Here - Feldesman Tucker Leifer Fidell LLP

Report
What Does a Divorce Lawyer
Want from a Forensic
Accountant?
Best Practices for an
Effective Working Relationship
October 21, 2014
1


Feldesman Tucker Leifer Fidell LLP
 Washington, D.C.


Mary S. Pence
Jason N. Sposeep

Schiller DuCanto & Fleck LLP
 Chicago

Shirley M. Steinbach
Feldesman Tucker Leifer Fidell LLP
 Washington, D.C.
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What is at stake?
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The best outcome for the client
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Reputations
5
Malpractice Exposure
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Attorneys and Forensic Accountants
have different training and mindsets
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The key is for the professionals to
have each other’s backs.
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Central Concepts
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Responsiveness, timing,
being forward looking
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Clarity about strengths and weaknesses
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Good communication
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Division of responsibility
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Fitting into the attorney’s mindset
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Types of Engagements in
Family Law Cases
1. Strategy
2. Investigation
3. Valuations
4. Determination of Income
5. Cash Flow/support
6. Tracing of Marital and
Non-marital Assets
7. Tax Projections
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Engagement to Develop Strategy
1. Understand the attorney’s theory of the
case/assist in its evolution
2. Understand the client’s goals and
objectives
3. Mastery of the facts/documents
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Investigation Engagement
1. Understand the attorney’s theory of the
case
2. Establish scope of work
3. Establish priorities and time frames
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Possible Areas of Investigation
1. Hidden assets:
a)
b)
c)
d)
Examine corporate and personal tax returns
Examine personal and corporate bank statements and corporate
detailed general ledger.
Obtain SEC filings
Review databases regarding real estate and corporate entities
2. Income Issues:
a)
b)
Personal expenses disguised as business expenses
Employment-related perquisites
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Valuation Engagement
1.
2.
3.
4.
5.
6.
7.
8.
Know the law in the relevant jurisdiction
Disclose prior relevant experience or lack thereof
Develop information about the opposing expert, if any
Develop information about ethical constraints of opposing
expert
Disclose your own prior expert opinions which may create a
conflict or constraint with regard to your expert opinion in
this matter
If the case is in litigation, communicate with the attorney
about discovery deadlines – i.e., designation of experts,
production of reports, deposition and trial dates
Plan ahead to preserve the work product privilege
Arrange for direct contact with the client to glean relevant
information
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Determination of Income
1. Review relevant statutory and case law
defining income
2. Understand the attorney’s theory of the
case
3. Educate the attorney as needed
4. Plan for the organization and presentation
of conclusions
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Cash Flow/Support Engagement
1. Understand the attorney’s theory of the
case
2. Clarify division of responsibility:
• Who will prepare the client’s detailed
expense statement
• How will results be presented?
• How will tax ramifications be included?
3. Decide how results will be presented
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Tracing of Marital and Non-Marital Assets
1. Review statutory and case law definitions
2. Be in close communication with the attorney as
information is produced/developed
3. Develop information about the opposing expert
4. Develop information about the ethical constraints of
opposing expert
5. Disclose your own prior expert opinions which may
create a conflict or constraint with regard to your expert
opinion in this matter
6. If the case is in litigation, communicate with the attorney
about discovery deadlines – i.e., designation of experts,
production of reports, depositions and trial dates
7. Plan ahead to preserve the work product privilege
8. Agree on how conclusions will be presented
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Establishing Dissipation
1. Understand the applicable statutory and
case law
2. With the attorney, develop the theory
regarding dissipation, including possible
alternative theories
3. Develop settlement/court exhibits
4. Be mindful of evidentiary rules for
introduction into evidence
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 Examples of Establishing
Dissipation:
◦ Spending on a paramour
◦ Gambling/addiction expenditures
◦ Unusual luxury expenditures
◦ Pre-payment of rental/lease expenditures
◦ Excess estimated tax payments
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Tax Projections and Opinions
1. Be knowledgeable about the relevant tax
law, or associate with an expert in a
particular specialty if needed in the relevant
jurisdiction
2. With the attorney, decide how many and
which scenarios will be created
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Accountant-Drafted
Document Requests

Provide the invoices or other supporting documents
(including “yellow sheets”) for all “personal expenses”
charged to Mr. Helfer’s capital account from 1/1/2009 to
the present.

Provide the general ledger entries reflecting all “personal
expenses” charged to Mr. Helfer’s capital account from
1/1/2009 to the present.

Provide copies of canceled checks used as payment for
“personal expenses” charged to Mr. Helfer’s capital
account from 1/1/2009 to the present.
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Attorney-Drafted Document Requests
Produce all documents relating or referring to personal
expenses that are paid for you or reimbursed to you by
Ginsberg Helfer & Boyd, PLLC since the date of the marriage,
including invoices, “yellow sheets,” general ledger entries,
and cancelled checks. This Request includes but is not
limited to all documents relating or referring to the line item
for “Personal Expenses” on the periodic Memoranda you
receive from Ginsberg Helfer & Boyd, PLLC on the subject of
your draws, a copy of which is attached as Exhibit A.
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Practice Pointers
(for Cooperating to Obtain Information
Necessary for Analysis)

Bemindful of important discovery dates
◦
◦
◦
◦
How soon can we serve discovery?
When will responses to document requests and
interrogatories be received from the other side?
When is the cut-off date for serving discovery requests?
When will the key persons be deposed?

Consult early in the engagement

Consult often throughout the engagement
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Discovery is a Two-Way Street!
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Discovery Requests from Opposing Party

Produce all your expert witnesses’ written
communications, including emails, that relate to this
lawsuit.

Produce all documents prepared by your expert witness
in the context of this litigation, including all drafts of
reports.

Produce all documents provided to your expert witness
in the context of the litigation.
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Attorney-Client Privilege
The attorney-client privilege attaches
to direct communication between a
client and their attorney, as well as
communications made through their
respective agents.
Reed Dairy Farm v. Consumers Power Co., 227 Mich.
App. 614, 618, 576 N.W.2d 709, 711 (1998).
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The Facts of People v. Marcy

Defendant was charged with murder.

Defendant’s attorney asked an expert to conduct a
polygraph examination of Defendant.

Prosecution requested that the expert reveal all the
information in his possession regarding the murder.

The expert refused on the grounds of attorney-client
privilege.
How did the Court rule?
See 91 Mich. App. 399, 283 N.W.2d 754 (1979).
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The Ruling in People v. Marcy
[C]ommunications between [the defendant] and [the expert] are
protected by the attorney-client privilege. . . . the attorney-client
privilege has been extended to cover, inter alia, an accountant,
investigator, engineer or appraiser employed by either the client or
the attorney to assist the attorney. . . [T]he assistance of experts is
often required in preparing a case for trial, and the participation of
an expert in trial preparation often makes him, in effect, “assistant
counsel . . . We agree with the trial court that the attorney-client
privilege extends to the polygraph examination conducted by [the
expert] at the request of [the defendant‘s] attorney.”
91 Mich. App. 399, 406-07, 283 N.W.2d 754, 757 (1979) (internal citations and quotations
omitted). Cf. Ill. S. Ct. R. 201(b)(3); D. C. Superior Court Domestic Relations Rule
26(b)(4)(B); Michigan Court Rule 2.302(B)(4)(b).
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The Facts of
Meany v. Am. Cas. Co. of Reading

Product liability action. Plaintiff was electrocuted upon operating a
machine made by Defendant Altec.

Altec hired Dr. Chard to inspect its machine. Dr. Chard prepared an
Initial Report and provided it to the Altec’s attorney.

Later, Altec designated Dr. Chard as a testifying expert and produced
his formal expert report

Altec refused to produce Dr. Chard’s Initial Report under claims of
attorney-client privilege. Plaintiff moved to compel.
How did the Court rule?
See 3:11-CV-401-S, 2013 WL 3154958 (W.D. Ky. June 19, 2013).
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The Ruling in
Meany v. Am. Cas. Co. of Reading
“[C]onfidentiality implies that the information will not be used to
form the basis of expert testimony at trial; this is because expert
testimony must be cross-examinable. . . A distinction must be
drawn between an expert hired to testify at trial and an expert
consulted as an adviser who will not testify. The first is a
witness who . . . does not fall in the definition of representative of
lawyer. In this situation disclosure is contemplated and the
privilege is eliminated . . . Altec has waived any attorney-client
privilege it may have had with respect to the Initial Report.”
2013 WL 3154958 (W.D. Ky. June 19, 2013) (internal citations and quotations omitted); see
also People v. Wagener, 196 Ill. 2d 269, 275, 752 N.E.2d 430, 435 (2001) (communications
between defendant and his expert are attorney-client privileged only so long as expert will
not testify).
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Work-Product Protection
The work product doctrine . . . is
designed to protect the right of
an attorney to thoroughly
prepare his case and to
preclude a less diligent
adversary attorney from taking
undue advantage of the
former's efforts.
Fischel & Kahn, Ltd. v. van Straaten Gallery, Inc., 189 Ill. 2d 579, 591, 727 N.E.2d
240, 246 (2000) (citing Hickman v. Taylor, 329 U.S. 495 (1947)).
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Work-Product Protection – Broad Iteration
A party may obtain discovery of documents and tangible
things that are relevant, and not privileged, and were
prepared in anticipation of litigation or for trial only
upon a showing that the party seeking discovery has
substantial need of the materials and that the party is
unable without undue hardship to obtain the substantial
equivalent of the materials by other means.
See Superior Court Domestic Relations Rules 26(b)(3); Michigan Court Rule
2.302(B)(3) (substantially similar).
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Work-Product Protection – Broad
“Substantial need and inability without undue
hardship to obtain the substantial equivalent.”
See, e.g., In re Terra Int’l, Inc. 134 F.3d
302, 305 (5th Cir. 1998) (requiring
disclosure of consulting expert’s report
detailing condition of explosion site
because site changed over time);
Delcastor, Inc. v. Vail Assocs, 108 F.R.D.
405, 408-09 (D. Colo. 1985) (requiring
disclosure of testifying expert’s report
where expert investigated site the
morning after a mudslide, and weather
and human activities altered the terrain
before plaintiff’s expert could examine
the site).
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Work-Product Protection – Broad
Discovery of facts known and opinions held by an expert, otherwise
relevant and not privileged, and acquired or developed in anticipation of
litigation or for trial, may be obtained only as follows:
(i) A party may through interrogatories require any other party to
identify each person whom the other party expects to call as an
expert witness at trial, to state the subject matter on which the
expert is expected to testify, and to state the substance of the facts
and opinions to which the expert is expected to testify and a
summary of the grounds for each opinion. (ii) A party may by
deposition require a person whom any other party expects to call as
an expert witness at trial to state the substance of the facts and
opinions to which the expert is expected to testify and the grounds
for each opinion. (iii) Upon motion . . .
Superior Court Domestic Relations Rules 26(b)(4); see also Michigan Court Rule
2.302(B)(4) (substantially similar)
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Work-Product Protection – Broad
As MCR 2.302(B)(4) recognizes, the facts known and opinions held by an
expert are not work product. Those facts and opinions are subject to
discovery by means of interrogatories, deposition, and further discovery
ordered by the court. The arrangement of those facts and opinions in
a report, made directly responsive to the inquiries of an attorney, is,
however, work product; a disclosure of the report itself would betray
those thoughts, mental impressions, formulations of litigation strategy,
and legal theories of the attorney that are protected by the work-product
doctrine. To hold that a party to a litigation could attain copies of those
reports by merely making a demand for production without more would
have the practical effect of chilling the ability of an attorney and his
retained expert witness to freely communicate in writing.
Backiel v. Sinai Hosp. of Detroit, 163 Mich. App. 774, 778, 415 N.W.2d 15, 17 (1987)
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Work-Product Protection – Narrow
Material prepared by or for a party in preparation for
trial is subject to discovery only if it does not contain or
disclose the theories, mental impressions, or litigation
plans of the party’s attorney.
Illinois Supreme Court Rule 201(b)(2) (emphasis supplied); see also Shields v.
Burlington N. & Santa Fe Ry. Co., 353 Ill. App. 3d 506, 508-09, 818 N.E.2d 851, 853
(2004) (“Our supreme court . . . deliberately narrowed the scope of the
protection”); Jackson ex rel. Jackson v. Reid, 402 Ill. App. 3d 215, 234, 935 N.E.2d
978, 994 (2010) (“The work product rule protects documents prepared by
counsel. Here, the articles, which plaintiffs' counsel sought to discuss during
cross-examination, were not prepared by defense counsel. Thus, work product
rule does not apply.”) (emphasis original).
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Work-Product Protection – Narrow
For each testifying expert who is retained in
anticipation of litigation:
The party must identify: (i) the subject matter on which
the witness will testify; (ii) the conclusions and
opinions of the witness and the bases therefor; (iii) the
qualifications of the witness; and (iv) any reports
prepared by the witness about the case.
Illinois Supreme Court Rule 213(f)(3).
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Summary: Am I required to respond
to the discovery requests?

Consulting Experts –
Generally (but not always)
protected from discovery.

Testifying Experts – Certain
work product may be
protected if prepared in
anticipation of litigation
depending on the law of the
forum.
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Practice Pointers
For Consulting Experts

Think twice before changing roles from a consulting
expert to a testifying expert.

Work under the assumption that the privilege will be
waived (because you may ultimately be designated
as a testifying expert).

Communicate verbally with the attorney and client
whenever possible, as opposed to in writing. Doing
so will at least minimize the burden to produce
documents.
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Practice Pointers
For Testifying Experts

Know the law of the forum on the subject of workproduct

Especially if you’re in a jurisdiction that uses a
narrow iteration of the doctrine, be mindful of the
documents you create and what you put in writing

Beware if you are testifying on behalf of a client
regarding work you did for that client when litigation
was not anticipated because the doctrine does not
apply in that context
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© 2014
This information is not intended to constitute legal advice and should not be relied
upon in lieu of consultation with appropriate legal advisors in your own
jurisdiction.
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