Financial experts play a key role helping the litigants and the court understand financial issues involved in oil and gas litigation matters. The scope of services extends far beyond standard accounting and tax issues. Financial experts can help attorneys and their clients analyze and understand a wide range of issues as they prepare trial strategy. They can then serve as expert witnesses to communicate those issues in court. The range of issues may include:
- Lost profits
- Corporate finance
- Cash flow management
- Forensic accounting
- Business valuations
- Loan compliance and collateral analysis
- Business viability and feasibility
- Management and operations
- Bankruptcy and insolvency issues
The financial expert’s role
The main role of the financial expert is to educate. The professional’s role is to remain objective. The consultant and expert must help the attorney and client understand the financial aspects of the situation. In trial, the expert may testify as an independent objective professional to educate the court and the trier of fact, whether it is a judge in a bench trial or a jury. Therefore, the professional’s ability not only to understand the issues, but the ability to communicate them clearly and in understandable language is paramount.
An expert’s credentials and experience are vital to establishing credibility with the judge, who acts as the gatekeeper for allowing evidence into trial, and for the court in general. Selection of the right expert or experts should be driven by the facts and circumstances of each case. Experts themselves are governed by a wide range of rules defining the expectations for their professional conduct. Certified public accountants are governed by the American Institute of Certified Public Accountants, but financial experts may possess a variety of other designations or certifications that demonstrate their qualifications and may impose performance rules and other financial and interpretive concepts upon them. Organizations offering credentials relevant to financial experts include, but are not limited to:
- Certified Fraud Examiner (CFE)
- Certified Insolvency Reorganization Advisor/Accountant (CIRA)
- Certificate in Distressed Business Valuation (CDBV)
- Accredited Senior Appraiser (ASA)
- Chartered Financial Analyst (CFA)
- Certified Financial Planner (CFP)
- Certified Financial Consultant (CFC)
- Certified Turnaround Professional (CTP)
- Certified Management Accountant (CMA)
Scale and scope
The scale and scope of the requested work are critical. A financial expert can provide as much as their capabilities can deliver, or as little as requested in each situation. A financial expert should also be able to scale up by working as part of a team. In other words, an expert should know when to recommend bringing in ancillary services and expertise to fully work through the issues. Many unique specialties exist with differing technical training and expertise. Can the expert identify and build the right engagement team to address the critical issues?
For example, oil and gas business analysis and litigation may involve many unique approaches that require the input of others to comprehensively analyze and address the questions at hand. Among the most complicated issues for the oil and gas industry are the range and complexity of revenue sharing arrangements, depreciation and depletion of assets, asset retirement obligations, intellectual property and licensing fees, farmout and other drilling related agreements, a wide range of leasing and working interest agreements, taxes, unique valuation issues and parameters related to reserves and overall business valuations, industry practices for accounting, unique issues in dealing with insolvency situations, and many other factors that can affect the overall analysis and interpretation of each situation. The financial expert should understand how to gather and factor in the range of specialists needed to address the questions at hand.
A number of questions should be considered when retaining a financial expert. Considering the following questions, among others, will help in understanding key issues that can assist in the selection of a financial expert:
- Will the financial expert serve as a business consultant, or will the expert be asked to testify as an expert witness or serve as a litigation consultant?
- Will the financial expert have fair and complete access to all of the pertinent facts necessary to form an independent and objective opinion?
- Does the expert have the appropriate background (i.e., industry, technical skills or other uniquely relevant background to address key issues), qualifications and experience, and the team necessary to analyze, develop and render an opinion?
- Who is the expert’s client—the attorney or the attorney’s client?
- What privileges will be available to protect the work product?
- Does the expert have any material conflicts of interest?
- Will the expert’s investigation affect other aspects of the case or of other cases?
- Will discoveries be revealed even if they jeopardize other cases?
- How could the expert’s findings affect trial strategy?
- Will the expert be able to effectively meet the court’s expectations regarding expert testimony, expert reports and expert opinions?
The financial expert’s most important responsibility is to be honest and objective with the client, the attorney and with the court. Careful, analytical work that is articulately and persuasively presented can be the difference between winning and losing the logic, the negotiation or the case.