Our firm is often engaged to provide financial forensic services involving allegations of embezzlement. In one such case, we were contacted by a criminal defense attorney to provide expert opinions relative to an alleged cash asset misappropriation involving forged checks. The attorney explained that the suspected checks were made payable to either "cash" or the defendant personally. The defense attorney requested that we review and evaluate the case, as built by the criminal investigator. Due to the total amount being claimed, the defendant was facing mandatory incarceration as governed by state statute. After reviewing copious amounts of documentation, our opinion was that the investigator’s conclusions were flawed, misleading, and ignored exculpatory evidence without providing any justification. Based on our independent analysis, we determined the amounts that should be considered by the trier of fact (e.g. judge in a bench trial or by a jury) were significantly less than the amount alleged by the investigator and ultimately less than the statutory level for mandatory incarceration.
The criminal case requires that the proofs meet a high threshold. The job of a defense attorney is one of arduous research and acquisition of facts, all for the sole purpose of convincing a judge or jury that this threshold has not been met. The side that prevails usually has done so because they understand how a case should be built and presented. Often, the success of the case relies on the methodology employed by the criminal investigator or fails based on the lack thereof. Determining the amount involved in an alleged financial crime can be complicated and time consuming. These types of cases are often built on circumstantial evidence involving multiple financial transactions. How effective the investigator is at building the case may depend on the extent of their training in financial forensics. Sadly, many investigators have little or no training in financial forensics. This may result in the investigator developing a case without an adequate foundation. In cases such as alleged forgery and/or embezzlement the defense attorney may find that there are holes in the criminal investigator’s findings.
Under ideal conditions, the financial forensic investigation includes three basic elements, which are as follows:
Obtaining evidence;
Analyzing evidence; and
Presentation of findings.
First, defense attorneys need to be aware that it is critical for the investigator to first obtain relevant information and documentation. This may include obtaining financial documents, interviewing witnesses, perform background research, etc. In short, any evidence relevant to the case. This requires an understanding of both financial documents and financial theory. It is the rare case where every relevant document is produced. Therefore, the investigator must be adept at understanding the impact of missing documents and methods that can be used to work around missing documents where possible. 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.
Second, countless hours may be required for purposes of analyzing data. 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) to identify the perpetrator(s). Often the method used by the investigator is dictated by the nature of the alleged crime and the nature of available documents. An experienced investigator may consider various methods before arriving at the most supportable method. At that point, the investigator must make an informed decision of whether or not there is sufficient evidence to arrive at any supportable conclusions.
Third, the facts must be presented in a way that they can be easily understood. In other words, the financial investigator must be skilled in the art and science of distilling complex financial matters into clear evidence. The "science" involved in financial forensics includes the evaluation of financial transactions and reliable application of principles and methods based on sufficient relevant data. The "art" involves interpretation of the meaning of the facts and drawing conclusions regarding the alleged bad acts, all of which requires expertise. When the analysis is complete and a conclusion is reached, 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 the relevant parties. The relevant parties in financial crimes cases are the prosecutor, the defense attorney and, ultimately, the judge or jury.
Defense attorneys need to understand that criminal investigators, with the most honest of intentions, can arrive at erroneous conclusions due to their lack of technical knowledge of accounting issues. A financial forensic expert can identify such errors and, if necessary, testify in the trial for the defense. Ultimately the judge or jury will have the final say in a case involving financial dishonesty. They must consider all evidence presented and make a fair judgment. In cases of fraud and embezzlement the importance of hiring a forensic accountant cannot be understated.