Money Talks
By David P. Bart
David P. Bart is director of Bankruptcy and Litigation Services/Financial Advisory Services at RSM McGladrey, Inc., in Chicago, Illinois, and can be reached at
Financial experts can provide invaluable services in litigation matters, offering evidence and opinions to assist the trier of fact in understanding key issues. These experts can assist in areas that extend well beyond tax and accounting and into areas such as corporate finance, cash flows, business valuation, lost profits, and damage calculations. The types of professionals who analyze these topics are also quite varied and include accountants, business consultants, turnaround experts, fraud examiners, tax professionals, and others with specialized training. The fundamental questions affecting each specific litigation matter will determine the relevance and role of the professional needed in your case.
When searching for a financial expert, look for someone who possesses the relevant qualifications to reach their opinions. Accounting degrees, MBAs, and professional training offer a foundation, and relevant professional experience is useful. The following professional designations help to demonstrate the professional’s special training and expertise: Certified Public Accountant (CPA); Certified Fraud Examiner (CFE); Certified Insolvency and Reorganization Accountant (CIRA); Certificate in Distressed Business Valuation (CDBV); Chartered Financial Analyst (CFA); and Certified Turnaround Professional (CTP). These designations and the rules of their related professional associations distinguish the professional’s work, define the ethical guidelines the person must follow, and present limitations on the nature and scope of the services that can be provided.
Prior to engagement, the attorney and financial expert should discuss and understand the answers to critical questions that can affect the disclosure of the professional to opposing parties and the obligations to produce work product during discovery, including:
• Will the professional testify as an expert witness or act as a litigation consultant?
• Will there be fair and complete access to all pertinent facts, documents, and people from which to form an opinion?
• Does the professional have the appropriate background, qualifications, and expertise to render the opinion?
• Who is the client? A party in interest, the plaintiff or defendant, a committee representing a defined class or interest, or perhaps the committee attorney? Who will retain the professional—the attorney or the attorney’s clients?
• Are any conflicts of interest present?
• How will the work impact other aspects of the case? Will the findings be revealed even if they jeopardize other matters?
• What is the venue and what are the expectations regarding rules of evidence and the use of expert testimony?
• What privileges are available to protect work product from discovery? Will the new Federal Rules of Civil Procedure regarding electronic discovery have any impact?
As a litigation consultant, the financial expert should investigate facts and circumstances, perform relevant analyses regarding key questions in the litigation, and educate the client and attorney about key findings. As an expert witness, the professional should educate the trier of fact about the issue at hand. A litigation consultant can shift roles and later testify as an expert. This commonly happens with consultants working on business viability, solvency, cash-flow forecasts, business valuation, and damages matters. That shift can have significant implications for discovery and potential testimony.
Communication with the financial expert is critical. Regular meetings help maintain a clear understanding between the attorney and the expert, and written reports document the work performed and provide a defined basis for evaluating the findings. Fee estimates and staged work can help prevent surprises. However, be careful of discovery implications for all written materials. And make sure the professional responsible for the expert opinion performs his or her own work and reaches his or her own conclusions.
Experts should be capable of explaining their methods, underlying data, procedures, ethical constraints, proper formats, interpretations, and terminology. They should also be able to explain potential weaknesses and questions they may face. The basis for the expert’s conclusions must be clearly understood by both the attorney and expert before trial to prevent any misinterpretations or surprises.
Above all, the expert must be honest and objective. If the expert is perceived as a “hired gun” or mouthpiece, he or she will not help the court or the client. An expert cannot simply “advocate.” A good expert will break down component issues to determine a set of basic assumptions, inferences, and conclusions that can be drawn from the facts to reach an opinion. By working together, the attorney and financial expert can function as a team, focusing on the many issues present in complex litigation. Careful, analytical work persuasively presented in an articulate, forthright manner should lead to firmly supported expert opinions that can make all the difference between winning and losing the case.
• A Litigator’s Guide to Expert Witnesses. 2006. PC # 5150306. General Practice, Solo, and Small Firm Division. To order online, visit