Forensic Accounting Today

Document Production in Litigation: Use an Excel-Based Control Sheet

In litigation cases, forensic accountants and the lawyers they serve depend greatly on documents and other data obtained from opposing counsel through the discovery and document production process. It can be frustrating when requested information is not timely received, or even worse if not received at all. I'm always amazed at how litigants avoid producing relevant data via a myriad of legal arguments, some sound and legit, and others quite laughable.

To help combat document production abuse, litigation specialists must utilize an effective methodology for tracking the discovery requests made and what information has been received. Via an e-newsletter article I received this morning from the National Association of Valuation Analysts (NACVA), I learned of a practical tool that you may want to consider. It was written by James R King, CPA/ABV, CFE, FCPA, CVA, CFF and includes these excerpts: 

This article describes one way to set up a document production control sheet in Excel which can serve many different purposes. While this is written from the perspective of a litigation engagement, the same principles could be used in a business valuation engagement.

It is important to maintain control over the numerous document requests. In our litigation engagements, we are continuously requesting additional documents. Having one schedule allows us to (1) easily communicate with the attorney regarding production status; (2) follow up on what has/has not been provided; (3) locate the documents in our files; and (4) provide an exhibit for use in court of production problems that have limited the scope of the work we were able to perform and report on.

We utilize a production template when the engagement begins to make a list of documents that are need (sic) for our work. As the work progresses, we add to this list new information as needed.

If an exhibit is needed for a hearing on failure to produce documents, your control sheet becomes the source for that exhibit. This is easily accomplished by hiding the column that contains the hyperlinks to where the electronic copy of the document is stored. The worksheet now becomes a good visual exhibit to communicate with the judge the numerous times you have requested documents and the lack of production that has been provided.

Read the entire article and see the example Excel-based "Production Tracking Worksheet"

Readers: Do you have other examples of tools you've used in the document production process? Have you got any war-stories you'd like to share about abuses you've seen in the discovery phase of your engagements? Do you have any practical tips or suggestions about this subject which you'd like to share? If so...please reply via the below comment feature.

Investigative Interviewing: Tips From an Ex-FBI Special Agent

"The next best thing to a confession is a real detailed lie."

I recently had the privilege of hearing Clifford E. Cormany, Jr. speak at one of the regular Lunch 'N Learn sessions hosted by the Forensic and Valuation Services Section of the Georgia Society of CPAs. In his 26-year career with the FBI, Mr. Cormany worked assignments involving criminal investigations, federal violations investigations, and organized crime investigations including public corruption matters, kidnapping, terrorism, and major narcotics cases.

Now President of Investigative & Polygraph Group, Inc., an association of retired FBI agents, Mr. Cormany has served as an expert witness and qualified on numerous occasions in Federal District Court, state courts and in other criminal and civil matters as an expert polygraph witness. At the program I attended, he discussed the role and importance of interviews and communication during financial investigations. Following is a summary of some of the key tips he offered the group:

• Before conducting an investigative interview, prepare yourself on all the important documents and issues.
• Research thoroughly the background of each interviewee. On-line research can be very helpful.
• It's OK to have a listing of questions you want to ask, but don't feel like you have to follow it precisely. Go with the ebb and flow of the interview.
• Make small talk in the early part of the interview...to establish common ground. For ex., where are you from? Do you like to play golf?
• Don't conduct interviews in public, for ex., in a noisy restaurant.
• When you expect the interviewee to be cooperative, it's OK to schedule the session in advance.
• Uncooperative or adversarial subjects should be interviewed on a surprise basis.
• If an interviewee is hostile or uncooperative, say, "OK, I didn't expect you to cooperate with me," and try to keep things moving on an even keel.
• Listen! Let the subject talk when they want to talk.
• Observe and read body language.
• If the interviewee wants a lawyer, friend, or family member present, say, "That's fine, but it won't change what I ask and how I ask it."
• Don't put a time limit on an interview. For ex., don't plan lunch in an hour when the interview may need to go another three hours.
• Don't lose your temper and or allow the interviewee to "get under your skin."
• Don't use ploys, tricks, or lies as an interview strategy. If you're caught doing this, the interviewee will be less likely to cooperate. Say, "I won't lie to you. I may not be able to tell you all I know and may not answer your questions, but I will not lie to you."
• Remember what you already know to be factual or what you think is the truth. Listen to what the subject says that may be different from what you know or think.
• The next best thing to a confession is a real detailed lie.
• Having a witness to the interview may be wise, especially with issues that may be key points in court. Or, after you prepare your interview report, consider having the interviewee confirm its accuracy.
• Well-written interview notes can be later used to prove lies.
• Use a neutral, non-defensive and non-aggressive approach during the interview.
• Seek permission from the interviewee to call them later if needed, and be sure you obtain their contact information.
• Just mentioning the idea of a polygraph exam may cause an uncooperative person to become cooperative and maybe even make a confession.
• Tape recordings can have a chilling effect on the interview. Obtain legal counsel regarding whether or not to record any interview.
• Take notes during the interview and dictate and clean them up within a day or two.
• As a forensic accountant, if you ever feel like you may be "in over your head" as it relates to an upcoming interview...then consider bringing in an expert interviewer, and sooner rather than later.

Should You Call a Financial Investigator?

Financial investigators, often referred to as forensic accountants, are increasingly being called upon by lawyers, corporate governance officers, government officials, and others...to ferret-out monetary and other pertinent facts and data in a wide variety of situations. You may be faced with a matter, now or in the future, in which a specially-trained financial "bloodhound" is needed.

Financial Investigations Defined - According to the IRS, "Financial investigations are usually very document-intensive. Specifically, they involve records, such as bank account information, real estate files, motor vehicle records, etc., which point to the movement of money. Any record that pertains to or shows the paper trail of events involving money is important. The major goal in a financial investigation is to identify and document the movement of money. The link between where the money comes from, who gets it, when it is received and where it is stored or deposited, can provide proof of criminal activity."

Types of Forensic Accounting Cases - Financial investigators are typically retained by lawyers, business-owners, government agencies, bankers, lenders and investors to help protect the interests and rights of individuals and organizations involved in the following types of cases:

• Mergers and acquisitions due diligence
• Shareholder and partnership disputes
• Economic crime and other criminal investigations
• Personal injury claims / motor vehicle accidents
• Business interruption and property loss claims
• Employee dishonesty (fidelity) claims
• Business/employee fraud investigations
• Corporate internal investigations
• State and city government investigations
• Ethics hotline and whistleblower allegations
• Business contract disputes and economic losses
• Professional malpractice/negligence
• Divorce litigation
• Other types of civil litigation
• Mediation and arbitration
• Specialized audits
• Tax investigations
  

When you're faced with one of these situations, you should indeed consider how a forensic accountant might serve your needs. Discussing things with your lawyer or CPA might be your best next-step, as they can help you determine if and when a financial investigator is needed. In addition, these experts can help with the identification and retention of one or more well-qualified financial professionals.

Preserving Chain of Custody in E-Discovery

Source: LexisNexis Tech Tips...

As the field of electronic discovery has matured, attorneys have enjoyed the benefits of electronic document review. They realize that the actual discovery and review processes have not changed—only the tools and the storage media are different. Review teams have become accustomed to the speed and efficiency of electronic discovery and would consider even a small-sized document review unmanageable if forced to use paper review methods.

Veteran review teams have learned that most of what it takes to make an electronic discovery project successful must happen before a single byte of data is gathered. This article discusses one of the crucial components of a discovery project: how to maintain a chain of custody log for all data gathered throughout the life of the case.

Purpose

The purpose of a chain of custody log is to prove that the integrity of the evidence has been maintained from seizure through production in court. Chain of custody logs document how the data was gathered, analyzed, and preserved for production. This information is important, as electronic data can be easily altered if proper precautions are not taken. A chain of custody log for electronic data must demonstrate the following: the data has been properly copied, transported, and stored; the information has not been altered in any way; and all media has been secured throughout the process.

Procedures

Documentation must be maintained throughout the life of the evidence and must be readily available for review at any time. Every instance of contact with the data must be documented throughout the entire discovery process.