In this case, our client had opened a restaurant with a Restaurateur who already owned and managed a successful restaurant in the area. After several years of being open, the restaurant co-owned by our client seemed to be a success, however, our client had not received any distributions of profits. Our client began to suspect that money was being misappropriated from the co-owned restaurant. We were hired to investigate.
We conducted a few different analyses, including profitability and cost of goods sold analysis of the new restaurant co-owned by our client and the other restaurant solely owned by the restaurateur. Since both restaurants offered similar types of food and beverages, it would be expected that both restaurant’s profitability percentages would be similar. However, we found that the restaurant owned by the Restaurateur was significantly more profitable than the co-owned restaurant. Additionally, we found that the restaurant owned by the Restaurateur became more profitable after the opening of the co-owned restaurant. This raised the concern that the co-owned restaurant’s funds were being used to pay for supplies of the Restaurateur’s other restaurant. We investigated this claim and found that both restaurants utilized the same suppliers. This, in addition to the fact that the restaurant solely owned by the Restaurateur became more profitable after the opening of the co-owned restaurant, supported the idea that funds from the co-owned restaurant were being used to purchase supplies for the restaurant solely owned by the Restaurateur.
In addition to the profitability analysis, we completed a lifestyle analysis of the Restaurateur to determine if the income reported on the Restaurateur’s tax return could support the expenses listed on their bank statements and credit cards. In conducting this analysis, we found that the Restaurateur spent an excessive amount of money on lavish vacations abroad. It was also found that the Restaurateur had historically spent a significant amount of money on gambling. Using various bank account statements, credit card statements, and gambling account histories, we were able to determine that the income reported on the Restaurateur’s tax return could not support their lifestyle.
This case was eventually brought to mediation. Our forensic report was an integral part of the mediation and in the end, our client won a favorable settlement.