Lumber City Corporation, f.k.a. Neiman-Reed Lumber and Supply Company, Inc. - Page 36

                                       - 36 -                                         

          had annual sales of only approximately $60 million during the               
          relevant years, it does not appear that any company included in             
          the ECS survey data had annual sales of less than $150 million.22           
               Petitioner relies on the opinions of Bruce W. Barren, Ph.D.            
          (Dr. Barren), the chairman of an international merchant banking             
          firm, and Joseph D. Vinso, Ph.D. (Dr. Vinso), the president of a            
          business valuation and consulting firm.  We are unwilling to rely           
          on the analyses or opinions of either of petitioner's experts.              
               In his expert report, Dr. Barren analyzed the various                  
          factors outlined by the Court of Appeals in Elliotts, Inc. v.               
          Commissioner, 716 F.2d 1241 (9th Cir. 1983), and concluded that             
          the compensation paid to Mr. Ruf was reasonable.  Dr. Vinso also            
          applied the factors identified by the Court of Appeals in the               
          Elliotts case and expressed his opinion as to whether the weight            
          of those factors shows that the compensation paid by petitioner             
          to Mr. Ruf was reasonable.  That is not the role of an expert,              
          see Marx & Co. v. Diners' Club Inc., 550 F.2d 505, 508-511 (2d              


          22  Although Mr. Brennan conducted a telephone survey to deter-             
          mine the accuracy of his results, we did not find the telephone             
          survey to be reliable or probative of comparable compensation.              
          In conducting his telephone survey, Mr. Brennan simply inquired             
          whether any of the companies he called paid their respective CEOs           
          compensation in excess of $500,000.  However, there was no dis-             
          cussion during those telephone discussions of what constituted              
          compensation or whether the work performed by the CEO of each of            
          those companies was comparable to the work performed by Mr. Ruf.            
          Nor does the record establish that the companies Mr. Brennan                
          surveyed by telephone were totally candid and forthcoming about             
          information relating to their respective CEOs' compensation.                




Page:  Previous  26  27  28  29  30  31  32  33  34  35  36  37  38  39  40  41  42  43  44  45  Next

Last modified: May 25, 2011