Over the years, I have received calls from attorneys asking me to be an expert witness on a particular case. After we discuss the issues at hand, if appropriate to the subject matter, I always ask if they have hired a forensic accountant to analyze the transactions relating to the case. I get one of several responses beyond yes:
- “My assistant is good with Excel and is preparing one.”
This is often a trap for the attorney and the case. I have been in these situations before and have found that the attorney-prepared accounting reports frequently lack necessary detail, schedules, accuracy and completeness that makes them unusable in a FINRA hearing. Further, the conclusion often fails to match the professionally prepared reports that come from the other side. (As long as it is the same account during the time period, the profits, losses and income should be the same.)
This recognition frequently comes after the 20-day exchange and puts the side with the assistant prepared report at a disadvantage which needs to be corrected before the hearings. This means lawyers and their expert scramble to get a last-minute report prepared.
- “The case is really simple and I don’t need an accounting report.”
I recall attorneys saying this in several master limited partnership cases from a couple of years back. MLP securities paid large dividends while at the same time the share prices were falling fast. Considering the share price decline alone, caused the clients to believe their accounts had a large investment loss.
In one matter that I recall, the claimant used the share price loss alone to convince the lawyer to take the cases which appeared to have a large capital loss. In reality, the dividends exceeded the share price loss and the account had a total return profit.
Following the preparation of a quality forensic accounting report, the amount of the profit was established leaving the clients and their counsel scrambling to negotiate a settlements that covered costs.
- “Not yet and I will do that.”
At this point I usually suggest they hire a securities forensic accounting firm with whom I have worked for fifteen years. Their work product is excellent, they private label their reports for me and since the work was prepared under my direction, I can testify about the reports. Results here have been very good.
Before taking any case involving the trading of securities and related issues, a good forensic accounting report should be prepared and considered.