how to testify€¦ · expert testimony and industry-accepted valuation standards valuation...

© 2018 Association of Certified Fraud Examiners, Inc.

How to Testify

Testimony About Damages

and Other Remedies

© 2018 Association of Certified Fraud Examiners, Inc. 2 of 27

Introduction

▪ In fraud cases, the bottom line for success is to

efficiently find, support, and recover an

appropriate remedy.

▪ Ultimate jury question: What sum of money, if

any, if paid now in cash, would fairly and

reasonably compensate the defendant for the

damages, if any, that were proximately caused

by such fraud?

© 2018 Association of Certified Fraud Examiners, Inc. 3 of 27

Steps to Calculate Damages

Identify

elements of

damages.

Identify

valuation

issues.

Document

damages for

presentation

in legal

proceedings.

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Identify the Damages

▪ Direct or general

damages

▪ Consequential or

special damages

▪ Punitive or

exemplary damages

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Direct or General Damages

▪ Out-of-pocket losses: Damages sufficient in

amount to replace what the perpetrator

wrongfully took or to repair what the perpetrator

wrongfully damaged

▪ Benefit-of-the-bargain losses: The difference

between the fair market value of the property

received by the victim and the value if the facts

had been as represented by the defendant

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Consequential or Special Damages

▪ Lost profits

▪ Opportunity costs

▪ Mitigation expenses

▪ Reliance expenses

▪ Incidental expenses incurred in the

transportation, care, and custody of goods or

property

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Consequential or Special Damages

▪ Loss of use

▪ Consideration or compensation paid

▪ Lost time

▪ Lost credit or damage to credit reputation

▪ Mental anguish

▪ Court costs and costs for trial preparation

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Punitive or Exemplary Damages

▪ Awarded in addition to

actual damages

▪ Awarded to punish the

wrongdoer and deter

others from similar

misconduct

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Punitive or Exemplary Damages

▪ Criticized by some as a windfall to the victim

▪ Calculations are based on some multiple of the

actual damages

▪ Calculations can be related to the economic

circumstance of the fraudster

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Identify Valuation Issues

▪ Expert testimony and industry-accepted

valuation standards

▪ Lost profits

▪ The time of valuation

▪ Future damages and discounts to present value

▪ Interest

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Expert Testimony and Industry-Accepted

Valuation Standards

▪ Valuation testimony generally requires that the

witness be established as an expert.

▪ Market information is usually inadmissible

hearsay unless it is gathered and relied upon in

the opinions of a qualified expert.

▪ It is necessary to identify and follow any

available professional or industry standards that

are applicable to the valuation issue at hand.

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Lost Profits

▪ Lost profits can be a loss related to a particular

venture, a segment of business, or the entire

business.

▪ Considerations in calculating lost profits:

• Performance history

• Market information

• Alternatives

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The Time of Valuation

▪ Fraud damages are usually valued as of the

time of the fraud.

▪ Market fluctuations can cut both ways in terms

of the amount of recoverable damages.

▪ Appreciation can be overcome in cases where

lost profit damages are appropriate.

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Future Damages and Discounts to

Present Value

▪ If any element of damages extends into the

future, the expert must carefully delineate the

amount of such damage element attributable to

the future.

▪ Factors used to discount the component of

future damages to present value typically

include analysis of the time value of money and

applicable risk factors.

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Interest

▪ Interest calculations

generally not part of

fraud damage

calculations

▪ Pre-judgment interest

▪ Post-judgment

interest