August 19, 2014

Child Abuse Expert Witnesses Part 2

Child abuse expert witnesses may advise regarding child abuse and neglect, including the physical, emotional, or sexual mistreatment of children. On its website, the Child Welfare Information Gateway describes the process of proving child maltreatment in court. CWIG is a service of the Children's Bureau, Administration for Children and Families, U.S. Department of Health and Human Services.

Proving Child Maltreatment in Court... Relevant and Material Evidence To be usable in court, evidence must be material and relevant. Evidence is material when it has a logical connection to any of the issues that need to be proved in the case. It should be clear from a particular State's law exactly what must be proved. For example, whether a parent cheated on his/her income taxes would be immaterial to any issue in a child abuse case. Evidence will be relevant when it increases the likelihood that a particular fact in question occurred. For example, the fact that, prior to the incident in question, the parent failed to provide his/her child with adequate medical care is irrelevant to the question of whether he/she molested that child. Evidence must also be competent. This means that the evidence does not violate any rules of evidence and is not more prejudicial (unfairly harmful or beneficial) than it is probative (tending to prove or disprove) on any given issue.

The Hearsay Rule
Although relevant evidence is generally admissible, some relevant evidence that is thought to be unreliable will be excluded from judicial consideration. One such evidentiary rule is the rule against hearsay. Hearsay is a statement made outside the courtroom that is presented in court by someone other than the original speaker to prove the truth of the original speaker's statement. So, the hearsay rule sometimes prevents a witness from testifying about what another person said. In other situations, because the purpose of repeating the statement in court is not to prove the truth of the statement, hearsay may be admissible.

For instance, a witness would not be permitted to testify that he/she heard another person say "I am the President," to show that that person was, in fact, the President. Such testimony could be used, however, to show that the speaker was mentally unstable. In a child abuse case, it is not uncommon for a witness to be told by the child's teacher, neighbor, or relative that "the child gets beaten up at home all the time." However, because of the hearsay rule, that witness may not testify that "Mr. X told me that the child gets beaten up at home all the time," to prove the abuse. If Mr. X has something to say about the child's home life, the judge will want to hear directly from Mr. X, so that Mr. X can be questioned fully, cross-examined, and observed on the witness stand.

There are a variety of exceptions to the hearsay rule which permit the use of some hearsay in court. The underlying reason for these exceptions is that some hearsay statements, when made under certain circumstances that suggest that they are especially trustworthy, are reliable enough to be used in court. The rule against hearsay is tricky, and sometimes lawyers and judges have difficulty applying it correctly.

The following are among the hearsay exceptions most commonly used in child abuse and neglect cases.

Admissions of a Party
When a person accused of some type of wrongful conduct makes an out-of-court admission, it may be testified to by another under an exception to the hearsay rule. For example, an allegedly abusive parent might confess to an investigating caseworker: "I know I hit her too hard but I won't do it again." Although the parent may deny in court that he/she ever made such a statement, the caseworker would be permitted to recount it under this hearsay exception. The reason for this exception is that an admission is considered reliable hearsay, since an alleged wrongdoer (for example, an abusive parent) has nothing to gain from making up such a damaging statement. In addition, the parent probably would not say something contrary to his/her own interests if it were not true.

Excited Utterances
An out-of-court statement that is made spontaneously under extreme emotional excitement is also admissible as an exception to the hearsay rule. The excited utterance is viewed as trustworthy because the speaker's excitement is thought to prevent him/her from reflecting long enough to fabricate a story. For example, in a child abuse case, courts will usually look at the length of time between the startling event and the child's statement when deciding whether it is an excited utterance. However, the time lapse alone is not determinative; it is just one factor among many that the court can consider.

Some States apply a more relaxed standard for admitting excited utterances when they are made by children. Very young children, particularly if they are victims of sexual assault, may be found to remain under the influence of the assault for an extended period of time.72 Thus, for example, the statement of a 4-year-old made several hours after he/she was raped may be considered sufficiently reliable to be admitted as an excited utterance, given the child's very young age, the degree of trauma to which he/she was exposed, and the level of excitement under which he/she made his/her statement. However, a court might find that the same statement, made by an adult rape victim, does not qualify as an excited utterance, since an adult (or even an older child) might be capable of reflecting on and fabricating a story during a time lapse of that length. Even when similar statements are made by children of similar ages and under similar circumstances, courts in different States vary widely as to what they will consider an excited utterance by a child.

August 14, 2014

Business Expert Witnesses & New York Barclays Complaint

Business expert witnesses may consult on executive management, corporate governance, director duties, and related matters. In the news, Barclays may pay as much as $2B billion in litigation costs and penalties due to litigation filed by New York’s attorney general. This follows 2012 penalties of $450M paid to the US and Britain after conceding that the banks employees manipulated global benchmark interest rates.

On June 25, 2014, New York’s attorney general Eric Schneiderman filed civil fraud charges in the New York Supreme Court, County of New York, alleging that Barclay’s private stock trading platform favored high frequency traders.



This is a case about fraud and deceit by one of the world’s largest banks.

Barclays operates in fifty countries with particularly large business operations in New York and London. The facts in this case concern a major business division in Barclays’ New York office, the Equities Electronic Trading division. In that division, Barclays operates a private securities trading venue known as a “dark pool.” From 2011 to the present, Barclays embarked on a business strategy to dramatically increase the market share of its dark pool, with the goal of making it the largest dark pool in the United States. Barclays accomplished this through a series of false statements to clients and the investing public about how, and for whose benefit, Barclays operates its dark pool. In short, contrary to Barclays’ representations that it implemented special following:

a) Barclays falsified marketing material purporting to show the extent and type of high frequency trading in its dark pool. That marketing material was false and misleading because, among other things, Barclays intentionally excluded from the material the dark pool’s then-largest participant – a high frequency trading firm Barclays knew engaged in predatory behavior in the dark pool. Internally, Barclays acknowledged that it was “taking liberties” with the truth by suppressing the disclosure of this high frequency trading firm, but decided to falsify the analysis in order to “help ourselves”;

b) Barclays falsely marketed the percentage of aggressive high frequency trading activity in its dark pool, asserting to clients and to the investing public that less than 10% of the trading activity in the pool was “aggressive,” while at the same time secretly indicating to at least one high frequency trading firm that the level of such trading activity was at least 25%;

c) Barclays made a series of false representations to clients about its “Liquidity Profiling” service. Barclays claimed that its Liquidity Profiling service “analyzes each interaction in the dark pool” to “protect [clients] from predatory trading,” to “continuously police . . . trading activity” and to “maintain quality flow” in the dark pool. In reality, and undisclosed to clients, Barclays failed to provide those services, because it (i) failed to remove known predatory traders from its dark pool; (ii) failed to regularly profile traders in its dark pool; (iii) granted liberal “overrides” to high frequency trading firms and to Barclays’ own internal trading desks (which themselves employ “aggressive” trading strategies), in order to make them appear less “toxic” than they really are; (iv) failed to apply the protections of Liquidity Profiling to a significant portion of the trading in its dark pool; and (v) misled clients as to how Liquidity Profiling actually evaluated traders;

d) Barclays falsely represented that it routed client orders for securities to trading venues in a manner that did not favor Barclays’ own dark pool. While representing that Barclays “treat[s] all venues the same based on execution quality,” Barclays, in fact, routed a disproportionately high percentage of client orders to its own dark pool. When a detailed analysis of Barclays’ order routing practices was conducted for a major institutional investor – showing that Barclays was routing and executing the vast bulk of this client’s sampled orders to Barclays’ own dark pool – Barclays senior executives directed that a written presentation to that client include falsified information, in an effort to mask Barclays’ biased order routing practices; and

e) At the same time that Barclays marketed its dark pool to institutional investors as offering protection from high frequency traders, Barclays secretly gave high frequency trading firms informational and other advantages over other clients trading in the dark pool. For instance, Barclays provided detailed information regarding the structure and composition of its dark pool to high frequency trading firms, including information about the identity and trading activity of other traders in the pool. Such information would allow high frequency trading firms to maximize the effectiveness of their aggressive trading strategies in the dark pool. Barclays did not generally provide such information to its brokerage clients. Barclays also charged high frequency trading firms virtually nothing to trade in its dark pool.

The facts described in this Complaint are the result of an investigation by the Office of the Attorney General. The Attorney General’s investigation has been aided significantly by a number of high-level former Barclays insiders, each of whom was in a position to observe much of the conduct described in this Complaint. These witnesses provided meaningful assistance to the Attorney General’s investigation.

As a result of the material misstatements set forth herein and the pattern of fraud and deceit engaged in by Barclays, the Attorney General brings this action pursuant to General Business Law §§ 352 et seq. (the “Martin Act”) and Executive Law § 63(12).

August 12, 2014

Bus Safety Expert Witnesses

What areas of transportation may bus may bus safety expert witnesses consult on? These experts may report and testify on bus accidents, motor carriers, D.O.T. compliance, and more. In the news, eighteen people were hospitalized when a passenger car struck a Massachusetts Bay Transportation Authority bus on August 12. An MBTA spokesman said the driver of the car turned into the bus and may have been under the influence of drugs.

On its website, the MBTA offers safety instructions created through a partnership with the MBTA, the American Red Cross of Massachusetts Bay, the Federal Transit Administration, and the U.S. Department of Homeland Security. The U.S. Department of Transportation’s National Highway Traffic Safety Administration recently proposed a new federal motor vehicle safety standard to protect motorcoach and other large bus passengers in rollover crashes.The proposal aims to improve the structural design of large buses to ensure that passengers are better protected in a deadly vehicle rollover by ensuring that the space around them remains sufficiently intact and the emergency exits remain operable.

Both the proposed test procedure and performance requirements are closely modeled after the European regulations for large buses. In a separate rulemaking action to improve safety even further, the Department is planning on finalizing requirements later this year for stability control technologies in these vehicles, which would help prevent rollovers from occurring.

“The traveling public deserves safer service and peace of mind when they board a motorcoach or large bus,” said NHTSA Acting Administrator David Friedman. “Stronger large bus structures, combined with seat belt use will help keep passengers secured and protected in the event of a crash.”

“Approximately 700 million trips are taken on commercial buses each year. Raising the standard for a motorcoach’s durability, in the event of a crash, is critical to saving the lives of the passengers inside,” said FMCSA Administrator Anne Ferro.

August 10, 2014

Chiropractic Expert Witness On Standard Of Care Part 1

In Defining the Chiropractic Standard Of Care, chiropractic expert witness Richard K. Skala, D.C., writes:
When the Supreme Court of the United States was considering the issue of pornography, Justice Stewart became a greater part of our legal lexicon when he responded in regards to defining pornography saying, “I shall not today attempt further to define the kinds of material I understand to be embraced within that shorthand description [hard-core pornography]; and perhaps I could never succeed in intelligibly doing so. But I know it when I see it…..” Jacobellis v. Ohio, 378 U.S. 184 (1964).

Hopefully, the question of what constitutes a breach of the Chiropractic Standard of Care can be better defined. However, one must consider that the chiropractic profession contains a wide range of variability in terms of philosophical adaptation on the part of the individual chiropractic physician as well as a wide range of legal definitions from state to state in so far as what the scope of chiropractic practice is. This article will not address the 50 state variability, but suffice it to say the various scope of practice regulations range from the very limited (Michigan) to California, long known as a state with a broad scope (which is now undergoing a regulatory challenge with the forced importation of the California Board of Chiropractic Examiners into the California Department of Consumer Affairs – which is attempting to limit the scope of practice of the chiropractic physician in California to a 1923 standard!) and most recently in states such as New Mexico. where the more recent “advanced practice” regulations allow limited prescription and injections as a part of the scope of chiropractic practice.

An Internet search in regards to “chiropractic standards of care” reveals a number of “treatment guideline” or “clinical guideline” documents which are more suited for determination of treatment plans that are reimbursable by third party payors. There is no universal “Standard of Care” document or binding reference to be found in such a search. A few states have various “standard of care or practice” documents on the web sites of state chiropractic associations and or licensing boards.


Clearly there is a disconnect between the medical legal determination of Standard of Care and guidelines to clinical practice.

Many of the so-called clinical guidelines offer a narrowly confined approach to clinical management based on the influence of the insurance industry and what they are willing to pay for as opposed to what the chiropractic physician should in fact do to assure his/her own standard of care.

In as much as there is wide diversity amongst the 50 states as to scope of practice, any regulatory body statements or published “scope of practice” standards cannot be used as a “Standard of Care” reference.

Thus the question defaults to this: What is the medical legal definition of a “Chiropractic Standard of Care?” Most of the definitions of Standard of Care have a few common threads. Here is what several sources have to say:

The Free Dictionary: The watchfulness, attention, caution and prudence that a reasonable person in the circumstances would exercise. If a person's actions do not meet this standard of care, then his/her acts fail to meet the duty of care which all people (supposedly) have toward others. Failure to meet the standard is negligence, and any damages resulting therefrom may be claimed in a lawsuit by the injured party. The problem is that the "standard" is often a subjective issue upon which reasonable people can differ. (See: negligence, duty of care)

Black’s Law Dictionary: Degree of care a prudent and reasonable person will exercise under the circumstances.

Nolo: The degree of care (watchfulness, attention, caution, and prudence) that a reasonable person should exercise under the circumstances. If a person does not meet the standard of care, he or she may be liable to a third party for negligence.

Most of these definitions also cross reference to “duty of care”. - duty of care: A requirement that a person act toward others and the public with the watchfulness, attention, caution and prudence that a reasonable person in the circumstances would use. If a person's actions do not meet this standard of care, then the acts are considered negligent, and any damages resulting may be claimed in a lawsuit for negligence.

A Doctor of Chiropractic since 1976, Dr. Skala provides consultation and expert witness services for attorneys regarding Personal Injury; Industrial Medical-Legal Cases; Standard of Care involving General Chiropractic, Manipulation Under Anesthesia (MUA), Non-Surgical Spinal Decompression, and Extracorporeal Shockwave (EWST); Chiropractic Licensure Compliance California, and Workers Compensation. Declared an expert witness by the California Workers’ Compensation Appeals Board, he is a California Qualified Medical Evaluator (QME), a Certified Industrial Disability Evaluator, and a certified AMA Impairment rater.

August 8, 2014

Forensic Accounting Expert Witness On Asset Misappropriation Part 1

In Preventing Damaging Effects of Asset Misappropriation, forensic accounting expert witness Alan D. Lasko and accountant Bradley Kaye write:

Employees across the country at all levels of power and in all types of companies, engage in some form of asset misappropriation on a daily basis. Though often these actions may seem insignificant, over a period of time they can create severe long-term damages.

Asset misappropriation is a general term used to describe when someone takes an asset of a company, such as cash or supplies, for personal use at the expense of a company. Examples of this are as simple as checking a personal email, to as damaging as skimming or borrowing for oneself from cash reserves.
Small businesses are more susceptible to these problems than large businesses. This is because the internal accounting controls are usually weaker in small businesses than large businesses. Generally, by creating a system of checks and balances within a company, this will serve to reduce the instance of fraud, and increase the likelihood that the perpetrator will be caught.

If there is an internal audit staff, they could work along with the executives of a company to help see that the financial statements are correct and that any suspicious transactions be further investigated.

For large corporations, the Securities and Exchange Commission has taken certain steps necessary in an attempt to combat fraud in publicly traded companies. The Sarbanes-Oxley Act passed in 2002 is an effort to combat upper level fraud. This mandate is to reflect that the rest of the company understands that any skimming or larceny will be caught more readily, even if it is coming from the highest levels. However, even with this law the percentage of fraud that was uncovered by audit firms jumped from 7 percent to 29 percent in recent years.

Fraudulent actions can occur at any level of personnel and could go unnoticed by people familiar with the employees or the accounts at hand. Companies try to minimize this by utilizing random independent internal audits to try to uncover any asset misappropriation or fraud, before it becomes too damaging to the company. If a company allows for too much time between these types of internal audits or creates a regular schedule of review, the damages from potential fraud could cause monetary shortfalls or even bankruptcy as dishonest workers may adapt their strategies to not be caught by the audit.

Small companies are not obliged to follow this sequence, nor do they employ enough people to have a strong system of checks and balances to combat fraud internally. Only one person may be trained to accurately analyze the accounts to find instances of fraud. In these cases, the owner of the firm must be familiar with some signals of fraud. These often include:

• Forged or altered documents
• Unexplained differences in cash accounts
• Undocumented transactions and advances
• Duplicate or phony and unreasonable expense reports
• Fake companies involved in transactions (sometimes based on employee's initials, or with the same home address)
• Consulting companies not previously utilized by the company

Alan Lasko
Alan D. Lasko & Associates, P.C.
Certified Public Accountants
29 South LaSalle Street, Suite 1240
Chicago, Illinois 60603

August 5, 2014

Child Abuse Expert Witnesses & Proving Maltreatment In Court Part 1

Child abuse expert witnesses may advise regarding child abuse and neglect, including the physical, emotional, or sexual mistreatment of children. On its website, the Child Welfare Information Gateway describes the process of proving child maltreatment in court. CWIG is a service of the Children's Bureau, Administration for Children and Families, U.S. Department of Health and Human Services

Proving Child Maltreatment in Court This section applies to both civil and criminal cases. However, some significant differences between the two types of proceedings exist; these differences will be noted throughout the discussion.

The Process of Proving Maltreatment
To succeed in a child maltreatment case, sufficient evidence must be presented to the court to prove that: the child has been harmed or threatened with harm; and in a civil trial, the parent either inflicted an injury on the child or failed to protect the child from harm; or, in a criminal trial, the defendant was the perpetrator of this harm. These elements may be proved by direct evidence alone, such as the child victim's testimony; but usually additional evidence, such as expert testimony, is needed to establish the facts to a sufficient degree of certainty.

When the alleged offender asserts some type of defense or extenuating circumstances (e.g., reasonable use of parental discipline), it is his/her burden to establish this defense, and rebuttal evidence then may be introduced.

The Rules of Evidence: Why They Exist
The rules of evidence control what information may be introduced in court to convince the judge to reach a particular decision. Because some types of testimony, documents, and records are less reliable and more prejudicial than others, special evidentiary rules are necessary to allow the judge to consider some evidence in his/her fact-finding process, while excluding other evidence from consideration.

How Evidentiary Rules Affect the Caseworker
Anyone who investigates or gathers facts in a child abuse case should have a general understanding of the rules of evidence. Although in most States few cases in a CPS caseload actually go to court, it is important to treat all investigations as if they might. The manner in which a caseworker should practice (i.e., conduct investigations, take notes, and preserve tangible evidence) is significantly affected by these rules.

Types of Evidence
There are several types of evidence that may be admissible in court. The caseworker should be able to sort out the information contained in his/her case narrative/dictation according to the type of evidence it represents.
Direct evidence is evidence which is based on personal knowledge or observation; generally, testimony by an eyewitness to an event.

Real or demonstrative evidence usually takes the form of documents, photographs, or x rays. It is an object (rather than testimony) that is offered to persuade the judge of the facts in question. The rules of evidence require that before real or demonstrative evidence may be presented to the judge, a foundation must be laid that establishes the relevance and authenticity of that object. This is generally accomplished by the testimony of someone who has had control over the object. (See "Getting Records Into Evidence.")

Circumstantial evidence is often used when no or little direct or real evidence is available; it is indirect evidence from which certain inferences can be drawn. This would include testimony by a neighbor who heard a child crying and an adult shouting, or by a teacher who noticed that the parent often smelled of alcohol and slurred his/her speech. The judge will not take this as absolute proof of abuse or neglect, but together, these details may create a probability that the abuse or neglect occurred. Although circumstantial evidence is the least persuasive type of evidence, it is particularly useful in child abuse cases, where eyewitnesses and clear evidence of inflicted physical injury are rare. Expert witnesses may also provide circumstantial evidence by testifying in court. (See "Expert Testimony.") For example, expert testimony that a child's injuries are inconsistent with the parents' explanations for them may be permitted to infer that the child is, in fact, a battered child.

For example, a caseworker's narrative/dictation on a child abuse investigation might contain the pieces of information listed below.

1.A teacher kept a log of the days that the child came to school with bruises.
2.A neighbor heard a child's screams.
3.A pediatrician reported the case after examining the child and found multiple bruises, both old and new, on his/her back and buttocks. The doctor says that the location, number, and severity of the bruises, as well as the presence of old bruises in the same place, suggest that the child's injuries did not occur accidentally, but rather were intentionally inflicted.
4.Medical records.
5.Photographs of the bruises taken by a police officer called by the doctor.
6.The child said that his/her parent beat him/her with a belt.
7.A belt.
A classification of the evidence should look something like this:

Direct evidence: the child's testimony.
Real or demonstrative evidence: the teacher's log (supported by his/her testimony); the medical records (supported by the doctor's testimony); the photographs (supported by the officer's testimony); and the belt.

All of this evidence might not be used in court, but caseworkers (aided by their attorneys) will want to sort out and consider it all initially. Once a caseworker has categorized all his/her information, the strengths and weaknesses of the case will become clearer. With the attorney's help, the caseworker may be able to fill in any gaps in the evidence by further investigative work and case preparation.71

August 3, 2014

Environmental Expert Witnesses & Blue-Green Algae

Environmental toxicology expert witnesses may consult on pollutants, ecological systems, forensic toxicology, ecology, and related topics. In the news, the blue-green algae toxin microcystin has tainted the water in the Ohio counties of Lucas, Wood and Fulton. Gov. John Kasich declared a state of emergency and officials told residents not to drink or boil the water. It should only be used to bathe and wash hands. Consumption may cause nausea and impair liver function

The Ohio Environmental Protection Agency, website answers the questions:

What is a harmful algal bloom?
A harmful algal bloom (HAB) is a large growth of bacteria that can produce toxins. These toxins may affect the liver, nervous system and/or skin.

What causes HABs to form?
Some factors that can contribute to HABs include sunlight; low-water or low-flow conditions; calm water; warmer temperatures; and excess nutrients (phosphorus or nitrogen). The primary sources of nutrient pollution are runoff of fertilizers, animal manure, sewage treatment plant discharges, storm water runoff, car and power plant emissions and failing septic tanks. The State of Ohio is currently working on a statewide nutrient reduction strategy that will document ongoing nutrient reduction activities and identify areas where more work is needed.

How dangerous are HABs?
If you touch HABs, swallow water with HAB toxins or breathe in water droplets, you could get a rash, have an allergic reaction, get a stomach ache, or feel dizzy or light-headed. HABs also are toxic to pets.

Always look for HABs before going in the water. Check for HAB advisories. Ask the park manager if there has been a recent HAB because colorless toxins can still be in water.

How will I know if there is a HAB?
HABs have different colors and looks. Some colors are green, blue-green, brown, black, white, purple, red and black. They can look like film, crust or puff balls at the surface. They also may look like grass clippings or dots in the water. Some HABs look like spilled paint, pea soup, foam, wool, streaks or green cottage cheese curd.

What should I do if I see a HAB?
■Stay out of water that may have a HAB.
■Do not let your children or pets play in HAB debris on the shore.
■After swimming or wading in lake water, even where no HABs are visible, rinse off with fresh water as soon as possible.
■Never swallow any lake or river water, whether you see HABs or not.
■Do not let pets lick HAB material from their fur or eat HAB material.
■Do not drink or cook with lake water.
■See a doctor if you or your children might be ill from HAB toxins. If your pet appears ill, contact your veterinarian.

July 31, 2014

Business Valuation Expert Witness On Clippers Deal

In Does the Clippers $2 Billion Deal Make Sense?, business valuation expert witness Donald Erickson ASA , writes:

In recent court testimony, Bank of America – Merrill Lynch (“BoA”) revealed its bid book (“Project Claret”[1]) prepared for potential buyers of a NBA franchise, the Los Angeles Clippers (“Clippers”). We are going to analyze elements within the Project Claret document with a particular focus on the revenue estimate of the local media contract renewal in 2014.

Let’s look at BoA’s estimate of local media revenues primarily related to television content. BoA forecasted television rights payment in June 2014 year-end at $25.8 million from the current contract projecting it to $125 million for a new local media contract. Michael Ozanian of Forbes recently estimated the 2014 new contract amount to most likely be closer to $75 million. I agree with Mr. Ozanian for the following reasons:

1. If the Los Angeles Lakers (“Lakers”), back in 2011, signed a local media television rights contract for $5 billion over 25 years, then the average is approximately $200 million a year. Typically these contracts have annual escalation clauses and if the total payout is $5 billion, then the amount in 2012 is close to $100 million for the Lakers. You need to escalate that to about $110 million in 2014.

2. The television ratings of the Lakers are multiples of the Clippers and cable subscribers ultimately pay for the right’s fees. So if you are a sophisticated buyer of sports content, like Fox Broadcasting Company or Time Warner Cable, are you going to pay the same dollar amount for the Clippers as you did for the Lakers? The Clippers have ½ the television ratings of the Lakers (1.28 vs 2.72) in the current year. To quote a recent Variety article, “This is believed to be the closest the Clippers have come to the Lakers in television ratings since the 1999-2000 season”[2]. Additionally, the Lakers experienced a very poor[3] win/loss record in the 2013-2014 season. If one analyzed their historical results, the Clippers have less than 1/3 of the viewership as the Lakers (121,000 vs 390,000) last year.

Therefore, how much will the Clippers realistically get in 2014 with the new contract? $75 million is approximately 68% of our estimated Lakers deal amount and seems generous based on the raw ratings numbers. However, if we utilize the Forbes estimate of $75 million in 2014 and the other BoA revenue estimates for game admissions ($62.3 million[4]) and other team revenue ($136.8 million[5]), the total revenue estimate for the Clippers would be $274.1 million in 2014 versus the $324.1 million utilized in BoA Project Claret.

If one assumes a multiple of 5x revenues, which is the high end of multiples paid for an NBA team to date, the indicated enterprise value estimate is $1.370 billion, a far cry from $2 billion. Additionally, many times when dealing with estimates of future results (in this case an estimate of future revenue) the valuation multiple applied should be lower than actual transaction multiples. These multiples are calculated based on historical revenues, which are usually lower than future estimates.

It seems clear to us that based on the data available the $2 Billion price from Steve Ballmer is a good deal for the Sterling Trust.

[1] Project Claret = Preliminary indication of valuation considerations by Bank of America/Merrill Lynch dated May 25, 2014.

[2] “Lakers’ television ratings down nearly 50% from the prior season”, March 17, 2014, Variety Media LLC.

[3] IBID

[4] Project Claret = Preliminary indication of valuation considerations by Bank of America/Merrill Lynch dated May 25, 2014.

[5] IBID

Donald Erickson is the President of Erickson Partners, Inc. a valuation and advisory firm based in Dallas, Texas. He has managed over 1,500 valuation, lost profits and damage engagements in over 40 years in the profession. These engagements have been conducted for the purposes of litigation, merger and acquisition, financing, allocation of purchase price, estate and gift taxes, employee stock ownership trusts, and business planning.

July 29, 2014

Aviation Safety Expert Witnesses & Southwest Airlines $12M Fine

Aviation safety expert witnesses may consult on aviation accident analysis, aerospace engineering, aviation maintenance, and related matters. In the news, a July 28th Federal Aviation Administration press release stated that the FAA plans to fine Southwest Airlines $12M for repair violations on some of its Boeing 737 aircraft.
From the FAA website:

The U.S. Department of Transportation’s Federal Aviation Administration (FAA) is proposing a $12 million civil penalty against Southwest Airlines for failing to comply with Federal Aviation Regulations in three separate enforcement cases related to repairs on Boeing 737 jetliners operated by the Dallas-based airline.

The FAA alleges that beginning in 2006, Southwest conducted so-called “extreme makeover” alterations to eliminate potential cracking of the aluminum skin on 44 jetliners. The FAA conducted an investigation that included both the airline and its contractor, Aviation Technical Services, Inc., (ATS) of Everett, Wash. Investigators determined that ATS failed to follow proper procedures for replacing the fuselage skins on these aircraft. FAA investigators also determined that ATS failed to follow required procedures for placing the airplanes on jacks and stabilizing them. All of the work was done under the supervision of Southwest Airlines, which was responsible for ensuring that procedures were properly followed.

Southwest returned the jetliners to service and operated them when they were not in compliance with Federal Aviation Regulations, the FAA alleges.

July 21, 2014

Child Sexual Abuse Expert Witnesses On The Forensic Interview Analysis

In Child Sexual Abuse – Forensic Interview Analysis, child sexual abuse expert witnesses at Forensic Pediatrics Consultants – Child Abuse & Child Safety write:

The objective of a forensic interview in the context of child sexual abuse is to provide an objective measure to understand what a child potentially experienced. A forensic interview may be the tool utilized by protective and/or prosecuting authorities in a case of potential sexual abuse. Therefore, assuring the quality of the interview is an integral component to evaluating a potential case of abuse. A poor interview does not discount the possibility of sexual abuse. However, standard protocols exist to minimize the possibility of leading questions, and to assure as truthful and accurate information as possible.

Core components to forensic interview analysis include:

Documentation – Was the interview transcribed, audio-taped or videotape?

Number of interviews – Was the child interviewed before and how may that impact the forensic interview?

Types of Questions – Were there repetitive questions, either/or questions, and/or multiple questions that may lead to suggestive techniques?

Experience – Was the interviewer objectively and properly trained to conduct the interview?

Protocol – Were standard protocols utilized in the interview? These include:
• Building Rapport
• Establish the Need to Tell the Truth
• Explain to the child that it is fine not to know the answer to a question. It is fine to correct the interviewer.
• Start with general questions such as “Do you know why you are talking with me today?” Proceed, if necessary, to more specific questions such as “Has anything happened to you?” Drawings may help initiate disclosure.
• Elicit a Free Narrative
• Pose General Questions
• Pose Specific Questions if Necessary
• Conclude the Interview

Read more:

July 11, 2014

Oncology Expert Witness On Malpractice Insurance Part 1

In Malpractice Premiums Drop for 6th Straight Year, oncology expert witness Dr. Judy L. Schmidt writes:
Judging by 3 representative specialties, physicians in 2013 are once again experiencing relief on malpractice insurance premiums.

Collective rates for obstetrician-gynecologists, internists, and general surgeons fell on average for the sixth straight year in 2013, according to an annual premium survey released this week by Medical Liability Monitor (MLM).

The decrease is only 1.9%, a tad more than the 1.7% decline in 2012. However, one group views the ongoing premium shrinkage as more evidence that organized medicine’s push for tough medical-liability tort reform, such as limits to noneconomic damages, is much ado about very little.

“It makes sense that premiums are going down because malpractice litigation is going down,” said Taylor Lincoln, a research director for the consumer watchdog Public Citizen, in an interview with Medscape Medical News. Lincoln’s organization announced in August that the number of malpractice payments on behalf of physicians as reported to the National Practitioner Data Bank fell for the ninth consecutive year in 2012. Public Citizen maintains that malpractice litigation cannot be blamed for runaway healthcare costs.

Asked to comment on the numbers from MLM, the American Medical Association (AMA) issued a statement from its president, Ardis Dee Hoven, MD, to Medscape Medical News:

Although the 2013 Medical Liability Monitor [survey] suggests decreases in premiums have become more common than premium increases, they pale in comparison to the magnitude of the increases experienced during the most recent liability crisis,” said Dr. Hoven. “We are committed to testing alternative reforms, such as safe harbors for the practice of evidence-based medicine, to determine if these innovations can improve patient care and reduce costs.

The AMA, she said, “continues to work for proven reforms to rein in the broken medical liability system, reduce the growth of healthcare costs, and preserve patients’ access to medical care.”

Chad Karls, an actuary who summarized premium trends in an article for MLM, sees both sides of the argument. For proponents of tort reform, “the wind has been taken out of their sails a little bit,” said Karls, a principal and consulting actuary for Milliman. “Premium costs are lower than what they were a decade ago. However, it doesn’t necessarily mean that they shouldn’t be lower.”

Falling premiums, Karls told Medscape Medical News, reflect a roughly 50% drop in malpractice claims per physician since the liability crisis in the early 2000s that the AMA references. In both 2003 and 2004, premiums shot up roughly 20%, according to MLM. State-level tort reform accounts for some of the decrease in malpractice claims, Karls said. However, claims frequency also has declined in states that lack such laws.
The 1.7% drop in premium rates this year for the combined specialties of obstetrics-gynecology, general surgery, and internal medicine, Karls noted, applies more or less to each individual specialty as well. In other words, it isn’t as if decreases for 2 specialties erased an increase for the third.

Read more: Quality Cancer Care

July 8, 2014

Automotive Engineering Expert Witnesses

What areas of the auto industry may automotive engineering expert witnesses consult on? They may provide reports concerning automobile defects, automotive technology, automotive components, and automobile design. In the news, the U.S. Department of Transportation announced record fines and unprecedented oversight requirements in its GM investigation…

Over the past ten years, NHTSA defect investigations resulted in 1,299 recalls involving more than 95 million vehicles and items of motor vehicle equipment, which has helped the agency to reduce vehicle fatalities to historic, all-time lows. Including today’s consent order, the agency has obtained record fines of $124.5 million in the last five years from automakers who have failed to promptly report defects to NHTSA. briefing room:

The U.S. Department of Transportation’s National Highway Traffic Safety Administration (NHTSA) today announced that General Motors (GM) has agreed to pay a record $35 million civil penalty and to take part in unprecedented oversight requirements as a result of findings from NHTSA’s timeliness investigation regarding the Chevrolet Cobalt and the automaker’s failure to report a safety defect in the vehicle to the federal government in a timely manner. The defect resulted in the non-deployment of airbags in certain Chevrolet Cobalt and other GM models. This action represents the single highest civil penalty amount ever paid as a result of a NHTSA investigation of violations stemming from a recall.
As part of today’s agreement, set forth in a Consent Order signed with NHTSA, the agency also ordered GM to make significant and wide-ranging internal changes to its review of safety-related issues in the United States, and to improve its ability to take into account the possible consequences of potential safety-related defects. GM will also pay additional civil penalties for failing to respond on time to the agency’s document demands during NHTSA’s investigation.

Federal law requires all auto manufacturers to notify NHTSA within five business days of determining that a safety-related defect exists or that a vehicle is not in compliance with federal motor vehicle safety standards and to promptly conduct a recall. GM admits in the Consent Order that it did not do so.

Today’s action is historic in that the provisions of the Consent Order will be immediately enforceable in federal court if GM does not fully comply. The Consent Order will hold GM accountable, push the automaker to make needed institutional change, and ensure that replacement parts are produced quickly and recalled vehicles are repaired promptly.

July 6, 2014

The Scope Of The Child Sexual Abuse Expert Witness

This week police in Beaverton, Oregon, arrested 17 year old swim coach Mitchell Alan Douglas Kelly who is accused of sexually abusing two young girls at the Sunset Athletic Club. The girls were taken from the pool area to another part of the facility, according to Sgt. Bob Ray. Investigators for the Washington County Sheriff's Office are concerned there may be other victims.

In this type of case, child sexual abuse expert witnesses may testify regarding sexual misconduct, sexual molestation, and child sexual assault. These professionals may provide reports concerning sexual exploitation and statutory rape. On its website, The American Board of Pediatrics describes the child abuse pediatrics practice scope which includes:

Understand the commonly used definitions of child sexual abuse.
Know the overall incidence and prevalence of sexual abuse of children and adolescents.

Know the general risk factors for sexual abuse by the age of the victims.

Understand the characteristics of children and adolescents that may place them
at risk of being sexually abused.

Understand family dynamics that may place a child at risk for sexual abuse.

Understand the role of childhood sexual abuse of a mother as a risk factor for the
sexual abuse of her children.

Describe societal and cultural factors that may place a child at risk for sexual abuse.

Psychosexual development
Know the stages of psychosexual development of children.

Recognize when a child's sexual behavior is not appropriate to his/her developmental stage.

Differentiate between normative sexual behaviors and sexual behavior problems in children.

Recognize that sexual behaviors can be a sign or consequence of child sexual abuse.

Know the social and behavioral factors (e.g. abuse, IPV, mental illness, exposure to sexually explicit materials, conduct disorders) that can be associated with sexual behavior problems in children.

July 3, 2014

Aviation & Airports Expert Witness On Pilot Error

On his website,, aviation and airports expert witness Steven J. Meyers, discusses pilot error. Mr. Meyers is an experienced aircraft accident investigator, and has work experience as an engineer, pilot, and mechanic.

Human beings are unpredictable as compared to physical evidence, and in the absence of cockpit or flight recorded data, investigators are left with evaluating human behavior from a percentage of likelihood. Most investigators typically lack adequate training to properly evaluate human behavior and performance, because there are such a large and diverse number of reasons that pilots can commit an error. Pilots make errors because they have not been adequately trained to perform tasks, or because they do not have the basic ability to perform the task even if they were trained. They commit errors because the task is beyond normal human abilities. They commit errors because they misinterpret information important to the performance of the task. They commit errors because some event occurring during the performance of the task changes the nature of the task in a way that they have never encountered. They also commit errors because of influences such as stress, distraction, fatigue, illness, visual illusions, spatial disorientation, old age, immaturity, and cultural beliefs. Pilot performance is also influenced or affected by such issues as cockpit design, temperature, altitude, physiology of the body, emotions, interactions, and communications.

Some common Human Factors issues related to piloting error can include:
• Spatial disorientation
• Not trusting instruments
• Loss of attitude references
• “Saving your baby”
• Extending emergency landing
• Failure to abort takeoff or landing
• Turning back to land on runway after engine failure
• Overconfidence or complacency
• Over-gross takeoff weight
• Lack of training
• Showing off
• Flying in severe weather
• Situational awareness
• Scud-running
• Obstructed vision
• Lack of scanning outside of cockpit
• Landing into wake/vortex turbulence
• Depth/distance perception
• Flaring too high during landing
• Botched landing approaches at night
• Training-related mistakes
• Stalls during takeoff or maneuvering
• Vmc rolls
• Cockpit management
• Fuel exhaustion or starvation
• Poor crew coordination
• Improper instrument settings
• Cabin inadequately secured during takeoff
• Improperly cross-referencing instruments
• Too much happening all at once
• Hypoxia
• Cabin depressurization
• Simply flying too high without using oxygen
• Sleep deprivation or lack of crew rest
An Example of Human Factors in Piloting Error: Empty Field Myopia
Empty field myopia (empty space myopia) is a condition in which the eyes, having nothing specific within the available visual field upon which to focus, focus automatically at a range of the order of a few metres ahead. Detection of objects outside this restricted field of view is delayed and if an object of interest does enter the restricted field of vision, the determination of its size or range would be problematic. The higher risk probability is distributed among general aviation flights conducted outside controlled airspace, or any flights in such airspace and conditions with predominant see and avoid rules and where the ATC assistance to avoid loss of separation (LOS) is limited.

There are several identified conditions when the eyes often tend to turn back to their natural resting state in flight on very dark night with no stimuli outside the cockpit to focus on, in hazy conditions when the optical properties of the atmosphere alter the appearance of aircraft and terrain, in bright light and glare when the flight is conducted in very sunny conditions over a cloud layer or due flight course set into the direction of the sun, and flying over snow covered and desert surfaces with predominantly featureless ground characteristics and over large bodies of water; the risk factor is especially high for low level inspection flights and military low flying assignments.

DVI’s Pilot Experts are experienced airline, corporate, and general aviation pilots and instructors. Many of our Pilot Experts are Designated Pilot Examiners and Check Airman for major airlines. All of our Pilot Experts, as well as our, Aviation Human Factors Experts understand the nature of errors and how to apply and correlate human performance to determining the cause of an aircraft or ground accident.

July 1, 2014

Business Expert Witness Describes The Role Of The Forensic Accountant

On his website FAQ, business expert witness Richard Teichner, CPA, CVA, CDFAJ, describes the role of the forensic accountant serving as an expert witness.

When explaining complex financial analyses to the trier of fact, it is imperative that your expert witness is skilled at clearly and accurately explaining the details in a manner that can be easily understood. Expert witnesses also must be objective and utilize generally acceptable practices in order for their testimony to be credible and admissible.

How can a forensic accountant help my case?
Forensic accountants can assist throughout the litigation process. During discovery and fact-finding, they can aid your investigation by advising you on what documentation you should obtain. They can also help you identify the accounting and valuation questions pertinent to your case, which includes their assistance with formulating requests for production, interrogatories, and questions to be asked of witnesses at deposition and trial. Thus, this process can help you streamline your trial strategies and the focus of your case. The earlier you hire your forensic accountant in the litigation process, the more assistance and support you will likely receive.

What qualities should I look for in selecting a forensic accountant?
There are a number of qualities you should look for when selecting a forensic accountant to work with on your case. The following summarizes some of the factors to consider in selecting a forensic accountant or valuation consultant on a legal matter:
• Experience: How many years of practical accounting experience and expert consulting experience do they have?
• Education: Are they licensed as a Certified Public Accountant? Do they have any professional designations? Do they stay current with continuing education courses, books and publications?
• Ability to communicate: Will they be able to clearly express complex accounting theories and explain financial issues in a manner a jury can understand? Have they given presentations to attorneys and other professionals?
• Impartiality: Will they be objective? Have they served as a consultant both to plaintiffs and the defense in litigation matters?
• Credibility: Do they appear to be honest and believable? How do you think they will be perceived by a judge or jury?
• Support: In the preparation of your case for trial, how much advice and support do you think they will offer? Do they appear to be committed to your case without being biased?
• Confidentiality: Do they understand the importance of the attorney-client relationship? Do they have experience with handling highly sensitive documents?
- See more at: Richard Teichner.

June 29, 2014

Automotive Engineering Expert Witnesses & Auto Defects

Automotive engineering expert witnesses may consult regarding automobile defect, automotive technology, automobile design, and the auto industry. General Motors announced more recalls last week with a 2014 total so far at 48. The most recent recall covers 474,000 pickups and SUVs. US automakers have recalled 32.4 million vehicles in less than six months. GM said a software glitch can cause “the transfer case to electronically switch to neutral without input from the driver” on 2014 and 2015 models. reports:

General Motors (GM: NYSE) today announced four safety recalls covering 428,211 vehicles in the United States.

• Dealers will replace the driver’s side air bag inflator in 29,019 2013-2014 model year Chevrolet Cruze sedans in the U.S. and 4,066 in Canada. The inflator in the driver’s front air bag may rupture and/or the air bag may not inflate during air bag deployment. A rupture could propel metal pieces of the inflator into the vehicle cabin, possibly striking and seriously injuring the driver or other vehicle occupants. Additionally, if the inflator does not inflate the air bag, there is an increased risk of injury to the driver. GM is aware of one injury related to the issue.

• Dealers will recalibrate transfer case control module software in 392,459 full-size pickup trucks and SUVs in the U.S. and 53,607 in Canada. An additional 20,874 were sold outside the U.S. and Canada. Affected are four-wheel-drive versions of the 2014-2015 Chevrolet Silverado and GMC Sierra; the 2015 Chevrolet Tahoe and Suburban; and the 2015 GMC Yukon and Yukon XL.

In these vehicles, the transfer case may electronically switch to neutral without input from the driver. If this occurs while a vehicle is in motion, no power will go to the wheels. If the vehicle is stopped or parked, it may roll away if the parking brake is not set. GM is not aware of any crashes or injuries related to this issue.

• Dealers will inspect, and replace if necessary, the windshield wiper module assembly in 4,794 2013-2014 model year Chevrolet Caprice police cars and 2014 Chevrolet SS sport sedans in the U.S. If the motor gear teeth become stripped, the wipers may not operate. GM is not aware of any crashes or injuries related to this issue.

• Dealers will replace the two rear shock absorbers in 1,939 2014 model year Chevrolet Corvettes in the U.S. with the FE1 or FE3 suspension to repair a possible insufficient weld in the rear shocks that could lead to a fracture and/or reduce the shocks’ service life. Thirty-three additional vehicles were sold in Canada and another 82 were exported. GM is not aware of any crashes or injuries related to this issue.

June 25, 2014

Credit Damage Expert Witness On Evaluating Credit Damage Part 2

In Evaluating and Understanding Credit Damage, credit damage expert witness Doug Minor writes:

One of the first steps is to examine the credit score itself. This seemingly straightforward action can become complex very quickly, as there are often numerous reports, with scores from multiple sources. So, a consumer will many times have a number of credit scores, each reflecting the data and scoring criteria of its source. Understanding the different features of each type of score and report is an important evaluation skill that an expert should have to accurately quantify credit damages.

For example, is the score a FICO score, or a Vantage score? Is the report a business-to-business (B2B), or a business-to-consumer (B2C) product? Was it a residential mortgage credit report (RMCR), or a three repository merged credit report (TRMCR)? When was the report produced? All of these are typical questions that an evaluator will ask, and in most cases they are necessary.

Before deciding whether to extend credit to an individual, lenders typically purchase credit reports and scores that provide information from one or all three of the major credit bureaus (Equifax, Trans Union and Experian). These scores reflect the credit-related events in the life of an individual going back several years. Each of those events can ultimately be assigned a value, positive or negative, that contributes to the overall score. Some lenders may average these numbers to determine a person’s creditworthiness, or focus on just one score (or report) from a particular credit bureau. In the mortgage industry it is common practice to pick the middle of three scores, or the lower of two if only two are available.

The companies that compile this information can produce a variety of reports, depending on the needs of their clients. The reports they provide for credit issuers are typically more detailed than the ones that are accessible to the consumers themselves. So, an expert attempting to assess the credit impact of specific events should consult these more complete reports whenever possible. But an experienced credit damages expert can make valid judgments based on information found in many types of reports.

Among the next steps, it is important to establish the subject’s credit and economic status before the harmful event(s). Then it can be compared to the status afterward. This provides measurable data, which can be used to quantify harm. For example, a foreclosure or bankruptcy might cause an individual’s score to drop between 100 and 250 points. This can cause demonstrable financial harm in variety of ways—not to mention emotional stress. And the effects may last for many years. If another party—acting through malice or negligence—was the proximate cause of that harm, there is a good probability that the victim deserves to be compensated.

As the credit damages field gains exposure, attorneys will inevitably become more familiar with it, and more confident to factor it into their cases. Realizing that such damages can be accurately quantified is still a revelation to many practicing lawyers. But the most convincing proof is the growing record of successful credit damages cases. That suggests that this relatively new field will gain importance in years to come.

Doug Minor is a credit damages expert and credit counselor. He serves as an expert witness and litigation consultant, with specialized expertise in the Fair Credit Reporting Act (FCRA) and Fair and Accurate Credit Transactions Act (FACTA). He is FCRA (Fair Credit Reporting Act) certified by the Consumer Data Industry Association (CDIA), which is the trade association of the credit reporting agencies. His company, Easy Credit Relief, Inc., provides a range of consumer services to help people understand and recover from credit problems. Please see Doug Minor.

June 18, 2014

Trade Secrets Expert Witness On Misappropriation

In Trade Secret Misappropriation of Software, trade secrets expert witness Gary Stringham writes on his blog:

A trade secret is something that provides an advantage to the company that owns it. It could be formulas, software, even lists of names. A trade secret is not disclosed publicly (unlike a patent).

If a company wishes to mark something a trade secret, it must proactively take action to protect those secrets. Employees of the company should have signed an agreement to keep secret company confidential information. If the trade secret needs to be disclosed to non-employees, those people need to first sign non-disclosure agreements.

Misappropriation of trade secrets consists of someone, who knew the trade secret, using it in a non-permissible fashion. It is not uncommon for employees of a company to leave and start up their own company to create a “better” and competing version of the product. They have to be very careful to not use any confidential steps, procedures, software, concepts, etc., in their new product. Even if they were to write their software code from scratch, if they use any algorithms, procedures, processes, or other confidential concepts from their former employer, it is in violation. If they use electronic or paper copies of software source code to guide them in writing new code from scratch, that is in violation. It is also theft.

Proof of trade secret misappropriation requires that the alleged violator must have somehow obtained those secrets from the owner. It could be through a former employee. It could be through an outsider that had signed a non-disclosure agreement. It could be theft by physically or electronically breaking in and stealing the secrets by copying documents, design guides, and/or software source code.

If Company B happens to independently create Company A’s secrets, but had done so without any knowledge that Company A even had those secrets and had marked them as such, then Company B is not misappropriating Company A’s secrets.

The concepts and examples I’ve written here are brief and incomplete. Closer examination is required on a case by case basis to determine if there was misappropriation of trade secrets.

Gary Stringham & Associates, LLC, is an engineering consulting and training firm in the software, firmware, and hardware domains. Gary helps clients with their design, debugging, integration, and litigation.

June 13, 2014

Credit Damage Expert Witness On Evaluating Credit Damage Part 1

In Evaluating and Understanding Credit Damages, credit damage expert witness Doug Minor writes:

Credit damage is a somewhat new field of expertise, and many attorneys and consumers have not yet been exposed to its potential and importance. But this is changing, as more and more cases demonstrate that such damage can indeed be quantified. Credit damages can pertain in a variety of cases: divorce, wrongful foreclosure, personal injury, breach of contract, identity theft, fraud, and medical malpractice, to name a few.

Now more than ever before, award amounts include compensation for credit damage. And as my own experience has confirmed, the amounts can easily reach well into the six-figure range. Thus, the competence of the experts retained in such cases is important.

When a person’s credit profile has been harmed through the malicious or negligent actions of others, the question naturally arises: How have they been financially impacted? The economic damage from such events depends on several variables; each situation is unique. But it is now demonstrably true that this damage can usually be quantified within a range.

Evaluating credit damage—and understanding the causes—is a challenging task. It is even more challenging to assign an accurate dollar amount to a change in credit scores or a credit report.

Before trying to calculate damages, an expert must establish the times frames involved and the duration that the damages will exist. Typically, the process is as follows: After collecting all relevant information on the consumer’s credit file, the expert will then review it to identify the cause(s) of damages. Several key questions should be addressed: How and why did the damage happen? Who caused the damage? Is the information continuing to be reported to credit bureaus, or has it stopped? How is the information being reported?

Tools and methodologies do exist to accurately measure the effects of harmful credit events, both present and future. The approaches, methods, and terminology may vary from one expert to the next. For instance, a credit expert may refer to out-of pocket costs, loss or reduction of credit capacity, loss or reduction of credit expectancy, time lost (valued at a reasonable rate), increased credit costs (for mortgages, auto loans, credit cards, insurance premiums etc.), lost opportunity (e.g., job offers or ability to purchase/refinance a home), loss of enjoyment of life (hedonic damages), and loss of reputation.

Among the approaches experts use are the dollar-for-dollar method, dollar-for-dollar plus tax liability, the multiplier method and the public record method. Any of these may and can be used to describe the impact of credit damages.

One of the first steps is to examine the credit score itself. This seemingly straightforward action can become complex very quickly, as there are often numerous reports, with scores from multiple sources. So, a consumer will many times have a number of credit scores, each reflecting the data and scoring criteria of its source. Understanding the different features of each type of score and report is an important evaluation skill that an expert should have to accurately quantify credit damages.

Doug Minor is a credit damages expert and credit counselor. He serves as an expert witness and litigation consultant, with specialized expertise in the Fair Credit Reporting Act (FCRA) and Fair and Accurate Credit Transactions Act (FACTA). He is FCRA (Fair Credit Reporting Act) certified by the Consumer Data Industry Association (CDIA), which is the trade association of the credit reporting agencies. His company, Easy Credit Relief, Inc., provides a range of consumer services to help people understand and recover from credit problems. Please see Doug Minor.

June 2, 2014

Securities Expert Witness On Failure To Supervise Part 2

In Failure to Supervise: An Inside Perspective, securities expert witness Alan Besnoff, Securities Expert Witness & Litigation Support, LLC, writes:

What are the steps that a Supervising Principal can and should take to assure adherence to FINRA regulations, the highest of ethical standards, and Supervisory duties are being met?

It is my belief that it is most important for the Supervising Principal to develop and maintain a culture of absolute adherence to FINRA regulations, company compliance guidelines, and the highest of ethical standards. To accomplish this desired culture, the Supervising Principal must always be consistent in his or her dealings with brokers and in demonstrating such a mindset in all of the Principal’s behaviors, actions, and policies and procedures.

In many organizations the compliance requirements may be handled simply by following minimum guidelines such as the conducting of an annual compliance meeting. This “check the box” approach is in my view a mistake as it sends the message that compliance requirements are an inconvenient burden that must be met even though it distracts from sales productivity. An atmosphere and culture may develop in which compliance requirements are met by “going through the motions” for the sole purpose of being able to indicate that a compliance requirement has been satisfied.

The Supervising Principal who takes a long-term view recognizes that the preceding attitude and approach is a huge mistake that threatens the best interests of the company, the brokers and managers within the branch, and the investing public.

Steps that a Supervising Principal can take to foster an ethical and compliant culture include:

1) At every group or individual meeting in which specific investment products or recommendations are discussed, always include a discussion of the suitability and other compliance issues associated with the product. Supervising Principals who take this action will help his or her brokers learn and understand the importance of FINRA rule 2090 “Know your customer”, and FINRA rule 2111 “Suitability”. Regularly conducting discussions of this nature clearly help to foster a culture in which only suitable transactions are valued and accepted.
2) During group meetings, moderate discussions in which brokers will share why a specific product, transaction, or recommendation was in the best interest of the client as compared to other alternatives. Supervising Principals who take this action will be able to gauge the degree to which brokers under his or her supervision understand, practice, and comply with FINRA rule 2090 “know your customer”, and FINRA rule 2111 “Suitability”. Providing brokers an opportunity to exhibit their compliance with FINRA rules and their commitment to the highest of ethical standards will greatly enhance the compliance learning experience for all brokers within the branch, and help the Supervising Principal with his or her goal of fostering a culture in which compliance and high ethical standards are the norm.
3) Frequently review disciplinary actions and arbitration awards against brokers. Discuss the harm done to the broker and his or her family, the firm and the investor. Initiate discussion as to what should have been done differently.
4) When discussing various products to be marketed, always emphasize how and in what circumstances such products should be used for the benefit of the client. Care must be taken to not overemphasize the commissions or payout to the broker.
5) The Supervising Principal should monitor what is being discussed by brokers during individual sales appointments by joining brokers periodically on appointments with clients.
6) The Supervising Principal can select a sampling of trades and transactions received and call the client to discuss the transaction. Confirm suitability and financial information and make sure the client understands all aspects of the transaction including charges and expenses, illiquidity and risk. Supervising Principals that take this action will help to assure that several FINRA rules are being observed. FINRA rule 2090 “Know your customer” requires that “every member shall use reasonable diligence in regard to the opening and maintenance of every account, to know (and retain) the essential facts concerning every customer…” FINRA rule 2111 “Suitability” requires that “a member or associated person must have a reasonable basis to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the customer….” The fact that the Supervising Principal is taking this action will be known by all brokers within the branch. Brokers are therefore likely to take extra care to assure that all “know your customer” detail on account applications are accurate and that all transactions are suitable for the customer.
7) The Supervising Principal should regularly attend public sales seminars and workshops conducted by brokers under his or her supervision. Supervising Principals that take this action will help to assure that brokers under his or her supervision are in compliance with applicable sections of FINRA rule 2210 “Communications with the public”.
8) The Supervising Principal can add the names of his or her brokers to “Google alerts” in order to be notified and stay informed of any new events or news stories in which the broker may be named.
9) The Supervising Principal must never “look the other way” when any compliance violation or breach of ethics may occur.
10) Care must be taken to make all hiring decisions not only upon anticipated productivity, but upon anticipated ethical conduct. Great care must be taken to safeguard the ethical and compliant culture once created. Since behaviors tend to be repeated, it is wise to prevent anyone with a poor ethical record to join the branch.

Supervising Principals can and should view their firm’s written compliance guidelines and FINRA rules and regulations as minimum standards. Above are just a sampling of steps that can be taken by the Supervising Principal to assure that supervisory responsibilities are being fulfilled.

When the Supervisor has been successful in fostering an ethical and compliant culture and is fully committed to his or her supervisory duties and responsibilities it is far less likely for incidents of broker misconduct to occur.