Impath

Client

Impath, Inc. was a publicly-held provider of cancer diagnostic testing service, cancer registry services, clinical trial services, and laboratory management software to the medical community. In July 2003, accounting irregularities were uncovered leading to legal action by the Securities & Exchange Commission and the US District Attorney for New York, The Company commenced a bankruptcy proceeding in September 2003. During the bankruptcy proceeding, all of the Company’s operating assets were sold. In March 2005, the Bankruptcy Court confirmed the 3rd Amended Plan of Liquidation which became effective July 2005 (the “Plan”). Anthony Schnelling, Managing Director of Bridge Associates, was named as the Trustee in the Plan.

Challenge

The proceeds of the bankruptcy asset sale enabled Impath to pay all creditors in full and allowed the Trust to pay $2.55 per share to former shareholders. However, the asset purchaser filed a $7.5 million administrative claim for a purchase price adjustment that had to be resolved. The Trustee also pursued and recovered approximately $28 million in federal, state and local income tax refund arising from amended tax returns filed as the result of the accounting fraud. Based on his evaluation of legal actions available, the Trustee initiated federal litigation against Impath’s former public accountants for their role in the accounting irregularities.

Solution

Providing litigation support services to the Trustee and his professionals, Bridge was able to facilitate the successful resolution of the asset purchaser’s claim in a lengthy arbitration process that saved the Trust $6.0 million. Further, Bridge provided analytical and litigation support services for the development and prosecution of the legal actions against Impath’s former public accountants that resulted in a settlement of $23 million. Additionally, Bridge concluded a 7 year audit by the IRS that has resulted in the recovery of $22.5 million of federal income tax refunds and $5.5 million in interest. The Trust has also recovered $2 million in state income tax refunds and is seeking an additional $4.5 million in state and local income taxes plus accrued interest for the benefit of the former shareholders.

Results

Through the professionals’ successful litigation strategy, the Trust was able to realize in excess of $3.09 per share return for the shareholders in addition to the $2.55 per share initially distributed.