When attorneys try to control the flow of discovery to the retained financial expert, they may create more problems than solutions.

By Joseph L. Leauanae and Jennifer A. Allen, Financial Consultants

Avoiding Tax Traps in High-Asset CasesWhen we work with an attorney, we need to reach a consensus on the type and quantity of information that we need for our financial analyses. Occasionally, the attorney will attempt to manage the flow of documentation to our office by either not providing us with pertinent discovery in a timely fashion or by only providing partial discovery.

Attorneys who try to manage the flow of discovery to the retained financial expert usually rationalize their actions as follows:

  1. I want to control costs and/or due diligence.
  2. I want to influence the expert’s conclusions.
  3. I am embarrassed that the expert will identify deficiencies in my requests for production.                                                                                                

 

Cutting Corners

We are not advocating for an open checkbook when it comes to the retained financial expert’s review of discovery, however, tightening the purse strings by limiting due diligence can cause substantial issues in a case.

Attempting to control costs by waiting until the last minute to retain an expert can be counterproductive: a rushed timeline could mean charges for additional (or more expensive) professionals than would have been necessary without the expedited time-frame.

Attempting to control costs by selecting which document production to provide or withhold could also backfire: the attorney may not know which documents are crucial to the retained expert’s analysis, and there is potential for significant damage if opposing counsel provides information at deposition or in trial that causes the expert to change their opinion.

Loading the Gun

Most attorneys are not actively seeking to control the retained financial expert’s testimony. However, even subtle attempts by counsel to direct the scope of the expert’s analysis through “management” of  the discovery they provide can leave the expert unnecessarily exposed to criticisms regarding their objectivity, competence, and the integrity of their opinions. Financial experts play a crucial role in the success of certain litigated matters, and the preclusion of their testimony can severely hamper counsel’s effectiveness.

An attorney may avoid providing the retained expert with documents that do not support their client’s position. However, the expert might have reached a favorable conclusion even if the attorney had provided all pertinent discovery. As such, by “directing” discovery, the attorney may have poisoned the appearance of the retained expert’s opinion. Unfavorable information seldom remains buried, and one of the worst experiences for an expert is to first see such information when opposing counsel provides it at deposition or trial.

If an opposing expert receives more information than the retained expert, the opposing expert’s analysis and opinion may be perceived as more credible, supported, and informed.

Covering the Oopsie

Finding Financial FraudBeing human, attorneys sometimes make mistakes. When mistakes occur in requests for production, counsel may attempt to divert attention from those mistakes by not giving the retained financial expert the opportunity to either assist with additional discovery requests or to identify deficiencies in documents already produced through discovery (since such deficiencies may have resulted from counsel’s actions rather than the responses provided by opposing counsel).

If the expert is not made aware of discovery deficiencies in a timely fashion, they may not be able to adequately address such deficiencies in their report. The trier of fact may also preclude the expert from rectifying deficiencies in counsel’s requests for production if not done in a timely fashion.

On occasion, counsel has sought to cure unrectifiable discovery deficiencies at trial by seeking our responses to hypothetical scenarios wherein such deficiencies did not exist. In our experience, these presentations are never as effective as being able to directly correlate testimony to documents that have actually been produced through discovery.

Protecting Your Expert

As financial experts, our currency is competency and credibility. By attempting to manage the flow of discovery, counsel runs the risk of either shortchanging our effectiveness or, at worst, debasing our worth. Therefore, we propose that open dialogue regarding discovery should be maintained between counsel and the retained financial expert in order to avoid the many pitfalls that may otherwise arise.

 

Joseph L. Leauanae (CPA, CITP, CFF, CFE, ABV, ASA) and Jennifer A. Allen (CPA, CFE) are with Anthem Forensics LLC, a Las Vegas-based firm specializing in forensic accounting, business valuation, and economic damage calculation services. Most of Anthem’s work is oriented towards providing expert witness testimony, but the firm also assists clients in non-litigious matters. www.anthemforensics.com

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