Forensic Accounting and Expert Testimony Success Stories
Our Forensic Accounting and Expert Testimony practice has a long history of reaching the right answer quickly and explaining it clearly. Following are several project descriptions that highlight the scope of our experience.
Expert Testimony – Commercial Developer Fraud / Florida Condominium Towers:
ResX conducted a forensic investigation of a large developer of condominium towers in Florida. Our investigation uncovered numerous schemes perpetrated by the managing partner that resulted in funneling money away from the other owners and into the pocket of the managing partner. Based on our study and subsequent testimony the judge awarded our client over $30 million.
Fraud Investigation – Remote / Large Scale Mine Construction:
We were asked to travel to Mongolia to perform a fraud risk assessment of a $6.5 billion construction project in the Gobi Desert. The project included shafts, tunnels, open pit, processing plant, airport and living facilities for 12,000 workers. After spending several weeks on site we uncovered a scheme where construction companies were avoiding contract "deductions" when using owner supplied material such as concrete and fuel. These unrealized deductions, if allowed to continue, would have cost the owner over $75 million in contract overcharges.
Damage Model for Class Action Defendant:
ResX was engaged by a large utility to develop a model that could calculate the damages claimed in a class action lawsuit. The plaintiffs were a group of home owners and condominium associations that alleged damage to their dwellings. The alleged damages occurred as a result of unscrupulous contractors that installed energy saving solutions at homes in order to take advantage of the utility's energy credit program. Allegedly, the work caused damage to the dwellings and diminished the life expectancy of certain critical elements of the dwellings. We developed a computer model that used the unique data from each dwelling owner's claim (i.e., installation date, obsolescence date, cost to replace, cost of added features, etc.) to calculate the present value of each homeowner's alleged damages. Our model was simple, accurate and able to show that the alleged damages were far less than the damages claimed by the plaintiff class.
Compliance Monitoring / DOJ Washington DC:
The Department of Justice (DOJ) in Washington DC negotiated a non-prosecution agreement (NPA) with a company accused of engaging in sham minority joint ventures. DOJ included language in the NPA that stipulated that ResX would act as the independent monitor of the NPA. The monitoring period was for two years and the role of ResX was to ensure that the company made the necessary policy/procedure changes needed to comply with the goals of the agreement.
Fraud Investigation – Las Vegas Hotel and Casino:
We were engaged by a global bank to investigate approximately $800 million in tenant improvement costs at a hotel/casino in Las Vegas. The bank had acquired the business due to the default of the developer during the facility's construction. Our investigation focused on the policies and procedures underlying procure-to-pay ("P2P") process for tenant improvements. During this study we uncovered numerous process failures and made critical process improvement recommendations. We determined that the P2P process failed due to two major events, 1) a poorly implemented system conversion that occurred in the middle of the project, and 2) the shrinkage of salvage material created when the hotel room interiors were re-design after long lead purchases had been authorized.
Expert Testimony – Contract Termination Damages:
We were engaged to determine the damages suffered by a supplier of manufactured products that it purchased from various manufacturers in China. The supplier sold these products to a customer in the US that subsequently sold them in the US market under its own brand name. The customer violated the terms of the contract by surreptitiously obtaining the names of the Chinese manufacturers and then contracting directly with these manufacturers. The customer then terminated the contract with the supplier since it now was contracting directly with the manufacturers in China. We determined the lost profit suffered by the supplier as a result of the contract's termination. The arbitration panel found the customer liable for breaching the terms of the contract. The panel awarded damages to the supplier consistent with our analysis of the supplier's lost profits.
Expert Testimony – Shareholder Oppression:
ResX was engaged by the largest shareholder of a global construction company to study the circumstances underlying its bankruptcy. Our analysis identified two key issues, 1) the executive leadership (some of whom were also stockholders), exceeded their authority by engaging in financial decisions that should have been elevated to the full board of directors, and 2) these decisions eventually caused the bankruptcy of the company. Our analysis was founded in our understanding of corporate governance and the authorization limits corporations generally establish. Decisions that have a high financial impact on the corporation, depending on the magnitude of their financial impact, are typically elevated to higher and higher levels within the organization, up to and including the board of directors.
Expert Testimony – Breach of Contract:
ResX was engaged to provide expert financial analysis by a large provider pension plans (the "Provider"). The Provider had executed a contract with a national association (the "Association") in which the Association was to promote the Provider's pension products to its membership which combined had millions of employees. After a period of time, the Association claimed the Provider breached the contract because the number of employees that signed on to use the Provider's products was less than the Association expected. The Association claimed that this shortfall was a breach of the contract and the Provider disagreed. The Association asserted damages based on this alleged shortfall. Our role was to critique the plaintiff's damage analysis, critique the qualifications of the plaintiff's expert, and to determine what the damages should have be if, in the unlikely event, the court agreed that the Provider was liable.