Tax Controversy and Transfer Pricing

Tax Controversy & Transfer Pricing

The Brattle Group’s team of consultants and experts has more than 30 years of experience advising taxpayers and taxing authorities in local, national, and international tax disputes across the globe.

Scroll down to explore

The Brattle Group answers complex economic, finance, and regulatory questions for corporations, law firms, and governments around the world. We are distinguished by the clarity of our insights and the credibility of our experts, which include leading international academics and industry specialists. Brattle has 500 talented professionals across four continents.

About Brattle

Brattle’s consultants, academic affiliates, and industry experts are well positioned to handle all types of tax controversy and transfer pricing matters.

Our clients include hedge funds, private equity and venture capital firms, investors, service providers, fiduciaries, and regulators. Both the prosecution and defense have retained us to address industry custom and practice, market manipulation, fiduciary obligations, the valuation of illiquid and bespoke investments, seed capital arrangements, and employment compensation disputes, among other things.

Key Areas of Expertise

Accounting liability

Assessing damages for Rule 10b-5, Section11, and Section 12

Class certification

Confounding factor analysis and loss causation

Counterfactual analysis

Digital asset and alternative securities investments

Event studies (including use of high-frequency market data)

Fundamental valuation analysis

Market efficiency and trading behavior

Materiality analysis of misleading/ false statements and omissions

Tracing of shares (using LIFO/FIFO methods and trading models)

Why Clients Work With Us

Tax matters often involve complex transactions where sources of value and risk are disputed. Knowledge of a wide range of disciplines, including capital markets, engineering, intellectual property, and marketing and advertising, combined with industry-specific knowledge, are often required. We leverage our diverse internal and external network to match the right expertise to each engagement.

multi-disciplinary

Our clients come to us with their most complex, high-stakes matters, and our team inherently understands that a cookie-cutter approach is rarely effective. We work closely with our clients and counsel to identify the most salient aspects for discovery and build the factual and analytical foundation for each case.

Resourceful

Driven by facts and disciplined analysis, our principals and outside experts have testified and submitted expert reports on behalf of taxpayers and taxing authorities in over 100 tax matters across the globe. Our economic analyses and opinions are often cited extensively and favorably in landmark legal decisions.

experienced

Tax matters may involve cross-border transactions at multiple points in the supply chain, including international trade, licensing, financing, and portfolio and foreign direct investment. We have worked on matters involving dozens of countries and some of the world’s largest multinational corporations. Brattle experts have submitted expert reports in the US, UK, Canada, and Australia.

global

Class action damages, short-selling and third-party corrective disclosures

Michael I. Cragg

Principal & Chairman

Practice Leader

Michael.Cragg@brattle.com

More About Michael

+1.617.234.5721

Michael Cragg has extensive consulting, research, and expert witness experience in corporate finance, financial services, and valuation. Dr. Cragg has testified in state and federal courts as well as in regulatory proceedings nationwide.

Our Client Successes

Our Knowledge

Our Flexibility

Our Experience

Our Reach

How does Brattle use structured and unstructured data to build the factual foundation for each case?

How We Can Help

Whether a matter involves the detailed structuring of complex financial transactions or the optimization of supply chains, expert opinions often critically depend on structured and unstructured data on external transactions, payments, customer interactions, and intercompany transfers. Brattle’s tax work leverages our deep expertise in data science – analyzing large datasets computationally to reveal patterns, trends, and associations, especially relating to human behavior and interactions. Our teams have worked on disputes involving some of the most extensive and complex litigation and eDiscovery activities. We have efficiently created systematic data from both structured and unstructured data such as phone calls, texts, emails, spreadsheets, or internal accounting, human resources, and transaction databases.

Data Science Capabilities

Substance over form

Transfer pricing

More Cases

Representative Engagements

Substance over form

Transfer Pricing

State and Local Tax

James W. Bradshaw, et al. v. Stephen E. Maiden, et al.

Appeals Work

Economic Substance

Capital Structure

Ponzi scheme: Petters Company Inc. Liquidating Trust

Forensic accounting for fiber optics

IFRS asset impairment

Earnings manipulation to meet analyst consensus estimates

Opt-out decisions by institutional investors

Overstatement of revenue and understated risk of bad debt

Counsel for Fidelity Investments engaged Brattle to provide consulting and testifying services in Cross Refined Coal LLC v Commissioner, a dispute with the IRS over the firm’s allocation of $330 million in refined coal production tax credits. Brattle applied a Monte Carlo analysis to quantify the risk distribution for the partnership and individual partners and demonstrated the significant risks borne by the taxpayer. A Brattle principal testified and a team of consultants worked closely with Fidelity and their counsel for two years to build the economic and financial evidence. The court issued a bench opinion – a rare event for large corporate tax disputes – ruling in favor of Brattle’s client.

Substance over form

In Eaton Corp. v. Commissioner, Brattle assisted the taxpayer’s counsel throughout the engagement, including expert sourcing, supporting a roster of testifying experts, trial preparation, and briefing. Brattle-supported experts opined on the IRS’s justifications for cancelling two advance pricing agreements (APAs), and arm’s-length pricing of several intercompany transactions involving intermediary products, sales and administrative services, and research and development. The court agreed with the taxpayer’s positions, finding that canceling the APAs was an abuse of discretion and that the taxpayer did not need to adjust its transfer pricing methodology under IRC §482.

Transfer Pricing

In Philip Morris USA v. Department of Treasury (Michigan Court of Claims), Brattle was retained by Altria Group Inc. to advise the taxpayer on the taxation of extraterritorial investment gains. Brattle worked closely with counsel and the finance team to undertake a detailed functional analysis and prepare analysis on the unitariness of the businesses at issue. The state tax authority conceded the matter.

State and Local Tax

Brattle consulted for attorneys representing Veolia Environnement SA (France) in a tax dispute over a $4.5 billion worthless stock deduction that persisted over a decade. Brattle analyzed a series of contracts for their profit potential and demonstrated the insolvency of the business. We prepared significant new analyses rebutting IRS arguments with market evidence to explain why a turnaround was impossible. Brattle worked closely with multiple law firms and advisors in Europe and the US to bring a new lens and new expert opinion to a long running dispute. Ultimately, the IRS conceded the case in full.

Appeals Work

Brattle consulted for the US DOJ in Wells Fargo & Co. v. United States of America. In the suit, the plaintiff sought to recover $76 million in taxes paid based on foreign tax credits, while the government argued that the plaintiff was owed no money because the transaction lacked economic substance. A Brattle team worked with counsel for several years on discovery requests, deposition preparation, and preparing a multi-expert rebuttal strategy. Brattle successfully resolved this complex tax matter by applying effective, creative, and insightful economic analysis. A Brattle principal testified to the lack of profit potential and absence of a non-tax business purpose in the course of a multi-week jury trial, after which the US prevailed.

Economic Substance

In U.S. Premium Beef, LLC, et al. v. United States of America, Brattle worked on behalf of the US Department of Justice (DOJ) in their dispute with a beef cooperative, which sought a $33 million tax deduction tied to the revaluation of financial instruments issued to its members, a deduction which could only be claimed for debt instruments. A Brattle-supported external academic expert opined on the equity-like characteristics of these instruments, leading to a favorable settlement for our client with an allowed deduction of only $8 million.

Capital structure

In a case arising out of the Madoff Ponzi scheme, a Brattle principal provided analysis and expert testimony. Their findings addressed the nature of the associated hedge fund organizations and the role of a securities custodian together, with the duties and responsibilities of the securities custodian based upon industry standards and practices as well as the service agreement executed with the fund.

Ponzi scheme: Anwar v. Fairfield Greenwich Limited

A Brattle principal was retained in litigation related to clawback claims stemming from the Petters Ponzi scheme. The principal issued two expert reports related to fraud, solvency, and asset tracing; as well as hedge fund industry custom and practice, including the calculation of management and performance fees

Ponzi scheme: Petters Company Inc. Liquidating Trust

On behalf of the board of directors for Global Crossing, Brattle examined the business purposes of the company’s fiber optic capacity transactions under indefeasible rights of use; reviewed internal accounting policies and the relevant accounting standards on leases and exchanges of non-monetary assets; and conducted a forensic analysis of the associated accounting records. In addition, Brattle investigated Global Crossing’s pro forma accounting and disclosure.

Forensic accounting for fiber optics

For a Brazilian company involved in a dispute with a minority shareholder regarding certain accounting measures that were used in a covenant clause, Brattle provided testimony on the distinction between impairment of productive assets under GAAP and IFRS. Specifically, we determined that the assets correctly had been impaired under IFRS, but would not have been impaired under GAAP. The analysis required us to reverse the write-up of assets relied upon under IFRS. The International Chamber of Commerce (ICC) tribunal found in favor of our client.

IFRS asset impairment

Brattle was retained to examine allegations by the SEC and the US Department of Justice that a company’s senior management was engaging in earnings manipulation by using reserves and improper revenue recognition to achieve earnings to meet analysts’ consensus estimates. A Brattle team examined senior management’s roles and responsibilities in preparing financial data. A detailed analysis found that the company’s financial statements were presented in accordance with GAAP; the company’s internal controls were operating effectively in accordance with applicable standards; and senior management reasonably relied on subordinates to manage the company’s day-to-day accounting. Performing an intraday event study of the company’s stock price response to announcements of earnings compared to analyst consensus estimates revealed that the alleged earnings manipulation was not material and resulted in de minimis harm to shareholders. The client settled with both regulatory agencies.

Earnings manipulation to meet analyst consensus estimates

Brattle worked closely with a number of institutional investors in a securities class action. The securities at issue included common stock, dually listed in the US and Canada, and more than 10 fixed-income instruments. As part of the mediation negotiations, Brattle worked with counsel to estimate aggregate damages for each of those institutional investors based on their trading history and the terms outlined in the proposed settlement. Brattle conducted event studies to parse out non-company-specific effects on stock prices. In calculating damages based on trading history, Brattle considered different scenarios with regards to LIFO/FIFO and whether pre-class holding could be used to offset trading during the alleged class period. For fixed-income instruments, we analyzed Trade Reporting and Compliance Engine (TRACE) data, taking into account the difference between dealer-to-dealer trades and dealer-to-end-client trades. Brattle also analyzed the potential claims of those institutional investors to facilitate their opt-out decisions.

Opt-out decisions by institutional investors

In a Rule 10b-5 matter, Brattle analyzed how the company’s alleged misrepresentations of industry metrics overstated revenue and understated the risk of bad debt. Shareholders claimed that the company – a fast-growing healthcare provider – downplayed its competition risk from lower-cost alternatives and implemented pricing policies that could reduce revenue in the longer term. Our internal team worked with an academic expert in health economics to assess these claims by analyzing case issues on provider reimbursement and market competition. Following a detailed analysis of the alleged misrepresentations, the case settled.

Overstatement of revenue and understated risk of bad debt

State and local tax

Appeals work

Meet the Experts

Publications

Our Brochure

Interactive Brochure

Download the PDF

We also leverage advanced data analytics techniques and robust valuation frameworks in our analyses. By considering each case’s unique characteristics, we are able to identify the most credible method to quantify damages. We have successfully applied these techniques in several high-stakes litigations, where we analyzed large volumes of transaction records and fragmented and unstructured financial data to understand the extent of the alleged fraud.

We routinely and successfully work at all stages of a tax dispute – including planning, documentation, audit, appeal, competent authority, litigation, and post-trial briefings. Our clients include a wide variety of tax authorities as well as taxpayers in a variety of industries, including finance, technology, real estate, and healthcare.

Our diverse set of clients rely on us to provide turnkey consulting services and compelling expert testimony on complex, sometimes precedent-setting, tax cases. We look at each case individually, and when needed, work across disciplines to leverage our firm’s expertise in accounting, data science, industrial organization, finance, and statistical analyses.

Economic substance

Economic Substance

Capital structure

Meet the Experts

Our Brochure

Our Publications