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Chapter 8 Litigation Services Provided by Accountants
CHAPTER SUMMARY
Overview
This chapter explains what standards apply to accountants when they perform litigation services, discusses how to qualify as an expert witness, gives tips for testifying at a deposition or trial, and points out the potential liability that accountants risk when they testify at trial.

Litigation in the United States
¶8001 U.S. Tort Costs Climbing The U.S. tort system cost $248.1 billion in 2009, which was about $808 per U.S. citizen ($12 in 1950). U.S. tort costs accounted for 1.74 percent of GDP (2.09 in 2002). Increasingly inefficient, the U.S. tort system returns less than 50 cents on the dollar to people it is designed to help; only about 22 cents to compensate for actual loss. ¶8006 A Dispute Begins

There are two different courtroom environments: civil and criminal. Some experts believe it is more difficult to convict in a criminal trial (e.g., Casey Anthony).

Types of Litigation Services Provided by Accountants
¶8011 Consultant An accountant may be hired by an attorney to gather and interpret facts, prepare analyses, help the attorney interpret evidence, advise about issues and strategies involved in a legal matter, locate other accountants to act as consultants or expert witnesses, and help expert witnesses form their opinions. Accountants acting as consultants will not be asked to testify in a judicial or regulatory proceeding, and their work usually will be protected from disclosure by the attorney work product privilege. ¶8016 Expert Witness

An accountant may be retained by an attorney or court as an expert witness to testify in a judicial or administrative proceeding. Accountants often are asked to lend their expertise to shareholder disputes, valuation controversies, and commercial damage claims. Accountants retained as expert witnesses will be expected to give their opinion in a judicial or administrative proceeding and can expect their work for a lawyer or court to be available to others involved in the litigation. ¶8021 Masters and Special Masters

Accountants sometimes are appointed by a court as a master to assist the court in some matter (e.g., to determine certain facts or compute damages). They also may be appointed to act as the court’s representative (referred to as a special master) in a particular transaction. The powers and duties of masters and special masters depend on the terms of the order making their appointment and applicable court rules. The compensation paid a master or special master is set by the court and paid by the parties or out of any fund or subject matter of the litigation.

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Standards of Conduct for Performing Litigation Services
¶8031 Knowledge, Skills, Experience, Training, and Education The knowledge, skills, experience, training, and education that accountants are expected to have and use in performing litigation services are the same that they must have and use when performing other professional services. They also must satisfy the standards established by the court or other disputeresolution forum controlling the litigation. ¶8041 Professional Codes of Conduct

An accountant who performs litigation services may be subject to professional codes of conduct. For example, a CPA who is a member of the American Institute of Certified Public Accountants, Inc. (AICPA) will be expected to comply with the AICPA Code of Professional Conduct, the AICPA Statement on Standards for Consulting Services No. 1, and the AICPA Statement on Responsibilities for Litigation Services No. 1, once finalized. ¶8051 Conflicts of Interest

Before agreeing to perform litigation services, accountants should consider whether they have, or have had, any relationships that would, or might lead others to think would, impair their integrity and objectivity in performing the litigation services. They also should consider whether their work might conflict with their duty to preserve client confidences. Once they have agreed to perform litigation services, accountants should be sensitive to conflicts of interest that arise during the course of their work. ¶8061 Written Agreement to Perform Litigation Services

Accountants asked to perform litigation services should enter into a written agreement with the employing attorney. See ¶8061 for a list of matters the written agreement should cover.

Becoming an Expert Witness
¶8071 Expert Witnesses Distinguished from Lay Witnesses An accountant may testify as a lay (fact) witness or as an expert witness. A fact witness testifies as to facts. An expert witness is an individual who, because of specialized training or experience, is allowed to testify in court to help the judge or jurors understand complicated and technical subjects. ¶8081 What Lawyers Look for in an Expert Witness

Accountants interested in becoming an expert witness should take steps to make themselves attractive to attorneys. See ¶8081 for a list of what lawyers look for in an expert. ¶8091 Qualifying as an Expert Witness

How an individual can qualify as an expert witness varies depending on whether the litigation is in federal or state courts. The federal courts and many states have adopted the Daubert standard. Some states follow the older Frye standard, and other states have their own standard (e.g., North Carolina balances relevancy or materiality against prejudicial effect). Frye Standard. Under the Frye standard, which no longer is used in federal courts but still is used by many state courts (at least 14), the test for admitting expert testimony is (1) whether the expert’s testimony will assist the trier of fact in understanding the evidence or in determining a fact in issue, (2) whether the theories and/or techniques relied upon by the expert are generally accepted by the relevant professional community, and (3) whether the particular expert is qualified to present expert testimony on the subject at issue. Daubert Standard. In Daubert v. Merrill Dow Pharmaceuticals, Inc., the Court established the rule for federal courts that trial judges have a special responsibility to ensure that scientific testimony is not only relevant, but also reliable. In Daubert, the United States Supreme Court suggested that judges consider the following factors:

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• Whether the theory or technique in question can be (and has been) tested • Whether the theory or technique in question has been subjected to peer review and publication • The theory or technique’s known or potential error rate • Whether the theory or technique has attracted widespread acceptance within the relevant community The Ninth Circuit Court of Appeals has added another consideration: whether the theory or technique existed before litigation began. Weight vs. Admissibility. Admissibility is different than weight. An expert may be admissible as an expert, yet his or her opinion may not be valid (e.g., weight). Weight should be determined on cross-examination and not as a means of eliminating a witness. ¶8101 Court-Appointed Expert Witnesses

Courts may, on their own motion or on the motion of any party to the litigation, appoint an expert witness. Courts may appoint an expert witness agreed upon by the parties or may select their own expert witness. That a court appoints an expert witness does not prevent parties from calling expert witnesses of their own selection. An individual may not be appointed as an expert witness unless the individual agrees to act as an expert witness.

Preparing to Testify as an Expert Witness
¶8111 Maintaining Independence from the Client Although accountants serving as a consultant to an attorney may be an advocate for a client, accountants who act as expert witnesses must be concerned about maintaining at least the appearance of independence from their client. ¶8121 Evidence Upon Which Experts May Rely

Experts may base their opinions on facts or data that they themselves perceived or which were made known to them at or before a judicial hearing. The facts or data need not be admissible in evidence in order for the expert’s opinion to be admitted if the facts or data are of a type reasonably relied upon by experts in the same field in forming opinions. Otherwise inadmissible facts or data may not be disclosed to the jury unless the court determines that their probative value in assisting the jury in evaluating the expert’s opinion substantially outweighs their prejudicial effect. ¶8131 Use of Confidential Client Information

Accountants acting as expert witnesses should not rely on any confidential client information as the basis for their opinions without first obtaining the client’s consent to disclose such information. If an accountant acting as an expert witness is required by a judge to disclose the source of information and the accountant refuses to disclose the source because the information is confidential client information, the judge may bar the accountant’s testimony. ¶8141 Expert Reports

Witnesses retained or specially employed to provide expert testimony, or whose duties as an employee of a party to litigation regularly involve giving expert testimony, must prepare and sign a written report (referred to as an expert report). A well-written report can be a vital tool in litigation. Such a report helps experts collect their thoughts and express them in a clear and cogent manner. The judge or jury may be particularly impressed with a thorough, persuasive report. For a fact-oriented report, a forensic accountant gathers and evaluates facts and uses them to prepare a report. Opinion reports (e.g., valuation reports) are more subjective and rely more on the professional judgment of the expert. ¶8151 Working Papers

Expert witnesses should bear in mind that any notes, memoranda, working papers, and similar materials prepared in anticipation of litigation may have to be disclosed to opposing counsel and can be used during cross-examination.

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Unlike attorneys, there is no work product rule protecting an expert’s working papers from discovery. Documentation should be sufficient to justify the expert’s opinion. An expert witness generally should admit, candidly (and preferably even before cross-examination exposes the problem), if there is a problem (with an explanation for why the problem is not material). ¶8161 Evaluation of Other Experts

One of an expert witness’s duties is to evaluate the opinions of other expert witnesses and help prepare attorneys to question those other experts. As an expert witness, the forensic accountant will be expected to review the expert reports prepared by other experts, identify problems with the conclusions reached by opposing experts, and help the attorney frame questions to expose those problems. ¶8171 Exhibits and Other Demonstrative Evidence

Demonstrative evidence (such as charts, graphics, and animations) is useful because it can make testimony more understandable and interesting. Such evidence should be prepared well before trial because a court ruling on their admissibility may be needed.

Testifying as an Expert Witness
¶8181 Testifying at a Deposition Expert witnesses are expected to answer questions from opposing counsel at a deposition, which takes place outside a courtroom but requires witnesses to answer oral questions under oath. Any written materials that they have relied on to form their opinions usually will have to be furnished to opposing counsel at the deposition. So may all written communications between an expert and counsel. Expert witnesses should bring their expert report with them to a deposition. ¶8191 Preparing to Testify at Trial

Experts need to prepare themselves to testify in court. Tips on preparing oneself to testify at court are listed in ¶8191. ¶8201 Testifying at Trial

At a trial, expert witnesses (like other witnesses) usually undergo four phases of interrogation: direct examination, cross-examination, redirect examination, and recross-examination. During direct examination, an expert witness is questioned by the attorney for the party for whom the witness is testifying. During cross-examination, the attorney for the opposing party questions the expert witness. During redirect examination, the direct examiner gives the expert witness the opportunity to clear up any confusion that may have been caused by the cross-examination and complete any answers that the witness could not complete during cross-examination. Unless there is an introduction of new matter on redirect examination, a recross-examination is not required. Goals of testimony, tips on testifying on the stand, and tips for defending the testimony are also important to know.

Liability of Expert Witnesses
¶8211 Witness Immunity For many years, expert witnesses have been protected by the same absolute immunity afforded other witnesses. In recent years, state courts have narrowed the protection afforded expert witnesses by ruling that friendly expert witnesses can be sued for negligently preparing their opinions or evidence (e.g., for making a mathematical error), but not for an opinion itself. Witness immunity has been held not to protect even court-appointed experts from a claim of negligence. However, even among courts that permit suits against expert witnesses for negligence in preparing their opinions or evidence, there has been a reluctance to permit one litigant to sue another litigant’s expert witness for negligence.

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¶8221

Bases for Liability

Lawsuits brought by clients against their expert witnesses generally involve breach of contract (for not performing promised services) or negligence. Breach of Contract. A claim for breach of ‘contract generally is brought in a state court using state laws, but under certain circumstances a breach of contract dispute may be brought in a federal court. A client may win a breach of contract dispute by showing that the expert failed to (a) perform a specific contracted service, (b) perform a contracted service in a timely fashion, (c) perform in a satisfactory manner, or (d) comply with professional standards. Negligence. A lawsuit against an expert for negligence is one type of tort action. A negligence claim has a shorter statute of limitations than a breach of contract action. In order to prove negligence, a plaintiff must show (a) a duty was imposed on the expert in favor of the plaintiff, (b) the expert violated that duty, (c) the plaintiff suffered damages, and (d) the expert’s breach was the proximate cause of the damages to the plaintiff. Criminal Process. In a criminal fraud situation, a suspect is arrested or the prosecutor obtains a grand jury indictment. In a criminal trial, the burden of proof on the prosecutor is much higher: beyond a reasonable doubt. Also, under the U.S. Constitution, a person is innocent until proven guilty. Harsher White-Collar Prison Sentences. In today’s climate, white-collar prison sentences may be harsher than prison terms for other crimes. ¶8231 Conclusion

Litigation breeds litigation, so an expert witness may be swimming with sharks when he or she testifies in a courtroom. A knowledge of courtroom procedures is essential to the success of a litigation consultant.

SOLUTIONS TO CHAPTER EXERCISES
1. Some experts believe it is more difficult to convict someone in a criminal trial. There is a much higher degree of evidence required to convict in a criminal trial (e.g., about 95 percent). Whereas, in a civil trial, there is a need for only 51 percent evidence. Also, in a civil trial the jurors are dealing with someone else’s money. There are fewer guilty feelings. 2. The five major phases are: • Pleadings • Discovery • Trial • Outcome • Appeal Much of a forensic accountant’s work occurs in the discovery stage (e.g., research, deposition). 3. The pleadings consist of: • Complaint—Plaintiff files. • Service of Process—Served on defendant. • Answer—Defendant must admit or deny allegations. • Demurrer—No cause of action exits. • Possible cross-complaint—Defendant files. 4. The goal of a forensic accountant should be to help the attorney avoid the costs and uncertainty of a trial. 5. A jury trial is available in the U.S. District courts (determining facts only) and some state trial courts. 6. U.S. District Courts, U.S. Tax Court, U.S. Court of Federal Claims, bankruptcy courts, probate courts, family law courts, state trial courts. 7. Raise the question of federal law or diversity of citizenship, and for the federal court the dispute must exceed $75,000.

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8. They are the same, plus the expert must satisfy the standards established by the court or other disputeresolution forum controlling the litigation. A CPA also will have to follow consulting standards. 9. The AICPA Statement on Standards for Consulting Services No. 1, and the AICPA Statement of Responsibilities for Litigation Services No. 1. 10. Accountants should consider whether they have or have had any relationships that would, or might lead others to think would, impair their integrity and objectivity in performing the litigation services. They also should consider whether their work might conflict with their duty to preserve client confidence. Once they have agreed to perform litigation services, accountants should be sensitive to conflicts of interest that arise during the course of their work. 11. Accountants asked to perform litigation services should enter into a written agreement with the employing attorney. The written agreement should cover the following matters: • The name of the attorney’s client. • The litigants’ names and place for the legal proceeding. • The nature of the litigation services to be performed. • Whether the practitioner will be asked to testify as an expert witness. • What restrictions will be imposed on use and disclosure of the practitioner’s work. • Whether the practitioner has any conflicts of interest with the litigants and/or their attorneys. • Whether the practitioner’s work will be protected by the attorney work product privilege. • Circumstances under which the practitioner may terminate his or her engagement. • Fee (including payment arrangements). 12. A lay or fact witness testifies as to facts, but generally not opinion. An expert witness is an individual who, because of specialized training or experience, is allowed to testify in court to help the judge or jurors understand complicated and technical subjects. 13. How an individual can qualify as an expert witness varies depending on whether the litigation is in federal or state courts. The federal courts and many states have adopted the Daubert standard. Some states follow the older Frye standard. And other states have their own standard (e.g., North Carolina balances relevancy or materiality against prejudicial effect). The following Internet sites keep track of the states: http://faculty.ncwc. edu/toconnor/daubert.htm, and http://www.effinggham.net/michael/ dbtp.html. 14. An expert is normally challenged with a motion of limine, based upon some or all of these: • Daubert challenge • Frye challenge • Lack of independence • Conflict of interest • Side-taking • Result-oriented work • Ghost-written report • Lack of knowledge, skill, education, experience 15. Simple Daubert challenge: • Motion of limine • Motion of summary judgment • Documents filed • Hearing with judge and lawyers • Motion may or may not be allowed

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16. Daubert applies to nonscientific disputes. 17. False. Daubert challenge applies in a District Court. 18. Admissibility depends upon whether or not you are qualified to be an expert. Weight is in respect to how strong is your argument, report, etc. 19. An agreement that tries to stop someone from being able to sue you. 20. Under the Frye standard, which no longer is used in federal courts but still is used by many state courts (at least 14), the test for admitting expert testimony is (1) whether the expert’s testimony will assist the trier of fact in understanding the evidence or in determining a fact in issue, (2) whether the theories and/ or techniques relied upon by the expert are generally accepted by the relevant professional community, and (3) whether the particular expert is qualified to present expert testimony on the subject at issue. 21. In Daubert, the Court suggested that judges consider the following factors: • Whether the theory or technique in question can be (and has been) tested. • Whether the theory or technique in question has been subjected to peer review and publication. • The theory or technique’s known or potential error rate. • Whether the theory or technique has attracted widespread acceptance within the relevant community. The Ninth Circuit Court of Appeals added another consideration: whether the theory or technique existed before litigation began. 22. An expert should not be an advocate for his or her client and should maintain at least the appearance of independence. Experts should not agree to a fee contingent on the success of their testimony. Accountants serving as a consultant to an attorney may be an advocate for a client. 23. Experts may base their opinions on facts or data that they themselves perceived or which were made known to them at or before a judicial hearing. The facts or data need not be admissible in evidence in order for the expert’s opinion to be admitted if the facts or data are of a type reasonably relied upon by experts in the same field in forming opinions. Otherwise inadmissible facts or data may not be disclosed to the jury unless the court determines that their probative value in assisting the jury in evaluating the expert’s opinion substantially outweighs their prejudicial effect. Unless the court requires otherwise, experts need not testify to the facts or data underlying their opinions before giving their opinion and the reasons for their opinion. However, they may be required to disclose underlying facts or data on cross-examination. Although expert witnesses are allowed to present naked opinions, if their testimony has an inadequate foundation, the court can exclude their testimony. 24. Yes. See exercise 23. But accountants acting as expert witnesses should not rely on any confidential client information as the basis for their opinions without first obtaining the client’s consent to disclose each source of information. If an accountant acting as an expert witness is required by a judge to disclose the source of information and the accountant refuses to disclose the source because the information is confidential client information, the judge may bar the accountant’s testimony. 25. Witnesses retained or specially employed to provide expert testimony or whose duties as an employee of a party to litigation regularly involve giving expert testimony, must prepare and sign a written report (referred to as an expert report). A well-written report can be a vital tool in litigation. Such a report helps experts collect their thoughts and express them in a clear and cogent manner. The judge or jury may be particularly impressed with a thorough, persuasive report. An expert report usually must be signed and contain the following information: • A complete statement of all opinions to be expressed and the basis and reasons for those opinions. • The data or other information that the accountant considered in forming the opinions. • Any exhibits to be used as a summary of or support for the opinions. • The accountant’s qualifications, including a list of all publications that he or she has authored within the past 10 years.

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26.

27.

28.

29. 30.

31. 32. 33.

34. 35. 36. 37.

38. 39.

• The compensation the accountant is to be paid for the study and testimony. • A list of any other cases in which the accountant has testified as an expert at trial or by deposition within the preceding four years. An accounting expert should not give opinion on what the law is, and be careful about citing law, code sections, and court decisions. Stating an opinion about the law may result in the exclusion of the report and testimony from the trial. For example, in FPL Group, Inc. et al (83 TCM 1463, TC Memo. 2002-92), Michael M. Wilson, an attorney filed a report on behalf of FPL. Tax Court Judge Robert P. Ruwe, observing that the report stated legal conclusions, granted the government’s request to exclude Wilson’s report. A report should be the work of the expert. If an expert’s preliminary form of report is radically reshaped by an attorney (a fact that is often obvious when the final report is compared with drafts), the expert’s independence and competence may be challenged with particular vigor. In general, the working papers of an accountant employed by an attorney as a consultant is not discoverable by the other side. For the expert witness who is to testify, notes, memoranda, working papers, and similar materials prepared in anticipation of litigation may have to be disclosed to opposing counsel and can be used during cross-examination. Yes, an expert can refer to his or her report and read from it, whenever necessary, even while being questioned in deposition and at trial. During direct examination, an expert witness is questioned by the attorney for the party for whom the witness is testifying. Leading questions (i.e., questions that suggest a desired answer, usually a ‘‘yes’’ or a ‘‘no’’) may not be asked on direct examination unless directed to the opposing party or hostile witness. During cross-examination, the attorney for the opposing party questions the expert witness. The opposing counsel generally can question an expert witness only about the credibility of the witness and matters covered by the direct examination. However under certain circumstances a court may permit questions regarding matters not covered during direct examination. While cross-examining a witness, the attorney may ask leading questions. No, an expert should make complex matters understandable without oversimplifying. Avoid technical language. No, instead of trying to answer a question that an expert does not understand, explain why you have a problem with the question and ask that it be rephrased. Yes, in certain states the protection afforded expert witnesses has been narrowed by allowing clients to sue friendly expert witnesses. Some states allowing suits are California, Connecticut, Louisiana, Missouri, New Jersey, Pennsylvania, Texas, and West Virginia. Currently only the state of Washington provides immunity protection to friendly experts. Poor paperwork, according to Steven C. Bennett. A four-page Model Consulting Agreement may be found in The Comprehensive Forensic Services Manual, Appendix V. Answers will vary. This would be a leading question, which cannot be used during direct examination. Better questions: • How much money was the defendant taking from the cash register? • How did you estimate the amount stolen? • How was she taking the money? Answers will vary. Answers will vary. Joe Nacchio was forced out of his CEO job by Qwest’s Board of Directors as a result of a multibillion dollar accounting scandal. In February 2003, the Attorney General brought criminal indictments against four former mid-level Qwest executives for cooking the books. Before Congress, Joe Nacchio denied any wrongdoing.

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40. 41. 42. 43. 44.

45. 46. 47.

48.

49.

No answer required. See exercise 33. The prosecution bears the burden beyond a reasonable doubt. An expert will probably get to testify only once at the trial court level. In criminal matters: a. Mens rea: caused the criminal act with guilty knowledge; state of mind indicating culpability. Staples, 511 US 600, 114 SCt 1793 (1994). b. Actus reus: brought about the criminal act. An expert has immunity in Washington State and Pennsylvania. A friendly witness may sue an expert in such states as Alaska, California, Connecticut, Louisiana, Missouri, New Jersey, Texas, and West Virginia. Breach of contract, negligence (a tort), fraud and violation of securities laws. There was a misrepresentation. Of a material fact. To a party whom an accountant owes a duty. The plaintiff justifiably relied. Proximate cause of the damage. Proximate cause generally includes two elements: a. Cause in fact. b. Foreseeability. Restrictive privity (in Pennsylvania and Virginia) requires a direct connection between the accountant and the suing party (the best state for a CPA). Near-privity releases an accountant from mere blunders. Reasonable forseeability (Mississippi and Virginia are the worst...Almost endless liability).

50. • A long-time compilation client with disorganized accounting records who requests an audit for the purpose of securing a loan. • A client who hires a new controller or CFO every few years. • A client who is unresponsive or ultimately in responding to requests for information needed to complete an engagement. • A client whose business is highly seasonal and dependent on few customers. • A client who changes lender relationships frequently. • A client who owns several businesses with entities owned by other family members and conducts extensive transactions among the businesses. • A business owner who has little involvement in the day-to-day management of the business, and relies on the controller or bookkeeper to supply all needed financial information to the CPA firm. Source: Joseph Wolfe, ‘‘Accounting for Malpractice,’’ AICPA, http://www/cpai.com/newsletter/indexadmiP. php?id-103. 51. Answers will vary. 52. Bates numbers are the series of numbers that are place on the bottom of evidence to identify each page or exhibit. It is the document’s identifier, e.g., 88241780 or 2000510120. 53. ATGs are booklets, some as long as 200 pages, that tells IRS agents about a particular industry (e.g., lawyers, service stations, oil and gas companies, etc.). If a forensic accountant is unfamiliar with an industry, he or she may find and study the ATG that explains the industry.

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55.

56.

57.

58. 59. 60. 61. 62. 63. 64.

65.

a. Ambush refers to when a plaintiff runs to the court house and files a suit without discussing it with the defendant. Serve and volley is when the plaintiff’s attorney discusses the dispute with the other side trying to obtain a settlement. b. Complex Daubert challenge is an extended discussion in the courtroom of the qualifications of an expert which can last for days. Other experts may testify for and against the expert. c. Weight refers to whether the expert’s opinion is valid or sound. Admissibility looks at factors to determine if an expert is really an expert. d. Hold-harmless provisions are clauses added to engagement letters to attempt to limit liability. e. Side-taking is when an attorney hints at his or her position before the expert reviews the facts of a dispute. f. Motion to compel asks the court to force a party to do something (e.g., deliver documents, answer questions, provide electronic tapes). g. Impeachment is an attack on the credibility of a witness. h. Subpoena duces tecum is a command to produce specified documents to a court. i. Bulletproof expert is one who survives cross-examination without incurring any damages. During trial you may want to answer as suggested, but your report before trial or you should not directly accuse someone of a crime. Both the AICPA and the CFE group indicate that you should prepare your report so that the reader will reach the conclusion that the party committed the crime (without stating a name). Also, be careful what you say outside the courtroom. Wrong. Now the other side can spend all day grilling you on the book. Also, this allows the other side to admit the book into evidence even though it is hearsay evidence. Something in the book may contradict what you have previously stated. There really were not ten factors, but this court had to decide between the medical expert’s $420 per hour charge for a deposition, when the expert had charged only $250 for a friendly litigant. The court said the ultimate goal is to ‘‘calibrate a balance so that plaintiff will not be unduly hampered in his/her efforts to attract competent experts, while at the same time an inquiring defendant will not be unfairly burdened by excessive ransoms which produce windfalls for plaintiff’s experts; decision making in such entropic field must be fair to parties, equitable vis-a-vis the witness and comprehensible to the community at large.’’ The charge was $350 per hour plus a $70 override for his employer. The court said the rate was high and unconscionable. The charge back seems more appropriately treated as a deduction from his fee, not an add-on. The court settled on $250 per hour. Three hours for travel between Baltimore, Maryland and Washington, D.C. This is an excellent exercise with digital cameras. Answers will vary. Search for ‘‘expert witness retainer agreement.’’ Or search for Aaron Larson, ExpertLaw. Answers will vary. Fees really will vary. The NLSSA is a nationwide not-for-profit association of CPA firms specifically selected for their experience in and commitment to providing litigation support services to the legal and business community. www.willyancey.com City of Tuscaloosa v. Harcos Chemicals, Inc. Independent Gasoline Antitrust Litigation Kuriansky v. Natural Mold Shoe Corp. One may subpoena and depose a public or private corporation, partnership, association, or government agency.

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66. Students should be able to locate. 67. Students should be able to locate. 68. a. When asked to assume invalid representations of fact or alter their methodologies without foundation or compelling analytical reason. b. No. Clause 2. c. There should be no change in methodology for purposes of favoring any party’s claim. d. Strive to maintain a current knowledge base of their discipline. e. Journal of Forensic Economics. f. None; an organization only. 69. a. Admitted to planting bones at crime scenes across Michigan and the United States. b. Allegedly committed aggravated perjury; former Houston Police Department DNA Lab Chief. c. Former Suffock crime lab director who pleaded guilty of lying about his credentials. d. A forensic document examiner who helped pioneer fingerprint evidence, but was involved in a $2.5 trillion fake bond scheme. 70. a. Court said she testified falsely about a scientific study that had not been published. Article did not say what she testified to in the courtroom. b. The Schlup gateway means that a petitioner must show that it is more likely than not that no reasonable juror would have convicted him in light of the new evidence. 71. a. Myron Scholes, a Nobel Prize winning author, affiliated with Stanford University. b. Several million dollars. c. Answers will vary. At least one author believes that Scholes has knowledge of the tax laws. d. Girlfriend and later wife, apparently, according to a Tax Notes article. e. Dr. Scholes. 72. Some experts believe that the punishment for white collar crime has been pushed to the extreme. 73. Answers will vary. 74. Answers will vary. 75. a. Vintage watches. b. April 29, 1938. c. Musical skit. d. Far Rockaway; 1956. e. Alabama; Hofstra. f. Nasdaq. g. 069-30-9552. h. Ruth Alpern; 096-32-2354. i. Brooklyn Law School. j. His sons (Mark and Andrew). k. Mark.

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Forensic and Investigative Accounting

SOLUTION TO COMPREHENSIVE PROBLEM
Adopted from an article by Scott Miller in The Valuation Examiner (September/October 2004). As you can see from this example, litigation support work is not as easy as it may seem to the uninformed. It takes confidence, education, research, a detailed approach, excellent communication and presentation skills, and good preparation to do litigation work well. Instead of discouraging someone from seeking a new revenue opportunity, it is strongly recommended that anyone seeking to get into this type of work do their homework first. Learn what different types of cases there are. Match your background, resources, and experience with the specific types of cases and choose them carefully. Find out what will be expected of you before you try it. Get some experience first and then slowly build your practice. The best piece of advice is for you to find a mentor: someone you can bounce things off of, learn from, and who can critique your work. Whether it is a friend, peer reviewer you have to pay, or attorney, do it even if you cannot bill it to your client. What would you rather do, build a successful niche over time or end up like Anderson? The following are some of the mistakes Anderson made: • He did not have the training, background, or experience to do this type of work. • Anderson should have thought about if he had the proper disposition to handle the stress of the work and testifying. • He misled Esquire about his qualifications and experience, hoping he would learn on the job. • Anderson allowed the attorney to prepare the engagement letter and did not have someone review it prior to the time he signed it. • Anderson did not review the engagement letter properly, missing the issues of contingent fees and payment terms. • He should have gotten a retainer. • He should have insisted his fees be paid prior to his testimony. • He didn’t know what the market rates were prior to quoting fees. • He should have had second thoughts about working for an attorney that would ask for a low result. • When he was first engaged, Anderson should have asked when the trial was scheduled and made plans with Esquire to reduce the scheduling impact on his practice and clients. Anderson could have tried pressing Esquire to commit to a specific date and time for better planning. • Anderson should have had contingency plans in case the trial was delayed into tax season. • Prior to preparing his damages calculations, Anderson should have taken the time to investigate what the potential elements of damages were. There is plenty of available literature out there. He could have started with AICPA Consulting Practice Aid 98-2 and then continued from there. Anderson should have realized that statutory deductions like social security and Medicare tax are elements of damages as well as unemployment insurance and workers compensation. • He did not ask Esquire the right questions or request additional information such as the actual employer’s cost of the medical and dental and if Broke was married or single. • He should have learned more about the case and Broke, so he could more accurately assess her potential damages. • Anderson should have done more to determine the true economic effect of Broke’s termination on her future earnings potential. Had he done so, he would have learned that her future earnings capacity was affected and therefore he should have projected the earnings out to a point where the effect would no longer exist. He would have then had to discount those earnings back to present value at an appropriate rate. • Anderson did not know how to prepare his report let alone that one was required. He should have known what was expected of him at the time of accepting the engagement. In other words, he should have asked the attorney when he originally obtained the engagement.

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Textbook Solutions

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• Anderson’s report should have included a listing of all documents he used to form his conclusions and how he calculated the damages. • The CV is not a resume and should be constructed in a fashion to give the Court an understanding of why Anderson was qualified as an expert in this case. Had Doright wanted, he could have initiated a Daubert challenge and moved to exclude Anderson’s testimony all together. • Anderson should have reviewed the report and CV that Esquire prepared for him prior to signing the signature page. Anyone with the desire to enter the litigation environment should understand that although most cases settle, not all of them do and you must be ready to testify at any time. Testifying is not for the faint of heart. Remember one thing: Testifying means standing up in a public environment and having an extremely intelligent (and usually) wellprepared attorney ask you questions with his complete purpose being to make you look like you don’t know what you are doing. If you don’t like the risk or challenge, stay as far away as possible. But, for those of us who thrive on the challenge and high stress of this type of work, it can be very rewarding and enjoyable. And don’t forget to be well prepared!

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Chapter 8