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Rebutting your client: How much involvement is too much?
By Joseph Leauanae, CPA, CITP, ABV, ASA, CFE and Bryant Petersen

In a situation that may be all too familiar, your client asks you how much your professional services will cost them. Assuming that you are feeling ethical that day, your response will likely be that it depends upon how much work you will have to perform. When your client follows up by asking how much of that work can be performed by them, how should you respond?

Clients will often seek to involve themselves in the litigation process in one form or another. Sometimes this attempted involvement is an effort to minimize fees and in other cases it may reflect a desire to exert control over an unfamiliar situation. If this article were about the relationship between attorneys and their clients we would likely be summarizing and concluding our narrative at this point. However, as non-attorney expert witnesses who are frequently faced with this dilemma, we believe this topic to be an important one. Not putting it lightly, cases have been destroyed because an expert relied too much upon the assistance and work product of a client.

As experts in financial matters, our interactions with clients are generally along the lines of reconstructing and evaluating financial statements, investigating allegations of fraud, and valuing businesses and business interests. Although our experiences are specifically relevant to these types of analyses, our observations and conclusions are universally applicable to experts in other fields. These observations also provide insight to those in the legal profession as to the amount of reliance an expert can and cannot be expected to have upon work product and assistance provided by a client.

In putting together this article, the authors have relied upon a fundamental difference between attorneys and expert witnesses. Other than the fact that we experts typically look like nerds and are easy to pick out of lineups, there really is an important distinction between the way that an attorney and an expert view their relationships with clients: although attorneys are advocates for their clients, expert witnesses are expected to remain objective and neutral to the party that retains them. How, then, can an expert witness interact with a client and use client work product without compromising that objectivity?

What is objectivity? Where can I buy it? Can I get a used one on eBay?

To experts, objectivity is something that, once lost, is difficult if not impossible to find again during an engagement. The American Institute of Certified Public Accountants states that in the performance of any professional service, a [CPA] shall maintain objectivity and integrity, shall be free of conflicts of interest, and shall not knowingly misrepresent facts or subordinate his or her judgment to others . While this guidance applies to CPAs, it provides an excellent barometer by which to gauge objectivity. Furthermore, the authors contend that an expert must also maintain objectivity in appearance and avoid even the impression of impropriety. With these concepts of objectivity in mind, how does objectivity become endangered when a client seeks to assist with or perform a portion of the work deemed necessary by an expert?

Experts will typically begin an engagement by assessing the amount of work necessary to reach a conclusion. Once this preliminary assessment has been made, the expert will then segment the anticipated work into chronological blocks that incorporate deadlines such as discovery cut-offs, report due dates, depositions, and trial. Common sense would seem to indicate that the client should not typically write any portion of the expert report or put together any part of the expert’s exhibits, but to what extent can an expert rely upon work provided by the client prior to the preparation of the expert report? We use Mel’s story to shed some light on this dilemma.

Conspiracy Theory
Mel was a client in a marital dissolution matter. She suspected that throughout 20 years of marriage her husband had used marital funds to purchase certain assets that were then purposely hidden from her. Mel claimed that her husband, his brothers, and certain close friends had conspired together to hide these assets. Mel engaged us to trace the ultimate disposition of marital funds to determine whether she could attach to any previously undisclosed assets.

The first time that Mel came into our office she thought that she recognized our office manager. She thought that the office manager was one of her husband’s cousins and that therefore she couldn’t be trusted. In fact, Mel refused to believe that our office manager was not related to her husband until we demonstrated it to her by tracing the office manager’s family tree to show that there really was no relationship. Even after this exercise, the first few months of our engagement with Mel continued to be strained when she was unwilling to leave messages for us with the office manager.

Soon after our engagement, Mel brought in a large plastic garbage bag and a banker box, both of which contained documents that she claimed would support allegations that her husband had been living a secret life involving an illegal pornography ring, polygamist wives, a secret identity, and hidden assets. Upon a cursory examination of the garbage bag and banker box we soon discovered that the documents were in total disarray.

As our fees for Mel’s case began to mount, she asked us if it would be possible to let her organize the documents so that she could reduce her costs of litigation and thereby save our expertise for use on the actual financial analysis. At that point we were relieved that she wanted to organize the documents; in our initial review of the documents we had found baby pictures intermingled with bank statements, which was only trumped by the discovery that one of her teenage son’s baby teeth had been stashed by the tooth fairy amongst promissory note documentation. We readily agreed to accept her assistance.

To facilitate our oversight of Mel’s work we provided her with free use of part of our office space and gave her daily parking validations. Initially Mel did as we requested, organizing the documents chronologically by entity; however, as Mel went through the documents and found items that she thought would link her husband’s activities to her conspiracy theories, she would track us down and attempt to explain why each particular document was crucial to our expert analysis. Thereafter, each time she located a similar document we would have to revisit the same issues. If Mel felt that a staff member in our office did not buy into her conspiracy theory, she would make her way through each consecutive office until she found someone who would believe her when she made claims such as the assertion that her husband owned a major credit card company because one of its call centers shared administration costs with one of her husband’s entities.

After continuing in this fashion for some time, we reached a point where we were dedicating large portions of the workday to hearing and addressing numerous conspiracy theories. With each passing day we conveyed our concerns regarding our rising professional fees, reiterating that instead of interrupting us with every little document she should instead make notes and continue organizing the documents, as we had asked her to do, so that we would be able to review all of the documents at once, prior to discussing addressing her individual concerns. Our fees were adding up and we had only just scratched the surface of our analysis.

The problem that arose in this instance is that we initially set out with the best intentions: to save our client a certain amount of fees by having her perform some of the more basic tasks that would otherwise have been completed by our firm. What actually happened, however, was that the client’s determination to perform the analysis she wanted rather than the organization and analysis we had instructed her to do, resulted in a situation where the client was requiring daily attention but could not understand that our escalating fees were due to our daily involvement with her in the performance of her tasks. But how did this impact our objectivity as experts?

When is it time to put the client on the payroll?
Although we may not always have great clients like Mel, we should be aware that even without explicit retellings of sex scandals and conspiracies, most clients are capable of providing valuable assistance to an expert.

A client can be a very helpful resource for information regarding historical and background information. Since they often have firsthand, detailed knowledge of the subject matter, whether it be a business (such as in the case of a business valuation); another individual (such as in the case of a marital dissolution); or a process (such as a forensic accounting investigation), a client will often provide background and insights not normally apparent to an outsider such as the expert witness.

As financial experts, our engagements often involve a financial evaluation or investigation of a business, business process, or industry. These businesses have ranged from small single owner operations to international conglomerates, and in each of these instances we have had clients who have been able to provide us with useful information that would have been difficult to obtain if not from an insider. Some of this information has included an understanding of both official and unofficial work processes and the identification of key people to interview within an organization.

To a certain extent, clients can also prove very helpful in performing a number of the routine but essential tasks that are required prior to expert analysis. As financial experts, we generally spend a lot of time reviewing financial information. This financial information must generally be compiled into schedules that can be used for our analysis and for the presentation of our conclusions. A client can typically do quite a bit to obtain and organize the data necessary to prepare the expert reports and schedules, although the expert must oversee the process to ensure that the compiled information is true to the source documents.

Since an expert should always remain an objective party, it is imperative that when an expert is considering what work they may be able to accept from a client and what work they should not, they must consider how the litigating parties would react if they knew the source of the work product. For an obvious example, if the client were to put together a historical narrative of the subject matter, the expert may generally use such information to the extent that it does not draw conclusions or reflect an unsupported bias.

On the other hand, having a client write any portion of the expert’s opinion, or any report narrative that casts the expert as an advocate, would compromise objectivity. But what should be done if the client actually thinks that they can do a better job than the expert? Jack’s story illustrates a not-so-uncommon situation.

The Nutty Professor
Jack was a tenured engineering professor at a prestigious California university who was involved in a dissenting shareholder action involving a company in which he was a minority shareholder. The company at issue had been designed to oversee the construction of a large professional business plaza. The general contractor, who was the majority shareholder, was also involved in a number of other contemporaneous construction projects. We were engaged to investigate the use of business funds for non-business activities such as payments to contractors for work performed on other projects.

Since Jack had a strong background in scientific analysis and theory, albeit with an underabundance of basic social skills, he wanted to be involved in all aspects of organizing and reviewing the documentation. Furthermore, Jack wanted 100 percent attention from both us and his attorney. In fact, when the attorney indicated that he would be unable to schedule a meeting for a particular date because he was getting married, the client promptly contacted us and requested a list of other attorneys that we worked with so that he could find an attorney who was more dedicated to his cause (things ultimately worked out for all of the parties concerned, including the attorney’s new bride.)

Jack was so confident in his academic background that he believed he could easily perform the analysis and then simply rely upon us to voice his opinions in a report and on the stand. To save money, Jack insisted that we use him to perform some of the tasks. The client had a number of theories and undocumented instances of how the general contractor had abused his authority and misused company assets, even though the client had not organized the documents in a fashion that demonstrated the alleged abuses. We requested that Jack organize and prepare a narrative on the general contractor’s abuses.

As we conducted our investigation and uncovered accounting improprieties, Jack would, in each instance, claim that he had previously known about the abuses we were uncovering and argued that we were billing him for information that he already knew. We were put into a situation where the client thought of himself as the expert. How would we prevent ourselves from relying upon a client’s analysis?

Don't miss the donut by looking through the hole
There are a number of reasons that an expert may want to consider using work produced by the client. (And no, “because they pay their bill” isn’t one of them.) One of the main reasons for accepting assistance is the fact that having the client perform such work will reduce the amount of time that the expert will need to spend on the engagement, ultimately reducing the fees that will be billed to the client. While this may sound like a problem endemic to smaller or budget-conscious clients, we have actually found that clients who have retained us in both small and very large engagements have sought to perform at least some of the analysis that we would otherwise have undertaken. We found that we cannot generally assume by a client’s size or the size of the engagement that a client will or will not want to perform some part of the analysis. Obviously, it is imperative that the expert remain involved in the client work product process to ensure that the expert understands what the client is doing, that the client is appropriately following the expert’s directions, and that the work product does not become deficient due to errors or the proclivities of the client.

The other reason that accepting assistance and work product from the client may be useful is because the client, usually an insider with detailed knowledge of the subject matter of the litigation, will have insights and even access to information that is not readily available to the expert. The main issue to be aware of in using this type of information or data, however, is that the expert does not surreptitiously fall prey to relying upon information and documents that should have been routed through the formal discovery process. While experts routinely rely upon inside information and documents provided by clients, courts have not looked kindly upon experts who base their opinions on information that was never formally produced, sometimes going so far as to deny the admissibility of key information and imposing sanctions.

While there are some fairly good reasons why client assistance and work product can be used, there are also corresponding reasons why it should not. The client in a litigation matter is obviously invested in their case and their position and therefore lacks the objectivity that an expert is required to maintain. The client has an agenda. Therefore, any assistance and work product proffered by a client to an expert must be evaluated carefully. If the expert cannot ensure that they will be able to oversee the client’s involvement, they may be unable to testify as to the integrity of anything that is received from the client.

Furthermore, while the client may be an expert in the litigated subject matter, they may not have the requisite experience to perform certain analyses nor recognize certain red flags that an expert might easily identify as a result of training or experience. Additionally, depending on the complexity of the case and the personality of the client, the client may not understand or intentionally choose not to adhere to the expert’s instructions. This may lead the client to attempt to subvert the expert’s work with a biased analysis performed by the client.

At the end of the day, when does an expert stop becoming an objective third-party and start becoming an advocate for their client’s position? While the answer can be as complex as the question is simple, the authors believe that the line in the sand is primarily dependent upon the type and amount of assistance and work product that the expert accepts from the client. And we believe that such a line of demarcation is crossed when the expert’s conclusions and opinions are directed or inappropriately influenced by the client. Essentially, an expert loses their objectivity when they compromise their integrity, whether in fact or appearance, and becomes a spokesperson for their client. Regardless of whether an expert’s client is the author of conspiracy theories or a nutty professor, the plaintiff or the defendant, given the same fact pattern and circumstances, expert witnesses should usually reach similar conclusions. Unless, of course, one expert is better than the other; but that’s a different story.

Biography of Joseph Leauanae, CPA, CITP, ABV, ASA, CFE

Joseph L. Leauanae has over nine years of professional experience in the areas of litigation support and business valuation. His engagements typically include the performance of business appraisals or valuations, investigative accounting assignments, and economic loss quantification cases. He is one of only a few professionals in the United States to have formal training, expertise, and experience in both forensic, or investigative accounting, and business valuation. Mr. Leauanae may be reached at joseph@sagefa.com.

Biography of Bryant D. Petersen

Bryant D. Petersen has over five years of professional experience and has participated in numerous litigation support and business valuation engagements. His assignments have ranged from the tracing of funds through a ponzi scheme involving offshore entities to valuing a business that was destroyed by a product liability action. Mr. Petersen may be reached by email at bryant@sagefa.com .

An expert witness is a specialist who, by virtue of special knowledge, skill, training, or experience is qualified to provide testimony to aid the fact finder in matters that exceed the common knowledge of ordinary people.

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