions in which the attorney acts as the title or real estate settlement agent.” In rendering Opinion 93-5, The Florida Bar’s committee reasoned that one of the exceptions to the Rule 4-1.6 duty of confidentiality is “to serve the clients interests” and that audits by title insurance underwriters help ensure the safety of the deposited funds. In equating “the clients interests” to the general safety of deposits, The Florida Bar committee applied a public policy approach to make an exception to the confidentially rule. While one may argue whether the BSA’s goal of fighting money laundering and terrorist financing serves the public good, The Florida Bar has made no such “public policy” exception for BSA inquiries, and until there is some reconciliation between the two mandates, attorneys and financial institutions alike remain challenged to find common ground on the issue. Here are some suggestions to help solve the dilemma. First, communicate with your relationship manager. If your financial institution understands the general nature of your practice and the types of transactions and volume of activity to expect, this can assist your financial institution in completing its due diligence while minimizing the need for inquiry. Second, understand that a financial institution’s BSA inquiries are not challenges to your honesty or integrity. By understanding the recordkeeping and reporting requirements that the BSA imposes on financial institutions, and familiarizing your relationship manager with the nature of your practice and the frequency and volume of transaction activity to anticipate, you can help facilitate your financial institution’s compliance with its obligations under federal law without compromising your ethical obligations under Rule 4-1.6 of the Rules Regulating The Florida Bar. Attorney Lewis Cohen is the founder of Lewis R. Cohen, P.A., with offices in MiamiDade County. He has more than 25 years of experience in the areas of banking, commercial finance, real property finance, real estate transactions and commercial litigation.

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Guest Contributor

Protecting an employer’s confidential information in the age of social media By Juan Enjamio

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mployers spend substantial resources protecting their confidential information, especially their trade secrets. Safeguarding the confidentiality of information such as customer lists, target clients, costs, and marketing strategies afford businesses substantial competitive advantages. Because of the intrinsic value of trade secrets and other confidential information, the law provides employers with tools to protect against the disclosure of this information. The advent of social media, however, threatens to destroy the legal protection afforded such information. By allowing their employees to rely on sites such as LinkedIn and Facebook for promotion and marketing, employers risk exposing their sensitive information—especially the identity of actual or target clients—and losing the shield afforded by law. The growing popularity of these networking sites raises serious and novel issues for employers, especially the need to balance the desire to exploit these popular sites for their competitive value with the ability to protect the confidentiality of sensitive information. Traditional methods of protecting confidential information, especially

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trade secrets, provide a good starting point for affording employers protection. But new issues being litigated across many courts demonstrate that the traditional application of these methods is not enough to safeguard confidentiality. Businesses must also update traditional methods to cover new social media access, expand lawful monitoring of employee activities, and ensure posttermination compliance by former employees. TRADITIONAL PROTECTION OF TRADE SECRETS Florida law defines a trade secret in two prongs. First, the information must derive “independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use.” Fl. Stat. § 688.002 (4) (a). Second, the information must be “the subject of efforts that are reasonable under the circumstances to maintain its secrecy.” Id. at (4)(b). To qualify as a trade secret, then, the information must at a minimum be nonpublic, and the employer (the owner of the information) must take concrete, effective steps to prevent disclosure—even the inadvertent disclosure—of sensitive information. Businesses have traditionally employed a number of tools to maximize the likelihood that their valuable information is defined as a trade secret and is not disclosed. These tools typically include confidentiality


Guest Contributor

and non-disclosure policies, and the execution and enforcement of restrictive agreements such as non-competition and non-solicitation agreements. Employers also restrict access to sensitive information and require password and similar security measures to access information. The use of these tools demonstrates the importance of the information to the employer, provides security, and in the case of inadvertent disclosures allows the employer to show that it took reasonable steps to maintain the confidentiality of the information. ISSUES RAISED BY THE USE OF SOCIAL MEDIA The increased use of social media sites presents novel issues that often render the use of these traditional tools ineffective, or at least insufficient. Issues such as the ownership of information posted on Facebook or LinkedIn, ownership of an employee’s login and password codes, and the scope of inadvertent disclosures are now beginning to be litigated. The main dilemma raised by these issues is how an employer can allow (indeed, how it can encourage) employees to exploit the marketing and promotional value of social networking sites while maintaining control of the information being shared, ensuring that truly confidential information is not disclosed, and thus protecting the trade secret character of the information. This issue is particularly vexing with respect to customer lists. Businesses typically take great pains to protect the confidentiality of the identity of its existing and target customers. The non-disclosure and non-solicitation of customers is a standard limitation in postemployment restrictive agreements. But the proliferation of solicitation and marketing through the Internet, especially through social networking sites, may render the enforcement of these covenants more difficult. Because these sites are by their nature public, any contact may disclose the identity of customers. This could render the protection of customer information—and thus the ability to defend the trade secret or general confidential character of this information— more challenging. Paradoxically, the popularity of these sites also increases the likelihood that restrictive covenants (especially non-solicitation covenants) may be breached. Courts face an increasing number of lawsuits alleging that an employee’s communication with a “contact” or a “friend” on LinkedIn or Facebook constitutes illicit solicitation. The popularity of such sites often blurs the line between personal and business affairs, making it hard to differentiate between purely social contacts and business solicitations.

TOOLS TO IMPROVE THE PROTECTION OF CONFIDENTIAL INFORMATION Courts and legislatures may take years to decide many of the issues raised by the use of social media—especially the ownership of information posted by employees, the protection of such information, and the boundaries of what constitutes solicitation. But businesses can take concrete steps now to heighten the protection of sensitive information even as they encourage employees to exploit the promotional power of social networking sites. First, employers should adopt social media policies that explain that login and passcode information on sites used for business purposes (not the employee’s private password and login information) are owned by the employer; provide notice that the employer will monitor activity on the sites when used for business purposes; specify that contacts provided and used for business purposes are owned by the employer; and specify and limit the information that may be posted on these sites. Next, employers should review their confidentiality and non-disclosure policies to ensure that social media information is specifically defined as part of the information protected. Non-solicitation and noncompetition agreements should also specify that activities prohibited under the restrictive covenants could include contacts on LinkedIn, Facebook, or similar social networking sites. Finally, these policies and agreements should provide notice that the employer may require the employee to “erase” contact information that it deems confidential or proprietary. These and similar steps will strengthen an

employer’s claim that information shared on social media sites maintains its confidential character, and will clarify the employer’s legal property interest in such information. They will also help employees understand the sensitivity of sharing information on social networking sites, reducing the possibility of inadvertent disclosure. Juan Enjamio is managing partner in Miami for Hunton & Williams LLP, and co-head of the firm’s Miami labor and employment team. Enjamio regularly represents domestic and international clients in discrimination and harassment lawsuits, wage and hour collective actions, ERISA litigation and enforcement of non-competition agreements, and counsels domestic and international clients on employment, labor and commercial issues. He has extensive experience in international litigation, complex commercial litigation, and defense of class actions. Enjamio currently serves on the Board of Advisors, University of Miami School of Law Center for Ethics and Public Policy; the Board of Directors, Volunteer Lawyers Project of the United States District Court for the Southern District of Florida; the Executive Board of the University of Florida Hispanic Alumni Association; and the United Way Center for Financial Stability. He has been a member of the Federal Magistrate Judge Merit Selection Panel of the United States District Court for the Southern District of Florida, is the past president of the Dade County School Athletics Foundation, and is the former executive director of the Dade County Fair Campaign.

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Guest Contributor

The Strange Odyssey of

Bradley Birkenfeld FATCA, Voluntary Disclosure and the

IRS Whistle-Blower Program By Stanley I. Foodman

B

radley Birkenfeld, a former banker at UBS, probably contributed more to the ongoing obliteration of international banking haven secrecy than any other instrument. He was a whistle-blower who was rewarded by the U.S. government with $104 million, while receiving a slap in the face (a couple of years in prison) Under the IRS program, a whistle-blower can be paid from 15 percent up to 30 percent of taxes recovered by IRS resulting from the information provided to the agency. It is safe to presume that the information provided by Mr. Birkenfeld resulted in the IRS collecting at least $346 million from UBS. Who is eligible to receive an IRS whistle-blower reward? The IRS may pay awards to people who provide specific and credible information to the IRS if the information results in the collection of taxes, penalties, interest or other amounts from the noncompliant taxpayer. Individuals are eligible for awards based on additions to tax, penalties, interest, and other amounts collected as a result of any administrative or judicial action resulting from the information provided. The IRS is looking for solid information, not an “educated guess” or unsupported speculation. It is looking for a significant federal tax issue. The IRS whistle-blower program is not designed to resolve personal problems or disputes about a business

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Guest Contributor

relationship. And once an award is authorized, the IRS will research the whistle-blower’s own accounts to confirm that he or she has filed required returns and satisfied all tax liabilities for the previous three years. If the whistle-blower has not filed returns or has outstanding tax liabilities, then the IRS will determine why he/she has not filed the returns or paid the tax liabilities, in which case the matter will be referred to the appropriate enforcement function. Award payments will first be used to offset any unpaid tax liabilities owed by the whistle-blower. THE IRS CODE SECTION UNDER WHICH WHISTLE-BLOWER AWARDS ARE PERMITTED PROVIDES FOR TWO TYPES OF AWARDS. 1. If the taxes, penalties, interest and other amounts in dispute exceed $2 million, and a few other qualifications are met, the IRS will pay 15 percent to 30 percent of the amount collected. If the case deals with an individual, his or her annual gross income must be more than $200,000. If the whistle-blower disagrees with the outcome of the claim, he or she can appeal to the Tax Court. (Internal Revenue Code IRC Section 7623(b) - Whistleblower Rules). 2. For cases that do not meet the dollar thresholds of $2 million in a dispute or cases involving individual taxpayers with gross income of less than $200,000, the awards are less, with a maximum award of 15 percent up to $10 million. In addition, the awards are discretionary and the informant cannot dispute the outcome of the claim in Tax Court. (Internal Revenue Code IRC Section 7623(a) - Informant Claims Program). HOW DOES THIS IRS PROGRAM AFFECT FOREIGN FINANCIAL INSTITUTIONS (FFIS) COVERED UNDER THE FOREIGN ACCOUNT TAX COMPLIANCE ACT (FATCA) AND TAXPAYERS WHO ARE CONSIDERING ENTERING THE U.S. OFFSHORE VOLUNTARY DISCLOSURE PROGRAM (OVDP)? 1. FFIs worldwide ought to be aware of their vulnerability. UBS paid a heavy price ($780 million) to avoid U.S. prosecution. 2. In certain offshore jurisdictions, FFIs are family businesses or legacy businesses. a. They are privately held and pass from generation to generation, or b. They are eventually sold to other legacy FFIs c. Many of the shareholders/owners of legacy FFIs are also U.S. taxpayers.

3. Many individuals with undisclosed foreign financial accounts have them in legacy FFIs. With FFI reporting under the FATCA regime and the added incentives of the U.S. whistle-blower program there really is no place to hide. Up until now, Mr. Birkenfeld has been the ultimate IRS whistle-blower. After all, the U.S. government kept its end of the IRS commitment despite Mr. Birkenfeld’ s prosecution and prison term for his reticence on his own involvement. Disgruntled employees of FFIs (of which there are many due to their economic circumstances) as well as ill meaning avaricious business associates could well follow in the footsteps of Mr. Birkenfeld. What is also interesting to note is that Mr. Birkenfeld is still blowing the whistle, after a period of more than two years in prison. The IRS is going to make sure to squeeze every last bit of information from him and from future whistleblowers. The IRS is not only after the taxpayers who may be avoiding their fiscal obligations, or the banks that may be assisting them. They also want to know the individual bank officers and/or tax advisors that may be aiding them and/or other clients in other banks in the same manner. The same “information squeeze” is occurring during the Individual Offshore Voluntary Disclosure process. All voluntary disclosers, as is the case with whistle-blowers, are expected to come forth with an open book and assist the IRS investigators with any information they may have, whether it is directly related to their particular cases or not. So, you may not be a U.S. taxpayer or a bank, but if you have advised or assisted any tax evasion, or given incorrect advice that has resulted in evasion, beware. The U.S. government has not only proved that it is willing to prosecute foreign nationals, as shown by the Wegelin Bank case, but it has now also reinforced its zero tolerance on tax evasion crimes by placing them in the “financial crimes” category side by side with money laundering and terrorist financing. This is not a good place to be in.

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, highprofile 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.

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Guest Contributor

Tips for Maritime Business Owners to Weather the Storm By Darren W. Friedman

In

2007, this country embarked on the longest lasting recession since WWII, and vessel owners have felt the impact of that storm. Budgets have been reined in, workloads redistributed, and new hires are a relative rarity. Weathering that economic storm means battening down the hatches, and donning ďŹ scal life jackets. Survival in a turbulent sea requires limiting ďŹ nancial and legal liabilities. From a legal perspective, the following practical tips are based on actual experience. They have general application and may assist vessel owners to implement a practical liability mitigation plan. 28

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Guest Contributor

KNOW WHAT IS ON YOUR PROPERTY Take a physical survey and inventory of your business. Assess the property for “attractive nuisances,” and any repairs that need to be made to sidewalks and public areas. Hold an annual or bi-annual meeting with your insurance agent to review your policy and ensure that your assets and operations are insured and that you have the appropriate coverage. Also, in light of the increasing environmental regulations and associated enforcement actions, ask whether your current policy covers your activities, and provides for any water- and land-based environmental pollution and clean-up coverage. KNOW WHAT YOUR ASSETS ARE AND IF THEY ARE INSURED Make a list of equipment, vessels and vehicles (including those in operation, in storage or in dry dock) and run a report of what is currently insured. Make sure that newly purchased equipment is listed and properly insured. Remove from insurance the equipment, vessels and/or vehicles no longer owned by the company. Inquire whether your barratry coverage is sufficient in the event you experience a loss to the cargo you are shipping and the master or crew members actions were affiliated with causing the loss. KNOW WHO IS DRIVING COMPANY CARS As a basic part of the hiring/termination process, make sure that all individuals with access to a company vehicle in connection with their employment duties have a valid license and are listed on the current liability policy. Remove the individuals who are no longer employed. INSPECT BOARDING AND LOADING DOCKS, PORT STRUCTURES AND GANGWAYS These structures should be inspected periodically by a qualified professional to ensure that they are safe, and comply with industry standards, particularly if they are accessible to non-employees and members of the general public. If you are ever faced with a claim for injury as a result of an unsafe condition, non-compliance with statutes or regulations only adds fuel to the fire. CONTROL LIABILITY FOR CONTRACTS Make it mandatory to have any contractor coming on your premises, and particularly aboard a vessel, to execute a waiver of liability and agreement of indemnity. Require them to provide you with a copy of their current policy of insurance demonstrating coverage for their activities, and if possible, ensure that your company is an additional insured under that policy.

STATUTORY AND REGULATORY COMPLIANCE Have an attorney or designated employee responsible for compliance issues. There are many compliance issues that arise in the maritime sector ranging from permits and documentation to the activity and operations of your business. For example, assess whether what is being stored or transported qualifies as a hazardous material (HazMat) . HazMats are subject to strict labeling, handling, storage, transportation and disposal regulations. Although there are too many HazMats to list here, examples of HazMats are batteries, paint, lubricants, and general cleaning products. Another example of a compliance issue concerns the Americans with Disabilities Act and provides compliance rules for both foreign and U.S. flagged passenger vessels. Non-compliance with a regulating agency’s rules or regulations runs the risk of severe civil and or criminal penalties for vessel owners and depending on the agency rule, may apply to anyone involved. EMPLOYEE TRAINING Ensure that employee training on safety issues is a required and documented part of the hiring process. Consult with your in-house attorney, or retain an outside attorney to review and opine on your safety policies and procedures, including proper documentation criteria for any shipboard crew. Require all new hires to learn the policies and procedures, and document their employment files to show that this was done.

background necessary and a good working relationship is established in the unfortunate event that a crisis arises. We also recommend an internal crisis communication plan: creating a list of employees to call in the event of a natural disaster, vessel incident, cargo loss, property loss (flood, fire, etc.) is a good start. An ounce of prevention is almost always worth more than a pound of cure. However, prevention cannot guarantee immunity from or minimization of liability. Business owners are always encouraged to seek local counsel for their specific business in their distinct locale. Darren W. Friedman is a founding partner of Foreman Friedman, PA. He handles complex litigation and appeals on behalf of cruise and cargo lines, as well as other corporate clients. Special contributions to this column were made by Associate Sharla Manglitz, a fourth-generation maritime executive who focuses her practice on commercial litigation and maritime matters; and Associate Elisa Sullivan who also focuses her practice on commercial litigation and maritime matters.

CONDUCT ROUTINE CLEANING AND MAINTENANCE Maintenance is not just a cosmetic concern. Keep an eye out for damaged flooring, drips, leaks, spills, and broken equipment. Keep warning signs and barriers, if necessary, available and accessible at all times for placement by staff to warn members of the public and limit their access to potentially dangerous conditions. CRISIS COMMUNICATION PLAN Although your business may be operating “under the radar” from public scrutiny, it can become well known in an undesirable way, should any of your vessels be involved in an environmental incident or personal injury. Working with a public relations firm in advance of a crisis is helpful in many ways such as issuing positive press about your company’s business, partnerships, innovative practices, or charitable acts. It also provides an opportunity to have the firm understand the operations of your business, your base market and who and what your business may effect, so that they have the relevant

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Guest Contributor

CPAs Should Count on Selling By Dwight L. Hill

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here are 1,762,000 accountants in the United States according to the 2010 US Census. That is 1.2 accountants for every 100 workers in America. How do you break out of the pack and become more than another number? As an accountant you solve problems for people and companies by plunging into numbers, calculating taxes, balancing the books, and making sense of things. You endured rigorous training and credentialing so people can entrust you with their books and records or to investigate, analyze and synthesize patterns of transactions. But, in all your formal schooling, were you ever taught how to sell your services, or yourself in the market place? Like many professionals, accountants are often not taught to sell and do not make it a primary focus. That can be a drawback. Expertise is vital, but it is not enough to bring business through the door and grow your practice. Unless the marketplace knows of your particular skills, you run the risk of being just one more CPA. Selling and marketing yourself and your expertise is critical to building your future. Here are ďŹ ve steps that can help you thrive when it comes to selling. First, determine, from your client’s point of view, where you can add value. With so many accountants in the market and advanced bookkeeping solutions on our computers, many clients may think of their accountants as a commodity. By taking time to carefully think of what your talents are and how they bring value to the client you can separate yourself from the crowd. Your focus should be, not on what you cost,

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Guest Contributor

but instead on how your client can benefit from the value your services bring. Second, don’t try to go it alone. Create a cadre of support around you by developing your own board of directors. Napoleon Hill wrote about the productive ingenuity of focused teams in what he called “the Master Mind” nearly 100 years ago, and his advice still rings true. Bringing together a group of smart, insightful friends and mentors from different walks of life will give you a broader base from which to work. The people you bring together can advise, guide, teach, and hold you accountable to reach your goals. They can and will become some of your biggest advocates and supporters; they will open doors for you and help you develop opportunities. Insist on blunt honesty, accountability and trust. Schedule regular meetings with agendas, goals and benchmarks. And, while you are at it, why not act as a ‘board member” for others who could use your help and support? Third, become a subject matter expert. Research a subject you have an interest in; make it one that is important and impactful to your existing or potential clients. Read everything you can on the subject. Interview other experts and attend conferences on the issue. Put your own mark on the topic, and become an expert on not only the topic, but its impact on your clients. With this knowledge and expertise, put it to use for you and your clients. Write articles, give presentations and reach out to the local media as a resource for them on the topic.

By choosing the right topic, and the right preparation, you will find people seeking you out for your knowledge. If you do not have good verbal presentation skills -- and many of us naturally do not -- get them. Join Toastmasters or a similar group to hone your speaking skills. Fourth, ask your existing clients for referrals. Your clients are with you because you provide them valuable service and advice; they all have friends and business associates that would benefit from your services. You may be hesitant to ask your clients for a referral thinking you are asking for a favor. In fact, just the opposite is true, you are giving your clients a gift, by giving them the chance to help you and their friends and associates by bringing the two of you together. They are creating value for both parties involved. Fifth, be organized and disciplined in your efforts. All of your thinking and planning will not result in success without strong execution of your plans. No outside force will impose deadlines on you. It is up to you to do it for yourself. In this digital age, a good client relationship management program (CRM) can make the process a snap. If you don’t have a CRM program, get one. Good programs are out there, such as cloud-based Salesforce, the current leader in the field. If you already have one, use it! Get comfortable with it, embrace it and learn to make it part of your daily routine. Your clients will appreciate your attention and follow-up. It is human nature to trust our

minds to retain and remember things. As we get older and our brain grows more cluttered -- and I speak from personal experience -- memory slips and it becomes harder to keep it all top of mind. A CRM system and disciplined use of it, will keep you on top of all the follow up details you have to remember to keep yourself moving and your business growing. Make selling and marketing a vital part of your business day and you will be on your way to differentiating yourself from the masses. Dwight L. Hill is executive vice president, Sabadell United Bank in Miami. Hill provides financial advice and assistance to South Florida attorneys , CPAs and their respective firms. Hill works with startup firms, merging firms and growing firms that need support with their transactions, working capital and longer-term financing. Hill earned his bachelor’s degree in business from the University of Florida in 1978, and has been with Sabadell United Bank, N. A. (formerly Mellon United National Bank) since 1984. He is responsible for business development, strategic planning, and implementation of new services in the South Florida market. Hill currently serves as chairman of the American Red Cross Greater Miami & The Key. Hill is also a board member of CarrFour Supportive Housing, and Florida Bankers Association, as well as a member of the Greater Miami Chamber of Commerce’s audit committee.

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Guest Contributor

Securities Fraud: What You Need To Know As an Investor By Jeffrey B. Kaplan

The

number of people investing in securities has increased significantly over the years. There also has been a proliferation of complex financial instruments available to investors. Unfortunately, this growth has led to a corresponding explosion of fraud in the financial markets. Almost anyone can be a victim of securities fraud. But not everyone knows how to recognize or prevent it. Even the term itself can be a source of confusion. Securities fraud encompasses a wide range of illegal and improper conduct. For anyone with a stake in the financial markets, a basic understanding of securities fraud can prove invaluable. TYPES OF SECURITIES FRAUD AND COMMON SCHEMES Securities fraud generally involves the deception of investors, manipulation of financial markets, or the abuse of investors’ trust. Some forms of securities fraud involve intentional misconduct, whereas other forms are the result of negligence.

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Intentional Misconduct There are numerous types of intentional securities fraud, including Ponzi schemes, market manipulation, intentional misrepresentations and omissions, and excessive trading. s 0ONZI SCHEMES INVOLVE USING MONEY COLLECTED FROM NEW investors to pay returns promised to earlier investors. While the payouts give the impression of a legitimate enterprise, defrauded investors are the only source of the “investment returns;” s -ARKET MANIPULATION OR hPUMP AND DUMPv SCHEMES involve the fraudster’s inflating or “pumping up” the price of a stock artificially through aggressive sales tactics, false information, or rumors. Once the share price increases, fraudsters sell (“dump”) their shares at a profit, to the detriment of hoodwinked investors; s -ISREPRESENTATIONS AND OMISSIONS CAN INVOLVE purposely presenting misleading, untruthful, or incomplete information to investors. This often


Guest Contributor

involves the misrepresentation of the nature of an investment or the risks associated with an investment; and s h#HURNINGv OR EXCESSIVE TRADING INVOLVES A BROKER MAKING TRADES FOR THE PRIMARY PURPOSE OF GENERATING COMMISSIONS rather than because the trades make ямБnancial sense for the investor. Negligent Misconduct Some securities fraud does not require A COMPLEX FRAMEWORK OR EVEN INTENTIONAL MISCONDUCT 2ATHER EVEN NEGLIGENT conduct can be deemed a form of securities fraud. Such misconduct can include: s 5NSUITABILITY CLAIMS IF YOUR BROKER recommends securities that are not CONSISTENT WITH YOUR INVESTMENT objectives or risk tolerance; s )MPROPER ASSET ALLOCATION OR LACK OF DIVERSIlCATION OF YOUR ACCOUNT ASSETS AND s -ISREPRESENTATIONS OR OMISSIONS of material information about an investment and its risks as a result of a BROKER S OR BROKERAGE lRM S NEGLIGENT failure to understand the investment. Such misconduct has increased with THE PROLIFERATION OF EVER MORE COMPLEX and difямБcult to understand structured investment products. RECOGNIZING AND PREVENTING SECURITIES FRAUD %VEN THOUGH SECURITIES REGULATORS SEEM TO HAVE INCREASED THEIR SCRUTINY OF SECURITIES FRAUD investors can take steps to protect themselves. 7HEN OPENING A BROKERAGE ACCOUNT MAKE SURE YOUR NEW ACCOUNT APPLICATION ACCURATELY REmECTS YOUR INVESTMENT OBJECTIVES RISK TOLERANCE INCOME AND NET WORTH "ROKERAGE lRMS RELY ON THIS INFORMATION TO DETERMINE WHETHER ACCOUNT ACTIVITY IS IMPROPER !FTER YOU OPEN AN ACCOUNT YOU CAN help avoid stockbroker misconduct in the FOLLOWING WAYS Monitor Your Account Review trade conямБrmations and ACCOUNT STATEMENTS FOR SIGNS OF UNSUITABLE INVESTMENTS LACK OF DIVERSIlCATION AND EXCESSIVE TRADING $O NOT RELY ON SUMMARIES PREPARED BY YOUR BROKER )F YOUR REVIEW REVEALS POTENTIAL MISCONDUCT YOU SHOULD CONTACT THE BROKER )F YOU ARE NOT SATISlED WITH THE BROKER S RESPONSE ADDRESS THE ISSUE with the brokerтАЩs supervisor. You also should SEEK AN INDEPENDENT REVIEW OF YOUR ACCOUNT FROM ANOTHER SECURITIES INDUSTRY PROFESSIONAL

"ROKERS FREQUENTLY TELL INVESTORS THAT INVESTMENT LOSSES ARE THE RESULT OF hMARKET LOSSES v WHICH IS NOT ALWAYS TRUE )N MANY INSTANCES ACCOUNT LOSSES ARE MUCH GREATER THAN GENERAL MARKET LOSSES )F YOU RECEIVE SUCH AN EXPLANATION THEN YOU SHOULD REQUEST DOCUMENTATION REmECTING THE performance of an appropriate market INDEX AS COMPARED TO YOUR OWN ACCOUNTS OVER THE SAME TIME PERIOD )F YOUR ACCOUNT PERFORMED SIGNIlCANTLY WORSE THAN THE COMPARABLE INDEX YOUR LOSSES COULD BE THE result of stockbroker misconduct rather THAN hMARKET LOSSES v тАЬHappinessтАЭ Letters Do Not Mean You Should Be Happy "ROKERAGE lRMS HAVE INTERNAL REPORTS THAT EXPOSE QUESTIONABLE ACCOUNT ACTIVITY 7HEN ACCOUNTS APPEAR ON THESE REPORTS A LETTER COMMONLY REFERRED TO AS A hHAPPINESSv LETTER OFTEN IS SENT TO THE INVESTOR )F YOU RECEIVE SUCH A LETTER YOU SHOULD RECOGNIZE IT FOR WHAT IT IS n A WARNING SIGN THAT THERE MIGHT BE BROKER MISCONDUCT THAT IS WORTH INVESTIGATING 9OU SHOULD CONTACT THE BRANCH MANAGER AND ASK IF THERE IS ANY ACCOUNT ACTIVITY THAT

IS INCONSISTENT WITH YOUR INVESTOR PROlLE )F THE BRANCH MANAGER IDENTIlES ANY PROBLEMS YOU SHOULD REQUEST THAT CHANGES be made to resolve the problem. You also should consider an independent review OF YOUR ACCOUNT AND CONSIDER CHANGING BROKERS OR MOVING YOUR ACCOUNT TO ANOTHER BROKERAGE lRM )F YOU BELIEVE YOUR INVESTMENTS LOSSES ARE THE RESULT OF SECURITIES FRAUD WE RECOMMEND THAT YOU SEEK THE ADVICE OF COUNSEL RATHER THAN SEEK RELIEF FROM SECURITIES REGULATORS )NVESTORS TYPICALLY RECEIVE LITTLE TO NO BENElT FROM CONTACTING SECURITIES REGULATORS 7HILE THESE ENTITIES ARE CHARGED WITH POLICING THE SECURITIES INDUSTRY THEY TYPICALLY DO NOT ASSIST INVESTORS IN THE RECOVERY OF INVESTMENT LOSSES Jeffrey B. Kaplan is a shareholder of the law ямБrm Dimond Kaplan & Rothstein, P.A. DKR is an AV-rated litigation boutique that represents individual and institutional investors in stockbroker misconduct and securities fraud claims. The ямБrm represents clients throughout the United States and Latin America from its ofямБces located in Miami, West Palm Beach, Los Angeles, and New York.

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Guest Contributor

Collateralizing Your Intangible Assets An Intellectual Property Audit May Enhance Borrowing Power By John Cyril Malloy, III

In

today’s lending environment, collateral is king. Access to capital is often directly linked to a borrower’s ability to list assets such as real estate, accounts receivable, and business equipment. But even the smallest business may have valuable, hidden intangible assets that can be used as collateral to secure working capital: Intellectual Property (“IP”). As such, borrowers and lenders alike should not overlook IP in credit applications. A simple IP audit will reveal a company’s intangible assets to ensure that significant assets are not left off the spreadsheet. The godfather of IP is the United States patent, which is granted only by the U.S. Patent and Trademark Office (“USPTO”) for new inventions. Of course, these are not difficult to identify, since they exist only where the USPTO has issued a certificate. But companies may not appreciate the great value attributable to patent assets, which may cover products, machines, devices, processes,

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Guest Contributor

chemical compositions, designs, and more. Although potentially the most valuable IP assets, patents are also the easiest to lose by failing to timely file a patent application. In that regard, an IP audit should account for a company’s novel ideas that might be appropriate for new patent filings. Lenders will want to be alert to the life span of a patent, usually 20 years from the date of the filing of the original patent application, as well as the USPTO maintenance fees that must be paid for the patent to remain in force. Collateralization of a patent is a routine matter, usually accomplished by recording a security interest pursuant to the Uniform Commercial Code (“UCC”), though it is recommended to also record with the USPTO against the patent directly. Trademarks can be a bit trickier to identify as part of an IP audit because they may or may not be registered with the government, but all have value. Almost every business will own trademarks in the form of brand names, logos, slogans, and even some packaging and recognizable product designs. Trademarks used in interstate commerce may be registered with the USPTO, usually signified by use of the “ ” symbol, but individual states also have trademark registers for in-state trademarks. Here again, pending trademark applications may have value, but even marks that have never been registered or applied for can qualify as valuable intangible assets, known as “common law” trademarks, often denoted with a “TM” or “SM” symbol. An IP audit will identify a company’s trademarks, categorize them appropriately, and address maintenance and renewal requirements, if applicable. Lenders can easily record security interests directly with the USPTO and/or the state registrar, but all marks including common law trademarks should be securitized under standard UCC filings as “general intangibles” with appropriate reference to the goodwill of the business they represent. Of course, every business is likely to have one or more domain names, some of which may also qualify as trademarks. Regardless of their particular status as IP, however, such web addresses may have value in the domain name re-sale market. The law is not settled as to whether domain names constitute “property” that can be collateralized, but they are routinely included in UCC filings. Copyrights are another form of IP that many businesses may not realize they already own. This type of IP protects works of expression fixed in a tangible form, which may be a written work, artistic presentation, technical drawing, or computer code. Here again, this type of intangible asset is often overlooked because registration with the U.S. Copyright Office is not a requirement for the

existence of a copyright. For example, having merely created advertisements, catalogs, product photographs, manuals, a website, and other materials may give rise to a copyright, but an IP audit must evaluate the circumstances of authorship to determine whether the company, an employee, or even an outside contractor may be the true owner. A security interest as to a copyright registration will be effective only if recorded with the USCO, but un-registered copyrights may be collateralized by standard UCC mechanisms. The last major category of IP is the trade secret, which is basically any information that is not generally known or readily ascertainable to the general public. Perhaps the most famous trade secret is the CocaCola formula, but even small businesses will have their own trade secrets in the form of customer lists, manufacturing techniques, secret ingredients, logistics, and other know-how. An IP audit will identify these intangible assets and confirm their IP status by reviewing confidentiality agreements, employment contracts, and other measures taken to maintain their secrecy. Trade secrets are often overlooked in financial transactions, often because they are not openly discussed and their value may be difficult to ascertain, but they can be the subject of a UCC filing. As a cautionary note to lenders, there are countless technicalities and pitfalls in the area of IP security interests, often intertwined between federal statutes, state laws, and even bankruptcy court precedent. Experienced counsel must be engaged to evaluate the existence of the IP, to properly identify the collateralized asset in the documentation, and to select appropriate filing location(s) to perfect the security interest.

Regardless of the need to obtain credit, every business should could conduct an IP audit to identify its intangible assets, ensure preservation of those rights, enforce against unscrupulous competitors where appropriate, account correctly on balance sheets, and correctly gauge corporate value for mergers, acquisitions, and other transactions. As the partner overseeing the Malloy & Malloy, P.L. Intellectual Property Litigation Group, John Cyril Malloy, III is board certified as an expert in intellectual property law and concentrates his practice on trial and appellate litigation. He also focuses on international portfolio management, filing trademark applications and directing enforcement proceedings around the globe. Malloy taught for nearly a decade as an adjunct professor of intellectual property law at St. Thomas University Law School. He earned his bachelor’s degree from Vanderbilt University and his law degree from the University of Miami. During his tenure as the chair of the International Trademark Association’s Model State Trademark Bill from 2003 to 2007, Malloy oversaw the passage of trademark legislation in a half dozen states and personally spearheaded the enactment of Florida’s present trademark statute, which became effective in 2007. In 2009 Malloy was named the chairman of the DCBA Intellectual Property Committee.

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Guest Contributor

Choosing a Proper Fiduciary By Daniel Stermer

With

the ups and downs of the current economic environment, business situations have arisen, and will continue to do so where the appointment of a fiduciary will be considered, whether inside or outside a formal court proceeding. In either case, the choice of a proper fiduciary is a critical decision and should not be made without due consideration, whether by the court or by counsel. In those business circumstances where a court is involved, the parties’ mutual agreement on a particular fiduciary is the most efficient way to move forward. Absent such an agreement, the court, after due deliberation, will chose the professional fiduciary it believes can accomplish what is necessary in that particular matter. A receiver may have been appointed where there is a statutory provision for such a fiduciary, in circumstances: where there is a contractual right built into the 36

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agreement between parties; where there is a disagreement among shareholders/partners; where there is a probability of fraudulent conduct that has or may occur to frustrate another party; where there is an imminent damage that property will be concealed, lost or diminished in value; or where other available remedies at law are believed to be inadequate. The appointed fiduciary is an arm of the court and is a neutral in the underlying matter before the court. The duties, powers, authorities, and responsibilities of the receiver, or any other fiduciary, are defined by the presiding judge in the order appointing the receiver/fiduciary and detailing that person’s authority. As such, either the initial order of the receiver/fiduciary or a subsequent order clarifying and/or delineating the duties and responsibilities is critically important in ensuring that the receiver/ fiduciary is authorized to do all of the things necessary to achieve the objectives of a given receivership. If the


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appointing order does not, a receiver/fiduciary may seek further instructions and clarification from the court as to a particular issue that the receiver may be facing. As part of the court’s appointment order, provisions are generally included with regard to the imposition of a bond and the frequency of reporting required by the receiver/fiduciary. Much discussion among professionals has centered on the bonding to be obtained by the selected fiduciary and the availability of the bond, separate from how often the fiduciary should file reports with the court, including the contents of the reports. As many fiduciary professionals are aware, being able to obtain a bond generally requires the completion of a personal financial statement and the execution of an indemnity contract with an insurance company. While many think that being appointed as a fiduciary is a glamorous position, serious consideration should be

given as to the overall significant responsibility and time commitment of becoming one. The ability of a fiduciary to obtain a bond and the court’s setting the amount of the bond are important protections for all involved and should not be taken lightly. The filing of reports by the appointed fiduciary is another important requirement that the court should clearly state in the appointment order. If not set forth in the order, a receiver is required by the Florida Rules of Civil Procedure to file such every three months. In an Assignment for the Benefit of Creditors, the assignee is required by statute to file two reports: The first 180 days into the matter and the second at the conclusion of the matter. These two reporting requirements are vastly different from the ones for bankruptcy trustees who are, in Chapter 11 matters, generally required to file operating reports on a monthly basis, that represent a full and

complete financial overview of assets being overseen and administered by the trustee. Moreover, at the end of a bankruptcy matter, the trustee needs to complete and file with the United States Trustee’s Office a Trustee’s Final Report (TFR) and its related financial detail, in addition to providing all bank statements and cancelled checks, for review prior to the TFR being submitted to the court. These reporting requirements demonstrate the lack of uniformity as to the frequency with which an appointed fiduciary prepares and files reports with the supervising court. Much discussion has taken place with regard to moving toward a more uniform reporting requirement regardless of the nature of the fiduciary appointment, with the discussion focusing on the requirement of monthly reporting. Keeping the appointing court and interested parties aware of the current financial position of an estate is an important aspect of any appointment and the filing of regularly required reports by the appointment fiduciary is critical and cannot be overstated. In addition to bonding and reporting requirements, a receiver’s primary job in these matters is to marshal the assets of the receivership estate and protect the status quo until such time as the court authorizes how the assets should be deal with, whether for the benefit of creditors, investors, and/ or other interested parties. This issue can get interesting and be made more complicated in instances where the assets are a building in the midst of construction or what may left in a Ponzi/bust-out scheme. Each of these circumstances will require the receiver/ fiduciary to use experience, skill, and expertise in trying to maximize the value of and/or recover the assets in that matter. While the sale of a hard asset such as a building, may be accomplished in a relatively short period of time, performing an investigation and commencing litigation to recover assets in a Ponzi/bust-out scheme could take much longer and the recovery is less than certain. Bonding and reporting are two critical aspects of a fiduciary appointment that a court must determine at the time of appointment and how a receiver/fiduciary maximized the value of the estate is something that the fiduciary must do once they are appointed. Their importance cannot be overstated. Daniel J. Stermer is a professional in the Miami office of Development Specialists, Inc., a leading provider of turnaround management consulting and financial advisory services. He has served as a receiver, assignee, and other fiduciary roles in a number of high-profile cases throughout Florida.

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Guest Contributor

THE UNSETTLED

STATE OF ESTATE PLANNING IN 2012 By Donald R. Tescher

The

Tax Follies continue in Washington. You may recall that it took Congress 11-1/2 months into 2010 to pass tax legislation regarding gift and estate taxation after the estate tax had expired on December 31, 2009. As a result, the carryover basis regime with no estate tax was visited upon those unfortunate individuals who were fortunate to have died between January 1 and December 16, 2010. On December 17, 2010, President Obama signed the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (the “2010 Tax Relief

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Act”). The 2010 Tax Relief Act extended the Bush era tax cuts that were set to expire on December 31, 2010, through December 31, 2012. In addition, the 2010 Tax Relief Act capped the federal gift, estate and generationskipping transfer (“GST”) tax rates at 35 percent and gave taxpayers a $5,120,000 federal estate, gift and GST tax exemption for 2012 (reduced by any prior taxable gifts). Given the uncertainty in today’s political arena, we do not know what the future holds for estate and gift tax laws for 2013 and beyond. If Congress does not address these tax laws in the near future, on January


Guest Contributor

1, 2013 the federal estate, gift and GST tax exemption will return to $1 million (GST will be indexed for inflation) with a top marginal estate, gift and GST tax rate of 55 percent. In addition, there is proposed legislation that would eliminate existing tax savings techniques such as short-term Grantor Retained Annuity Trusts, valuation discounts for closely held family entities, and favorable tax treatment for intentionally defective grantor trusts. Coupled with the expiring income tax rate structure, including the favorable treatment of qualified dividends and capital gains, and the additional taxes imposed next year under the Affordable Care Act, taxpayers are facing continued tax uncertainty in what remains a politically charged environment. Gifts to Heirs in Trust. The easiest planning for those persons who can afford to part with assets and their income is to make taxable gifts to utilize their unused gift tax exemptions. The prevailing view is that the $5,120,000 gift tax exemption will not survive past 2012. A couple who have not used any of their gift tax exemptions can make taxable gifts of up to $10,240,000 to their heirs. If these gifts are made to multi-generational (“dynasty”) trusts and GST exemptions are allocated to the gifts, the assets in these trusts, for as long as they remain in the trusts, will avoid estate and GST taxes in future generations. Non-Reciprocal Spousal Trusts. In those situations where a married couple is unwilling or unable to part with the access to the income or the assets, each can create irrevocable trusts for the benefit of the spouse (and may also include their descendants as discretionary beneficiaries). Under this arrangement, the income and principal of the trusts remains available to the family. There is potential tax risk in this planning technique based upon a concept referred to as the reciprocal trust doctrine that would negate the planning if successfully asserted by the IRS. In order to avoid its application, the trust terms must be sufficiently different so as to be nonreciprocal and it is recommended that they not be created simultaneously. On the theory that a half of a loaf is better than no loaf, in many circumstances it may be better to have only one spouse create an irrevocable spousal trust and only utilize half of the couple’s available exemption. Marital Gift Trust. Those couples who do not feel comfortable parting with their wealth and need the continued income from the assets could forgo utilizing their gift tax exemptions and instead create marital trusts for each other. The assets of their trusts remain includible in their federal gross

estates, but they can have total control over the income and principal of their trust. While this will not result in an estate tax savings in their estates, by making the trusts dynasty trusts and allocating their GST exemptions to these trusts, it will shelter the assets for as long as they remain in trust from estate and GST taxes in future generations. Grantor Retained Annuity Trusts (“GRAT”) and Valuation Discounts. The GRAT involves an irrevocable gift transfer in trust with the donor retaining an annual annuity for a term of years. The annuity is typically structured to nearly equal the current fair market value of the transferred property, thereby virtually eliminating a taxable gift. To the extent that the transferred assets outperform the IRS hurdle rate (currently at its lowest ever), any growth in excess of the initial fair market value plus the IRS 7520 rate will pass free of transfer taxes to the remainder beneficiaries of the GRAT. If the legislative proposals effecting GRATs were enacted, which would require a minimum term of 10 years, a maximum term equal to the donor’s life expectancy, and requiring that at inception the remainder interest subject to gift tax be some minimum percentage of the initial value, the future viability of GRATs as an effective planning vehicle would be curtailed significantly. Frequently, the GRAT technique (as well as other estate planning techniques) is coupled with the use of entities such as limited partnerships and limited liability companies and gift transfers of fractional interests in the entities. These interests are highly susceptible to the application of valuation discounts in arriving at the fair market value of the gifted interest. By minimizing the value of the gift, the donor is able to obtain greater leverage in the use of his or her gift tax exemption or maximize the amount ultimately passing tax free at the end of a GRAT term. If the proposed legislation, which would eliminate the application of certain restrictions in determining the fair market value of certain closely held family entities, were to be enacted, those planning techniques that utilize the transfer of assets subject to valuation discounts will be adversely effected. What to do. If you have not yet reviewed your estate plan in light of the current uncertainties in the tax system, you need to do so as soon as possible as the window of opportunity to take advantage of planning techniques that could result in very significant tax savings for your family is rapidly closing.

Donald R. Tescher is a shareholder in Tescher & Spallina, P.A., with offices in Boca Raton. He is a graduate of the University of Florida School of Business with a degree in accounting. He is also a graduate of the University of Florida College of Law and holds an LL.M. degree in taxation from New York University. He is a past chairman of the Tax Section of The Florida Bar and recipient of the Gerald T. Hart Outstanding Florida Tax Lawyer Award. He is a fellow of the American College of Tax Counsel and a member of the Business Planning, Asset Protection Planning and Estate and Gift Tax committees of the American College of Trust and Estate Counsel. He has served as adjunct professor at the University of Miami School of Law Graduate Tax Program. He is a member of the Directors’ Committee of The Florida Bar Tax Section, the Executive Council and Trust Law Committee of The Florida Bar Real Property, Probate and Trust Law Section, and member of various committees of the Tax and Real Property Sections of the American Bar Association. His practice is limited to representation of high net worth individuals and families in connection with their business, tax, estate planning, post-mortem planning and trust administration, charitable planning and expert witness and mediator.

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Guest Contributor

Moving on Up to the East Side By Benjamin E. Wilson

Like

the late, great George and Louise Jefferson from the classic TV show “The Jeffersons,” Miami real estate developers and purchasers continue “moving on up to the East side” as several new luxury condominium projects along Miami’s coastline have recently been completed or launched construction or sales programs. Glancing through recent editions of Ocean Drive Magazine, Miami Magazine, and other local high-end publications, one will notice numerous advertisements and stories about new luxury condominium projects in Miami Beach, Coconut Grove, Brickell Avenue, Midtown, the Biscayne Boulevard/Design District corridor, and Bal Harbour. One may wonder how construction of these luxury condominium projects and others will be financed in the midst of the current economic downturn and the decreased availability of condominium construction and acquisition financing. The answer for some Miami real estate developers has been to rely more heavily on the deposits of purchasers to fund construction of these condominium projects, and the formula has been successful for several projects.

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Guest Contributor

During the condominium boom of the early and mid 2000s (a time when condominium construction financing was more readily available), most developers required purchasers to make a deposit equal to 20 percent of the unit purchase price, with half the deposit retained in an escrow account and the other half used by the developer for construction purposes. The developer financed the remainder of the condominium construction through one or more construction loans. The practice of using purchaser deposits to partially finance construction was, and remains, permitted under the Florida Condominium Act so long as the proper disclosures are in the developer’s purchase contract. Now, some Miami developers are abandoning the notion of obtaining construction loans for their new projects and are requiring purchasers to make a series of deposits between the period of contract execution and closing, with all deposits above 10 percent of the unit purchase price being used by the developer to fund construction. In essence, by the time a purchaser in this scenario goes to closing, he or she may only owe the remaining 10-20 percent of the unpaid unit purchase price. That’s quite different from the development formula of recent years where the purchaser paid a deposit equal to 15-20 percent of the purchase price upon signing the contract (or even a 10 percent deposit at signing and another 5-10 percent deposit once construction commenced) and then paid the remaining balance at closing through a mortgage loan, cash, or a combination of both. By using this new formula, the developer benefits by avoiding the costs of obtaining a construction loan for the project, as well as the pressures of satisfying construction deadlines to receive construction draws and to be in a position to make timely loan payments. This new formula also benefits the developer because it is conducive only to purchasers of substantial means who can purchase the unit without obtaining a mortgage loan and these purchasers are potentially less likely to default under a purchase contract due to the heavy equity investment required from them prior to closing. Even if a purchaser defaults, the developer’s collectable remedy has the potential to be much greater than before because it has the option of retaining the much larger deposit required from the purchaser, not merely the 15-20 percent deposit required in years past. However, if the project is subject to the Interstate Land Sales Full Disclosure Act (ILSA) because it contains more than 99 units and construction cannot be completed in two

years, the developer’s liquidated damages for a purchaser default would be limited to retaining deposits equal to 15 percent of the purchase price. This form of construction financing and development seems wonderful for developers; however, it is not an option for all. It is really limited to developers with substantial connections to high-net-worth international and domestic purchasers and an established reputation of timely delivering products featuring top-quality construction and amenities. The international connections are essential for this method of construction financing because a substantial amount of Miami’s new construction continues to be purchased by international buyers. This development method appeals more to international buyers, who are accustomed to purchasing new construction in this manner, than to U.S. buyers. Further, international purchasers remain interested in investing in South Florida real estate for economic and perhaps political reasons. The developer’s reputation is critical under this development strategy because purchasers are being asked to take a much bigger risk that the developer will complete the project within the timeframe and in the manner promised. Purchasers will be more reluctant to take that risk if the developer is not well established, trustworthy and reliable. If the developer breaches the purchase contract after construction has commenced, chances are that the purchaser has little or no collectable remedies against the developer, other than a return of the 10 percent deposit required to be held in an escrow account. In situations like these, the developer will likely be a special purpose entity with few or no assets other than the project site and escrowed deposits, and the purchaser’s previously paid deposits (except for the 10 percent deposit in escrow) may have already been spent on construction costs. This development formula worked well for a long-standing Miami real estate developer who used contacts in Latin America to quickly secure purchasers for its project along Biscayne Bay and completed closings for the project within a four-month period. This formula seems to also be successful for several

other well-established Miami developers. Here’s hoping for continued luxury condominium ads in the upcoming issues of Ocean Drive Magazine, Miami Magazine, and other local publications. Benjamin E. Wilson is an attorney in the Real Estate Department of Shutts & Bowen’s Miami office, where he concentrates his practice in the areas of real estate transactions, real estate development and finance, commercial leasing, condominiums, affordable housing, planned unit developments, mixed-use developments, and distressed property acquisitions, loan work-outs, and foreclosures.

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Minority Pro Bono Program

Mentoring Program Helps Minority Law Students Advance Their Careers

Florida Supreme Court Justice Peggy Quince with John Kozyak at 2011 picnic.

As a student at the University of

Miami School of Law, Quinshawna Landon seized her opportunity to take part in a special minority mentoring program organized by John W. Kozyak, founding partner of the Miami firm Kozyak Tropin & Throckmorton, PA. Through his foundation and the support of thousands of judges, lawyers, law school administrators and guests, Kozyak hosts an annual Minority Mentoring Picnic for students from every law school in Florida. “A fellow law student and friend challenged me to take advantage of the many networking opportunities at the picnic,” said Landon, who attended

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Minority Pro Bono Program

the 2009 event. “I listened to her advice and it resulted in a wonderful experience. Through the picnic, I was able to meet two incredible mentors, Assistant United States Attorney James Weinkle and Magistrate Judge Chris McAliley.” In fact, Weinkle remembers his mentee, who graduated from law school in May. “I have lots of emails still from those days, and it was a great experience,” says Weinkle who has mentored five students since 2009. Kozyak says the goal of the Kozyak Minority Mentoring Foundation is to help each minority law student in Florida succeed and to maximize his or her law school experience. “During the past decade, we have helped match more than a thousand minority law students and have a waiting list of outstanding, experienced judges and lawyers eager to assist. This is a low-cost, highly rewarding program and we encourage the South Florida legal community to get involved.” COMBATING RACISM Since moving to Miami in 1974, Kozyak has been dedicated to helping minority student succeed. “I grew up in a segregated community in Illinois, across the Mississippi River from St. Louis, and was a high school sophomore when the 1964 civil rights legislation was implemented,” he said. “It

was a time when Missouri, and Florida as well, had bathrooms that said ‘colored only.’ I knew that there was something wrong with our society and decided to do something to combat that racism.” Kozyak came to Miami after law school for a summer clerkship without knowing a person. “I was hired by two well-known, respected lawyers, who were wonderful mentors,” he said. At the Miami office of Mahoney Hadlow and Adams, a Jacksonville firm, Kozyak quickly got involved in recruiting new associates. “I took a special interest in recruiting women, blacks and Hispanics for the firm,” he says. “By the time the firm dissolved in 1980, our office was a leader in bringing in Latin American attorneys.” In December 1982, Kozyak founded his firm with partners Harley Tropin and Chuck Throckmorton. “At that time there was a citywide curfew following a riot in Overtown,” he recalled. “Looking out the window and seeing buildings burn made a deep impression on all of us.” Soon after the firm was up and running, Kozyak began helping black law students with scholarships and contributions to the University of Miami School of Law’s Litigation Skills Program. In keeping with that philosophy, Kozyak became a

A little advice for

LAW STUDENTS John Kozyak has a few words of advice for minority law students ¥ Don’t take shortcuts. It takes time to become a skilled attorney. ¥ Start cultivating your reputation now while you are in law school, and make sure your classmates respect you. ¥ Be prepared to work hard in law school. Go to every class and take advantage of special programs. ¥ Start building your network in school. Your classmates will one day be your peers in the legal profession.

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Minority Pro Bono Program

mentor as well. For the past 15 years, the attorneys at the firm have been actively involved in mentoring black students from the law schools at the University of Miami, St. Thomas University and Florida International University. LAUNCHING THE EVENT Nine years ago, Kozyak and Detra ShawWilder, a partner at the firm, decided to host a picnic that would give black law students in South Florida an opportunity to connect with potential mentors, get career advice and network with their peers. About 200 people turned out for the first picnic, but thanks largely to word-of-mouth referrals, the event attracted more than 1,000 participants in its second year. Last year, attendance surpassed 3,500 as the minority mentoring picnic expanded to cover all minorities, including Hispanics, Muslims, Asian-Americans, as well as gays, lesbians and students with disabilities. Law firms from throughout the region participated and hosted a variety of activities. For instance, Berger Singerman sponsored a volleyball tournament for the law students. THIS YEAR THE KOZYAK MINORITY Mentoring Foundation will be hosting its 9th Annual Minority Mentoring Picnic on Saturday, November 10 at Amelia Earhart Park in Hialeah. Lead sponsors include GreenbergTraurig, BNY Mellon Wealth Management, Sabadell United Bank, Berger Singerman and Gunster among others. The picnic is also supported by the Dade, Broward and Palm Beach Bar Associations, as well as many other South Florida legal associations. “I think the picnic has been so successful, because it’s a fun, easy, low-cost model,” Kozyak said. After registering, students receive a button that says “Need Mentor,” while attorneys, judges and other guests wear buttons that say “Need Mentee.”

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Students can walk around, talk to others, and establish a mentor-mentee relationship, while sampling a wide array of ethnic foods. They can also visit tents set up by groups like the Cuban American Bar Association and the National Hispanic Bar Association. Students can also fill in applications and be matched with a mentor after the picnic. Kozyak says most minority students are first-generation college graduates who are wondering about what classes to take or legal specialty to pursue. “Other students want some advice about living in South Florida and being away from home,” he added. When Kozyak takes on a new mentee, he tries to help them set priorities and understand the first steps in an associate’s legal career. “Some students want to get right into entertainment and sports law and work with big-name celebrities,” he said. “But I tell them to learn about contracts or taxes or licensing issues and business disputes first. You have to know the basics before you can really serve your clients – whoever they might be.” He also brings mentees to bar events, judicial fundraisers and other activities, that provide opportunities for networking. “I mentored a Hispanic woman who graduated two years ago,” he said. “I introduced her to a local firm, and she was able to become a summer associate and eventually get a job offer. I think being a mentee can give you a real advantage in today’s job market.” As a former mentee, Landon certainly agrees with that sentiment. “My mentors provided me with guidance and support, and served as great sounding boards. I truly enjoyed the picnic and appreciate John Kozyak’s tireless efforts to expose minorities, who otherwise may not have the opportunity, to mentors in the legal field. I would encourage everyone to take part in the Minority Mentoring Picnic. Mentoring truly works.”

SOUTH FLORIDA LEGAL GUIDE FINANCIAL EDITION 2012

IN 2006, JOHN KOZYAK RECEIVED THE FLORIDA BAR PRESIDENT’S PRO BONO SERVICE AWARD AND THE FLORIDA BAR’S HIGHEST AWARD FOR HUMANITARIANISM, THE G. KIRK HAAS HUMANITARIAN AWARD. IN 2007, HE RECEIVED THE ABA’S “SPIRIT OF EXCELLENCE” AWARD FOR HIS WORK IN DIVERSITY. KOZYAK WAS HONORED BY THE ANTIDEFAMATION LEAGUE WITH ITS 2010 JURISPRUDENCE AWARD FOR HIS CONTRIBUTIONS TO THE LEGAL PROFESSION AND TO THE COMMUNITY AT LARGE, AND IN 2011, HE RECEIVED THE FLORIDA BAR’S HENRY LATIMER DIVERSITY AWARD.


Profiles

STANLEY I. FOODMAN

JOHN ELLIOTT LEIGHTON

TAXATION, LITIGATION SUPPORT

PERSONAL INJURY

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

LEIGHTON LAW, P.A. 1401 BRICKELL AVE., SUITE 900 MIAMI, FL 33131 121 S. ORANGE AVE. SUITE 1150 ORLANDO, FL 32801 PHONE: 888-395-0001 JOHN@LEIGHTONLAW.COM WWW.LEIGHTONLAW.COM

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 2007-2012.

John Elliott Leighton is the founding partner of Leighton Law, P.A., a personal injury trial law firm representing individuals who have been seriously injured or have lost loved ones due to the negligence of others. A board certified civil trial lawyer, Leighton has 26 years of experience in litigating and trying catastrophic injury and death cases in state and federal courts. He has litigated and tried complex cases throughout Florida and in Illinois, North Carolina, Wisconsin, Georgia, Texas, Indiana and New York. He is chairman of The Academy of Trial Advocacy and the Inadequate Security Litigation Group of the American Association for Justice, and serves on the Executive Committee of the Board of Trustees of the National College of Advocacy. He is listed in The Best Lawyers in America, Florida Super Lawyers, Florida Trend Florida Legal Elite, and South Florida Legal Guide’s “Top Lawyers.” He is rated AV by MartindaleHubbell and 10/10.0 (“superb”) by AVVO.com. He is the author of “Litigating Premises Security Cases” (West, 2006).

C. ZEV PASTERNAK

ORLANDO ROCHE

TAXATION, FINANCIAL INVESTIGATIONS

REGIONAL PRESIDENT, MIAMI-DADE COUNTY SABADELL BANK & TRUST PRIVATE BANKING & WEALTH MANAGEMENT DIVISION OF SABADELL UNITED BANK, N.A. 1111 BRICKELL AVENUE, SUITE 2910 MIAMI, FL 33131 305-441-5310 ORLANDO.ROCHE@SABADELLUS.COM WWW.SABADELLTRUST.COM

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

Zev Pasternak is a Certified Public Accountant with more than 25 years of experience in the public accounting field. He specializes in audit and taxation – personal, corporate and partnerships. He has in-depth knowledge of the real estate industry and represents a variety of small to medium-sized businesses. Prior to his work with the firm, he was a tax manager for the largest co-op converter in Manhattan. A graduate of Rutgers University and Florida International University, Pasternak is a member of the Florida Institute of Certified Public Accountants and the New Jersey Society of Certified Public Accountants. Pasternak also serves on the Eleventh Circuit Grievance Committee for The Florida Bar.

With more than 25 years of financial services experience, Orlando Roche is the regional president in Miami-Dade County of Sabadell Bank & Trust, the private bank and wealth management division of Sabadell United Bank. Roche oversees Sabadell’s private banking, wealth management and fiduciary services in Miami-Dade County. Prior to joining Sabadell, Roche served as regional president for Lydian Bank & Trust and senior banking officer for Northern Trust Bank in Miami-Dade County, where he spent over 11 years. He started his banking career at SunTrust Bank. Roche is a Miami resident and a graduate of Florida International University. An active member of the community, Mr. Roche is board member of Feeding South Florida, Florida International University Foundation, University of Miami’s School of Business Advisory Board, Young Presidents’ Organization (YPO) and University of Miami Citizens Board. He is also active with the Belen Jesuit Preparatory Alumni Association and other local chambers.

SOUTH FLORIDA LEGAL GUIDE FINANCIAL EDITION 2012

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Profiles

PIERRE A. SALIBA

FRANK C. WAGNER

TAXATION, LITIGATION SUPPORT

VP, RELATIONSHIP MANAGER

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

SABADELL UNITED BANK, N.A. 110 SE 6TH STREET FORT LAUDERDALE, FL 33301 954-768-5972 FRANK.C.WAGNER@SABADELLUNITED.COM WW.SABADELLUNITED.COM

Pierre A. Saliba provides international and domestic tax, forensic accounting, litigation support and advisory services to clients in a broad range of industries including healthcare (Medicare and Medicaid fraud and regulatory compliance), manufacturing and not-for-profit organizations. He assists clients with domestic and international corporate and personal taxation services, due diligence and evidence retrieval. He also works with clients on voluntary disclosure matters. As firm manager, Saliba also leads Foodman’s focus on client service. He brings prior experience as a cost accountant, controller and production manager in the garment industry, both in the U.S. and internationally. Fluent in French, Creole and Spanish, he serves as president of the Haitian American Chamber of Commerce. Saliba is also an active member of other Miami civic and charitable organizations, devoting both time and resources to helping those in need.

Frank C. Wagner is a vice president, relationship manager, for Sabadell United Bank in Broward County. For the past 36 years he has served in various capacities within the financial services industry, including banking, lending and wealth management in South Florida. Throughout his career, Wagner has consistently delivered a high level of professional service in meeting the banking and financial needs of his clients. Over the last five years he has concentrated his efforts in positioning Sabadell United Bank (and its predecessor Mellon United National Bank) to be the bank of choice within the legal community. Wagner take price in being proactively involved in the various voluntary Bar associations that Sabadell sponsors and supports in Broward County. He served a three-year term on the Seventeenth Judicial Circuit Grievance Committee., and currently serves as the citizenat-large member of the Seventeenth Judicial Pro Bono Committee and Legal Aid Services of Broward County’s Executive Council.

Red Cross South Florida Legacy Fellows The American Red Cross South Florida Region recognized the work of 100 professional advisors by naming them 2012 Legacy Fellows during a ceremony hosted by Sabadell United Bank in Miami, Fl.

Alfred Katzin CPA, Levenson, Katzin & Ballotta, P.A., addresses the attendees as Dwight Hill Executive VP of Sabadell United Bank and Gloria Kaplan Sr. Gift Planning Officer at the American Red Cross South Florida Region look on.

Dwight Hill, Angela Carrillo, Andrea Stone in representation of Bruce Stone, Bob King, Bruce Charles King, Jr., Alfred Katzin, Gloria Kaplan (Sr. Gift Planning Officer at the American Red Cross South Florida Region), Ed Joyce, Jacob Safdeye, Melody Hendrick, Penn Chabrow and Samuel Spencer Blum.

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SOUTH FLORIDA LEGAL GUIDE FINANCIAL EDITION 2012

American Red Cross Legacy Fellows are advisors whose professional expertise help clients achieve their financial and philanthropic goals by including the American Red Cross in their personal estate plans. “Many people would like to contribute to the long-term viability of the American Red Cross with a donation but feel they cannot afford to make such a gift today,” said Gloria Kaplan, Senior Gift Planning Officer, American Red Cross South Florida Region. “For them, a planned gift is a great option.” A simple definition of a planned gift is a gift where professional assistance is required, explained Kaplan. “Examples of this are wills and trusts that are drafted by attorneys or stock transfers that a financial advisor helps the donor complete,” she said. “Most often, that professional is the individual’s attorney, accountant or financial advisor.” The advantage of a bequest by will or revocable trust is that it can be tailored to complement a person’s lifestyle and financial goals while at the same time supporting the Red Cross, said Kaplan. “These professionals have an important role in helping the American Red Cross raise funding each year so that the organization can continue its lifesaving work,” said Kaplan. “We want to be a charity of choice for donors in their estate planning.”


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Because

PREMISES LIABILITY NEGLIGENT SECURITY MEDICAL MALPRACTICE DEFECTIVE PRODUCTS VEHICLE NEGLIGENCE LEGAL MALPRACTICE

Happens. Leighton Law represents plaintiffs in complex and catastrophic personal injury and wrongful death cases, with special emphasis on violent crime/negligent premises security, medical malpractice, trucking, aviation, cruise ship/maritime, product liability and Resort Torts™.

1401 Brickell Avenue, Suite 900 ▼ Miami, FL 33131 305.347.3151 121 S. Orange Avenue, Suite 1150 ▼ Orlando, FL 32801 407.384.8004

888.395.0001 ▼ LeightonLaw.com

Mr. Leighton has been selected for inclusion in: Florida

©2012 Leighton Law, P.A.

LEIGHTON LAW, P.A.



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