Preview
FILED: QUEENS COUNTY CLERK 06/06/2023 08:06 PM INDEX NO. 714855/2021
NYSCEF DOC. NO. 120 RECEIVED NYSCEF: 06/06/2023
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FILED: QUEENS COUNTY CLERK 06/06/2023 08:06 PM INDEX NO. 714855/2021
NYSCEF DOC. NO. 120 RECEIVED NYSCEF: 06/06/2023
LSH FORENS1C SERVICEs, LLC
Forensic Accounting Consultants to the Insurance hdustry
March 11, 2021
Sent via Regular Mail & Email
Ms. Nia Williams Our File: #2717
AIIstate Insurance Your File: #0555072973
P.O. Box 2874 D/A: July 29, 2019
Clinton, IA 52733
Claimant: Michael West
71 Cedarhurst Street
Islip Terrace, NY 11752
SUPPLEMENTAL REPORT & ANALYSIS
Previously, we issued a Supplemental Report to you regarding the above-captioned matter
dated June 12, 2020. At that time, we advised that additional records were required to quantify
any potential loss that was causally related to the accident.
I. Follow-Up
On June 12, 2020, we wrote to the Claimant's attorney, Samuel Felberbaum, Esq., and
provided him with an itemized listing of the outstanding records. A copy of our correspondence
was previously furnished to you.
We subsequently received certain records from Mr. Felberbaum on a piecemeal basis, which
will be discussed in the report below.
On December 15, 2020, we wrote to the attorney to provide him with an up-to-date listing of the
records and information that continued to be necessary to the evaluation of this claim. In
addition to the requested records, we requested that the Claimant execute a release form that
would enable us to obtain information about potential unemployment compensation benefits in
the period from January 1, 2020 to date. A copy of our letter was previously forwarded to you.
On February 13, 2021, we received a letter from Mr. Felberbaum dated February 11, 2021,
which contained certain explanations and records. We will discuss this information in the report
below.
The attorney furnished an executed unemployment release form, which we immediately
submitted to the NYS Dept. of Labor for processing. Although the attorney advised that the
Claimant did not apply for unemployment ("UI") benefits, the information we recently obtained
directly from the NYS Dept. of Labor indicates that he did, in fact, apply for UI benefits during
998C OLD COUNTRY ROAD. SUITE 403 " PL.AINVIEW, NY 1 1803
Phone: 516.551.9150 Fax: 516.433.7208
FILED: QUEENS COUNTY CLERK 06/06/2023 08:06 PM INDEX NO. 714855/2021
NYSCEF DOC. NO. 120 RECEIVED NYSCEF: 06/06/2023
Ms. Nia Williams
Allstate Insurance
Re: Michael West
March 11, 2021
Page 2
the claimed loss period, stating that his last day of work was February 2, 2020 due to
"lack of work". The ramifications of this will be discussed in greater detail in the report below.
Mr. Felberbaum advised that the Claimant's businesses were not affected by the COVID-19
pandemic shutdown and that he did not receive any Paycheck Protection Program ("PPP")
loans.
Despite the attorney's assertion that the Claimant's businesses were not affected by COVID-19,
many businesses did experience reduced sales in 2020, either because their supply chains
were interrupted or because their customers were affected by the shutdown. The Claimant's
attestation to the State of New York that he stopped working as of February 2, 2020 due to "lack
work"
of is an indication that his companies were, in fact, being negatively impacted. We note
that the Claimanes application for UI benefits was submitted two days prior to the World Health
Organization declaring the COVID-19 pandemic on March 11, 2020.
As will be discussed in the report below, based on the records furnished, there is n_o
evidence that the Claimant sustained any loss of earnings from Hillcrest Supply Corp.
through December 31, 2019 or from NY Tool Box Inc. through August 21, 2020.
Mr. Felberbaum failed to submit certain key records that were necessary to quantify the
Claimant's potential loss in the year 2020. For example, he failed to furnish the
Claimant's 2020 W-2 and 1099 forms (which have been available since January 31, 2021).
He also failed to submit Hillcrest Supply Corp.'s 2020 corporate income tax return and
general ledger as well as bank records dated in 2020.
However, since the Claimant deposited unsubstantiated funds amounting to $171,441
into his personal bank account during the claimed loss period in 2020, an amount that far
exceeds his historical earnings, there is no evidence that he sustained any loss of
earnings through August 21, 2020.
Since the records provided indicate that the Claimant did not sustain lost earnings as a
result of the accident, as alleged, we recommend that no lost earnings benefits be paid to
.h_i,m.
It is our understanding that the Claimant had a negative I.M.E. with an effective date of August
21, 2020. Accordingly, for the purposes of this discussion, we have assumed that the claimed
loss period would not exceed the 390 days from July 29, 2019 through August 21, 2020.
As previously reported, the Claimant is alleging a loss of $10,000 per month as a result of
the accident, which far exceeds his maximum lost earnings benefit of $3,000 per month.
Had the Claimant been able to demonstrate a $3,000 per month loss throughout the 13-
month claimed loss period, his lost earnings benefits would have totaled $39,000.
FILED: QUEENS COUNTY CLERK 06/06/2023 08:06 PM INDEX NO. 714855/2021
NYSCEF DOC. NO. 120 RECEIVED NYSCEF: 06/06/2023
Ms. Nia Williams
Allstate Insurance
Re: Michael West
March 11, 2021
Page 3
II. Personal Income Tax Returns (Forms 1040) (2017-2019)
Previously, we inspected the Claimants 2017-2018 personal income tax returns (Forms 1040),
which were prepared on a joint basis with his wife, Laurie West. We were recently provided with
the Claimant's 2019 joint personal income tax return. Information taken from the tax returns
inspected is presented below:
2019 2018 2017
Wages -Claimant $ 0 $ 0 $ 0
Wages - Wife 43,323 58,335 69,165
Interest Income 100 113 190
Net Business Income - Claimant 24,000 24,000 36,000
Other Gains (Losses) 0 (6.113) 0
S Corporation Net (Loss) - Claimant & Wife 12,027 (731) 15,830
Rental Property Net Income (Loss) (6,818) 6.059 (31,877)
Unemployment Compensation Benefits - Wife 0 10,500 0
Taxable Refunds of State & Local Income Taxes 0 795 788
Total Income $ 72,632 $ 92.958 $ 90.096
Since the claimed loss period includes nearly eight months in 2020, we requested that
the Claimant submit his 2020 personal income tax return when it is prepared. Even if the
2020 personal income tax return has not yet been prepared, the Claimant should have
been able to furnish the W-2 and 1099 forms issued to him and Mrs. West along with the
other records submitted on February 13, 2021.
Occupation & Waqes
No occupations were shown for the Claimant and/or his wife on their 2017-2019 personal
income tax returns. No wages were reported by the Claimant in any year.
Based on the W-2 records provided, Mrs. West reported wage income from Tiffany & Company
(2017-2018) and from Sourceways Inc. (2018-2019). Mrs. Wests wages are not relevant to the
evaluation of this claim.
Unemployment Compensation
The couple reported unemployment compensation benefits amounting to $10,500 on their 2018
personal income tax return. Based on the information we recently obtained directly from the
NYS Dept. of Labor, Mrs. West collected these benefits. Given that Mrs. West had S
corporation net income amounting to $25,158 in 2018, we are uncertain how she qualified for
unemployment benefits.
FILED: QUEENS COUNTY CLERK 06/06/2023 08:06 PM INDEX NO. 714855/2021
NYSCEF DOC. NO. 120 RECEIVED NYSCEF: 06/06/2023
Ms. Nia Williams
Allstate Insurance
Re: Michael West
March 11, 2021
Page 4
The CARES Act signed into law by President Trump on March 27, 2020 gave States the option
of extending unemployment compensation to independent contractors, self-employed workers
and other workers who are ordinarily ineligible for unemployment ("Ul") benefits.
The information we obtained directly from the NYS Dept. of Labor indicates that the
Claimant, did, in fact, apply for UI benefits on March 9, 2020 (approximately 7-½ months
subsequent to the accident). The Claimant advised the Dept. of Labor that his last day of
work was February 2, 2020 due to "lack of work". The Claimant advised the State that he had
"wages"
amounting to $4,732 per quarter in the quarters ended September 30, 2019 and
December 31, 2019. We are uncertain how the Claimant calculated these amounts, since his
combined earnings (net business income plus S corporation net income) averaged $7,501 per
quarter in 2019. Based on the earnings information he provided, the Dept. of Labor determined
that he was entitled to UI benefits amounting to $182 per week for a period of 26 weeks. We
have enclosed relevant documentation for your file.
On December 7, 2020, the Dept. of Labor wrote to the Claimant to advise that they needed to
verify his identity in order to complete the
processing of his unemployment claim. They
requested three forms of identification (Social Security card, driver's license and birth certificate
and/or passport). The Dept. of Labor advised that if the Claimant did not submit documents
within 10 days and/or a written explanation for why he was unable to submit documents within
that timeframe, they would find him ineligible to collect UI benefits.
As of March 5, 2021 (date of the NYS Dept. of Labor's response), the Claimant had not
collected any UI benefits. Since UI benefits are paid in lieu of earned income, any benefits that
might have been collected during the claimed loss period would have acted as an offset to this
claim.
Most importantly, when the Claimant applied for UI benefits, he was required to attest to
the State of New York that he was "ready, willing and able to work", which was contrary
to his claim to Allstate Insurance that he had been disabled since the July 29, 2019
accident.
Based on the Claimant's application for UI benefits, consideration should be given to
limiting the claimed loss period to the 189 days from July 29, 2019 through February 2,
2020, since he attested he stopped working on February 2, 2020 to "lack of work".
Net Business Income
The Claimant reported net business income in 2017-2019. We inspected the Claimant's 2017-
2019 Schedule C forms and note that the primary business activity was shown as "manager".
FILED: QUEENS COUNTY CLERK 06/06/2023 08:06 PM INDEX NO. 714855/2021
NYSCEF DOC. NO. 120 RECEIVED NYSCEF: 06/06/2023
Ms. Nia Williams
Allstate Insurance
Re: Michael West
March 11, 2021
Page 5
Below we have presented a summary of the sales and expenses reported on these documents:
2019 2018 2017
Sales (1099 income from Hillcrest Supply Corp.) $24,000 $24.000 $36,000
Less: Expenses 0 0 0
Claimant's Net Business Income $24.000 $24,000 $36,000
According to the Claimant's Schedule C forms, he received non-employee compensation (1099
income) from Hillcrest Supply Corp. that amounted to $36,000 in 2017, $24,000 in 2018 and
$24,000 in 2019. As will be presented later in this report, these amounts are consistent with the
officer's compensation deducted on the 2017-2019 corporate income tax returns (Forms 1120S)
prepared for Hillcrest Supply Corp.
In the absence of the 2020 general ledger for Hillcrest Supply Corp. (requested but not
provided), we are unable to determine to what extent that payments to the Claimant were
classified as officer's compensation in that year.
S Corporation Net Income (Loss)
In 2017-2019, the Claimant and his wife reported S corporation net income (loss) amounts from
Hillcrest Supply Corp. and NY Tool Box Inc. In an S corporation, the company is not
responsible for paying federal income taxes on its net taxable income. Instead, the net income
(loss) for each year is passed through to the individual stockholders of the company. These
stockholders report their proportionate share of the corporation's net income (loss) on their
personal income tax returns (Forms 1040) each year.
The Claimant holds a 49% ownership interest in Hillcrest Supply Corp., which was
incorporated on August 26, 2010. Mrs. West holds the remaining 51% ownership interest in this
entity.
The Claimant holds a 100% ownership interest in NY Tool Box Inc., which was incorporated
on February 20, 2018.
FILED: QUEENS COUNTY CLERK 06/06/2023 08:06 PM INDEX NO. 714855/2021
NYSCEF DOC. NO. 120 RECEIVED NYSCEF: 06/06/2023
Ms. Nia Williams
Allstate Insurance
Re: Michael West
March 11, 2021
Page 6
Below we have presented a summary of the S corporation net income (loss) amounts allocated
to the Claimant and his wife based on their 2017 and 2018 personal income tax returns:
CLAIMANT WIFE
S Corporation 2019 2018 2017 2019 2018 2017
Hillcrest Supply Corp. $ 5,785 $ 24,171 $ 8.982 $ 6,022 $ 25,158 $ 9.348
Less: Section 179 Deduction 0 (19,604) (1,225) 0 l (20,405) (1,275)
Total Hillcrest Supply Corp. 5,785 4,567 I 7,757 6 022 | 4,753 | 8,073
NY Tool Box Inc. 220 5.337
Less: Section 179 Deduction ,,,,, 0 (15)§§)
Total NY Tool Box Inc. 220 (10 051)
Total S Corporation Net Income (Loss) $ 6.005 $ (5 484) $ 7,757 $ 6.022 $ 4,753 $ 8,073
The Claimant and his wife reduced their taxable S corporation net income by taking Section 179
deductions in 2017 and 2018. A Section 179 deduction is allowed for certain tangible property
placed into service whereby a taxpayer can deduct the cost of this property (subject to certain
dollar limitations) in the year the property was acquired rather than having to depreciate the
property over its estimated useful life.
After his Section 179 deductions, the Claimant reported S corporation net income amounting to
$7,757 in 2017 and an S corporation net (loss) amounting to $(5,484) in 2018. The Claimant
did not take any Section 179 deductions in 2019 and reported S corporation net income totaling
$6,005 in that year.
Based on the personal income tax returns provided, the Claimant's combined earnings in 2017-
2019 were as follows:
2019 2018 2017
Net Business Income (1099 Income from Hillcrest Corp. $24,000 $24,000 $36,000
Supply
S Corporation Net Income (Loss) 6.005 (5,484) 7,757
Claimant's Combined Earnings $30,005 $18.516 $43.757
Combined Earnings* $ 2.500 S 1.543 $ 3.646
Claimant's Average Monthly
*Based on 12 months per year.
Based on 12 months per year, the Claimant's average monthly combined earnings declined by
58% from $3,646 per month in 2017 to $1,543 per month in 2018. in 2019 (year of the
accident), the Claimant's average monthly combined earnings increased by 62% to $2,500 per
FILED: QUEENS COUNTY CLERK 06/06/2023 08:06 PM INDEX NO. 714855/2021
NYSCEF DOC. NO. 120 RECEIVED NYSCEF: 06/06/2023
Ms. Nia Williams
Allstate Insurance
Re: Michael West
March 11, 2021
Page 7
month. As will be discussed in the report below, the records fumished indicate that the
Claimant continued to work for Hillcrest
Supply Corp. and NY Tool Box Inc. throughout 2019.
The fact that his average monthly combined earnings in 2019 were greater than in 2018
indicates that he did not sustain a loss of income through December 31, 2019.
As previously reported, the Claimant alleges that he sustained lost net earnings amounting to
$10,000 per month, which far exceeds the maximum lost earnings benefit of $3,000 per month
allowed under his policy. His average monthly combined earnings, both before and after the
accident, demonstrate that his claim is vastly overstated.
We will present additional information about Hillcrest Supply Corp. and NY Tool Box Inc. later in
this report.
Based upon our independent research, we previously determined that Michael K. West, Inc.
was incorporated on May 21, 2001. According to Mr. Felberbaum, the Claimant did not prepare
corporate income tax retums to report the transactions of Michael K. West, Inc. Rather, the
retums."
attorney stated, "Ies all filed under his personal income tax
It should be noted that the transactions of a corporation should be reported utilizing either Form
1120 or a Form 1120S, depending whether the business is organized for tax purposes as a
regular or an S corporation. Notwithstanding that it would be inappropriate to report corporate
sales and expenses on a personal income tax return, there is no evidence that the transactions
of Michael K. West, Inc. were ever reported on the Claimanes personal income tax returns.
The attorney recently furnished bank statements for an account maintained with Michael K.
West, Inc., Chase Bank Checking Account #xxx-xxx-2318 encompassing the period from
September 29, 2018 through December 31, 2020. We were not provided with the bank
statement dated January 31, 2019. Information taken from the documents inspected is
presented on Schedule I attached.
FILED: QUEENS COUNTY CLERK 06/06/2023 08:06 PM INDEX NO. 714855/2021
NYSCEF DOC. NO. 120 RECEIVED NYSCEF: 06/06/2023
Ms. Nia Williams
Allstate Insurance
Re: Michael West
March 11, 2021
Page 8
We noted that deposits were made into this bank account in periods both before and after the
date of accident. Below we have presented a monthly summary of these deposits:
MONTHLY
DEPOSITS
Michael K. West, Inc.
(Chase Bank #2318)
2020 2019
January $ 650 $ N/P
February 700 800
March 0 800
April 800 1,077
May 800 | 800
June 0 0
July 800 1,500
August 800 2,300
September 650 1,500
October 0 1,500
November 0 3,751
December 0 0
$ 5,200 $14.028
N/P - Not provided.
We continue to be uncertain if/how deposits into the checking account maintained by Michael K.
West, Inc. were reported on the Claimanes personal income tax returns. All post-accident
deposits should be an offset to this claim.
III. Hillcrest Supply Corp.
Corporate Income Tax Returns (Forms 1120S) (2017-2019)
Previously, we inspected the 2017 and 2018 corporate income tax returns (Forms 11208)
prepared for Hillcrest Supply Corp. We recently inspected the 2019 corporate income tax return
for this business.
As previously reported, the primary business activity of Hillcrest Suppl
Preview
FILED: QUEENS COUNTY CLERK 06/06/2023 08:06 PM INDEX NO. 714855/2021 NYSCEF DOC. NO. 120 RECEIVED NYSCEF: 06/06/2023 ) FILED: QUEENS COUNTY CLERK 06/06/2023 08:06 PM INDEX NO. 714855/2021 NYSCEF DOC. NO. 120 RECEIVED NYSCEF: 06/06/2023 LSH FORENS1C SERVICEs, LLC Forensic Accounting Consultants to the Insurance hdustry March 11, 2021 Sent via Regular Mail & Email Ms. Nia Williams Our File: #2717 AIIstate Insurance Your File: #0555072973 P.O. Box 2874 D/A: July 29, 2019 Clinton, IA 52733 Claimant: Michael West 71 Cedarhurst Street Islip Terrace, NY 11752 SUPPLEMENTAL REPORT & ANALYSIS Previously, we issued a Supplemental Report to you regarding the above-captioned matter dated June 12, 2020. At that time, we advised that additional records were required to quantify any potential loss that was causally related to the accident. I. Follow-Up On June 12, 2020, we wrote to the Claimant's attorney, Samuel Felberbaum, Esq., and provided him with an itemized listing of the outstanding records. A copy of our correspondence was previously furnished to you. We subsequently received certain records from Mr. Felberbaum on a piecemeal basis, which will be discussed in the report below. On December 15, 2020, we wrote to the attorney to provide him with an up-to-date listing of the records and information that continued to be necessary to the evaluation of this claim. In addition to the requested records, we requested that the Claimant execute a release form that would enable us to obtain information about potential unemployment compensation benefits in the period from January 1, 2020 to date. A copy of our letter was previously forwarded to you. On February 13, 2021, we received a letter from Mr. Felberbaum dated February 11, 2021, which contained certain explanations and records. We will discuss this information in the report below. The attorney furnished an executed unemployment release form, which we immediately submitted to the NYS Dept. of Labor for processing. Although the attorney advised that the Claimant did not apply for unemployment ("UI") benefits, the information we recently obtained directly from the NYS Dept. of Labor indicates that he did, in fact, apply for UI benefits during 998C OLD COUNTRY ROAD. SUITE 403 " PL.AINVIEW, NY 1 1803 Phone: 516.551.9150 Fax: 516.433.7208 FILED: QUEENS COUNTY CLERK 06/06/2023 08:06 PM INDEX NO. 714855/2021 NYSCEF DOC. NO. 120 RECEIVED NYSCEF: 06/06/2023 Ms. Nia Williams Allstate Insurance Re: Michael West March 11, 2021 Page 2 the claimed loss period, stating that his last day of work was February 2, 2020 due to "lack of work". The ramifications of this will be discussed in greater detail in the report below. Mr. Felberbaum advised that the Claimant's businesses were not affected by the COVID-19 pandemic shutdown and that he did not receive any Paycheck Protection Program ("PPP") loans. Despite the attorney's assertion that the Claimant's businesses were not affected by COVID-19, many businesses did experience reduced sales in 2020, either because their supply chains were interrupted or because their customers were affected by the shutdown. The Claimant's attestation to the State of New York that he stopped working as of February 2, 2020 due to "lack work" of is an indication that his companies were, in fact, being negatively impacted. We note that the Claimanes application for UI benefits was submitted two days prior to the World Health Organization declaring the COVID-19 pandemic on March 11, 2020. As will be discussed in the report below, based on the records furnished, there is n_o evidence that the Claimant sustained any loss of earnings from Hillcrest Supply Corp. through December 31, 2019 or from NY Tool Box Inc. through August 21, 2020. Mr. Felberbaum failed to submit certain key records that were necessary to quantify the Claimant's potential loss in the year 2020. For example, he failed to furnish the Claimant's 2020 W-2 and 1099 forms (which have been available since January 31, 2021). He also failed to submit Hillcrest Supply Corp.'s 2020 corporate income tax return and general ledger as well as bank records dated in 2020. However, since the Claimant deposited unsubstantiated funds amounting to $171,441 into his personal bank account during the claimed loss period in 2020, an amount that far exceeds his historical earnings, there is no evidence that he sustained any loss of earnings through August 21, 2020. Since the records provided indicate that the Claimant did not sustain lost earnings as a result of the accident, as alleged, we recommend that no lost earnings benefits be paid to .h_i,m. It is our understanding that the Claimant had a negative I.M.E. with an effective date of August 21, 2020. Accordingly, for the purposes of this discussion, we have assumed that the claimed loss period would not exceed the 390 days from July 29, 2019 through August 21, 2020. As previously reported, the Claimant is alleging a loss of $10,000 per month as a result of the accident, which far exceeds his maximum lost earnings benefit of $3,000 per month. Had the Claimant been able to demonstrate a $3,000 per month loss throughout the 13- month claimed loss period, his lost earnings benefits would have totaled $39,000. FILED: QUEENS COUNTY CLERK 06/06/2023 08:06 PM INDEX NO. 714855/2021 NYSCEF DOC. NO. 120 RECEIVED NYSCEF: 06/06/2023 Ms. Nia Williams Allstate Insurance Re: Michael West March 11, 2021 Page 3 II. Personal Income Tax Returns (Forms 1040) (2017-2019) Previously, we inspected the Claimants 2017-2018 personal income tax returns (Forms 1040), which were prepared on a joint basis with his wife, Laurie West. We were recently provided with the Claimant's 2019 joint personal income tax return. Information taken from the tax returns inspected is presented below: 2019 2018 2017 Wages -Claimant $ 0 $ 0 $ 0 Wages - Wife 43,323 58,335 69,165 Interest Income 100 113 190 Net Business Income - Claimant 24,000 24,000 36,000 Other Gains (Losses) 0 (6.113) 0 S Corporation Net (Loss) - Claimant & Wife 12,027 (731) 15,830 Rental Property Net Income (Loss) (6,818) 6.059 (31,877) Unemployment Compensation Benefits - Wife 0 10,500 0 Taxable Refunds of State & Local Income Taxes 0 795 788 Total Income $ 72,632 $ 92.958 $ 90.096 Since the claimed loss period includes nearly eight months in 2020, we requested that the Claimant submit his 2020 personal income tax return when it is prepared. Even if the 2020 personal income tax return has not yet been prepared, the Claimant should have been able to furnish the W-2 and 1099 forms issued to him and Mrs. West along with the other records submitted on February 13, 2021. Occupation & Waqes No occupations were shown for the Claimant and/or his wife on their 2017-2019 personal income tax returns. No wages were reported by the Claimant in any year. Based on the W-2 records provided, Mrs. West reported wage income from Tiffany & Company (2017-2018) and from Sourceways Inc. (2018-2019). Mrs. Wests wages are not relevant to the evaluation of this claim. Unemployment Compensation The couple reported unemployment compensation benefits amounting to $10,500 on their 2018 personal income tax return. Based on the information we recently obtained directly from the NYS Dept. of Labor, Mrs. West collected these benefits. Given that Mrs. West had S corporation net income amounting to $25,158 in 2018, we are uncertain how she qualified for unemployment benefits. FILED: QUEENS COUNTY CLERK 06/06/2023 08:06 PM INDEX NO. 714855/2021 NYSCEF DOC. NO. 120 RECEIVED NYSCEF: 06/06/2023 Ms. Nia Williams Allstate Insurance Re: Michael West March 11, 2021 Page 4 The CARES Act signed into law by President Trump on March 27, 2020 gave States the option of extending unemployment compensation to independent contractors, self-employed workers and other workers who are ordinarily ineligible for unemployment ("Ul") benefits. The information we obtained directly from the NYS Dept. of Labor indicates that the Claimant, did, in fact, apply for UI benefits on March 9, 2020 (approximately 7-½ months subsequent to the accident). The Claimant advised the Dept. of Labor that his last day of work was February 2, 2020 due to "lack of work". The Claimant advised the State that he had "wages" amounting to $4,732 per quarter in the quarters ended September 30, 2019 and December 31, 2019. We are uncertain how the Claimant calculated these amounts, since his combined earnings (net business income plus S corporation net income) averaged $7,501 per quarter in 2019. Based on the earnings information he provided, the Dept. of Labor determined that he was entitled to UI benefits amounting to $182 per week for a period of 26 weeks. We have enclosed relevant documentation for your file. On December 7, 2020, the Dept. of Labor wrote to the Claimant to advise that they needed to verify his identity in order to complete the processing of his unemployment claim. They requested three forms of identification (Social Security card, driver's license and birth certificate and/or passport). The Dept. of Labor advised that if the Claimant did not submit documents within 10 days and/or a written explanation for why he was unable to submit documents within that timeframe, they would find him ineligible to collect UI benefits. As of March 5, 2021 (date of the NYS Dept. of Labor's response), the Claimant had not collected any UI benefits. Since UI benefits are paid in lieu of earned income, any benefits that might have been collected during the claimed loss period would have acted as an offset to this claim. Most importantly, when the Claimant applied for UI benefits, he was required to attest to the State of New York that he was "ready, willing and able to work", which was contrary to his claim to Allstate Insurance that he had been disabled since the July 29, 2019 accident. Based on the Claimant's application for UI benefits, consideration should be given to limiting the claimed loss period to the 189 days from July 29, 2019 through February 2, 2020, since he attested he stopped working on February 2, 2020 to "lack of work". Net Business Income The Claimant reported net business income in 2017-2019. We inspected the Claimant's 2017- 2019 Schedule C forms and note that the primary business activity was shown as "manager". FILED: QUEENS COUNTY CLERK 06/06/2023 08:06 PM INDEX NO. 714855/2021 NYSCEF DOC. NO. 120 RECEIVED NYSCEF: 06/06/2023 Ms. Nia Williams Allstate Insurance Re: Michael West March 11, 2021 Page 5 Below we have presented a summary of the sales and expenses reported on these documents: 2019 2018 2017 Sales (1099 income from Hillcrest Supply Corp.) $24,000 $24.000 $36,000 Less: Expenses 0 0 0 Claimant's Net Business Income $24.000 $24,000 $36,000 According to the Claimant's Schedule C forms, he received non-employee compensation (1099 income) from Hillcrest Supply Corp. that amounted to $36,000 in 2017, $24,000 in 2018 and $24,000 in 2019. As will be presented later in this report, these amounts are consistent with the officer's compensation deducted on the 2017-2019 corporate income tax returns (Forms 1120S) prepared for Hillcrest Supply Corp. In the absence of the 2020 general ledger for Hillcrest Supply Corp. (requested but not provided), we are unable to determine to what extent that payments to the Claimant were classified as officer's compensation in that year. S Corporation Net Income (Loss) In 2017-2019, the Claimant and his wife reported S corporation net income (loss) amounts from Hillcrest Supply Corp. and NY Tool Box Inc. In an S corporation, the company is not responsible for paying federal income taxes on its net taxable income. Instead, the net income (loss) for each year is passed through to the individual stockholders of the company. These stockholders report their proportionate share of the corporation's net income (loss) on their personal income tax returns (Forms 1040) each year. The Claimant holds a 49% ownership interest in Hillcrest Supply Corp., which was incorporated on August 26, 2010. Mrs. West holds the remaining 51% ownership interest in this entity. The Claimant holds a 100% ownership interest in NY Tool Box Inc., which was incorporated on February 20, 2018. FILED: QUEENS COUNTY CLERK 06/06/2023 08:06 PM INDEX NO. 714855/2021 NYSCEF DOC. NO. 120 RECEIVED NYSCEF: 06/06/2023 Ms. Nia Williams Allstate Insurance Re: Michael West March 11, 2021 Page 6 Below we have presented a summary of the S corporation net income (loss) amounts allocated to the Claimant and his wife based on their 2017 and 2018 personal income tax returns: CLAIMANT WIFE S Corporation 2019 2018 2017 2019 2018 2017 Hillcrest Supply Corp. $ 5,785 $ 24,171 $ 8.982 $ 6,022 $ 25,158 $ 9.348 Less: Section 179 Deduction 0 (19,604) (1,225) 0 l (20,405) (1,275) Total Hillcrest Supply Corp. 5,785 4,567 I 7,757 6 022 | 4,753 | 8,073 NY Tool Box Inc. 220 5.337 Less: Section 179 Deduction ,,,,, 0 (15)§§) Total NY Tool Box Inc. 220 (10 051) Total S Corporation Net Income (Loss) $ 6.005 $ (5 484) $ 7,757 $ 6.022 $ 4,753 $ 8,073 The Claimant and his wife reduced their taxable S corporation net income by taking Section 179 deductions in 2017 and 2018. A Section 179 deduction is allowed for certain tangible property placed into service whereby a taxpayer can deduct the cost of this property (subject to certain dollar limitations) in the year the property was acquired rather than having to depreciate the property over its estimated useful life. After his Section 179 deductions, the Claimant reported S corporation net income amounting to $7,757 in 2017 and an S corporation net (loss) amounting to $(5,484) in 2018. The Claimant did not take any Section 179 deductions in 2019 and reported S corporation net income totaling $6,005 in that year. Based on the personal income tax returns provided, the Claimant's combined earnings in 2017- 2019 were as follows: 2019 2018 2017 Net Business Income (1099 Income from Hillcrest Corp. $24,000 $24,000 $36,000 Supply S Corporation Net Income (Loss) 6.005 (5,484) 7,757 Claimant's Combined Earnings $30,005 $18.516 $43.757 Combined Earnings* $ 2.500 S 1.543 $ 3.646 Claimant's Average Monthly *Based on 12 months per year. Based on 12 months per year, the Claimant's average monthly combined earnings declined by 58% from $3,646 per month in 2017 to $1,543 per month in 2018. in 2019 (year of the accident), the Claimant's average monthly combined earnings increased by 62% to $2,500 per FILED: QUEENS COUNTY CLERK 06/06/2023 08:06 PM INDEX NO. 714855/2021 NYSCEF DOC. NO. 120 RECEIVED NYSCEF: 06/06/2023 Ms. Nia Williams Allstate Insurance Re: Michael West March 11, 2021 Page 7 month. As will be discussed in the report below, the records fumished indicate that the Claimant continued to work for Hillcrest Supply Corp. and NY Tool Box Inc. throughout 2019. The fact that his average monthly combined earnings in 2019 were greater than in 2018 indicates that he did not sustain a loss of income through December 31, 2019. As previously reported, the Claimant alleges that he sustained lost net earnings amounting to $10,000 per month, which far exceeds the maximum lost earnings benefit of $3,000 per month allowed under his policy. His average monthly combined earnings, both before and after the accident, demonstrate that his claim is vastly overstated. We will present additional information about Hillcrest Supply Corp. and NY Tool Box Inc. later in this report. Based upon our independent research, we previously determined that Michael K. West, Inc. was incorporated on May 21, 2001. According to Mr. Felberbaum, the Claimant did not prepare corporate income tax retums to report the transactions of Michael K. West, Inc. Rather, the retums." attorney stated, "Ies all filed under his personal income tax It should be noted that the transactions of a corporation should be reported utilizing either Form 1120 or a Form 1120S, depending whether the business is organized for tax purposes as a regular or an S corporation. Notwithstanding that it would be inappropriate to report corporate sales and expenses on a personal income tax return, there is no evidence that the transactions of Michael K. West, Inc. were ever reported on the Claimanes personal income tax returns. The attorney recently furnished bank statements for an account maintained with Michael K. West, Inc., Chase Bank Checking Account #xxx-xxx-2318 encompassing the period from September 29, 2018 through December 31, 2020. We were not provided with the bank statement dated January 31, 2019. Information taken from the documents inspected is presented on Schedule I attached. FILED: QUEENS COUNTY CLERK 06/06/2023 08:06 PM INDEX NO. 714855/2021 NYSCEF DOC. NO. 120 RECEIVED NYSCEF: 06/06/2023 Ms. Nia Williams Allstate Insurance Re: Michael West March 11, 2021 Page 8 We noted that deposits were made into this bank account in periods both before and after the date of accident. Below we have presented a monthly summary of these deposits: MONTHLY DEPOSITS Michael K. West, Inc. (Chase Bank #2318) 2020 2019 January $ 650 $ N/P February 700 800 March 0 800 April 800 1,077 May 800 | 800 June 0 0 July 800 1,500 August 800 2,300 September 650 1,500 October 0 1,500 November 0 3,751 December 0 0 $ 5,200 $14.028 N/P - Not provided. We continue to be uncertain if/how deposits into the checking account maintained by Michael K. West, Inc. were reported on the Claimanes personal income tax returns. All post-accident deposits should be an offset to this claim. III. Hillcrest Supply Corp. Corporate Income Tax Returns (Forms 1120S) (2017-2019) Previously, we inspected the 2017 and 2018 corporate income tax returns (Forms 11208) prepared for Hillcrest Supply Corp. We recently inspected the 2019 corporate income tax return for this business. As previously reported, the primary business activity of Hillcrest Suppl