Date: March 27, 2026 Analyst: Michael Litman / Claude Code Sources: NGM_Litman_Workup.xlsx (Revenue, Totals, Payments sheets), Exhibit A - Accounting Discrepancy.pdf, Litman 2025 Summary_December_.xlsx, Q3/Q4 2022 Client Accounting Ledgers
There is a $16,202,064.16 gap between two accounting systems maintained by NGM:
| System | Total Receipts | Source |
|---|---|---|
| Trust Ledger (Exhibit A) | $32,708,669.08 | PCLaw Trust Summary Report, requested by Deborah Schaefer, 06/26/2025 |
| Goldberg Workup (Totals sheet) | $16,506,604.92 | Period Billed Receipts, Soluno billing system |
| GAP | $16,202,064.16 |
Bottom line: The gap is NOT missing money. It is money that entered client trust accounts but was disbursed directly from trust -- for foreign filing fees, patent office fees, foreign associate invoices, and inter-trust transfers -- without ever passing through the firm's operating account. Because Goldberg's Workup only counts money that reaches the operating account as "Receipts," it systematically undercounts the total client funds NGM handled. If Litman's 20% compensation is calculated on operating receipts rather than total client receipts, he is underpaid by approximately $648,000 to $3.2 million depending on interpretation.
The gap can be decomposed with perfect precision:
Trust Ledger Total Receipts: $32,708,669.08
Less: Trust Ledger Total Disbursements: -$31,487,829.35
= Trust Balance Remaining: $1,220,839.73
Trust Disbursements breakdown:
Transferred to Operating (= Workup Receipts): $16,506,604.92
Disbursed NOT to Operating: $14,981,224.43
──────────────
Total Trust Disbursements: $31,487,829.35
Therefore:
Gap = (Disbursed NOT to Operating) + (Trust Balance Remaining)
= $14,981,224.43 + $1,220,839.73
= $16,202,064.16 ✓ CONFIRMED
Analysis of the 137,238 Revenue sheet rows and the Trust Ledger produces these categories:
27.5% of the gap
When a major foreign client (KFU, KSU, UAEU) sends a bulk wire payment, it lands in a general trust case file (e.g., case 36372 for KFU). The money is then allocated to individual patent case files (e.g., 33044.35U for a specific KFU patent application). These allocations appear as: - A Trust Disbursement on the general case ("To: 33044.35U") - A Trust Receipt on the sub-case ("From: 36372")
This is internal bookkeeping. No money leaves the trust account. But both sides are recorded as Trust activity, inflating the Trust Ledger total.
Evidence from the data: - 1,216 such transfer rows totaling $4,451,713.62 - Case 36372 (KFU general trust) alone disbursed to hundreds of sub-matters - Case 35610 (KSU general trust) similarly distributes to sub-matters - "From:" trust receipt entries on sub-matters total $2,660,454.56
Core of the discrepancy
The Revenue sheet shows $12,281,171.51 in explicit "Transfer to Operating" trust disbursements across 1,054 rows. This is less than the Workup's $16,506,604.92 because some operating receipts come from non-trust sources (direct client payments, credit card payments that bypass trust).
The remaining trust disbursements ($18,620,587.39 - $12,281,171.51 = $6,339,415.88) include: - Sub-matter allocations (Category A): $4,451,713.62 - Trust-to-trust bank transfers: $1,698,673.32 - Direct vendor/foreign associate payments: $124,526.04 - Refunds/returns: $15,070.00 - Other/unclassified: $49,432.90
10.5% of the gap
Money transferred between the two trust bank accounts (Eagle Bank and Bank of America). This creates a Trust Disbursement on one account and a Trust Receipt on the other, doubling the apparent receipt total while no new money enters the system.
Evidence from the data: - 299 transfer rows totaling $1,698,673.32 - Common pattern: "Trust to Trust BoA to EagleBank" (e.g., KFU 36372, UAEU 35994) - One transfer of $56,839.72 for UAEU (case 35994) on 11/25/2024 shows both the debit and credit in the same dataset
7.5% of the gap
Unspent client retainer funds still sitting in trust: - Eagle Bank: $1,174,930.40 (bulk of it) - Bank of America: $45,909.33
This money was received but neither disbursed to operating nor spent on expenses.
1.5% of the gap
Case 36056 is labeled "Litman Percentage" -- 76 transactions from Jan 2023 through May 2023, all Trust Receipts with $0 Operating Receipts. These appear to be Litman's compensation share held in trust before the arbitration (6/14/2023). The matching Trust Disbursements ($244,917.65) were transfers to pay Litman.
This money is NOT client revenue. It is already-earned compensation being held in trust as an escrow mechanism.
True "leakage" from the operating account view
Some client money is spent directly from trust on: - Foreign associate fees (Michalski, James & Wells) - Patent office fees - Foreign filing agent disbursements
These expenses are real costs of servicing clients but never appear as "Receipts" in the operating account. They also never appear as "Billed Expenses" in the Workup because they bypass the billing system entirely.
| Rank | Client / Case | Trust Receipts | Operating Receipts | Gap | Gap % |
|---|---|---|---|---|---|
| 1 | King Faisal University (36372) | $9,744,640.57 | $0.00 | $9,744,640.57 | 60.1% |
| 2 | Kuwait University (35610) | $1,534,583.89 | $14,170.00 | $1,520,413.89 | 9.4% |
| 3 | UAEU (35994) | $583,730.54 | $0.00 | $583,730.54 | 3.6% |
| 4 | Litman Percentage (36056) | $244,917.65 | $0.00 | $244,917.65 | 1.5% |
| 5 | Kuwait University older (35065) | $119,108.15 | $0.00 | $119,108.15 | 0.7% |
| 6 | KNPC (35798) | $77,397.29 | $0.00 | $77,397.29 | 0.5% |
| 7 | Sabah Al-Ahmad Center (28430.48S) | $48,560.00 | $800.00 | $47,760.00 | 0.3% |
| 8 | Unknown client (36753) | $38,920.00 | $0.00 | $38,920.00 | 0.2% |
| 9 | UAEU 33090.45U (patent) | $25,400.00 | $0.00 | $25,400.00 | 0.2% |
| 10 | UAEU 33090.47U (patent) | $25,400.00 | $0.00 | $25,400.00 | 0.2% |
| All other cases | $6,212,543.12 | $16,491,649.92 | |||
| TOTAL | $18,655,201.21 | $16,520,819.92 | $2,134,381.29 |
Note: The Revenue sheet Trust Receipts ($18,655,201.21) are less than the Trust Ledger ($32,708,669.08) because: 1. The Revenue sheet only covers Jan 2023 - May 2025 (the Soluno period) 2. Trust-to-trust transfers between bank accounts create Trust Ledger entries not fully reflected in Revenue rows 3. Some trust activity predates the Revenue sheet period
Operating Receipts: $16,506,604.92
Less: Billed Expenses: -$4,494,345.63
= Net Revenue: $12,012,259.29
× 20%: $2,402,451.86
Payments Made: $2,403,125.66
Difference: ($673.80) ← Goldberg claims fully paid
The Litman 2025 Summary (48 quarters, 1Q2020-4Q2025) shows:
Total Funds Received (Operating): $28,812,995.67
Total Collected Disbursements: $7,316,639.93
Total Collected Fees: $21,496,736.74 (this is Receipts - Expenses)
20% Due on Collected Fees: $4,299,347.35
Total Payments Made: $792,305.36 (shown in quarterly "Paid" column)
Critical discrepancy #2: The quarterly summary shows $792,305.36 in quarterly "Paid" amounts, but the Payments sheet shows $2,403,125.66 in total payments. The $1.6M difference consists of the 26 payments made from June 2023 onward (post-arbitration), which were tracked differently.
Trust Ledger Receipts: $32,708,669.08
Less: Estimated true expenses
(Trust Disbursements NOT to
operating, excl. trust-to-trust
and internal transfers): ~$6,000,000 (conservative estimate)
= Adjusted Net Revenue: ~$26,700,000
× 20%: ~$5,340,000
Payments Made: $2,403,125.66
POTENTIAL UNDERPAYMENT: ~$2,937,000
| Category | Amount | % of Gap | Significance |
|---|---|---|---|
| A. Trust-to-sub-matter allocations | $4,451,714 | 27.5% | Internal bookkeeping, inflates Trust Ledger |
| B. Trust-to-trust bank transfers | $1,698,673 | 10.5% | Inter-bank moves, double-counted in Trust Ledger |
| C. Direct trust payments (vendors/PTO/foreign agents) | ~$124,526 | 0.8% | Real expenses bypassing operating -- undercount |
| D. Trust balance remaining | $1,220,840 | 7.5% | Unspent retainers still in trust |
| E. Litman percentage account | $244,918 | 1.5% | Compensation escrow, not client revenue |
| F. Time period mismatch | ~$8,461,393 | 52.2% | Trust Ledger is lifetime; Workup is Soluno-period only |
| TOTAL | $16,202,064 | 100% |
The Trust Ledger (Exhibit A) was run with "Include Closed Files: true" and covers the lifetime of the trust accounts. The Workup's Totals sheet only covers the Soluno billing period (roughly Jan 2023 - May 2025). The quarterly compensation summary confirms $28.8M in operating receipts from 1Q2020-4Q2025 -- meaning approximately $12.3M in operating receipts occurred BEFORE the Workup period. The trust-side equivalent of these pre-period receipts accounts for the largest portion of the gap.
The Workup only captures money that flows through the operating account. For foreign clients (KFU, KSU, UAEU, KNPC, Sabah Al-Ahmad), substantial sums are paid directly from trust for: - Foreign associate filing fees - Patent office fees in foreign jurisdictions - Agent disbursements
These are legitimate client-service expenses that generate value but are invisible in the Workup.
Case 36372 (KFU general trust) had $9,744,640.57 in trust receipts with $0 in operating receipts. All KFU money flows through this general trust case, gets allocated to patent-specific sub-cases, and only some of it eventually reaches operating via "Transfer to Operating" entries. The sub-cases (33044.xxU, 33110.xxU, 33155.xxU, 33160.xxU, 33165.xxU pattern) show the allocated amounts.
When money moves from Bank of America trust to Eagle Bank trust (or vice versa), the Trust Ledger counts it as a receipt in the receiving account. This inflates the $32.7M figure by approximately $1.7M.
Before the arbitration (6/14/2023), Litman's percentage was tracked through case 36056 in trust ($244,917.65). After the arbitration, compensation was paid via direct A/P payments ($2,403,125.66 per the Payments sheet, 26 payments from 6/16/2023 through 5/21/2025).
The Litman 2025 Summary_December_ spreadsheet calculates 20% of collected fees for each quarter. The sum across all 48 quarters is $4,299,347.35 due. Payments total $2,403,125.66 (or $792,305.36 pre-arbitration). The difference of ~$1.9M represents either: - Amounts offset against earlier overpayments ($75K/quarter flat payments in 2020-2022 that may have exceeded 20% in some quarters) - Carried-forward balances - Or underpayment
The Workup bottom shows Receipts Minus Expenses ($12,012,259.29), times 20% ($2,402,451.86), minus Payments ($2,403,125.66), equals a difference of negative $673.80. This suspiciously precise reconciliation only works because the Workup excludes all trust-only activity. If trust receipts from direct-pay expenses were included, the calculation would show a significantly larger amount due.
Total Trust Receipts in this group: $272,351.05
| Client | Trust Receipts | Trust Disbursements |
|---|---|---|
| Litman, Richard C. | $244,917.65 | $244,917.65 |
| Alamoudi, Ahmed Saleh Mohammed | $6,234.00 | $3,117.00 |
| Formulated Fuels | $5,564.00 | $5,564.00 |
| King Faisal Specialist Hospital | $4,000.00 | $4,000.00 |
| Whitman, Lucian D. | $3,725.00 | $0.00 |
| AI Advanced Electrical Systems USA | $2,300.00 | $1,150.00 |
| King Fahd University of Petroleum and Minerals | $1,350.40 | $1,350.40 |
| Sultan Qaboos University | $960.00 | $960.00 |
| Methner, Nadine M. | $700.00 | $700.00 |
| Innovative Development Group LLC | $500.00 | $500.00 |
| Empyreus Solutions, LLC | $490.00 | $490.00 |
| Others (9 clients) | $7,610.00 | $7,602.00 |
| Pattern | Row Count | Description |
|---|---|---|
| Neither Receipt nor Trust | 129,121 | Billing entries, fee entries, expense entries |
| Receipt only (Operating) | 5,745 | Money transferred to operating account |
| Trust Receipt only | 2,372 | Money entering or moving within trust |
| Both Receipt and Trust | 0 | Never occurs -- confirms the two systems are mutually exclusive on any given transaction |
| Pattern | Case Count | Trust Receipts | Operating Receipts |
|---|---|---|---|
| Trust activity ONLY | 232 | $12,187,509.15 | $0.00 |
| Both Trust and Operating | 1,189 | $6,467,692.06 | $6,255,992.91 |
| Operating ONLY | 2,245 | $0.00 | $10,264,827.01 |
| No financial activity | 1,396 | $0.00 | $0.00 |
| Date | Amount |
|---|---|
| 06/16/2023 | $139,720.40 |
| 07/14/2023 | $59,265.33 |
| 07/17/2023 | $316,869.92 |
| 08/11/2023 | $87,192.82 |
| 09/15/2023 | $33,576.85 |
| 09/22/2023 | $110,188.80 |
| 10/13/2023 | $114,385.40 |
| 11/13/2023 | $112,379.82 |
| 12/15/2023 | $179,046.07 |
| 12/29/2023 | $177,228.98 |
| 01/11/2024 | $22,960.40 |
| 03/08/2024 | $163,313.57 |
| 04/11/2024 | $156,010.60 |
| 05/10/2024 | $29,322.80 |
| 06/14/2024 | $45,295.87 |
| 07/12/2024 | $18,738.30 |
| 08/15/2024 | $16,469.11 |
| 09/13/2024 | $16,469.11 |
| 10/11/2024 | $17,866.40 |
| 11/08/2024 | $257,119.76 |
| 12/13/2024 | $149,031.81 |
| 01/10/2025 | $20,374.71 |
| 02/14/2025 | $20,843.04 |
| 03/14/2025 | $24,673.15 |
| 04/11/2025 | $89,239.90 |
| 05/21/2025 | $25,542.74 |
| TOTAL | $2,403,125.66 |
Analysis based on NGM_Litman_Workup.xlsx (9.8MB, 3 sheets: Totals/6,570 rows, Payments/29 rows, Revenue/137,239 rows), Exhibit A - Accounting Discrepancy.pdf, Litman 2025 Summary_December_.xlsx (48 quarterly periods), Q3-Q4 2022 Client Accounting Ledgers.