In divorce cases at Broder Orland Murray & DeMattie LLC, we often add a forensic expert to our team. This is particularly true in the financial realm. Many of our cases emanating from Greenwich, Westport, and throughout Connecticut involve sophisticated financial structures, including interests in private equity, hedge funds, and venture capital entities. Disputes arise over valuation and issues like carried interest. It is therefore critical to involve a forensic with expertise in these areas.
Certain compensation structures involve stock options, restricted stock, phantom income, and deferred compensation. A financial forensic expert will assist counsel in analyzing documents so that nothing is left on the table. He or she will provide projections as to the realization of these items and help craft a mechanism for allocating them, sometimes “if, as and when” they are actually received, which is often after the divorce is finalized.
Another area requiring the involvement of an expert is the valuation of a business. The expert will review such items as tax returns, K-1s, profit and loss statements, balance sheets, general ledgers, operating agreements, partnership agreements, bank statements, and payroll documents. Additionally, the expert may do an analysis to normalize earnings to prevent double dipping, so that a reasonable compensation is extracted from the valuation of the business and not counted twice.
In other instances, we utilize a forensic expert to analyze spending in order to determine actual income. The expert will trace expenditures by reviewing bank account and credit card statements, as well as ATM withdrawals. It can be time consuming and laborious to pore over these documents, but it is especially necessary when a party has access to cash in a business.
We will occasionally involve an expert to trace offshore and foreign investments. The expert has access to a wide range of resources and industry tools that are helpful in tracking down these assets. He or she is well versed in analyzing and interpreting the data which is often complicated by design.
We also use forensic experts to analyze personal, partnership, and corporate tax returns. These returns often provide us with a trove of information which, when unscrambled by the expert, provides us with a clear picture of the parties’ finances. While experienced divorce counsel should have a good working knowledge of tax returns, we are typically not CPAs or accountants, and therefore consulting with such experts is often necessary.
So at what stage do we get the forensic financial expert involved? In our practice, it is often the very first call we make after our client retains us. Each expert brings personal strengths and perspectives to the case, and we want to make sure our client hires the optimal expert. Having our expert in at the outset also provides us with an overall understanding of the case and a roadmap as to the best and most efficient way to proceed. We have our expert design for us discovery requests which target the documentation we will need to prove our case, as well as to review and analyze those documents when we receive them.
We often use our expert during negotiations with our adversary, who most often has an expert as well. Many times, counsel instructs the two experts to talk to each other in order to resolve disputes and to assist in settling the case. This works particularly well when both experts are highly reputable and experienced and when they have mutual respect for one another. In many instances, we have our expert prepare us for depositions involving finances and sometimes we have our expert sit in on the deposition to assist as needed. A skilled expert can also be very valuable in the type of mediation we sometimes employ just prior to trial, where the model involves a former judge or esteemed member of the bar, counsel, and clients. It is usually the last best chance to settle the case and a talented expert can often be instrumental in arriving at a resolution.
Finally, in cases where trial is the only option, the financial forensic expert will not only assist in preparation, but also testify during the proceedings. The Court must qualify the expert before he or she can testify to substantive issues and before being allowed to render an opinion. Experts we use have been qualified many times in courts throughout the state, so it is rarely an issue in cases we handle. If an expert is to testify, counsel has previously filed a document known as an Expert Disclosure, which, according to our Rules of Procedure, Section 13-4, includes the field of expertise and the subject matter on which the witness is expected to offer expert testimony; the expert opinions to which the witness is expected to testify; and the substance of the grounds for each such expert opinion. A well-drafted Expert Disclosure, prepared with the assistance of an experienced expert, will prevent any qualification and evidentiary issues at trial.
At Broder Orland Murray & DeMattie LLC, we have included financial forensic experts to our team in a multitude of cases. We know which expert is best suited for a particular matter and are adept at maximizing that person’s expertise to achieve the best results for our clients. While hiring an expert appears to add cost to the case, in the long run, it usually makes for a more cost effective way of developing that case and typically maximizes the financial results for the client. In short, it is most often money well spent.