ACFE Course Materials Welcome!

Transcription

ACFE Course Materials
Welcome!
The ACFE would like to welcome you to Creating an Effective Work Product for the Courtroom.
We hope you will find this course informative and immediately useful. The materials in this book will
not only supplement your learning experience during the class, but will also serve as a reference and
reminder for you when you are back on the job.
There are a few important administrative items to keep in mind:
• Timing and Structure — Class will start promptly at 1:00 p.m. and end at 5:00 p.m. each day.
Beverages, continental breakfast, and one group lunch will be provided.
• Sign-In Sheet — Please initial next to your name on the Sign-In Sheet. It is critical that you
do so each morning to be eligible for CPE credit.
• Certificate of Attendance — Please complete the CPE Reporting Form found inside your
registration packet. This form is due on the last day of the seminar and will serve as your
Certificate of Attendance. Return the top white copy to the Registration Desk and keep the
bottom yellow copy for your records. The yellow copy will serve as your Certificate of
Attendance.
• Evaluations — Course evaluations will be distributed by email. Please take time to provide
feedback about the course, venue, and instructor. Your evaluation will help the ACFE make
improvements to future training courses. At the conclusion of the evaluation you will receive a
link to all the PowerPoint slides used throughout the class.
Thank you for attending. Please let us know if there is anything we can do to make your experience
in this class more comfortable, productive, and valuable.
Creating an Effective Work
Product for the Courtroom
©2012 by the Association of Certified Fraud Examiners, Inc.
Revised 5/21/12
No portion of this work may be reproduced or transmitted in any form or by any means
electronic or mechanical, including photocopying, recording, or by any information
storage and retrieval system without the written permission of the Association of Certified
Fraud Examiners, Inc.
“Association of Certified Fraud Examiners,” “Certified Fraud Examiner,” “CFE,”
“ACFE,” “Fraud Magazine,” “CFE Exam Prep Course,” “EthicsLine,” the ACFE Seal,
and the ACFE Logo are trademarks owned by the Association of Certified Fraud
Examiners, Inc.
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DISCLAIMER
Every effort has been made to ensure that the contents of this publication are
accurate and free from error. However, it is possible that errors exist, both
typographical and in content. Therefore, the information provided herein
should be used only as a guide and not as the only source of reference.
The author, advisors, and publishers shall have neither liability nor
responsibility to any person or entity with respect to any loss, damage, or
injury caused or alleged to be caused directly or indirectly by any information
contained in or omitted from this publication.
Printed in the United States of America.
Association of Certified Fraud Examiners
23RD ANNUAL ACFE FRAUD
PRE-CONFERENCE
CREATING AN EFFECTIVE WORK
PRODUCT FOR THE COURTROOM
JUNE 17, 2012
ORLANDO, FL
11:00 a.m. – 1:00 p.m.
1:00 p.m. – 2:10 p.m.
2:10 p.m.
2:25 p.m.
3:35 p.m.
3:50 p.m.
–
–
–
–
2:25 p.m.
3:35 p.m.
3:50 p.m.
5:00 p.m.
Registration: City Hall Lobby
Room Name: Sun Ballroom B
How It All Started: Frye, Daubert, and Federal Rules of
Evidence
Break
Evidentiary Issues: Cutting-Edge Legal Principals and Trends
Break
Practice Pointers: What Went Right, What Went Wrong
DOUG SQUIRES
Adjunct Professor of Law
Ohio State University Moritz College of Law
Capital University School of Law
Columbus, OH
Doug Squires is an adjunct professor at the Ohio State University Moritz College of Law and
the Capital University Law School in Columbus, OH. At Moritz, Squires teaches white-collar
crime. At Capital, Squires developed and, for eight years, taught a class in forensic evidence, an
advanced evidence course.
Doug has authored several published materials on white-collar crime and fraud, including a
chapter entitled “Forensic Accounting” in Scientific Evidence in Civil and Criminal Cases, the
leading legal text on scientific and technical evidence.
Since 2000, Doug has worked as a federal prosecutor in Columbus, OH. In 2009, Doug
received the U.S. Department of Justice Distinguished Service Award. Prior to that, Doug
worked for seven years as a state prosecutor in California. Doug received a B.A. from Miami
University, Oxford, OH, his law degree from the University of San Francisco School of Law,
and is licensed to practice law in Ohio and California.
FRANK WISEHART, CFE, CPA, ABV, CVA
Director of Business Advisory Services
Schneider Downs, Inc.
Columbus, OH
Mr. Wisehart has more than 15 years of experience in management consulting, litigation
support, strategic planning, and financial transaction due diligence. He has testified as a qualified
expert in matters of forensic accounting, fraud examination, business valuations, economic
damages, lost wages, family law, dissipation of marital assets, bankruptcy, breach-of-contract,
and general commercial litigation. Frank is a faculty member of the National Association of
Certified Valuation Analysts and the ACFE. He has written and taught in the areas of business
valuation, personal and business damage calculations, fraud examination, and expert testimony
technique. Mr. Wisehart received his B.S. from Miami University, Oxford, OH, and his M.B.A.
from the Samuel Curtis Johnson Graduate School of Management at Cornell University, Ithaca,
NY.
TABLE OF CONTENTS
HOW IT ALL STARTED: FRYE, DAUBERT, AND FEDERAL RULES OF EVIDENCE
Foreword ......................................................................................................................................1
Frye, Daubert, and Federal Rules of Evidence............................................................................2
“Gatekeeping Obligations” in Federal Courts .............................................................................8
Role of the Expert Witness in Fraud Cases .................................................................................9
An Overview of Selected Federal Rules ......................................................................................11
General Electric Co. v. Joiner ......................................................................................................14
The Four Pillars of Expert Opinions ............................................................................................15
EVIDENTIARY ISSUES: CUTTING EDGE LEGAL PRINCIPLES AND TRENDS
The “New” Rules of Evidence .....................................................................................................25
The Attorney-Client Privilege......................................................................................................36
The Accountant-Client Privilege .................................................................................................38
PRACTICE POINTERS; WHAT WENT RIGHT, WHAT WENT WRONG
Know the Facts ............................................................................................................................41
©2012
Creating an Effective Work Product for the Courtroom
i
Foreword
In civil and criminal litigation, attorneys and judges follow
two basic charges: procedure and the merits of a case.
Procedure is the process by which evidence, including an
expert’s work product, is entered into a trial for
consideration. This includes the order and flow of
testimony, the admissibility of experts and evidence, and
the timeframe in which the case will occur. Knowing and
understanding the procedures, standards, and the court’s
role as a gatekeeper is an important aspect of expert
witness work.
Merits relate to the actual arguments for and against legal
positions taken by the opponents. These are the facts and
analysis that set forth the cause-and-effect arguments. Is the
plaintiff able to prove its case based on the facts, or do the
facts get in the way of a good story?
As advocates for their client, attorneys focus their attack
initially on disallowing damaging work product from
entering the courtroom. For example, failing to adhere to
federal rules might cause an expert’s work product to be
rejected despite its credibility. Therefore, counsel will
focus on not allowing this work product in by denying its
admittance through procedural hurdles. Attorneys study
how to attack and alternatively defend four principal areas
of expert testimony and work product: evidence,
assumptions, methodology, and the expert himself.
Defending your work product relative to these four areas is
critical to establishing you as a credible expert with an
opinion worthy of the court’s consideration. As an expert, it
is important to understand not only how to produce the
substance of a report, but also the hall of mirrors in the
submission of your work product to the court. If you or
your work product fails to meet the hurdle threshold, it
does not make it into the courtroom. Only after passing
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1
NOTES
through the maze of procedure and standards is the merit of
the work product considered.
Finally, there is no substitute for good preparation. Know
your report. Opposing counsel will have spent considerable
time dissecting its content. Know the case timeline. When
did you first become involved? When did you meet with
the client and attorney? What information was provided to
you? When did you form your opinion? These answers are
important to displaying the logical approach taken in the
assignment and orderly steps that lead to your opinion.
Frye, Daubert, and Federal Rules of Evidence
Consultation with an expert is often critical to case
development. Nothing spoils a case faster than the lack of
evidence, and so expert opinions are a valuable asset during
litigation. The way that courts have handled evidence from
expert witnesses has evolved over the years. Below is a
brief history of these developments.
In the Beginning, There Was Frye v. United States
In Frye v. United States, 293 F. 1013 (DC Cir. 1923),
the court was faced with a murder trial involving James
Alfonzo Frye. Frye claimed he was innocent of the
charges and offered new, scientific evidence to support
his claim in the form of a blood systolic pressure test.
The court rejected this scientific evidence because the
test had not been generally accepted by the scientific
community. This standard was adopted by courts as the
basis for including or excluding scientific evidence.
Interestingly, this proof of innocence test was relabeled
as a lie-detector test, and subsequently, gained general
acceptance among the scientific community.
After Frye, the proponent of novel scientific evidence
had to show that the evidence was reliable. The
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2
NOTES
reliability prong testing scientific and technical
evidence still survives today, as discussed below.
Reliability was shown by the “general acceptance test”
by offering scientific publications, judicial decisions,
evidence of practical use, or testimony by scientists on
their peers’ position regarding the evidence in question.
Many courts, faced with determining the admissibility
of a wide array of scientific evidence, favored the Frye
standard for decades. Often, new scientific evidence
failed to survive this demanding standard.
The general acceptance test under Frye is still used as
the standard for admissibility in some state courts.
However, the federal government and most states
adopted a new standard after the U.S. Supreme Court
case Daubert v. Merrell Dow Pharmaceuticals, 509
U.S. 579 (1993).
Daubert v. Merrell Dow Pharmaceuticals
The Daubert case involved petitioners Jason Daubert
and Eric Schuller, minor children who had been born
with serious birth defects. They and their parents sued,
alleging that the birth defects were the result of the
mothers’ ingestion of Benedectin, an anti-nausea drug
marketed by Merrell Dow Pharmaceuticals, Inc.1
Plaintiffs offered the testimony of eight experts who
concluded that Benedectin could cause birth defects.
These experts cited epidemiological evidence, including
animal-cell studies, live animal studies, and chemical
structure analysis to support their causation argument.
Some of this analysis was based on a reinterpretation of
previously conducted studies that concluded Benedectin
was not a cause of birth defects.
1 Daubert
et ux., individually and as guardians ad litem for Daubert, et
al. v. Merrell Dow Pharmaceuticals, Inc., No. 92-102, U.S. Supreme
Court.
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NOTES
Respondents employed Dr. Steven H. Lamm, a medical
expert, to refute the plaintiffs’ claims. Dr. Lamm
offered testimony that there had been no published
reports linking Benedectin to malformations in fetuses.
Dr. Lamm concluded that, therefore, maternal use of
Benedectin during the first trimester of pregnancy had
not been shown to be a human birth defect risk factor.
Based on Dr. Lamm’s affidavit, the respondents moved
for summary judgment, which was granted by the
district court.
The court relied upon the Frye standard that scientific
evidence is admissible only if the principle upon which
it is based is sufficiently established to have “general
acceptance in the field to which it belongs.”2 Since the
petitioners’ studies were not published and had not been
subjected to peer review, the court ruled that the
evidence was inadmissible under the general acceptance
doctrine.
The plaintiffs appealed to the U.S. Court of Appeals,
Ninth Circuit. The appeals court confirmed the district
court’s ruling. The plaintiffs then appealed this decision
to the Supreme Court, which reversed the lower courts’
rulings.
The Supreme Court decided that Frye’s general
acceptance requirement was not necessarily a
precondition to the admissibility of scientific evidence
under the Federal Rules of Evidence. The Court
recognized that many well-founded theories are too
new or of too limited interest to meet the general
acceptance requirement. Additionally, the Supreme
Court affirmed a judge’s role as the gatekeeper of
2
727 F. Supp. 570, 572 (SD Cal. 1989), quoting United States v.
Kilgus, 571 F. 2d508, 510 (CA9 1978).
©2012
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NOTES
scientific expert testimony under Federal Rule of
Evidence (FRE) 702. Scientific testimony must be
relevant and reliable and be the product of sound
scientific methodology. The Daubert decision
formulated four relevant factors to be considered to
determine the validity of the scientific process,
methodology, and conclusion. These are not, however,
rigid requirements and are to be flexibly applied:
1. Proof of testing of the basic underlying hypothesis
upon which the technique rests
2. Whether the method has been subjected to peer
review and publications
3. What the known or potential error rate is
4. The general acceptance of the technique used in the
scientific community
METHOD V. CONCLUSION
In Daubert, the court had written that the “focus, of
course, must be solely on principles and
methodology, not on the conclusions they
generate.”3 In General Electric Co. v. Joiner, 522
U.S. 136 (1997), the plaintiff charged the district
court of disagreeing with the conclusions of the
testimony rather than the methods from which the
experts had drawn. The court responded in its first
post-Daubert decree, “[C]onclusions and
methodology are not entirely distinct from one
another…A court may conclude that there is simply
too great an analytical gap between the data and the
opinion proffered.”4 Upholding a judge’s right to
exclude given expert testimony on the basis of
perceived analytical gaps in the science is an
unprecedented broadening of the gatekeeper role.5
3
509 U.S. at 595.
118 S. Ct. at 519.
5 Daniel S. Fridman and J. Scott Janoe, “An Overview of Differing
4
©2012
5
NOTES
Joiner upheld a judge’s right to exclude in the
presence of perceived analytical gaps between
method and outcome.
PEER REVIEW
While peer review and publication is a factor under
Daubert, this process is subject to flaws and
limitations. A former editor of The Journal of the
American Medical Association has observed: “Peer
review is far from being a ‘perfect sausage machine
for grinding out the truth.’ Just because peer review
is about a review of scientific data doesn’t mean
that it is itself a scientific process.”6
RELIABILITY REQUIREMENT
In Kumho, the Supreme Court held that the trial
judge’s gatekeeping obligation applies to
“technical” and “other specialized” knowledge. In
addition, the Court recognized that “there is no clear
line that divides the one from the others.”7
Once it was clear that the reliability requirement
applied to all expert testimony, the courts had to
determine whether “the factors cited in Daubert
also applied in this context.”8 While questioning
how to assess reliability within various forms of
expertise, the Court decided the test of reliability
should be “flexible,” and Daubert’s list of criteria
must be used accordingly. However, since
Approaches to Judicial Gatekeeping in the United States,” Harvard
Law School (1999); presented January 19, 1999, at State Supreme
Court Justices Conference in Washington, DC.
6 Giannelli and Imwinkleried from Los Angeles Times, May 22, 1989,
pt. 11 at 3 (quoting Elizabeth Knoll).
7 119 S. Ct. at 1174.
8 Paul C. Giannelli and Edward J. Imwinkleried, “Application of
Daubert to ‘Technical’ Expert Evidence,” Scientific Evidence, Volume
1 (Charlottesville, VA: Lexis Law Publishing, 1999), page 47.
©2012
6
NOTES
“technical knowledge” involves the application of
well-established scientific principles and
procedures, it is unnecessary to subject it to the
same “full-scale reliability determination required
for scientific knowledge…Thus, its reliability may
be presumed.”9 In this way, the Court effectively
shifted the burden of proof on the reliability
requirement to the opposing party.10
RULES OF THUMB
Several federal case decisions provide clarity on the
Daubert test. An individual can qualify to render
testimony in any one of these five ways:
knowledge, skill, experience, training, or
education.11 An expert need not be an “outstanding
practitioner” in the field.12 Qualification should be
based on the nature and extent of the witness’s
knowledge, not on the witness’s “title.”13
BEYOND QUALIFICATIONS
Expert testimony must relate to subject matter in
which the expert has been qualified in no other area.
Offers to stipulate opposing counsel’s expert
qualifications are often rejected. Stipulations can
deprive juries of material that causes the testimony
to be more persuasive. In State v. Colwell, 246 Kan.
382, 790 P.2d 430 (1990), when the defense was
forced to accept the prosecution’s stipulations of
their counsel’s qualifications, the court found that
9
State v. Fukusaku, 85 Haw. 462, 473, 946 P. 2d 32, 43 (1997).
Paul C. Giannelli and Edward J. Imwinkleried, “Application of
Daubert to ‘Technical’ Expert Evidence,” Scientific Evidence, Volume
1 (Charlottesville, VA: Lexis Law Publishing, 1999), page 47.
11 Kopf v. Skyrm, 993 F.2d 374, 377 (4th Cir. 1993).
12 United States v. Barker, 553 F.2d 1013, 1024 (6 th Cir. 1977).
13 Jenkins v. United States, 307 F.2d 637, 643-44 (DC Cir. 1962).
10
©2012
7
NOTES
the jury did not learn the credentials of the expert
who had a “national reputation” in the field.14
“Gatekeeping Obligations” in Federal Courts15
Prior to the adoption of the Federal Rules of Evidence in
1975, the federal court system relied on case law and the
discretion of the court to decide matters of evidence
relating to expert witnesses. Common law evidence rules
were not uniform. Evidence laws varied from state to state
and district to district. The common law rules were harsh in
some instances and made little sense in others. A single,
comprehensive set of rules was necessary to eliminate this
rather complicated variance.
In 1965, U.S. Supreme Court Chief Justice Earl Warren
appointed an advisory committee of 15 to draft the new
rules. The committee was chaired by trial lawyer Albert E.
Jenner of Chicago, Illinois. Other trial lawyers included
David Berger of Philadelphia, Pennsylvania; Hicks Epton
of Wewoka, Oklahoma; Egbert Haywood of Durham,
North Carolina; Frank Raichle of Buffalo, New York;
Herman Selvin of Los Angeles, California; Craig
Spangenberg of Cleveland, Ohio; and Edward Bennett
Williams of Washington, DC. Members from legal
academia included Thomas F. Green, Jr. of the University
of Georgia Law School; Charles W. Joiner of the
University of Michigan Law School; Jack Weinstein of
Columbia Law School; and Edward W. Cleary of the
University of Illinois College of Law. Representing the
judiciary were U.S. Circuit Judge Simon E. Sobeloff of
Paul C. Giannelli and Edward J. Imwinkleried, “Qualifications of
Experts,” Scientific Evidence, Volume 1 (Charlottesville, VA: Lexis
Law Publishing, 1999), page 269.
15 Frank Wisehart, “How to Get Evidence and Expert Testimony
Admitted into Court,” National Business Institute, author/lecturer,
Columbus, Ohio, February 2007.
14
©2012
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NOTES
Maryland; U.S. District Judge Joe E. Estes of Texas; and
U.S. District Judge Robert Van Pelt of Nebraska.16
The U.S. Supreme Court promulgated drafts of the FRE in
1969, 1971, and 1972, but Congress then exercised its right
under the Rules Enabling Act to suspend implementation of
the FRE until it could study them further. After a long
delay blamed on the Watergate scandal, Congress allowed
the FRE to become federal law in 1975, but only after
enacting a series of modifications to the rules proposed by
the Supreme Court, particularly in the area of privilege.17
As defined in FRE 102 Purpose and Construction, the
thrust of the FRE is to “secure fairness in administration,
elimination of unjustifiable expense and delay, and
promotion of growth and development of the law of
evidence to the end that the truth may be ascertained and
proceedings justly determined.”
Trial courts are not required to conduct Daubert hearings
before considering expert testimony at a motion to suppress
hearing, or at a bench trial.18, 19 “The purpose of Daubert
was to require courts to serve as gatekeepers so that
unreliable expert testimony does not carry too much weight
with the jury.”20
Role of the Expert Witness in Fraud Cases
It is important for fraud examiners to understand their role
in a case. Experts should neither comment on the facts nor
interpret the law. When any party seeks to have the expert
state opinions concerning the facts of the case and/or
16
en.wikipedia.org/wiki/Federal_Rules_of_Evidence
en.wikipedia.org/wiki/Federal_Rules_of_Evidence
18 United States v. Ozuna, 2009 WL 902293 (7th Cir. April 6, 2009).
19 Gannon v. United States, 571 F.Supp.2d 615 (E.D. Pa. 2007).
20 Ozuna, Id. (emphasis added)
17
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NOTES
interpret statutes and regulations, there are often problems.
There are some exceptional circumstances for this general
rule. (See the discussion of FRE 704 on the ultimate issue
below.)
However, these rules do exclude legal conclusions, or, as
the Advisory Committee put it in the notes to FRE 704,
“opinions phrased in terms of inadequately explored legal
criteria.” In Molecular Tech. Corp. v. Behbehani, 925 F.2d
910, 919 (6th Cir. 1991), an expert’s testimony concerning
“the requirements of federal securities disclosure laws” was
held improper and not harmless error. The court’s role is to
determine what the law is, and it may not delegate this
authority to an expert.
Stay away from using statutory terminology because it
might be viewed as usurping the role of the court.
Similarly, testimony regarding the credibility of witnesses
tends to be considered usurping the province of the jury.
For example, the courts have been much more receptive to
the testimony of securities experts if they avoid using key
statutory terms or voicing their opinions on the credibility
of witnesses.
Balance the above concepts with the fact that limiting
defenses and the testimony of defense experts, in criminal
cases, is not preferred. In United States v. Barile, 286 F.3d
749 (4th Cir. 2002), the court held that the defense expert
should have been permitted to testify that the defendant’s
statements in a pre-market notification to the Food and
Drug Administration concerning a product enhancement for
cardiac monitors were reasonable, but did not hold that no
materially misleading comments were stated.
When experts testify about background information,
descriptions of standard industry practice, and analyses of
©2012
10
NOTES
the facts concerning the conduct in question, linked to solid
opinions, those subjects are likely to be permitted. But
opinions on whether the conduct was consistent with
normal practice will likely be excluded as too close to
simply telling the jury what result to reach. This balancing
act must be kept in mind during the preparation of the
witness for his or her testimony.
An Overview of Selected Federal Rules21
Federal Rule of Criminal Procedure 16 (Criminal
Case Discovery)
In criminal cases, in advance of trial, at the defendant’s
request, the government must give the defendant a
written summary of expert testimony.22 (See the
discussion of United States v. White below.) Excluded
from discovery and inspection are reports and internal
government documents made by a government attorney
or agent.23 Once the expert testifies on directexamination, on cross-examination the expert may be
required to disclose the underlying facts and data which
form a basis of the opinion.24 (See the opinion above.)
Prosecutors are charged with keeping track of
documents provided in discovery, especially in
voluminous document cases.25 (See also the hybrid fact
and expert witness testimony issues discussed below.)
21
These summaries include text taken verbatim from the Federal Rules
of Evidence.
Matthew C. Hurley, “Changes to Federal Rules Regarding Expert
Witness Discovery,” Litigation Advisory, December 21, 2010,
www.mintz.com.
22 Fed.R.Crim.P. 16(a)(1)(G).
23 Fed.R.Crim.P. 16(a)(2).
24 FRE 705.
25 United States v. Chapman, 524 F.3d 1073 (9th Cir. 2007).
©2012
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NOTES
Federal Rule of Civil Procedure 26 (Civil Case
Discovery)
OVERVIEW OF RULE 26 AMENDMENTS
Rule 26 of the Federal Rules of Civil Procedure is
now more in-line with the Federal Criminal Rules
of Discovery discussed above. The civil rules have
been revised as to the governing of expert witness
discovery. The new rule went into effect on
December 1, 2010.
As a result of these changes, Rule 26 no longer
allows full discovery of draft expert reports or broad
disclosure of communications between attorneys
and expert witnesses, as had been the case since
1993. Rule 26(b)(4)(B) now provides that draft
expert reports are protected from discovery, and
Rule 26(b)(4)(C) confers work-product protection
on communications between attorneys and retained
experts except to the extent that the
communications: relate to compensation for the
expert’s study or testimony; identify facts or data
that the party’s attorney provided to the expert and
that the expert considered in forming the opinions to
be expressed; or identify assumptions that the
party’s attorney provided to the expert and that the
expert relied on in forming the opinions to be
expressed.
While prohibiting discovery of draft expert reports
and significantly limiting discovery of attorneyexpert communications, Rule 26 continues to
require full disclosure of the expert’s opinions and
the facts or data used to support them.
Under the old rules, drafts of expert reports and all
communications between counsel and experts
©2012
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NOTES
relating to the subject matter of the litigation were
fair game in discovery (absent an agreement
between the parties that such information was off
limits). Ultimately, lawyers and experts often took
elaborate steps to avoid creating drafts of the
expert’s report and to minimize communications
between attorneys and experts. For instance,
attorneys in federal court would often hire
“consulting” experts, along with additional
“testifying” experts.
DEPOSITIONS AND HEARINGS
The protections afforded by the new rules to draft
reports and attorney-expert communications apply
not only to document production, but extend to “all
forms of discovery,” including depositions.
CONSULTING AND TREATING EXPERTS
Prior to the 2010 amendments, the requirement that
an expert must file a report was confined to any
expert witness “retained or specially employed to
provide expert testimony in the case or one whose
duties as the party’s employee regularly involve
giving expert testimony.” For anyone else expected
to provide expert testimony in a case—for example,
a treating physician, an employee whose duties did
not regularly involve giving expert testimony, or a
third party witness—no report was required. The
2010 amendment to Rule 26(a)(2)(C) mandates
counsel-prepared disclosures for non-reporting
experts that must include: “(i) the subject matter on
which the witness is expected to present evidence
under Federal Rule of Evidence (FRE) 702, 703, or
705; and (ii) a summary of the facts and opinions to
which the witness is expected to testify.”
©2012
13
NOTES
General Electric Co. v. Joiner
In addition to the explanation of method versus conclusion
in General Electric Co. v. Joiner (discussed earlier), the
court’s gatekeeping role was challenged as an “abuse of
discretion” in this case.
After respondent Joiner was diagnosed with small-cell lung
cancer, in 1991 he sued in Georgia state court alleging his
disease was promoted by exposure to chemical toxins at his
place of work, General Electric Co. Petitioners removed the
case to federal court and moved for summary judgment.
Joiner responded with the depositions of expert witnesses,
who testified that exposure to the chemicals PCBs, furans,
and dioxins was likely responsible for his cancer. The
district court granted summary judgment based on the
testimony’s failure to link exposure to PCBs and small-cell
lung cancer. The testimony was therefore inadmissible
because it did not rise above “subjective belief or
unsupported speculation.”
The Court of Appeals for the Eleventh Circuit reversed the
district court ruling. The Eleventh Circuit stated that the
Federal Rules of Evidence display a preference for
admissibility of expert testimony: “We apply a particularly
stringent standard of review to the trial judge’s exclusion of
expert testimony.” In its ruling, the Eleventh Circuit cited
two district court errors. First, it excluded the experts’
testimony because it “drew different conclusions from the
research than did each of the experts.” The Court of
Appeals opined that a district court should limit its role to
determining the “legal reliability of proffered expert
testimony, leaving the jury to decide the correctness of
competing expert opinions.”26 Second, the district court had
held that there was no genuine issue of material fact as to
26
Joiner at 533.
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14
NOTES
whether Joiner had been exposed to furans and dioxins.
This was also incorrect, the Court of Appeals ruled,
because testimony in the record supported the proposition
that there had been such exposure.
The Eleventh Circuit decision was appealed. The Supreme
Court affirmed that on appellate review of a district court’s
decision to admit or to exclude expert testimony that it
would not initiate its own review of the basis for the court’s
decision. Instead, appellate courts should leave in place the
trial judge’s gatekeeper role to ensure that evidence is
relevant and reliable. Appellate courts were adjured to give
great deference to a trial court’s admissibility decisions
unless it was an abuse of discretion. Court decisions that
are reviewed by an abuse of discretion standard require the
reviewing court to find that the lower court’s decision was
unreasonable in the circumstances to be overturned. In
other words, trial judges may be quite arbitrary in ruling on
expert testimony.27 The Supreme Court affirmed that:
“Abuse of discretion” (standard ordinarily applied to
evidence review) is an appropriate standard to review a
district court’s decision.
 The trial judge is granted the “gatekeeper” role in
screening expert testimony.

The Four Pillars of Expert Opinions28
Experts rely on four primary legs to support their opinions:
evidence, assumptions, methodology, and the expert
himself. Each leg should be fundamentally solid. The
ability of the expert to defend and support each area lends
credibility to their testimony.
Ralph Slovenko, “Daubert in Collapse,” International Journal of
Offender Therapy and Comparative Criminology, Volume 2, Number
47 (2003), pages 240–243.
28 Frank Wisehart, “Four Pillars of Expert Testimony,” Auditor of State
of Ohio, Emerging Trends in Fraud Investigation and Prevention
Conference, author/lecturer, Columbus, Ohio, May 2011.
27
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15
NOTES
Evidence
Experts must consider many factors relating to
evidence. Who provided the evidence? Is the evidence
reliable? Is the evidence relevant? What did the expert
fail to consider? What was considered and ignored?
Attacking evidence can undermine an opinion’s
foundation.
Proving the expert used the wrong information or failed
to consider new evidence can potentially have a
damaging effect on the expert’s conclusion. Many
attorneys attempt to turn experts to their side based on
the consideration of altered facts or evidence. Experts
should be aware of all available data, whether it
ultimately is used to support their conclusion. Experts
who fail to arm themselves with all of the facts can be
harmed under cross-examination.
Reliable evidence can be expressed on a continuum.
Unsupported facts and speculation are less reliable than
independent third-party facts.
Less Reliable
Uncorroborated
Statements
More Reliable
Client Prepared
Financials/Tax
Returns
Audited
Financials/Bank
Statements
©2012
16
NOTES
The following cases involved expert testimony that was
excluded based on inaccurate facts:29
 In re Scrap Metal Antitrust Litig., 527 F.3d 517 (6th
Cir. 2008)
 Avery Dennison Corp. v. Four Pillars Enterprise
Co., 45 Fed. Appx. 479 (6th Cir. 2002)
 Pirolozzi v. Stanbro, 2009 U.S. Dist. LEXIS 42575
(N.D. Ohio 2009)
 Honeysett v. Williams, 2003 U.S. Dist. LEXIS
27595 (N.D. Ohio 2003)
Assumptions
Experts make important assumptions about key facts,
data, and interpretations of the same. The client and/or
client’s attorneys advocate their version of the events
and facts. As an expert, filtering this bias helps
establish independence in thought processes. This
independence helps establish the credibility of the
expert in the eyes of the fact finder. Changing these
assumptions might produce different conclusion
outcomes. For example, an expert may make key
assumptions concerning recurring benefit streams,
company viability, appreciation rates, growth rates, etc.
The expert should be able to articulate the key
assumptions in their opinion and defend the same as
reasonable under the circumstances.
Some cases result in the court excluding an expert’s
testimony due to the expert’s improper assumptions.
Blue Dane Simmental Corp. v. American Simmental
Assn. (ASA), 178 F.3d 1035 (8th Cir. 1999), involved
the registration of “percentage” and “purebred”
Simmental cattle. The purebred designation, as defined
by the ASA, is cattle with slightly less than 100 percent
29
Case selections in this section were provided by Gerry Kowalski,
attorney, Cooper & Wolinski, LPA, Toledo, Ohio.
©2012
17
NOTES
Simmental blood. Initially, the ASA did not recognize a
difference between purebred domestic animals and
purebred Simmental from the original herds of Austria,
France, Germany, or Switzerland. Some breeders
sought official acknowledgment that some animals
were original or from European herds. In response, the
ASA passed a foreign ancestry rule in 1988. As a result,
between 75,000 and 80,000 purebred animals were
given a foreign ancestry designation. Certain animals
that the ASA registered from defendant Risinger were
classified as full-blooded and purebred. The plaintiffs
later discovered that some of the Risinger cattle’s
pedigree was 3 percent Angus, and the remaining 97
percent Simmental. Plaintiffs sued to revoke the
classification of the Risinger animals as purebreds
based on their layperson definition that purebred cattle
should be 100 percent Simmental-blooded.
The plaintiffs hired Dr. Alan Baquet, an agricultural
economist, who testified that following the inclusion of
the Risinger cattle as purebreds, both the Canadian and
American Simmental markets dropped by 26 percent
and 53 percent, respectfully. Using a common damage
method, the before and after model, Dr. Baquet
attributed 27 percent of this market drop to the
inclusion of the Risinger cattle as purebreds.
The district court determined that Dr. Baquet’s
testimony was not reliable. His assumption that the
market drop was attributable to the inclusion of the
Risinger cattle was not supported by the evidence. The
Risinger cattle made up only a tiny fraction of the
market, 19 out of 138,169, or 0.0138 percent of the total
Simmental head. Further, Dr. Baquet admitted that
various factors contribute to cattle breeds losing market
value and that generally, an economist would attempt to
©2012
18
NOTES
identify and evaluate the various independent variables
affecting this change.
Accordingly, the district court ruled in favor of
defendants ASA and Risinger. The plaintiffs appealed.
The U.S. Court of Appeals for the Eighth Circuit
affirmed the lower court’s ruling.
The following are cases that excluded testimony based
on improper assumptions:

Concord Boat Corp. v. Brunswick Corp., 207 F.3d

1039 (8th Cir. 2000)
In re Brand Name Prescription Drugs Anti-Trust
Litig., 1999 U.S. Dist. LEXIS 550 (N.D. Ill. 1999)
Other cases of interest on the issue of assumptions
include:
 Pirolozzi v. Stanbro, 2009 U.S. Dist. LEXIS 42575
(N.D. Ohio 2009)
 Bouchard v. Am. Home Prods. Corp., 2002 U.S.
Dist. LEXIS 27517 (N.D. Ohio 2002)
Experts make assumptions in two key areas: core issues
and expert assumptions. Core issues involve legal
assumptions. Did the defendant’s actions cause the loss
in income? For example, assume in the above example
that the prized cattle were allegedly poisoned by the
defendant’s negligence. Experts might reasonably
assume these facts will be proven in the court
proceeding. Obviously, if this core issue is lost, the
underlying analysis that follows is irrelevant (because
defendants are not responsible for the loss).
Predicated upon the core assumptions are the expert’s
assumptions about the value of the lost income
opportunity. Would those lost cattle have been able to
©2012
19
NOTES
produce valuable offspring? If so, how do you calculate
the same? What are the costs involved in replacing
these cattle? Expert assumptions should be reasonable
and should apply to the facts of the case.
Methodology
There is typically more than one way to reach a
conclusion based on the facts of the case. The
important consideration for an expert is why they chose
the particular method(s) to arrive at his/her conclusion.
Were there other methods available that the expert did
not use? Did the expert consider the other methods? If
not, why not? Although you need to know what you
did do, what you did not do may also be relevant.
Is the method used standard practice? Recall the four
factors in the Daubert case that the court takes into
account when making the gatekeeping assessment:
whether a theory has been tested; whether an idea has
been subjected to scientific peer review or published in
scientific journals; the rate of error involved in the
technique; and even general acceptance. If the expert
used a new theory in determining their conclusion, this
new science may be challenged under a Daubert
examination.
The Blue Dan Simmental Corp. case also serves as an
example of an expert’s improper methodology.
Additionally, in Virginia Vermiculite Ltd. v. W.R.
Grace & Co.–Conn., 98 F. Supp. 2d 729 (W.D. Va.
2000), the expert testimony of Seth Schwartz was not
allowed. The court found Schwartz’s methodology to
be unreliable. This case involved the calculation of the
vermiculate market in an antitrust matter. Schwartz
chose not to rely on United States Geological Society
(USGS) guideline vermiculite calculations because he
©2012
20
NOTES
viewed these statistics as “badly flawed” in the area of
consumption and production. Instead, Schwartz
collected his own data and opined that the other experts
who relied on the USGS were relying on improper data
in forming their definitions of a relevant market.
Relying upon his independently calculated vermiculite
analysis in an antitrust matter left substantial bias for
error. Unlike Schwartz’s analysis, the USGS analysis
provided detailed surveys of the vermiculate industry.
Further, the USGS had substantial resources it
employed to calculate and observe the vermiculate
industry. Schwartz did not have, nor could he have
employed, similar resources to calculate the same. As
such, the court found Schwartz’s methodology to be
unreliable. This fact, combined with Schwartz’s overall
lack of understanding of antitrust matters, caused his
testimony and report to be excluded by the district
court.
Other cases of interest on the issue of methodology
include:
 Bouchard v. Am. Home Prods. Corp., 2002 U.S.
Dist. LEXIS 27517 (N.D. Ohio 2002)
 McGarry v. Horlacher, 149 Ohio App.3d 33, (2nd
Dist. 2002)
 Lewis v. Alfa Laval Separation, Inc., 128 Ohio
App.3d 200 (4th Dist. 1998)
Making an Expert an Expert
The final leg of expert testimony is the expert himself.
Is the expert qualified to form a meaningful, credible
opinion? Issues involved with the expert himself
include:
 What educational background does the expert have?
Is it enough? Should additional training
opportunities have been taken?
©2012
21
NOTES




What credentials does the expert maintain? Has the
expert ever been disciplined by any of their
credentialing bodies?
Should the expert be certified in another more
suitable credential in order to better render their
opinion?
Has the expert embellished accomplishments? How
many times have they testified about a particular
topic?
Is the expert consistent in rendering an opinion? Do
they flip sides on issues depending upon who hires
them?
Experts may be qualified by “knowledge, skill,
experience, training, or education.”30 The operative
word in this list is or; it is not necessary to possess all
five requisites. By possessing one, the expert may be
deemed qualified.
In Seatrax, Inc. v. Sonbeck Int’l, Inc., 200 F.3d 358 (5th
Cir. 2000), plaintiff Seatrax proffered the expert
testimony of Douglas Campbell, who testified about
lost profits Seatrax incurred pursuant to Sonbeck’s
infringement on Seatrax’s trademark. Campbell
possessed 15 years of experience in the marine crane
industry. Sonbeck moved to have Campbell’s testimony
excluded. The district court granted Sonbeck’s request,
citing Campbell’s lack of formal or professional
training in accounting. Further, Campbell did not
conduct any independent examination of Sonbeck’s
gross sales figures, which were provided by Seatrax’s
attorneys. Campbell’s lack of formal training or
education in accounting and his failure to conduct an
independent analysis of Sonbeck’s sales figures were
30
Federal Rule of Evidence 702.
©2012
22
NOTES
insurmountable obstacles for Seatrax in its attempt to
qualify him as an expert.
The U.S. Court of Appeals for the Fifth Circuit upheld
the district court’s ruling to exclude Campbell’s
testimony.
Other cases that excluded testimony based on
qualifications include:
 In re Independent Serv. Orgs. Antitrust Litig., 114
F. Supp. 2d 1070 (D. Kan. 2000)

Virginia Vermiculite Ltd. v. W.R. Grace & Co.–
Conn., 98 F. Supp. 2d 729 (W.D. Va. 2000)
©2012
23
NOTES
EVIDENTIARY ISSUES: CUTTING EDGE LEGAL PRINCIPALS AND TRENDS
The “New” Rules of Evidence
Many of the following Federal Rules of Evidence were
amended effective December 1, 2011, and such
amendments are incorporated into the summaries below.
These rules do change from time to time, and the expert
should be vigilant to check for amendments.
FRE Rule 104 (Preliminary Questions)
A judge must preliminarily determine whether a
witness is qualified to testify (e.g., as an expert
witness), a privilege exists, or evidence is admissible.
FRE Rule 401 (Definition of Relevant Evidence)
Relevant evidence means the evidence having any
tendency to make the existence of any fact that is of
consequence to the determination of the action more
probable or less probable than it would be without the
evidence.31
FRE Rule 402 (Relevant Evidence Generally
Admissible; Irrelevant Evidence Inadmissible)
All relevant evidence is admissible, except as otherwise
provided by the Constitution of the United States, by
Act of Congress, by these rules, or by other rules
prescribed by the Supreme Court pursuant to statutory
authority. Evidence that is not relevant is not
admissible.32
FRE Rule 403 (Exclusion of Relevant Evidence on
Growth of Prejudice, Confusion, or Waste of Time)
A judge may exclude evidence if it is prejudicial, will
likely confuse or mislead a jury, or wastes time.
31
32
www.law.cornell.edu/rules/fre/rules.htm
www.law.cornell.edu/rules/fre/rules.htm
©2012
25
NOTES
FRE Rule 701 (Opinion Testimony By Lay Witnesses
A/K/A Fact Witness Testimony)
Opinion testimony is admissible by non-experts in the
form of opinions or inferences. Witnesses’ rational
conclusions must prove useful in resolving issues and
must not be based in knowledge as defined in FRE Rule
702.
All testifying experts and the attorneys who prepare
them must be aware that a sophisticated fact witness
may be deemed an expert if the witness has
characteristics of both a fact and expert witness.33 This
is particularly difficult to forecast and will throw a
monkey-wrench into trial preparation if not considered
ahead of time. Often, a judge will ask the proponent of
the evidence through a sophisticated fact witness to
fashion an order requiring the proponent to follow
“expert-like” disclosure rules. Examples of
sophisticated fact witnesses include securities investors,
industry analysts, and regulators.
If a witness is not testifying as an expert, he or she may
testify to opinions or inferences which are rationally
based on his or her perception of the facts if it is helpful
to a clear understanding of a fact in issue and not based
on scientific, technical, or specialized knowledge.34 A
medical examiner who examines the victim of an
accident may not be an expert witness.35 Challenge to
the testimony as an expert failed since the testimony
related to factual observations of an otherwise
sophisticated witness. Witnesses with personal
knowledge of the facts relevant to the case typically
make them fact witnesses under FRE 701.
United States v. White, 492 F.3d 380 (6th Cir. 2007).
FRE 701.
35 Binakonsky v. Ford Motor Co., 133 F.3d 281 (4th Cir. 1998).
33
34
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26
NOTES
FRE Rule 702 (Testimony by Experts)
Opinion testimony by expert witnesses is admissible in
most courts if the witness qualifies as an expert. As
revised, FRE 702 also states that a witness qualified as
an expert by knowledge, skill, experience, training, or
education may testify in the form of an opinion or
otherwise if:
 Expert’s scientific, technical, or other specialized
knowledge will help the trier of fact to understand
the evidence or to determine a fact in issue

Testimony is based on sufficient facts or data

Testimony is the product of reliable principles and
methods
Expert has reliably applied the principles and
methods to the facts of the case

Testimony must be based on scientific, technical, or
other specialized knowledge and reliable methods:
 Rule focuses on “scientific” and “knowledge,”
meaning “only inferences that are derived by the


scientific method can be offered as expert opinion
testimony.”36
Hypothesis testing is process of deriving some
proposition (or hypothesis) about an observable
group of events from accepted scientific principles,
and then investigating whether, upon observation of
data regarding the group of events, the hypothesis
seems true.37
Error rate is the likelihood of being wrong. Type I
error (level of confidence) is the test’s propensity
for false positives, while Type II error regards false
negatives.
Stephen Mahle, “Daubert and the Law and Science of Expert
Testimony in Business Litigation: An Introduction to Daubert v.
Merrell Dow,” The Florida Bar Journal (April 1999).
37 Jan Kmenta, Elements of Econometrics (1971), page 112.
36
©2012
27
NOTES


Testimony must assist in understanding evidence or
determining a fact in issue.
Witness must be qualified by knowledge, skill,
experience, training, or education beyond
understanding of laypersons.
Advisory Committee Notes on FRE 702
“The rule [FRE 702] is broadly phrased. The fields of
knowledge which may be drawn upon are not limited
merely to the ‘scientific’ and ‘technical,’ but extend to
all ‘specialized’ knowledge. Similarly, the expert is
viewed, not in a narrow sense, but as a person qualified
by ‘knowledge, skill, experience, training, or
education.’ Thus, within the scope of the rule are not
only experts in the strictest sense of the word (e.g.,
physicians, physicists and architects), but also the large
group sometimes called ‘skilled’ witnesses, such as
bankers or landowners testifying to land values.
The common-law standard for expert qualifications is
typically even more general than the statement in FRE
Rule 702. The courts state that no exact standards are
possible for fixing the qualifications of an expert
witness. An expert is generally considered qualified if
he or she possesses special skill or knowledge
respecting the subject matter, superior to the average
person, to make the expert’s opinion of probative
value.”38
“The multifaceted test for expert qualifications stated
by FRE Rule 702 has significant practical benefits for
litigants. …The ratification of experience as the basis
for qualification in the cases permits a qualified party or
an employee of a corporate party to be the expert in
38
Dunn, Expert Witnesses –Law and Practice § 2.2 (Lawpress, 1997).
©2012
28
NOTES
many circumstances. The search for an expert witness
is limited only by the trial lawyer’s ingenuity.”39
The Expert Opinion
The expert opinion may be based on one or more of
three possible sources of information:
 Personal observation, FRE 703
 Facts made known to the expert at trial, usually in
the form of a hypothetical question, FRE 705
 Facts made known to the expert outside court, not
known personally by the expert, but supplied
outside the courtroom (e.g., reports of computer
technicians, accountants, or consultants), FRE 703
FRE Rule 703 (Bases of Opinion Testimony by
Experts)
FRE 703 states that “an expert may base an opinion on
facts or data in the case that the expert has been made
aware of or personally observed. If experts in the
particular field would reasonably rely on those kinds of
facts or data in forming an opinion on the subject, they
need not be admissible for the opinion to be admitted.
But if the facts or data would otherwise be
inadmissible, the proponent of the opinion may disclose
them to the jury only if their probative value in helping
the jury evaluate the opinion substantially outweighs
their prejudicial effect.”
Facts or data forming the basis of testimony may
include:
 Firsthand observation
 Information presented at trial
Robert L. Dunn, “Standards for Qualifications of Experts,” Recovery
of Damages for Lost Profits, Volume 2 (Westport, CT: Lawpress,
1998), page 533.
39
©2012
29
NOTES

Information received by the expert outside of court
and from outside sources
Facts themselves need not be admitted if they are “of a
type reasonably relied upon by experts of a particular
field.”
FRE Rule 704 (Opinion on an Ultimate Issue)
FRE Rule 704(a) provides that “an opinion is not
objectionable just because it embraces an ultimate
issue.” What constitutes an “ultimate issue” is not
readily defined, but it generally means a primary issue
at hand—one that may determine the outcome of a case.
The expert opinion may embrace the ultimate issue
unless it is “too conclusory.” In other words, the
statement must be made to assist the trier of fact, rather
than decide the issue for the trier of fact. An example of
an inadmissible opinion is “X had testamentary
capacity,” while “X has sufficient mental capacity to
understand his situation” may be allowed.40 The
exception to this rule is that an opinion on an ultimate
issue is inadmissible if it relates to the defendant’s
mental state which constitutes an element of a crime or
defense. So, an expert may not state an opinion as to
whether the accused did or did not have the mental state
in issue.41
However, as the advisory committee’s notes point out,
Rule 702’s requirement that the testimony be “helpful”
to the jury, and Rule 403’s proscription against
evidence that “wastes time” preclude expert testimony
that “would merely tell the jury what result to reach,
40
41
FRE 704(a).
FRE 704(b).
©2012
30
NOTES
somewhat in the manner of the oath-helpers of an
earlier day.”
See also United States v. Duncan, 42 F.3d 97, 101 (2nd
Cir. 1994), a tax evasion case noting, “[w]hen an expert
undertakes to tell the jury what result to reach, this does
not aid the jury in making a decision, but rather
attempts to substitute the expert’s judgment for that of
the jury’s”; Hygh v. Jacobs, 961 F.2d 359, 364 (2nd Cir.
1992), regarding the exclusion of testimony that the use
of force by police was “not justified” and “totally
improper”; and United States v. Wood, 207 F.3d 1222,
1236 (10th Cir. 2000), regarding a medical expert’s
testimony—that treatment was “reckless”—improperly
described requisite mental state for manslaughter.
FRE Rule 705 (Disclosure of Facts or Data
Underlying Expert Opinion)
The expert may give his or her opinion before
disclosing the facts and data upon which the opinion is
based. The court may require the expert to reveal the
underlying facts or data during cross-examination.
An expert may give opinion testimony on direct
examination without disclosing the basis of the opinion,
unless the court orders otherwise. However, the expert
may be required to disclose such information on crossexamination.42 (See “Spoliation and Document
Retention” below.)
FRE Rules 1006 and 611 (Fact Summary Witnesses
and Fact Summaries)
The contents of voluminous writings, recordings, or
photographs that cannot conveniently be examined in
42
FRE 705.
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31
NOTES
court may be presented in the form of a chart, summary,
or calculation. The originals, or duplicates, shall be
made available for examination or copying, or both, by
other parties at a reasonable time and place. The court
may order that they be produced in court.
Moreover, “summary witnesses” can testify to explain
such voluminous or complex evidence that has already
been properly admitted. This is a particularly hot topic
in litigation today, since fact summary witnesses may
often substitute for expert witnesses in fraud cases.
Juries often have a hard time accepting the opinions of
experts, especially when a “battle of the experts” gets
nasty during a trial or contested hearing. A fact
summary witness has the added benefits of not being
subject to expert disclosure rules, and the “opinion” is
left to the determination of the fact finder/jury.
Contents of voluminous writings or recording which
cannot conveniently be examined in court may be
presented in the form of a chart summary or
calculation.43 An expert witness is required when
special expertise is needed to present the summary in
court.44 The underlying documents should be made
available to the other side.45 Since summaries
introduced under Rule 1006 are themselves evidence,
underlying documents should be admissible (although
not moved into evidence), and the summary moved into
evidence under FRE 1006. Summaries used for
demonstrative or “pedagogical” purposes to aid the jury
and to avoid needless consumption of time may be
shown but not moved into evidence.46 Organizational
43
FRE 1006.
United States v. Jennings, 724 F.2d 436, 443 (5th Cir. 1984).
45 FRE 1006.
46 FRE 611(a).
44
©2012
32
NOTES
charts are a good example of demonstrative exhibits,
and the jury is a given a limiting instruction as to their
purpose.
WHEN CAN AN EXPERT BE CALLED AN EXPERT?
Recently, limits have been placed on whether an
expert may be called an “expert” in front of the
jury. References should only be made to the term
“opinion” rather than the “expert” in front of the
jury so as to avoid any undue weight to any
proffered expertise.47
SPOLIATION AND DOCUMENT RETENTION
Spoliation is the intentional alteration or destruction
of a document or evidence. In civil cases, in
advance of trial, expert reports must be provided to
the parties as part of “discovery” and must disclose
a complete statement of all opinions and the data or
other information considered by the expert witness
in forming the opinions.48 Matters considered by
experts are discoverable, including documents
provided by counsel to the expert and the expert’s
draft reports and notes. Ordering experts to destroy
drafts and notes may be sanctionable. While
privileges protect some work product and
communications, expert materials and
communications between counsel and experts may
be discoverable in some situations. (See “The
Attorney-Client Privilege” below.)
BUSINESS RECORDS
Companies should have document retention policies
and protocols, including the regular destruction of
documents (including electronic documents).
47
48
United States v. Johnson, 488 F.3d 690 (6th Cir. 2007).
Fed.R.Civ.P. 26(a)(2).
©2012
33
NOTES
Companies should not destroy documents when
they become aware of government investigations.49
Companies working in the fields of health care,
banking, and auditing have trade-specific rules for
documenting and retaining records.
EVIDENCE INTEGRITY AND THE CHAIN OF
CUSTODY
In order for evidence to be admitted at trial, it must
be authenticated—a process by which a party shows
that the item is what it is claimed to be.
Authentication is not a particularly high hurdle, and
proponents need not rule out contrary possibilities.
Once the standard is met, lack of proof of
connection to the issues at trial and reliability go to
the weight of the evidence, not the admissibility.50
Other authentication issues include:
 A witness who participated in an email may
authenticate it. United States v. Gagliardi, 506
F.3d 389 392-93 (2nd Cir. 2007)
 A case agent can testify about the process used
to obtain computer records. United States v.
Whitaker, 127 F.3d 595, 601 (7th Cir. 1997)
 Hash values are a means of authenticating
electronic evidence. Lorraine v. Markel
American Ins. Co., 241 F.R.D. 534, 546-47
(D.Md. 2007)
Practice Guidance: Chain of custody is normally
required when the exhibit is not readily identifiable,
unique characteristics of the exhibit are not noted,
and/or condition is critical to an issue in dispute.
49
18 U.S.C. § 1512 and § 1519 (criminal sanctions for knowingly
destroying relevant evidence).
50 United States v. Long, 857 F.2d 436, 441-42 (8th Cir. 1988), cert.
denied, 502 U.S. 828 (1991); Fed R. Evid. 901.
©2012
34
NOTES
For example, chain of custody may be important in
a dispute involving the business records of a
subsidiary and whether the parent corporation could
have electronically altered such records. This rule
applies to documentary and physical evidence.
Authentication pursuant to chain of custody can be
tricky in cases involving documents or business
ledgers. For example, in a criminal case, the
defendant may not be available to authenticate his
or her own records (since defendants cannot be
compelled to testify). In such cases, a document can
be authenticated through circumstantial evidence,
including the document’s own distinctive
characteristics and the circumstances surrounding
the discovery of the document.
Certain items of physical and electronic evidence
(e.g., contraband in a crime or a copy of digital
data) that are tendered at trial need to be shown to
have gone through the proper chain of custody, a
process designed to ensure that evidence has not
been tampered with. Chain of custody requires that
when evidence is obtained during the course of an
investigation, it should be marked, identified,
inventoried, and preserved to maintain its original
condition and to establish a clear chain of custody
until it is introduced at trial.
The chain of custody required in authenticating or
identifying an item depends on whether the item is
unique, has been made unique, or is neither of the
above.51 Evidence that “is not readily identifiable
and is susceptible to alteration by tampering or
contamination” requires chain of custody “to render
United States v. Cardenas, 864 F.2d 1528 (10th Cir. 1989), cert.
denied, 491 U.S. 909 (1989).
51
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35
NOTES
it improbable that the original item” is not what it is
claimed to be.52 Documents are generally not items
that require chain of custody.53 Generally, defects in
the chain of custody go to the weight of the
evidence and not to its admissibility.54
Another issue relating to authentication is “the best
evidence rule,” which applies only to documentary
evidence. The theory behind this rule is that the best
proof of the contents of documents is the documents
themselves.55 However, if an original has been
destroyed or is in the hands of another party and it
is not subject to legal process by search warrant or
subpoena, an authenticated copy of that original
may be substituted as evidence.56 Duplicates are
generally admissible as originals in all cases except
where there is a genuine issue regarding the
authenticity of the original, or where admission of
the duplicate instead of the original would be
unfair.57
The Attorney-Client Privilege
The attorney-client privilege is designed to promote and
facilitate a person’s ability to seek legal advice, knowing
that all matters can be discussed candidly and completely
with counsel. This is perfected by protecting disclosure
under most circumstances.58 Although the privilege is
designed to provide confidentiality, its purposes are
Id., at 1531; United States v. Washington, 15 F.3d 1510 (10th Cir.
1993).
53 United States v. Humphrey, 208 F.3d 1190-1204 (10th Cir. 2000).
54 United States v. Cardenas, 864 F.2d 1528 (10th Cir.), cert. denied,
491 U.S. 909 (1989); United States v. Kubiak, 704 F.2d 1545 (11th
Cir.), cert. denied, 464 U.S. 852 (1983); United States v. Wood, 695
F.2d 459 (10th Cir. 1982).
55 FRE 1001 and 1002.
56 Fed. R. Evid. 1004.
57 Fed. R. Evid. 1003.
58 Upjohn v. United States, 449 U.S. 383 (1985).
52
©2012
36
NOTES
subverted where the assertion of the privilege is designed to
provide a cloak of secrecy around the illicit business affairs
of an individual or corporation.
Lawyers have an ethical duty to maintain the privilege that
is shared by the agents of either the lawyer or client who
come into possession of such information. The courts have
long recognized that modern legal practice requires lawyers
to rely upon the services of non-lawyers. This may include
secretarial personnel, interpreters, investigators, law clerks,
and accountants.59
Practice Guidance: Communications made by a client to
an accountant assisting the client’s attorney, for the purpose
of obtaining legal advice from the attorney, may be
privileged. In such a situation, the accountant may be the
attorney’s agent, and communications with that accountant
may be covered under the umbrella of the attorney-client
privilege. (See United States v. Kovel, 296 F.2d 918, 92122.)
Practice Guidance: Investigative reports submitted by a
forensic accountant, prior to commencement of a
government investigation, may not be considered
privileged merely by their transmission to counsel.
However, if the investigation was conducted at the
direction of counsel either to obtain legal advice or to assist
in the preparation for potential litigation, the attorney-client
privilege may apply to the investigative report.
The December 2006 “McNulty Memo” drew criticism for
inadequately protecting the attorney-client privilege in
federal prosecutions since the memo specified that
corporate voluntary production of such information would
be considered in a calculation of “cooperation” to be
59
United States v. Cote, 456 F.2d 142 (8th Cir. 1982).
©2012
37
NOTES
ultimately considered in charging decisions. Since August
of 2008, cooperation will no longer be measured on
whether a corporation under criminal investigation chooses
to waive the attorney-client privilege, nor will attorneyclient or work-product materials be demanded.60
The Accountant-Client Privilege
Federal courts have refused to recognize a pure accountantclient privilege.61 A limited federal privilege exists
extending to tax advice under the Federally Authorized Tax
Practitioner Privilege, which does not apply to criminal
matters or state tax proceedings. If a crime involves
specific-intent, a defense of good faith reliance on the
advice of an accountant is available if the defendant (1)
fully disclosed all facts to the accountant, and (2) relied on
the account advice in good faith.62 The defense can negate
a crimes element requiring specific intent where the
defendant shows she relied on the advice of her attorney,
accountant, or state official in taking certain actions.63
Ohio Senate Bill 371(2008), now dead, would have created
an accountant-client privilege, which is the trend in about
one-half the states. The measure would have little impact
on federal cases.
Cross-Examination of Experts
Experts typically review authoritative texts and treatises
to prepare their statements. These materials may be
used and subject to cross-examination as long as the
60
Deputy Attorney General Mark R. Filip, Principals of Federal
Prosecution of Business Organizations (the “Filip Memo”), August 28,
2008.
61 United States v. Arthur Young & Co., 465 U.S. 805, 836 (1984);
United States v. Mihalich, 2006 WL 2946947.
62 United States v. Duncan, 850 F.2d 1104 (6th Cir. 1988).
63 United States v. Swafford, 2005 U.S. Dist. LEXIS 26890 (E.D. Tenn
Nov. 3, 2005).
©2012
38
NOTES
publication is established as a reliable authority.64 A
publication may be established as reliable by:
 Testimony of the expert
 Testimony of another expert
 Judicial notice
64
FRE 803(18).
©2012
39
NOTES
PRACTICE POINTERS: WHAT WENT RIGHT, WHAT WENT WRONG
Know the Facts
Relevant application of reliable facts to the instant case is
an important factor in expert testimony. An expert that
either does not consider or apply the relevant facts while
testifying at trial can unravel a valid case.
Concord Boat Corp. v. Brunswick Corp., 207 F.3d
1039 (8th Cir. 2000)
In Concord Boat Corp. v. Brunswick Corp., 207 F.3d
1039 (8th Cir. 2000), litigation was commenced over the
alleged behavior of Brunswick through acquisitions and
discount programs, which led to monopolization of the
stern drive engine market in Brunswick’s favor.
Brunswick owned about 75 percent of the stern drive
engine market. The boat builders (Concord Boat Corp.)
took exception to Brunswick’s acquisition of U.S.
Marine (Bayliner) and Ray Industries (Sea Ray).
Further, Brunswick offered discounts to boat builders
that purchased 60 percent or more of their stern engines
from Brunswick. The boat builders contended that these
practices constituted an antitrust violation, which
allowed Brunswick to charge supracompetitive prices
for its engines and led to an unfair barrier of entry to
other market participants.
The boat builders hired Dr. Robert Hall as their expert.
Dr. Hall relied on the Cournot model of economic
theory that posits that a firm “maximizes its profits by
assuming the observed output of other firms as a given,
and then equating its own marginal cost and marginal
revenue on that assumption.”65 Dr. Hall concluded that
any market share over 50 percent was evidence of
anticompetitive conduct. Further, he opined that the
discount program offered by Brunswick imposed a
65
Phillip E. Areeda et al., Antitrust Law: An Analysis of Antitrust
Principles and Their Application, P925a (revised edition 1998).
©2012
41
NOTES
“tax” on boat builders and dealers that chose to
purchase their stern engines from any firm other than
Brunswick.
Jury deliberations resulted in an award of $133,115,283
in favor of the boat builders. Brunswick appealed the
decision to the U.S. Court of Appeals for the Eighth
Circuit. The appeals court reversed and vacated the
$133 million judgment. The appeals court reversed the
jury’s decision because it found that Dr. Hall’s expert
opinion should not have been admitted. Dr. Hall’s
analysis did not incorporate all aspects of the economic
reality of the stern drive engine market, and did not
separate lawful from unlawful conduct. These
deficiencies led the court to conclude that the expert’s
resulting conclusions were “mere speculation.”66 Expert
testimony that is speculative is not competent proof and
contributes “nothing to a ‘legally sufficient evidentiary
basis.’”67
Although Brunswick did own more than 75 percent of
the stern engine market, this fact by itself did not lead
to an anticompetitive practices conclusion. Brunswick’s
discount program was voluntary and could be
terminated by any boat builder at any time. Further,
when other stern engine manufactures offered
competitive discounts for their engines, boat makers
switched from Brunswick engines despite the existence
of the discount offering. Since the jury award was based
66
Virgin Atlantic Airways Ltd. v. British Airways PLC, 69 F. Supp. 2d
571, 580 (S. D.N.Y. (1999); summary judgment appropriate on Section
1 and 2 claims because “an expert’s opinion is not a substitute for a
plaintiff’s obligation to provide evidence of facts that support the
applicability of the expert’s opinion to the case.”
67 Weisgram v. Marley Co., 528 U.S.440 (2000); citing Brooke Group
Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 242 (1993).
©2012
42
NOTES
on unsupported expert’s facts, the Court of Appeals
reversed the jury award.
Brand Name Prescription Drugs Anti-Trust Litig.,
1999 U.S. Dist. LEXIS 550
The following case is an example of how an expert’s
failure to adequately review evidence can result in
substantially harming a party’s case.
In the nationwide class action suit, the class plaintiffs
alleged a price-fixing conspiracy to keep name brand
prescription drugs artificially high to retail pharmacies,
in violation of Section 1 of the Sherman Act. The
plaintiffs alleged that defendants stratified their pricing
policies by favoring hospitals, health maintenance
organizations, managed care facilities, and mail-order
pharmacies with lower rates for brand name
prescription drugs while imposing upon retail
pharmacies an inflated pricing structure for the same
drugs.
The defendants argued that they gave discounts to the
plaintiffs in certain instances and that market conditions
were the primary consideration in whether or not they
offered discounts to any particular purchasing group.
The defendants further asserted that they gave
preferential pricing to buyers whom they felt were able
to “move market share.” Additionally, the defendants
asserted that customers such as managed care
organizations and hospitals created formularies, in
which a restrictive list of drugs is created. The ability of
managed care organizations and hospitals to exclude an
individual manufacturer’s products from its requisite
formularies induced defendants to offer the favored
buying groups rebates and discounts on brand name
drugs. Pharmacies, generally speaking, must carry a
©2012
43
NOTES
wide variety of competing drugs. As a result, the
defendants argued, it would be unethical for pharmacies
to engage in steering customers to one product over
another by failing to stock competing brands. Unlike
managed care organizations and hospitals, pharmacies
do not possess the same market power or ability to
include or exclude drugs based on prescribed
formularies. The defendants argued that they treat
customers differently, as any competitive market would
expect.
The plaintiffs offered the expert testimony of Dr.
Robert Lucas. In fact, the court noted his “eminent and
distinguished credentials. He is affiliated with the
University of Chicago, past recipient of the Nobel Prize
in Economics, an award without equal in recognition of
scholarship and contributions in his chosen discipline.”
Dr. Lucas testified:







Retail pharmacies repeatedly applied to the
defendant drug manufacturers for discounted
formulary pricing of brand name prescription drugs.
Retail pharmacies had the same power to announce
and enforce formularies than any hospital, nursing
home, or mail-order pharmacy.
Retail pharmacies had the same ability as hospitals
to refuse to stock brand name prescription drugs.
No discounting of generic drugs to retail
pharmacies occurred.
Manufacturers refused to grant contract pricing
options to retail pharmacies.
This refusal was tantamount to collusion.
The formularies maintained by hospitals and HMOs
were not the reason manufacturers gave discounts to
those entities.
©2012
44
NOTES
The court found that, “sad to say, Dr. Lucas’ testimony
did not measure up to his unique qualifications.”
Among other things, the court found:
 Dr. Lucas was ignorant of the material testimony
and other evidence.
 His opinions were not only not based on the
evidence, they were inconsistent with the evidence.
 His opinions had no scientific basis.
In short, the court found that Dr. Lucas was “wrong in
his beliefs about every one of [his assertions]. Perhaps
even more disturbing than the fact that the evidence so
overwhelmingly established the opposite of what Dr.
Lucas thought was characteristic of the industry, was
his ignorance of that very evidence.” Dr. Lucas failed to
make any effort to investigate the plaintiff’s claims as
to whether any manufacturers had offered contract
pricing plans to retail pharmacies. If he had done so, he
would have found that thousands of discounts had been
offered to retail pharmacies. Further, Dr. Lucas did not
study why manufacturers gave discounts to HMOs and
hospitals. He gave a conclusion, but nothing more.
The plaintiffs were able to offer only an opportunity to
conspire, but failed to present actual evidence of a
conspiracy. Unsurprisingly, judgment was entered for
the defendants.
When Does an Expert Go Too Far?
One example of improper testimony of a government
expert in a criminal securities case is United States v.
Scop, 846 F.2d 135 (2nd Cir. 1988), in which the
witness repeatedly testified that the defendants were
“active participants and material participants . . . in a
manipulative and fraudulent scheme,” and admitted on
cross-examination that his opinions were, in part, based
©2012
45
NOTES
on his personal views of the credibility of fact
witnesses. When this testimony was tested, the court
pointed out that had the expert “merely testified that
controlled buying and selling of the kind alleged here
can create artificial price levels to lure outside
investors, no sustainable objection could have been
made.”
What Can Happen When You Cross a Line and
Express a Legal Conclusion?
In United States vs. Bilzerian, 926 F.2d 1285 (1991),
the court excluded, as an impermissible legal
conclusion, testimony by a defense expert that certain
loans obtained by the defendant to purchase securities
were “personal funds” within the meaning of Section 13
D of the Securities Exchange Act. (A Schedule 13 D
report to the SEC was necessary for the large block of
stock purchased by the defendant.) This was viewed as
tantamount to saying that the defendant’s disclosures on
his 13 D form were not misleading. By contrast, the
court permitted the government expert to explain
ambiguities in a blank Schedule 13 D. The Second
Circuit, in part, seems to have distinguished the
government expert’s testimony based on a limiting
instruction given by the district court that the expert
was furnishing “background concerning the meaning of
terms, the procedures which are followed, and his
opinion as to the reason for these procedures. He is not
here to give his opinion as to what the law requires.
That is a matter which must be presented to you by the
court.” It is not clear how the government expert’s
testimony on the meaning of terms in a blank Schedule
13 D, even if not coupled with testimony applying the
facts of the case to that interpretation, was not a legal
opinion, albeit one that did not seek to tell the jury
whether the funds in issue were “personal funds.”
©2012
46
NOTES
When Case Fact Summaries Go Bad?
In a case called Russo, the government expert
summarized and described a small brokerage firm’s
trading patterns, including how the stock of two small
companies was kept off the market through
unauthorized trading and parking, and concluded that
the price of these stocks would have declined
significantly in the absence of these measures. The
expert’s testimony that certain securities transactions
constituted “parking,” without offering any opinion
regarding the defendants’ state of mind or whether they
had violated the securities laws, was held to be proper.
The court rejected the defense argument that the
expert’s testimony implicitly involved the legal
conclusion that the defendants intended to park stock.
ACFE Litigation Engagement Professional Standards
Opposing counsel frequently question experts as to the
applicable standards for conducting litigation services.
This is a procedural issue. If you do not know your
professional standards, how can you properly prepare a
professional report? Expect this line of questioning if
you do not know your standards.
Standards of Professional Conduct
Integrity and Objectivity
Members shall conduct themselves with integrity,
knowing that public trust is founded on integrity.
Members shall not sacrifice integrity to serve the client,
their employer, or the public interest.
Prior to accepting the fraud examination, members shall
investigate for potential conflicts of interest. Members
shall disclose any potential conflicts of interest to
prospective clients who retain them or their employer.
©2012
47
NOTES
Members shall maintain objectivity in discharging their
professional responsibilities within the scope of the
engagement.
Members shall not commit discreditable acts, and shall
always conduct themselves in the best interests of the
reputation of the profession.
Members shall not knowingly make a false statement
when testifying in a court of law or other dispute
resolution forum. Members shall comply with lawful
orders of the courts or other dispute resolution bodies.
Members shall not commit criminal acts or knowingly
induce others to do so.
Professional Competence
Members shall be competent and shall not accept
assignments where this competence is lacking. In some
circumstances, it may be possible to meet the
requirement for professional competence by use of
consultation or referral.
Due Professional Care
Members shall exercise due professional care in the
performance of their services. Due professional care
requires diligence, critical analysis, and professional
skepticism in discharging professional responsibilities.
Conclusions shall be supported with evidence that is
relevant, competent, and sufficient.
Members’ professional services shall be adequately
planned. Planning controls the performance of a fraud
examination from inception through completion and
involves developing strategies and objectives for
performing the services.
©2012
48
NOTES
Work performed by assistants on a fraud examination
shall be adequately supervised. The extent of
supervision required varies depending on the
complexities of the work and the qualifications of the
assistants.
Confidentiality
Members shall not disclose confidential or privileged
information obtained during the course of the fraud
examination without the express permission of proper
authority or order of a court. This requirement does not
preclude professional practice or investigative body
reviews as long as the reviewing organization agrees to
abide by the confidentiality restrictions.
Standards of Reporting
GENERAL
Members’ reports may be oral or written, including
fact witness and/or expert witness testimony, and
may take many different forms. There is no single
structure or format that is prescribed for a member’s
report; however, the report should not be
misleading.
REPORT CONTENT
Members’ reports shall contain only information
based on data that are sufficient and relevant to
support the facts, conclusions, opinions and/or
recommendations related to the fraud examination.
The report shall be confined to subject matter,
principles, and methodologies within the member’s
area of knowledge, skill, experience, training or
education.
No opinion shall be expressed regarding the legal
guilt or innocence of any person or party.
©2012
49
NOTES
AICPA Litigation Engagement Standards
The AICPA provides an excellent resource, specifically
for litigation service engagements. Experts who are
CPAs should be familiar with these rules.
The Litigation Services and Applicable Professional
Standards publication 03-1 by the AICPA outlines its
expectations of professionals performing litigation
services. Specifically, AICPA Publication 03-1
identifies the following sections of the Code of
Professional Conduct applicable to members engaged in
providing litigation services:
 Rule 101, Independence. The member should be
independent with respect to the parties.
 Rule 102, Integrity and Objectivity (AICPA,
Professional Standards, vol. 2, ET sec. 102.01)
 Rule 201, General Standards (AICPA, Professional
Standards, vol. 2, ET sec. 201.01)
 Rule 202, Compliance with Standards (AICPA,



Rule 301, Confidential Client Information (AICPA,
Rule 302, Contingent Fees (AICPA, Professional
Rule 501, Acts Discreditable (AICPA, Professional
Of these aforementioned AICPA Codes of Conduct
Rules, 102, 201, and 501 are particularly relevant.
AICPA Code of Professional Conduct Rule 102-6
provides guidance on professional services involving
client advocacy. Specifically, 102-6 “requires
(members to) maintain(ing) objectivity and integrity
and prohibits subordination of judgment to others.”68
68
AICPA Code of Professional Conduct Rule 102-6, discussed in §
102.7, page 4444.
©2012
50
NOTES
This is further discussed in the Litigation Services and
Applicable Professional Standards publication 03-1 by
the AICPA: “The expert does not serve as an advocate
for the client’s position and, therefore should not
subordinate his or her judgment to the client.”69 “The
expert’s function is to assist the trier of fact in
understanding complex or unfamiliar concepts after
having applied reliable principles and methods to
sufficient relevant data.”70
Rule 201, General Standards, of the AICPA Code of
Professional Conduct requires that engagements be
conducted with due professional care using sufficient
relevant data. According to AICPA Publication 03-1,
“Due care requires diligence and critical analysis of all
work performed.”71 Furthermore, the AICPA requires
that the practitioner “obtain relevant data that is
sufficient to provide a reasonable basis for conclusions
or recommendations for any professional services
performed.”72 “The practitioner should consider
analyzing key assumptions to determine whether they
are reasonable. In several recent cases, experts had their
testimony excluded because their opinions were based
on assumptions that were deemed not reasonable.”73
69
Litigation Services and Applicable Professional Standards, American
Institute of Certified Public Accountants, Inc., Rule 102, Integrity and
Objectivity, page 3, paragraph 13.
70 Litigation Services and Applicable Professional Standards, American
72 AICPA Code of Professional Conduct, 2005 Rule 102, discussed in
§ 201.06 D, page 4561.
Objectivity, page 5, paragraph 24b.
©2012
51
NOTES
When considering whether data are sufficient and
relevant, accountants should consider whether by
including or excluding the data a risk of material
financial misstatement is likely. “The evidential matter
obtained should be sufficient for the auditor to form
conclusions concerning the validity of the individual
assertions embodied in the components of financial
statements.”74
Rule 501-01, Acts Discreditable of the AICPA Code of
Professional Conduct states that a “member shall not
commit an act discreditable to the profession.”75 Rule
501-04 states that a member shall be considered to have
committed an act discreditable to the profession when,
by virtue of his or her negligence, the member “signs,
or permits or directs another to sign, a document
containing materially false and misleading
information.”76
74
AICPA Professional Standards Volume 1, U.S. Auditing Standards,
American Institute of Certified Public Accountants, Inc., 2002,
discussed in § 326.13, page 447.
75 AICPA Code of Professional Conduct, 2005, Rule 501, discussed in
§ 501.01, page 4831.
76 AICPA Code of Professional Conduct, 2005, Rule 501, discussed in
§ 501.04, page 4832.
©2012
52
NOTES
ABOUT THE ASSOCIATION OF CERTIFIED FRAUD EXAMINERS
About the ACFE
The Association of Certified Fraud Examiners (ACFE) is the world’s largest anti-fraud organization
and premier provider of anti-fraud training and education. Together with more than 60,000 members,
the ACFE is reducing business fraud worldwide and inspiring public confidence in the integrity and
objectivity within the profession.
Founded in 1988 by Dr. Joseph T. Wells, CFE, CPA, and former Federal Bureau of Investigation
(FBI) Special Agent, the ACFE has become the largest anti-fraud organization in the world. ACFE
members in more than 160 countries have investigated more than two million cases of suspected
criminal and civil fraud.
Members of the ACFE include CPAs; auditors; lawyers; investigators; law enforcement officers;
security professionals; executives; managers; and anyone whose job involves preventing, detecting, or
deterring fraud. The ACFE supports members and the anti-fraud profession by providing conferences,
seminars, and other training events year-round, while also offering self-study and online learning
opportunities, manuals, software, and other resources for fighting fraud.
By becoming an ACFE member, you will receive many valuable benefits that help to promote your
professional and career development. These benefits include access to members-only services and
resources, as well as discounts on many of the ACFE’s valuable products. To learn more about
becoming a member of the ACFE, visit our website at www.ACFE.com/Membership or call (800)
245-3321 (USA & Canada only) or +1 (512) 478-9000.
A Leader in Research
The ACFE supports the future of fraud examination by providing funding and resources through its
Anti-Fraud Education Partnership and Law Enforcement Partnership. ACFE research, including the
Report to the Nations on Occupational Fraud & Abuse, provides benchmarking statistics on fraud, and
the ACFE is one of the founding members of the nonprofit Institute for Fraud Prevention (IFP). The
IFP is a consortium of domestic and international universities dedicated to cutting-edge research into
the causational factors of a wide variety of white-collar crimes.
Certified Fraud Examiners (CFEs)
The ACFE established and administers the Certified Fraud Examiner (CFE) credential. Globally
preferred by employers, the Certified Fraud Examiner credential denotes proven expertise in fraud
©2012
ABOUT THE ASSOCIATION OF CERTIFIED FRAUD EXAMINERS
prevention, detection, deterrence, and investigation. Members with the CFE credential gain a
professional advantage and quickly position themselves as leaders in the global anti-fraud community.
CFEs are knowledgeable in four major areas critical to the fight against fraud:
• Fraudulent Financial Transactions
• Fraud Prevention and Deterrence
• Legal Elements of Fraud
• Fraud Investigation
To become a CFE, one must:
• Pass a rigorous examination administered by the Association of Certified Fraud Examiners (ACFE).
• Meet specific education and professional requirements.
• Be approved by the ACFE certification committee.
• Exemplify the highest moral and ethical standards and agree to abide by the bylaws of the ACFE
and the CFE Code of Professional Ethics.
• Maintain annual CPE requirements and remain an ACFE member in good standing.
To learn more about becoming a Certified Fraud Examiner, visit our website at:
www.ACFE.com/CFE.
As experts in the four major areas of fraud, CFEs are trained to see the warning signs and red flags that
indicate not just actual fraud, but fraud risk―potentially saving organizations thousands of dollars in
losses through prevention and detection before it’s too late.
CFEs have the ability to:
• Identify an organization’s vulnerability to fraud.
• Examine data and records to detect and trace fraudulent transactions.
• Interview personnel to obtain information.
• Write fraud examination reports, advise clients about findings, and testify at trial.
• Advise on improving fraud prevention and deterrence measures.
Learn more
For more information about the ACFE, visit our website at: www.ACFE.com.
©2012

ACFE Course Materials Welcome!

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