Diamond Claims & Investigation Services, Inc. - Page 21

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          neys' fees and costs actually incurred in the Farmers lawsuit).13           
               Sometime after the damages hearing, DCI and/or the Diamonds            
          retained James Donnelly (Mr. Donnelly), a certified public                  
          accountant, to analyze how the proceeds of the Farmers lawsuit              
          should be allocated between DCI and ETS.  Mr. Donnelly made seven           
          alternative analyses.  In making those various analyses, he had             
          access to, and relied on, inter alia, the following that he                 
          received from Mr. Diamond:  (1) A copy of the District Court's              
          opinion and (2) copies of certain evidence presented at the                 
          damages hearing, including copies of Analysis 1 and portions of             
          the transcript containing Mr. Wharton's testimony, historical               
          financial records of DCI and ETS, and Federal income tax returns            
          filed by DCI and by the Diamonds.  Mr. Donnelly recommended, and            
          the board of directors of DCI and the Diamonds in their capacity            
          as owners of ETS approved, the use of one of those analyses                 
          (selected allocation analysis).                                             
               Under the selected allocation analysis, Mr. Donnelly recom-            
          mended that $446,981 of the lost profits damages be allocated to            
          ETS.  That amount, which was approximately 29.86 percent of those           
          damages (selected allocation ratio), represented Mr. Donnelly's             
          estimate of the profits that ETS would have earned during each of           

          13  Although the attorneys' fees and costs actually incurred in             
          the Farmers lawsuit were $692,203, the District Court awarded the           
          plaintiffs $220,360 in attorneys' fees and costs, and FIG paid              
          the plaintiffs $226,212 in attorneys' fees and costs.  See supra            
          note 10.                                                                    

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