Bear Stearns & Co., the troubled investment bank acquired last year by JP Morgan Chase, has been ordered to pay $27,353,000 in damages for misrepresenting its investment strategies, after a court heard key testimony from a forensic accountant.
Ninth Judicial Circuit Court Judge James E. Glatt, Jr., ordered the damage award after 17 years of litigation. Bear Stearns has been ordered to pay the damages to the state of Delaware, as receiver for National Heritage Life Insurance Co., a Delaware company whose principal offices are in Orlando, Fla. The court’s decision was based in part on the analysis and testimony of Stewart Appelrouth, a co-founder of Appelrouth, Farah & Co., a CPA firm based in South Florida.
The court determined that Bear Stearns breached its contract and its duty of good faith and fair dealing by failing to accurately represent its investment strategy and projected returns to NHLI. The plaintiff’s attorney, Thomas Equels, hired Appelrouth (pictured) as a forensic accountant to determine the total amount of damages and provide expert testimony on the money lost in the investments. Throughout the trial, Appelrouth’s forensic investigation, analysis and testimony helped determine how much the plaintiff’s reliance on Bear Stearns cost them by analyzing the sophisticated financial investments, and played a role in the judge’s decision to sustain his calculation of the damages.
On April 15, 2008, the court determined that Bear Stearns consistently provided analyses and financial information that was deceptive, misleading and inaccurate, and the $27.4 million award for the plaintiffs was settled during mediation in October 2008. Appelrouth’s firm announced his role in the trial on Feb. 26.
“We settled for more than what the court awarded,” said Appelrouth. “It was a very complicated case. We had one attorney and Bear Stearns had six. I felt like I had an army against me while I was up on the stand. You felt like they were trying to eat you up alive.”
Appelrouth often provides expert testimony in cases as a forensic accountant. He only testified one day in the NHLI case, but later returned to the court when Bear Stearns put its expert on the stand. “One of the most important things you can do as an expert is not just testify but help the attorney determine what questions to ask and how to go down a path with those questions,” he noted.
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