When to Retain Your Expert Witness

It has happened before – a case is pushing up against discovery deadlines and counsel realizes that an expert witness and report will likely be necessary. While experienced experts can usually expedite an analysis, it is almost always more advantageous to engage the expert as soon as possible.

Developing Strategy

Consulting experts can be vital in assisting counsel in developing the strategy and theme of the case. Expert advice may even be preparatory to determining if litigation should even be pursued or if seeking prompt settlement is more advisable; financial experts may be able to estimate the range of potential economic damages without regard to who may ultimately prevail. This allows counsel to add independently derived perspective(s) to his or her estimation of the outcome.

In addition to assisting counsel as to the potential value of a case, experts can provide valuable guidance on how to frame certain aspects of the case. While counsel is well aware of the legal standards and burdens that must be met or rebutted, financial experts can assist counsel in identifying and understanding vital financial, accounting and economic aspects of the case. A more thorough understanding of these components at the inception of a case can not only assist counsel in drafting a complaint or responsive pleading, but in setting and maintaining a cogent and consistent theme. Without such a framework, counsel may take preliminary positions that conflict with foundational aspects of the expert’s eventual report and/or testimony.

Discovery

Often, an expert is retained during the latter part of the discovery process, or even worse, after certain aspects of discovery have closed. This approach disadvantages counsel. An expert can often help counsel tailor document requests, interrogatories and even deposition questions to information that will likely be critical to a clear understanding of the case but sufficiently narrow to be useful; no one wants to search through thousands of pages produced under an “all documents” type request when a pointed request could have yielded the specific document(s) needed to evaluate different aspects of a case or, more critically, fail to request important information before discovery closes.

Additionally, if an expert is more involved in the discovery process, the expert will be in a position to assist counsel in determining whether, when (and for how much) a settlement should be pursued.

Effective Use of Time and Resource Management

When retained at the “last minute,” the expert is often in a rush to complete his or her analysis. Given more time, an expert has the opportunity to more effectively and efficiently manage the process, by comprehensively delving into the discovery with a focus on overall case issues and by fully utilizing the resources at his or her disposal. For example, if given more time, it is typically easier for the expert to delegate many tasks to staff with lower billing rates, thereby actually decreasing the costs.

More Persuasive as Witness at Deposition and Trial

Often cases that make it to trial hinge on the testimony of the parties’ respective experts. In this so-called “battle of the experts,” an expert who is more familiar with the case will likely be perceived by the trier of fact as more knowledgeable, and, therefore, more reliable. This broad understanding of the facts and history of the case is more likely to be achieved by early involvement of the expert. Perhaps more importantly, if an expert has not had the opportunity to be exposed to large aspects of the case, deposition or trial testimony could potentially include more questions than answers.

Considering the important role that an expert’s report or testimony is likely to play in a particular matter, serious consideration should be given as early as possible as to whether and when an expert should be retained. Often, the expert’s findings and testimony are the linchpin to counsel’s winning strategy, providing vital support to keep the wheels from falling off. Let us know if your next case requires a financial or forensic accounting expert witness.

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$35M GI Bill fraud tied to N.J. university, feds say

By Tim Darragh | NJ Advance Media for NJ.com 
on April 22, 2016 at 8:30 AM, updated April 22, 2016 at 8:34 AM

NEWARK — A Pennsylvania man who allegedly schemed with former officials at Caldwell University was charged Thursday with plotting to defraud a program that funded the education of veterans who served in the armed forces following the Sept. 11, 2001 terrorist attacks.

According to a criminal complaint, the fraud involved tricking veterans into thinking they had enrolled in accredited university classes when they actually were taking courses developed and taught by an online correspondence school.

Continue reading at www.nj.com.

Red flags preceded fraud allegations at Jay Peak Resort

Boston Globe

By Hilary A. Niles Globe Correspondent  April 21, 2016

MONTPELIER — The news was stunning: Two of Vermont’s most prominent businessmen, Jay Peak Resort owner Ariel Quiros and president Bill Stenger, were accused last week of securities fraud and misuse of more than $200 million raised from investors since 2008.

But red flags had been waving for years over their use of a controversial federal program that grants US residency to foreigners in exchange for job-creating investments.

Continue reading at Boston Globe.

Supreme Court Opinion Expands the Importance of Tracing Assets

In a case that could lead to future implications, the Supreme Court held Wednesday that a criminal defendant has a Sixth Amendment right to use her own “innocent” property to the pay legal fees of counsel of her choice, drawing a distinction between “innocent funds” and “tainted funds” related to fraud. In a dissenting opinion, Justice Kennedy remarked that the “unprecedented holding rewards criminals who hurry to spend, conceal, or launder stolen property by assuring them that they may use their own funds to pay for an attorney after they have dissipated the proceeds of their crime.”

The 5-3 decision set aside an order from a Federal Judge freezing the assets of Sila Luis, a defendant charged with fraudulently obtaining $45 million through crimes related to health care. The case deals with a federal statute that allows a court to freeze, before trial, certain assets belonging to a criminal defendant accused of violations of health care or banking laws. Those assets include: (1) property “obtained as a result of ” the crime, (2) property “traceable” to the crime, and (3) other “property of equivalent value.” Believing they will ultimately prevail in the case, the government asked the District Court to freeze approximately $2 million still in Luis’ possession which it contended constituted “property of equivalent value”. Of particular importance to this case, the $2 million in question is “not loot, contraband, or otherwise ‘tainted.’ It belongs to the defendant” and is not traceable to the $45 million alleged to have been received fraudulently.

In concluding that “tainted funds” and “innocent funds” need to be dealt with separately in preserving a defendant’s Sixth Amendment right to counsel, the Court acknowledged Justice Kennedy’s concern that money is fungible. But, the Court states “the law has tracing rules that help courts implement the kind of distinction we require in this case.”

The decision obviously has repercussions with respect to tracing. For example: who is required to proffer the initial evidence with respect to the source of funds; how early should experts be involved with respect to tracing; what level of evidence will courts require to show the “innocent” versus “tainted” funds.

In his dissent, Justice Kennedy notes “[t]he principle announce[d] today—that a defendant has a right to pay for an attorney with forfeitable assets so long as those assets are not related to or the direct proceeds of the crime alleged—has far-reaching implications. There is no clear explanation why this principle does not extend to the exercise of other constitutional rights….” One thing that is clear from the ruling, tracing the proceeds of an alleged fraud may be as important to the commencement of a case as it is to the ultimate judgment.

The case is Luis v. United States and can be found at http://www.supremecourt.gov/opinions/15pdf/14-419_nmip.pdf.

Now Available: 2016 ACFE Report to the Nations on Occupational Fraud and Abuse

The 2016 Association of Certified Fraud Examiners Report to the Nations is now available as a resource for anyone working with employee fraud-related cases. This year’s data includes findings such as:

  • The CFEs who participated in the survey estimated that the typical organization loses 5% of revenues in a given year as a result of fraud.
  • The median loss for all cases in the study was $150,000, with 23.2% of cases causing losses of $1 million or more.
  • Asset misappropriation was by far the most common form of occupational fraud, occurring in more than 83% of cases, but causing the smallest median loss of $125,000. Financial statement fraud was on the other end of the spectrum, occurring in less than 10% of cases but causing a median loss of $975,000. Corruption cases fell in the middle, with 35.4% of cases and a median loss of $200,000.
  • Among the various forms of asset misappropriation, billing schemes and check tampering schemes posed the greatest risk based on their relative frequency and median loss.
  • The longer a fraud lasted, the greater the financial damage it caused. While the median duration of the frauds in our study was 18 months, the losses rose as the duration increased. At the extreme end, those schemes that lasted more than five years caused a median loss of $850,000.
  • In 94.5% of the cases in the study, the perpetrator took some efforts to conceal the fraud. The most common concealment methods were creating and altering physical documents.

Download the full report from the ACFE.