Joe Epps 2013-08-23 00:28:45
Investigation and Defense of Financial Crimes When there is a criminal charge of a financial crime, the prosecutor must prove guilt beyond a reasonable doubt. Because of the very personal impact of criminal trials for both the victim and the alleged perpetrator, a criminal case requires that the proofs meet a high threshold. The role of the defense attorney is to convince a jury that this threshold has not been met. On one side are the police detective and the prosecutor. On the other side are the defense attorney and their financial expert. In financial crimes, the party who prevails usually has done so because they understand how a case (prosecution or defense) should be built and presented. In many financial crimes cases there is no witness to identify the perpetrator. Also, it can be complicated to determine the specific amount of fraud that has occurred. Cases are often built on circumstantial evidence involving financial transactions. Successfully prosecuting or defending a case involves three elements: obtaining evidence, analyzing evidence and presentation of findings. A financial crimes case is built on documentary evidence more than on any other factor. Therefore, it is critical for the investigator to first obtain the relevant documentation. This requires an understanding of both financial documents and theory. It is the rare case where every relevant document is produced. Therefore, the financial analyst must be adept at understanding the impact of missing documents and methods to work around missing documents where possible. The reality is that in some situations the case simply should not go forward due to a lack of foundation. Laying the documentary foundation starts with identifying the relevant documents. If the investigator cannot demonstrate that they knew what the relevant documents were and made an attempt to obtain them, the case is greatly weakened. It is far different to say that the relevant documents were all considered during the discovery phase than to admit that the relevant documents were not even considered. In the first case, the investigator can state the attempt was made and explain how he or she worked around the lack of some documents. In the second situation, the investigator has more difficulty referring to a work around since they did not even attempt to obtain the relevant documents. Once all of the available documents have been produced, the analysis is performed. In most cases, there is some belief as to the nature of the alleged crime. The analysis in such cases is therefore geared to determine (1) if a crime did occur, (2) the magnitude of the crime, and (3) the perpetrator. There is no one way to perform the analysis; it is often referred to as financial forensics. It has been said that financial forensics is both art and science. The science is the application of financial theory. The art is in determining what analyses are relevant and can be effectively performed. Often the method used is dictated by the nature of the alleged crime and the nature of available documents. An experienced analyst may consider various methods before arriving at the most supportable conclusion. At that point, the analyst must make an informed decision of where there is sufficient evidence to form an opinion. The nature of the opinion (for each side) will determine how the case is handled. When the analysis is complete and a conclusion is formed regarding the alleged crime, the evidence must be presented in such a way that people with limited financial knowledge can understand what happened. The most sophisticated analysis will fail if it cannot effectively be explained to a jury. The presentation phase incorporates financial theory, understanding human nature and effective presentation skills. The effectiveness of the presentation of opinions can make all the difference in the conclusion. Whether an attorney is a prosecutor or defense attorney, the information in this article applies equally in cases involving financial crimes. The prosecutor should anticipate that the defense attorney will retain a financial expert to review the foundation for the charges brought against their client. In doing so, the prosecutor is best served by having qualified detectives who have had the proper training and who can ultimately present their findings convincingly. If the prosecutor goes forward with charges, the defense attorney should retain an expert who knows how to evaluate the evidence and opinions presented. Joe Epps is a CPA and CFE with over 30 years of experience in forensic accounting. His litigation support experience includes contract disputes, anti-trust, economic damages, fraud investigations, business valuation and intellectual property litigation. Joe is currently president of Epps Forensic Consulting and teaches a graduate course on forensic accounting at Arizona State University. For more information, please call (480) 595-0943 or visit www.eppsforensics.com.
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