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respondent proffered the testimony of Howard Lewis (Mr. Lewis), a
valuation engineer with the Internal Revenue Service in Atlanta,
Georgia, as a rebuttal witness to Mr. Harris.
Procedures Used by Goldman Sachs To Value the Preferred Stock
At trial, Mr. Harris stated that Goldman Sachs had used
appropriate procedures in valuing the Securities during 1987 and
that the Goldman Sachs Valuation had reached accurate
conclusions. Mr. Harris explained that, in preparing the Goldman
Sachs Valuation, Goldman Sachs had concluded that it would be
unreasonable to value the HealthTrust PIK Preferred Stock solely
by reference to the trading prices of existing publicly traded
PIK preferred stock because (1) only a limited number of publicly
traded PIK preferred stocks existed at the time HealthTrust
issued the Preferred Stock; (2) shares of the publicly traded PIK
preferred stock were thinly traded; and (3) the issuers of the
publicly traded PIK preferred stock were not comparable companies
to HealthTrust as none were in the health care industry. Based
on recommendations of its traders, Goldman Sachs concluded that a
more reliable valuation approach would be to analyze the
increment between the market yield on the publicly traded PIK
12 (...continued)
Co., to support the Commissioner's position that the fair market
value of the Securities was at least $443 million in total, of
which petitioners would own approximately $432 million.
Respondent had not retained Mr. Doolittle as an expert witness,
and he did not wish to serve in that capacity. As Mr. Doolittle
was not being called as a fact witness, we declined to enforce
the subpoena that would have required Mr. Doolittle to serve as
an involuntary, uncompensated expert witness.
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