A delay in retaining a financial expert can cause unnecessary problems and create extra work for both the expert and the attorney that could have otherwise been avoided.
By Michael J. Kresslein, Forensic Accountant
Whenever I speak to attorneys about forensic accounting or other financial expert services, there is one particular type of phone call that I caution them against making: “I need an expert. The report is due in two weeks. Discovery is closed.” Don’t get me wrong — I always welcome phone calls from an attorney looking to send me business and, in some cases, those particular circumstances may not pose any problems at all. In many cases, however, a delay in retaining an expert can create trouble for both the expert and the attorney that could have been easily avoided.
Rushing any kind of analysis poses a greater risk of error; and errors in expert reports used in litigation can be disastrous. It is the opposing attorney’s job to search for, expose, and take full advantage of any such errors to undermine the credibility of the expert and the reliability of his opinions.
Retaining a Financial Expert and Providing Support for Opinion
More significantly, the attorney’s delay may undermine the expert’s ability to do his job properly, potentially prejudicing the entire case. An expert should have control over the documents and other information he needs to support his opinions; the expert is in the best position to know what those materials are, especially if the subject requires particular sophistication, such as business valuation. It is possible that the attorney has already requested and obtained everything that the expert needs or that any additional information can be sought from the attorney’s own client, in which case the expert is on solid ground. Too often, however, the expert will find that gaps in discovery remain. While the attorney may serve supplemental discovery requests seeking additional documents for the expert, that opportunity is lost if insufficient time remains, either because the expert report deadline is too close to wait for responses or because fact discovery is already closed or will close before the opposing party’s allowed response time. Even if the attorney has obtained the necessary documents, the expert may wish that additional questions had been asked of certain witnesses in their depositions, but that opportunity may now be lost.
Weighing the Cost Against the Benefit
Why do these problems persist in cases that require financial experts? Usually, it comes down to money. Because experts are an additional cost of litigation, clients are reluctant to incur that cost unless and until it is absolutely necessary. Therein lies another, more nebulous, problem – the view of an expert as merely another cost, rather than as a benefit.
I have generally found that the cases in which my services have had the largest impact are those in which I have not just formulated opinions and drafted a report, but those in which I have worked closely with the attorneys in reaching that point or in shaping the case in a broader sense, beyond an expert’s traditional role. If used properly, an expert can help the attorney marry the legal and financial sides of a case, which are often disjointed due to many attorneys’ unfamiliarity with important financial factors. This unfamiliarity, while perfectly understandable, may lead to deficiencies in discovery concerning matters pertinent to the expert’s analysis. Having a financial expert assist with discovery requests may be viewed as an extension of the attorneys’ role, even though the expert maintains independence to issue opinions.
The Benefits of Retaining a Financial Expert Early
It all starts with retaining a financial expert early. Not only will early retention of the financial expert enables the expert to do her job better, but it will also enable the attorneys to do their job better. If retained early enough, a good financial expert may be used to help prepare document requests, interrogatories and answers thereto, corporate designee deposition notices, deposition questions, or other matters bearing on the subject of the expert’s opinions. The expert may be particularly useful in attendance at certain depositions, especially those related to financial matters. The attorney may also find it beneficial to discuss the overall theory of the case with the financial expert to help shape broader case strategy and earlier retention will better allow the expert ample time to formulate opinions and produce a high quality work product. Early interaction between attorneys and financial experts often results in cost savings for clients, demonstrating the reality that a financial expert is not just an added cost, but a true value.
Michael J. Kresslein, JD, CPA, CFE, CVA is a director in Aronson LLC’s Forensic & Valuation Services Group, where he specializes in fraud investigations and commercial disputes. With more than 19 years of experience, he combines forensic accounting, legal and investigative skills to assist his clients with a wide range of forensic and litigation matters, including calculating commercial damages for litigation; conducting investigations regarding embezzlements, accounting improprieties and other matters; and providing expert testimony.