CS Categories: Archived

Assessment Model and Sustainability Profile for an international food-additive company …

Modeled an objective and quantifiable assessment of the sustainability profile of ingredients procured by the company. The model incorporates all aspects of ESG, including environmental factors such as energy and climate change, water usage, and biodiversity as well as social impact factors – child and forced labor, community displacement, and governmental corruption. The model also considered third-party certifications and supplier audits to improve sustainability and is now being used to improve the overall profile of the ingredients the company procures.

 

Company-Wide, Multiple Facility Risk Profile for a multinational healthcare products company …

Developed a facility Environmental, Health, Safety, and Sustainability model to identify and quantify the relative risk presented by each facility the company operates worldwide. Factors considered include water stress, proximity to sensitive locations, waste and wastewater, water usage, air emissions, hazardous materials storage, and worker safety issues. The model provides a quantitative rating for each facility, tracks improvements in facility risk profiles, and guides resource allocations to reduce risk and improve performance.

Product Compliance, Safety, and Sustainability for one of the world’s largest private consumer products companies …

Gnarus experts have advised one of the world’s largest private consumer products companies for over two decades on issues related to product compliance, safety, and sustainability. Assignments include helping them develop corporate standards for product safety, environmental and regulatory compliance, as well as completing reviews of the company’s operations in virtually every international market. Our efforts have contributed to the company becoming a recognized leader in the use of safer chemical ingredients, sustainable packaging, and product safety and compliance.

Experts at Gnarus provided testimony in some of the largest bankruptcies involving environmental claims in U.S. history, including In re: ASARCO LLC, et al and In re: Tronox Incorporated, et al (as part of the subsequent litigation with Kerr McGee and Anadarko Petroleum). Analysis and testimony included estimation of environmental liabilities and natural resource damages, evaluation of response action consistency with the National Contingency Plan, allocation of liabilities among potentially responsible parties (PRPs), and present valuing liabilities using discount rates.

One such case was analysis and testimony in the ASARCO bankruptcy case, on behalf of the debtor ASARCO LLC. ASARCO had operated for over 100 years as a copper mining and smelting company, and had potential environmental liability at approximately 80 sites across the country. Initial claims by the US government, state governments, and PRPs were in excess of $6 billion.

The Gnarus experts were retained to independently estimate environmental liabilities at 26 of the largest sites. Specific deliverables included the filing of affirmative expert reports for each of the 26 sites, rebuttal expert reports responding to opposing experts for the US government, state governments, and PRPs, and deposition and trial testimony.

Probabilistic cost analysis was used to determine the expected value of environmental liabilities at each of the 26 sites. These analyses included the construction of decision trees, which specified the potential remedial technologies that may be employed at the sites, the costs, timing, and relative likelihood of those technologies, and the liability share of those costs apportioned to ASARCO. Monte Carlo simulation models were utilized to evaluate each of the decision trees and derive an expected value of ASARCO’s environmental liability at each of the sites.

Following over 20 depositions and 4 trials, the parties settled for approximately $1.8 billion, which at the time was the largest bankruptcy settlement in the history of the Superfund program. Settlement of the environmental liabilities was a key factor in allowing ASARCO to successfully emerge from Chapter 11 bankruptcy.

A Gnarus expert provided expert testimony regarding insurance allocation of asbestos claims for a former asbestos-products manufacturer. Testimony included appropriate methodology for handling claims for which exposure dates were not known and for allocating costs to triggered years and policies. Gnarus also developed a detailed projection of future asbestos claims and costs and advised the insured in evaluating other issues in this case, including the value of various settlement proposals made by insurers.

For a coalition of asbestos defendants involved in asbestos tort litigation Gnarus experts developed cost estimates for various asbestos litigation reform proposals.  Work included projecting the number and cost of future asbestos claimants under various legal scenarios and medical criteria; and estimating the number, composition, and cost of resolution of pending claims.

Our insurance coverage experts have consulted and/or testified in numerous cases involving a range of alleged toxins and other issues. Each case has unique features and we recognize and approach the those issues accordingly. In one case, Gnarus experts provided settlement advice and expert testimony regarding asbestos insurance coverage for a Fortune-50 diversified manufacturing company. Gnarus acquired the client’s database of over 300,000 asbestos claimants and 3 million payment records, developed detailed disease-specific actuarial projections of future asbestos claims and resulting costs; developed an insurance allocation model to determine net present value exposure of excess insurance carriers to those claims; and provided carrier-specific packages and supporting documentation for settlement negotiation.

Gnarus Advisors LLC expert Ron Rudkin was retained by a worldwide gaming company to determine the fair value of its outstanding employee stock options (EDOs). The valuations, which were required to consummate a merger with another firm, were challenging because of the large number of complex features of the ESOs being valued.

The ESOs in this case study had features that were different from those of the instruments typically awarded by the firm, including stock prices that are no longer “at-the-money,” market-based mechanisms, accelerated vesting and time-varying inputs, which cause the models traditionally used to value ESOs (Modified Black-Scholes and Hull and White) to produce incorrect results. By using the Gnarus Equity and Stock Option Valuation (ESOVAL) models instead of the traditional models, Dr. Rudkin was able to produce fair value estimates that were more accurate and significantly lower than those produced by traditional models.

The Gnarus ESOVAL models are a suite of sophisticated lattice-, Monte-Carlo simulation-based and Quasi-Monte Carlo-based models that are specifically designed to reflect the key features of complex traded- and non-traded instruments, including those awarded by firms in their compensation programs and real options.

As required in FAS 123R, the Gnarus ESOVAL models used to value employee stock options are specifically designed to reflect the key features of ESOs, including risk-aversion, lack of diversification, dynamic or time-varying inputs, blackout dates, market-based payoff mechanisms, as well as employees’ exercise and termination behavior.

Experts at Gnarus Advisors LLC were retained by National Grid to estimate its legacy environmental liabilities associated with its former manufactured gas plants (MGPs). The scope of this analysis included more than 140 former MGPs located throughout the Northeast, which were acquired by National Grid as a result of its merger with KeySpan.

The estimate of environmental liabilities was to be used for National Grid’s financial reporting. Gnarus experts had previously provided environmental liability estimates for KeySpan for its insurance recovery and financial reporting activities, using probabilistic cost analysis. These analyses evaluated the likelihood of potential remediation outcomes and their costs, including assessment of outcomes that could be considered probably, reasonably possible or even remote from a FASB financial reporting perspective.

One of the key objectives of this update was to transition the prior analyses from U.S. financial reporting standards IFASB) to international financial reporting standards (IFRS), as National Grid is a UK-based company. This transition involved identifying and quantifying differences between the two sets of standards; key differences included the use of expected value for financial reserving, the treatment of remote outcomes and the use of net present value.

Gnarus updated its prior analysis of the 140 sites to produce a comprehensive assessment of the environmental liabilities associated with the former KeySpan MGP sites. This update of environmental liabilities included a risk transfer expected value analysis (for insurance recovery or merger/acquisition transactions), a 75th probable cost analysis (for FASB financial reporting purposes), and fair value expected cost analysis (for IFRS reporting). While this transition from FASB to IFRS standards was at the time somewhat unique to National Grid given its merger with KeySpan, it is anticipated that this transition (and the need to understand the potential reporting implications) will become commonplace in the future as the United States moves toward the adoption of the IFRS.

A major division of a large municipality sought cost recovery under an existing pollution legal liability (PLL) policy. This $100 million policy covered hundreds of sites over a 20-year period. Numerous policy conditions and exclusions were at issue.

The insurer stopped paying on the policy once claims had exceeded the premium amount. Experts at Gnarus were engaged by the insured once the matter entered into litigation and the firm played a fundamental role in achieving a successful settlement.

During the course of the engagement, Gnarus reviewed costs submitted to the insurer and developed a comprehensive set of costs covered by the policy, including incurred past costs and probabilistically modeled future costs to demonstrate that the limits of the policy would be exhausted.

In addition, we calculated a significant amount of prejudgment interest for unpaid claims that were submitted to the insurer. Gnarus experts also addressed certain defenses claimed by the insurer, including voluntary payments, insufficient notice and failure to disclose material information.

Gnarus summarized its findings in an expert report that was submitted as part of mediation. Gnarus experts actively participated obtaining a settlement of over 85 percent of the policy limits.

Gnarus Advisors LLC was retained by a large U.S. insurer to assist in litigation to recover claims under its reinsurance policies. Based on a review of a sample of claims files by experts it had retained, the re-insurer alleged that our client overpaid and was therefore requesting amounts of coverage that were too high. A Gnarus expert was retained to examine the validity of the claim file sample and evaluate the extent to which the sample could be extrapolated to the claims population.

The Gnarus team obtained summary characteristics of the entire claims population as well as the list of specific claims drawn by the opposing experts. The opposing experts drew a stratified random sample using claim amount for the purposes of stratification. In general, the goal of stratification is to create strata that are more homogeneous (within strata) than the population overall. Relatively homogeneous strata allow for smaller sample sizes to have sufficient predictive power over the population. While claim amount can be a powerful tool in stratification, when the Gnarus team examined the sample, they found that the opposing expert had ignored systematic differences independent of claim amount that ultimately led to heterogeneous strata, the opposite of the desired outcome.

Because of this, the Gnarus expert was able to discredit the sampling results of the opposing expert on the basis of the sampling plan, selection methodology and sample size. The Gnarus expert submitted an expert report, sat for deposition, assisted counsel in developing cross-examination of opposing experts and testified at the arbitration. Ultimately the panel of arbitrators found in favor of the Gnarus client and ruled that the reinsurer was to pay out the policies.