Why is it important to put the right group of advisers together and get a financial expert involved?
Putting together the right group of advisers can give a litigant some perspective as the case progresses regarding risks and strategy. Having the right advisers also ensures that all aspects of the case are covered. For example, many legal counsels involve a financial expert early in the process to assess the cost benefit of proceeding with litigation. From an economical standpoint, spending $150,000 to pursue a claim worth $50,000 might not make sense. A financial expert can help you and your legal team make a determination of the possible range of recovery before incurring a substantial amount of fees pursuing a claim.
It is also important to get the financial expert’s input on creating discovery requests. Some of the most critical steps of the litigation have to do with the discovery process. It’s important to obtain the appropriate data for the relevant time period and well-crafted discovery requests can ensure you have asked for the right information. Unfortunately, some times the financial expert is called in to assist after the discovery process is closed and data that would have been relevant and potentially helpful to the analysis was not obtained.
The financial expert should become involved sooner than later in order to ensure that all the financial issues are identified and the related documents obtained. Accountants and financial experts know what reports should be available and how to ask for them. For example, asking for a company’s ‘financial information’ may get you different results than making a more specific request such as ‘balance sheets, income statements and cash flows, on a monthly basis for the prior 36 months.’ Also, asking for an electronic back-up of the company’s books and records (if they use common software such as QuickBooks) can provide a wealth of information.
What should a business owner do to make sure this process goes smoothly and the advisers have all the necessary information to handle the dispute?
You need to be as forthcoming as possible with your attorney during this process. For the most part, a litigant has attorney/client privilege with their attorney, meaning they do not have to disclose their communication with their attorney to the other party. Even if there are facts that you think might hurt you, you need to share them with your attorney so he or she has all the information in advance and can be prepared to deal with it. If a bad fact comes to light very far into a case, it’s difficult to deal with it at that point.
Also keep in mind that you don’t have that same attorney/client privilege with a CPA or financial expert. Thus, communications with your CPA or expert can be discoverable.
How can business owners be prepared for future disputes?
Many attorneys will consult with companies on litigation readiness and to assist owners in assessing where their company might be vulnerable. From a financial standpoint, if the dispute involved some type of financial misconduct or embezzlement, there may be some internal control processes that are weak and need to be remediated.
Rebekah Smith, CPA, CVA, CFFA, is the director of dispute advisory and forensic services with GBQ Consulting LLC. Reach her at (614) 947-5300 or [email protected].