Building the War Room Before Trial
Author: Chris Young, PhD
Over the past many years, I have spent long hours working on behalf of plaintiffs who allegedly have been defrauded by a friend, spouse, business partner, client, or vendor. In these cases, we often find that the wrongdoing happens when the books and records of the plaintiff are disorganized and exhibit minimal financial and or operational controls. We also see fraud surfacing when there are limited historical records archived.
In these cases, we prepare an economic damages calculation for the plaintiff. Yet, almost invariably, the financial data is not in a condition that can be relied upon to calculate. In situations such as this, we often must recreate the economic history using bank statements that are not always readily available – and often require special bank requests. Frequently, we request historical tax returns from the IRS. When there are allegations of theft, we not only recreate the financial statements from the bank records, but we must also verify that the company deposits were accurate and that the money deposited agree to the company sales (long process). In cases where we believe that the defendant was stealing cash, we analyze the defendant's financial statements and lifestyle. Sometimes clearly showing that the lifestyle was mathematically impossible based on the defendant's earnings. We often trace down the defendant's assets, which usually sit in a domestic or international bank or investment account. Many of these assets use aliases or fictitious corporate names.
To correctly perform the above procedures, the forensic team must bring to the engagement a series of skills and personalities. A comprehensive team includes a:
forensic economist,
forensic accountant,
internal investigator,
external investigator,
computer forensic expert, and
someone with the overt or covert skills required to trace down domestic or international assets.
The roles mentioned are not always mutually exclusive, and sometimes one person can perform a few tasks. Unfortunately, many firms retained for economic damage calculations do not have the skills to fulfill all of the above, which can drastically delay an economic damages report.
I highlight the above for a few reasons:
make sure you interview a few forensic teams who can bring all of the above skills to the engagement if required (at the minimum get a few perspectives of what is needed);
make sure you get a view from the forensic team(s) early in the case process so that the document discovery can be adequately addressed well in advance of closing;
request a forensic budget so that there are no financial surprises later in the case, and;
start the work well in advance of trial.
Over the past few years, I have worked on fraud and similar cases 12-36 months in advance of trial. In some of these cases, it took six months to over a year to successfully subpoena banks and financial institutions for documents. In some cases, it takes months to unlock old computers and download deleted data. Nevermind, the lengthy periods it takes to track down assets hidden outside of the U.S. Sometimes, depending on the number of parties and state of the financial records, it may take months to recreate complicated financial statements, especially when the economic damages are significant - often more than a few hundred million dollars
However, do not let these large case numbers dissuade you from performing the tasks outlined above. The most successful trial attorneys perform these tasks well in advance of trial, even when the damages expected numbers are well in advance of those stated above.
If you want to be sure of overwhelming your opponent in the next trial – address the above process now – get started early – and arm yourself with all of the required information – no excuses!
At The Red Maple Group, we can help you quickly ascertain what specialists are required for your case. Feel free to give me a call should you want to discuss a case.
Christopher Young, Ph.D., 347-522-0480, or chris@redmapleeconomics.com