Dispute Advisory Ability to Pay Services | FTI Consulting

Dispute Advisory Services – Ability to Pay Services

Forensic & Litigation Consulting

March 30, 2018

When facing a criminal fine, a company need not accept the amount calculated initially, for Section 8C3.3 of the United States Sentencing Guidelines allows for a reduction in the fine based on a company’s inability to pay. As provided by the Sentencing Guidelines, an Ability to Pay defense is prudent when the fine imposed is so onerous that even with a reasonable installment schedule, the fine will impair the company’s ability to pay restitution to victims of its conduct and/or substantially jeopardize the continued viability of the organization.

While the Sentencing Guidelines offer no prescribed methodology for analyzing a company’s ability to pay, that analysis is typically performed by analyzing the company’s projected free cash flows and assessing the strength of its balance sheet.

Description of the Process

Although the Ability to Pay defense may be sensible, the burden of proof is on the entity accused of wrongdoing. When presenting an Ability to Pay defense, the company must produce relevant documents demonstrating the burdensome nature of the proposed fine. The company will be asked to produce documents such as the following: organizational charts, five years of audited financial statements, strategic business and operating plans, borrowing and repayment schedules, detailed capital expenditure budgets, projections, tax returns, asset schedules, among others.

FTI Consulting professionals can help identify and obtain the documentation necessary to fairly and fully analyze the issues in an Ability to Pay matter. FTI Consulting can serve as a sounding board and help to organize productions to the requesting governmental authority in order to ensure that the company is cooperative and responsive. We understand the tenor of these exercises and from behind the scenes, we can aid counsel in fostering this relationship with the authority levying the fine. Whether physically locating or recreating financial records, we assist counsel in all phases of the “discovery” process.

While FTI Consulting performs its analysis, the governmental authority will often engage its own expert to perform a similar analysis concurrently. We have found it successful and persuasive in presenting our analyses to the governmental authority on behalf of the company. Having presented to multiple governmental authorities on numerous occasions, FTI Consulting has developed a rapport with opposing experts and a methodology that is effective in reducing criminal fines.

FTI Consulting has unique insight into how governmental authorities treat these matters. Though we have typically performed these analyses on behalf of the company, the UK Serious Fraud Office retained FTI Consulting to evaluate a company’s Ability to Pay defense.

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Basil A. Imburgia

Senior Managing Director, Leader of North America Forensic and Litigation Consulting