Consulting experts play large, but often invisible roles in assisting their clients. Forensic accountants Dawna Wright and Uriel Koloditzky draw from their experiences on past independent and consulting engagements to showcase the impact a consulting expert can have on the assumptions, calculations, reports and ultimately the outcome of a matter.
What Is a 'Dirty' Expert, and Why Would I Need One?
A 'clean' or testifying expert has a duty to the court and must give their independent opinion. This means that they have to be prepared to be called to the witness box to be cross-examined on their opinions. In contrast, a 'dirty' or consulting expert has no such constraints. They are in your corner to help optimise the outcome for your client, akin to having an on-call accountant.
At What Stage of the Proceeding Should I Engage a Consulting Expert?
Our biased answer is: the earlier, the better.
One of the first things the legal team must do is draft pleadings. While this can be done well before they have engaged a testifying expert, engaging a consulting expert in the early stages can add value by ensuring:
- Allegations or refutations are supported by financial information
- All relevant heads of claims, including any related counterfactuals, are capable of being quantified
- The pleadings contain correct and accurate references to accounting-related materials, such as accounting standards and financial metrics
Your 'clean' expert's task will be impactful (and they will be easier to work with) if they receive pleadings that contain well-articulated counterfactual assumptions linking the subject of the dispute to a quantifiable loss — aligning their work with your underlying legal strategy. A consulting expert can help make that happen and is protected from having to reveal the thought process in cross-examination.
Scenarios, Scenarios and More Scenarios
If we had a dollar for every scenario we have ever calculated . . . things would certainly be different. Regardless of the type of matter, there is real merit in testing and knowing the sensitivity and materiality of certain inputs and assumptions on a calculation.
Enter the consulting expert. Clients do not need to provide a formal letter of instructions detailing every specific combination required at the outset. A consulting expert can produce calculations on an ad-hoc basis, making changes as needed to help attain the highest or lowest number. In past engagements, we have assisted as consulting experts by:
- Undertaking a variety of different financial modelling, ranging from simple calculations to large, complex calculations that regularly crash our computers
- Creating an interactive dashboard that allows a user to toggle between different inputs or assumptions to automatically update loss
- Calculating loss on a group member basis as well as on a total basis in class actions
The value added by a consulting expert extends beyond the calculations to the 'on-call' communications throughout an engagement. They are easier to communicate with than a testifying expert, essentially becoming part of the legal team, allowing you to check the outcomes of as many scenarios as you like, including testing specific assumptions and inputs, without worrying about the work being seen by the other side.
Information Is Key
One of the common dilemmas in proceedings concerns the quantity of information to be discovered. Is it better to disclose more information or less? As much as we would love to provide a blanket rule, the answer is disappointing: it depends.
There is some good news, though — a consulting expert can help you figure out the answer, from tens of millions of rows of data requiring months of time, data analytics tools and programming skills, to the bare minimum of information.
Either scenario can produce a robust report, but both require navigating the potential pitfalls. A good consulting expert will have the skills and experience to help you navigate the fine line between 'too much' and 'too little' and identify the precise information required for your testifying expert to undertake a particular calculation. We draw on our experience as testifying experts to pre-empt the information requests and any follow-up questions and ensure that you disclose what is required, but nothing more.
We have learned that adequate, relevant and quality information is one of the most important factors for an impactful expert report. A consulting expert can assist you by:
- Meeting with the client's accountants to discuss the types of information available (i.e., taking one for the team, so a lawyer does not have to)
- Going to a client site and extracting the relevant information from their accounting systems (e.g., analysing large, complex and disparate datasets stored in multiple database systems to extract information for loss quantification)
- Reviewing, sorting and cleansing data before it is briefed to an independent expert to ensure that only relevant information is provided
Critiquing (and Sometimes Tearing Apart) Expert Reports
Having drafted countless expert reports and with a team that has testified more than 75 times in court, we know what to look for.
Your consulting expert can play a big role when it comes to issuing expert reports (without signing their own) by reviewing the reports of both your expert and the opposing expert.
A consulting expert can assist you by:
- Drafting the letter of instructions alongside the legal team to ensure they are interpreted as intended by the testifying expert
- Reviewing draft reports of your testifying expert and providing feedback on structure, methodology, calculations and clarity of expression
- Critiquing an opposing expert's report (which we are particularly passionate about) and identifying issues with the report's methodology, errors in the calculations and any key cross-examination points
In our experience, focusing on what an expert has not written is just as important as what they have written. You can learn a lot from the calculations and explanations that are not in the report (but should be), which can provide insight into what the testifying expert (and their legal team) may see as areas of weakness.
An expert report is the ultimate culmination of the instructions, assumptions, opinions and calculations of a testifying expert — you want to get it right. Unleashing the keen eye of a consulting expert on a report will provide you with insights that can enhance your legal strategy and strengthen your position in any matter.
Key Learnings
At the start of your next case, consider adding forensic accounting expertise to your corner to inform your strategy and add a nimble, but diverse skillset to the legal team. Trust us, the high impact of engaging a low profile 'dirty' expert will far outweigh the costs.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
