Ingram Micro 2010 Annual Report Download - page 29

While the tax authorities may seek to impose interest and penalties in addition to the tax as discussed above, we
continue to believe that we have valid defenses to the assessment of interest and penalties, which as of January 1,
2011 potentially amount to approximately $15,000 based on the exchange rate prevailing on that date of 1.666
Brazilian reais to the U.S. dollar. Therefore, we have not established an additional reserve for interest and penalties
as we have determined that an unfavorable outcome is currently not probable. We will continue to vigorously pursue
administrative and judicial action to challenge the current, and any subsequent assessments. However, we can make
no assurances that we will ultimately be successful in defending any such assessments, if made.
In 2007, the Sao Paulo Municipal Tax Authorities assessed our Brazilian subsidiary a commercial service tax
based upon our sale of software. The assessment for taxes and penalties covers the years 2002 through 2006 and
totaled 55,100 Brazilian reais or approximately $33,100 based upon a January 1, 2011 exchange rate of 1.666
Brazilian reais to the U.S. dollar. Although not included in the original assessment, additional potential liability
arising from this assessment for interest and adjustment for inflation totaled 84,000 Brazilian reais or approximately
$50,400 at January 1, 2011. The authorities could make further tax assessments for the period after 2006, which may
be material. It is our opinion, after consulting with counsel, that our subsidiary has valid defenses against the
assessment of these taxes, penalties, interest, or any additional assessments related to this matter, and we therefore
have not recorded a charge for the assessment as an unfavorable outcome is not probable. After seeking relief in
administrative proceedings, we are now vigorously pursuing judicial action to challenge the current assessment and
any subsequent assessments, which may require us to post collateral or provide a guarantee equal to or greater than
the total amount of the assessment, penalties and interest, adjusted for inflation factors. In addition, we can make no
assurances that we will ultimately be successful in our defense of this matter.
We and one of our subsidiaries were named as defendants in two separate lawsuits arising out of the bankruptcy
of Refco, Inc., and its subsidiaries and affiliates (collectively, “Refco”). In August 2007, the trustee of the Refco
Litigation Trust filed suit against Grant Thornton LLP, Mayer Brown Rowe & Maw, LLP, Phillip Bennett, and
numerous other individuals and entities (the “Kirschner action”), claiming damage to the bankrupt Refco entities in
the amount of $2,000,000. Of its forty-four claims for relief, the Kirschner action contains a single claim against us
and our subsidiary, alleging that loan transactions between the subsidiary and Refco in early 2000 and early 2001
aided and abetted the common law fraud of Bennett and other defendants, resulting in damage to Refco in August
2004 when it effected a leveraged buyout in which it incurred substantial new debt while distributing assets to Refco
insiders. In March 2008, the liquidators of numerous Cayman Island-based hedge funds filed suit (the “Krys
action”) against many of the same defendants named in the Kirschner action, as well as others. The Krys action
alleges that we and our subsidiary aided and abetted the fraud and breach of fiduciary duty of Refco insiders and
others by participating in the above loan transactions, causing damage to the hedge funds in an unspecified amount.
Both actions were removed by the defendants to the U.S. District Court for the Southern District of New York. In
April 2009, the trial court in the Kirschner action granted our motion to dismiss, and ordered that judgment be
entered in favor of Ingram Micro and our subsidiary. On November 18, 2010 the 2nd Circuit Court of Appeals
affirmed that judgment. The plaintiff has petitioned for a rehearing in the 2nd Circuit. In the Krys action, the trial
court partially granted, without prejudice, our motion to dismiss on standing grounds. Our motion to dismiss on
other grounds is still pending. We intend to vigorously defend these cases and do not expect the final disposition of
either to have a material adverse effect on our consolidated financial position, results of operations, or cash flows.
ITEM 4. (REMOVED AND RESERVED)
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