PF2’s Client Crusader Health Prevails in Business Valuation Dispute over Impact of Bribery Conduct
Court Relies Heavily on Expert Evidence of PF2 Expert
PF2's expert, Gene Phillips, was retained by Cohen & Gresser LLP, counsel for Claimants Dr. Ian Hagen and Laurethé Hagen on behalf of Crusader Health DRC SARL (“Crusader”), to provide an expert report (the “Phillips Report”) inter alia valuing the loss of Crusader’s remaining business in the Democratic Republic of Congo (“DRC”) caused by Defendant Glencore International A.G.’s bribery conduct in the case of United States of America v. Glencore International A.G. (case no. 22-cr-297), in the Southern District of New York.
In the case, Claimants filed a request for restitution, arising from Glencore’s admitted scheme to bribe a public official in the DRC in exchange for dismissing a lawsuit (the “2010 Lawsuit”) brought by Crusader against an indirect subsidiary of Glencore.
On February 27, 2023, United States District Judge Lorna G. Schofield ruled in favor of Claimants, citing the Phillips Report extensively. The Court "awarded restitution in the amount of $29,691,165, comprised of (1) $16,084,556 for the value of the 2010 Lawsuit as of the date the [Congolese] action was dismissed and (2) $13,606,609 for the value of Crusader’s residual business as of September 30, 2022."
In determining direct causation, the Court stated that the Phillips Report provides evidence "sufficient to establish that the loss of the $16 Million damages award was a cause-in-fact of the demise of Crusader’s residual business."
The Court also ruled that Claimants had established proximate cause by a preponderance of the evidence, rejecting Defendant’s argument that such an analysis was too speculative. The Court ruled that:
"Defendant argues that it is too speculative to hypothesize what would have happened to Crusader’s business had it prevailed in the lawsuit and obtained damages and that to calculate the value of the loss would require 'a complex assessment.' This argument is rejected because [the Phillips Report] has offered such an assessment, based on a reasonable methodology and reasonable assumptions as discussed below. For these reasons, Claimants have established by a preponderance of the evidence both direct and proximate causation necessary to recover for the loss of its residual business."
In determining the value of Crusader’s residual business, the Court ruled:
"Claimants have submitted the expert testimony of a valuation expert Gene B. Phillips. He opines that, if Crusader had received the $16 Million, the company would have had a value of $13,606,609 as of September 30, 2022. Defendant has not offered its own expert testimony, nor has Defendant criticized or even commented on Mr. Phillips’ opinion. Because the opinion is clearly explained and appears to be based on a reasonable methodology and reasonable assumptions, Claimants have sustained their burden of proving the value of their lost property, Crusader’s residual business."
The Court used the $13,606,609 valuation from the Phillips Report, concluding that "Crusader is entitled to $13,606,609 as of September 30, 2022, for the lost value of Crusader’s business, which was caused by Defendant’s unlawful bribe."
The Court ruled:
"The assumptions that are the basis for Mr. Phillips’ analysis are clearly explained and appear to be reasonable, including reducing projected earnings at the outset to reflect the terminated contracts, assuming a growth rate based on annual increases from actual contracts, and based on the actual growth rate of mining personnel (when mining personnel were the ultimate consumers of Crusader’s services) in the same geographic area where Crusader operated, and adopting an earnings multiplier that appeared to be conservative. Although other valuation methodologies and other comparables at least in theory might have been used, this one had the benefit of being based on available data. Particularly, since Defendant had no criticism of Mr. Phillips’ estimate or his analysis, his expert opinion is sufficient to establish by a preponderance of the evidence that, but for Defendant’s unlawful bribe, Crusader’s residual business would have survived and had a value of $13,606,609 as of September 30, 2022."
Link to Judge's Order
To review the judge's ruling, click here.
Chris Dolmetsch, “Glencore Must Pay Almost $30 Million to Bribery Victim Crusader Health,” Bloomberg, February 27, 2023
Dylan Tokar and Richard Vanderford, “Glencore Subsidiary Sentenced, Ordered to Pay $30 Million to Medical Company,” Wall Street Journal, February 28, 2023