How many lawyers does it take to provide detailed evidence regarding a financial crime?
None - if they've got the right accountant.
Litigation support provides a niche area of expertise for accounting professionals who are comfortable operating in a legal arena. The traditional litigation support services - including business valuation, expert witness testimony and damage calculations - form a solid part of accounting services in today's litigious society.
Additional services that fall under the umbrella of litigation support include asset valuation in divorce proceedings; contractual disputes; calculation of lost earnings potential in personal injury situations; helping with organization of data; providing expert opinion on financial problems based on financial statement analysis; determining possible financial motives relating to insurance claims; calculation of lost business opportunities and costs of repair; debtor/creditor calculations in bankruptcy proceedings; and more.
And a growing demand for litigation support translates into a flowing revenue stream.
In fact, 69 percent of the firms ranked in Accounting Today's 2005 Top 100 Firms listed litigation support services as a client niche that had grown over the past year.
The federal rules of evidence were amended in 2000 to allow expert witnesses to testify in the form of an opinion if such opinion was based on scientific, technical or other specialized knowledge that will assist the trier of fact to understand the evidence or determine the facts.
"Prior to 2000, courts only allowed expert testimony when the facts became too complex for the average juror," explained Shannon Rusnak, CPA, DFE and managing partner in the Houston office of Matson, Driscoll & Damico LLP, an accounting firm that specializes in loss and value accounting.
The amendment in effect established trial judges as gatekeepers, responsible for determining the reliability and usefulness of all expert witness testimony. Since that time, the use of expert witnesses and other technical professionals, including financial experts, has become more prevalent in legal matters, and not just in the courtroom.
Much civil litigation is settled without going to trial. "What that means is that the information you obtain in the pre-trial phase of the case becomes increasingly important, because it helps you analyze what a reasonable settlement will be. The accountant plays a critical role," said Kenneth R. Hartmann, a partner in the Coral Gables, Fla.-based law firm of Kozyak Tropin & Throckmorton.
"When I take a deposition, I will often have the accountant help me prepare for that witness, help me craft questions that will advance my case, or deflect the other side of the case if I'm [representing] a defendant," said Hartmann. "Having the insight of the accountant is very helpful."
Sometimes there's no case without an accountant. Chris Martin, an attorney and founding partner of Houston-based law firm Martin Disiere Jefferson & Wisdom, defends insurance companies. "If there are indications that the insured would have an incentive or reason to burn the building down, then your accountant is the most important witness in the whole case," said Martin.
Credentials are important
Because it's important to establish the expertise of the expert witness or the financial professional providing valuation information, credentials can play a significant part in establishing an accountant's proficiency. Judges have the right to prohibit an expert from testifying if that expert does not have sufficient experiential capacity in the appropriate field, or if the expert does not have specialized knowledge that relates to the facts of the case.
"In terms of litigation dollars, you've seen some really huge jury awards over the last 20 years, and part of it is that one side has started using expert witnesses, so the other side is forced to counter with somebody of equal expertise and certifications," said Rusnak. "If this side has a CPA, CFE, the other side feels they have to bring on someone of equal or greater certification."
"It's almost like a battle of the experts," added Jack Damico, CPA, founding partner of Matson, Driscoll & Damico.
Responding to the growth of litigation support services and the need to identify credentials, the American Institute of CPAs started administering the Accredited in Business Valuation credential in 1997. The credential is only available to CPAs.
Other certifications carried by litigation support specialists can include the Accredited Senior Appraiser, the Certified Business Appraiser, the Certified Valuation Analyst, the Certified Forensic Accountant and the Certified Fraud Examiner (see box). Each of the certifications requires holders to pass an examination and demonstrate a certain amount of experience and classroom learning.
Sometimes the best training comes from unexpected sources. Even though Damico regularly provides litigation support services, he has been called for jury duty twice. "Every expert witness should sit in a jury room to see what they think is important - it's unbelievable," he said. "The people on the jury were looking at the body language of the prosecutor, the defendant, the witnesses. It was a fascinating experience."
Beyond the letters that come after a name, there are other skills and requirements that are associated with people who provide excellent litigation support services.
Ongoing education is important, because the field is constantly changing. All of the organizations that provide the certifications mentioned above offer continuing education training programs and classes, and there are national conferences throughout the year with experts providing seminars.
Many accountants find that much of their work in this area comes from referrals. "One attorney is going to have a good experience with you, and somewhere down the line someone asks about a financial expert and your name gets passed on in that matter," said Rusnak.
"We'll be sitting on a case, and opposing lawyers get to see what our firm does, and they turn around and say 'We'd like to have you on our side next time,'" said Damico.
Advice for expert witnesses
Caroline Cinquanto is director of the LLM trial advocacy program at Temple University. Her program trains lawyers in the area of trial advocacy, and part of the training involves teaching them how to utilize and work with financial experts. "We teach them how to prepare an expert for trial."
"We teach our students that the experts are there to teach," Cinquanto said. "Your job as a lawyer is to help the expert teach the jury in the most simple way possible. Use charts, chalkboards. You have to get that information out to the jury as simply and as plainly as possible, without talking down to the jury. You can use visual aids, and always include the jury in any type of explanation that you're giving."
"Jurors form an opinion very quickly as to whether they'll believe a witness. You have to be credible, you have to speak in a way they can understand," explained Sharon Lundgren, Ph.D, psychologist and trial consultant, who works with expert witnesses to help them become more persuasive before they testify. She emphasized the importance of body language in communicating with a judge and jury. "Look at the jury, make eye contact, make sure they're still tuned in to you. Use hands in an efficient way. If you're making three main points, use your fingers, count 1, 2, 3. Make your face engaging. Most witnesses need to be a little more theatrical and involved in a way that fits their personality and comes across naturally. Get up and use the corkboard, get out of the box, educate like a teacher. When you become a moving object, it becomes more engaging for the jurors."
"You're an independent party and the court is looking for credible testimony. Maintain credibility, maintain independence, don't get caught up with being an advocate for the client. Stay objective, and do work that's going to withstand any challenges - it must be able to withstand cross-examination," said Richard A. Pollack, CPA, ABV, ASA, CBA, CFE and managing director of the business valuation and litigation services practice at Miami-based Berkowitz Dick Pollack & Brant.
"You need a person who can teach the jury and judge what's going on in layman's terms, the ability to take a fairly complex calculation and bring it down to the level of someone off the street who's not schooled in finance and accounting," said Donna Beck Smith, CPA, ABV, ASA, CVA, CrFA and head of the business valuation and litigation support practice at St. Louis-based accounting firm Brown Smith Wallace.
"It's an art," said Damico. "If you get someone presenting a case with such technical jargon, you can almost see the jury glaze over and not pay attention. The CPA can crystallize everything in short order so [the jury] understands."
