Deposition Questions for Financial Expert Witnesses

The second edition of Lifestyle Analysis in Divorce Cases: Investigating Spending and Finding Hidden Income and Assets has more than 25% new material. I’ve updated the book for tax law changes, I have added material that clarifies topics covered the first time around, and there is brand new material.

One of the new parts of the book relates to the direct examination of financial expert witnesses, especially during depositions. The deposition is the time for the attorney to dig into the background and qualifications of the forensic accountant. It is also the time to ask probing questions about the work done, the the choices made with respect to the financial analysis, and the opinions expressed in the report (or maybe opinions they have but didn’t enumerate in the report).

I have a Direct Examination Checklist in the book that I think attorneys will find invaluable. I can’t replicate the entire list of questions here, but I’m going to give you some snippets of the list of general lines of questioning that you can use with a financial expert witness:

Background and qualifications

  • Educational background—Include both formal education and continuing professional education.
  • Credentials obtained—When were they obtained? How?
  • Credentials not obtained—Why not? Is the expert not qualified for them or did the expert simply choose to not get them?

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Do-It-Yourself Divorce?

divorce financial analysisWho gets rich in divorce? They say only the attorneys and experts.

I’ve seen firsthand the high cost of divorce. I typically work on divorces for higher income individuals. They’ve got more complicated financial situations, and that’s my specialty. With the complications comes a lot of arguing, it seems. And even when the parties are fairly friendly, there is just a lot of stuff that has to be sorted out, and there is a cost to the attorneys and experts.

Fancy divorce attorney Laura Wasser is often  hired by celebrities to sort out their situations. She says a “typical” divorce (that’s one for the likes of you and me) will cost $20,000. Ouch. So she created a site to help people have do-it-yourself divorces.

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Is January Really Divorce Month?

You’ve probably heard people talking on social media that January is “divorce month.” In other words, more divorces are filed in January than any other month.

Is it true?

MarketWatch says it is.  But their evidence was only anecdotal. They talked to some divorce lawyers who put a number to the divorce cases that come into their practices… They say new cases are 25% to 30% higher than other months.

That’s hardly scientific. But let’s accept it as true for the moment. Why might it be? Some say it’s because many couples want to have one last family holiday season before telling their children they’re getting a divorce. Others say the stress of the holidays pushes some couples over the edge. Still others say that “new year, new you” also applies to married life for some. And in some cases it’s financial: the spouses are waiting for a year-end bonus or other year-end financial event.

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Dooce Will Sleep With Your Husband

From time-to-time, I used to talk about mommy bloggers here. Primarily the fraud that is Jennifer McKinney (MckMama), but occasionally I would mention others. One such person was Dooce (Heather B. Armstrong), the “original” mommy blogger.

Dooce made a mint off her blog when it was in its prime, which led to her buy a 9 bedroom, 9 bath house in Salt Lake City. But following her divorce, her income sources dried up and she was forced to sell. (That led to blog posts about living in a small house, waaaaahhhhh!) By all appearances, Heather had all sorts of opportunities for sponsorships, television shows, speaking engagements, and other lucrative gigs… but her bad attitude, inconsistency, and failure to follow through led to those revenue sources evaporating.

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Dennis Quaid Child Support: Reasonable Needs

When child support or spousal support is calculated for a “normal” person, we often use a percentage of income. It’s simple. It’s often fair. And it’s a way to standardize things.

When someone makes a ton of money, calculating support based on a percentage of income isn’t necessarily so fair. If someone is making $75,000 per year and the ex-spouse is not employed, paying 25% of the income ($18,750 per year) in child support might seem reasonable. (There are lots of factors involved… I’m using the simplest possible scenario here.

But if someone makes $5,000,000 per year and has an ex-spouse who is not working, is the same 25% ($1,250,000 per year) fair. Many times the answer is no.

In the case of actor Dennis Quaid, the divorce agreement with his ex-wife Kimberly specified $13,750 per month of child support ($165,000 per year). However, if he made more than $1.3 million in a given year, the amount was to be increased. In a recent court filing reported on by TMZ, Quaid admitted to earning approximately $550,000 per month in 2019 (or $6.6 million for the year).

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Windy City Rehab Fraud?

Windy City Rehab is an awesome reality show on HGTV. Alison Victoria (legal name Alison Gramenos) and Donovan Eckhardt are the faces of the show, and they find properties in Chicago to rehab and sell. But construction projects don’t always go as planned, and a lawsuit filed in Cook County on December 30 alleges that the Windy City Rehab team defrauded James and Anna Morrissey.

In March 2019, the Morrisseys bought a 4,000 square foot home at 2308 West Giddings Street in Lincoln Square for $1.36 million. The property was sold for $645,000 in October 2017 and then underwent renovations featured on an episode of Windy City Rehab.  (You can even see this episode next week, 6pm central on January 14!)

The couple says that the house leaks… that the day after they closed the shower on the second floor leaked gallons of water into the kitchen. They say they paid for a new roof, but that the old roof was simply repaired and now it leaks. The windows allegedly were installed improperly throughout the house, with water coming in the windows in the master bathroom and the bedrooms. The Morriseys further say that the masonry and mortar are crumbling on the outside of the house, and the front door is crooked.

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Digging Into the Numbers in Litigation

Nearly every lawsuit has a financial component to it. In many cases, the issues surrounding the numbers have high stakes. Cases involving securities fraud, money laundering, tax fraud, investment fraud, and Ponzi schemes rely on an accurate tabulation and evaluation of the numbers. To take the numbers as provided by the other side at face value would be a huge mistake.

In fact, there is almost always a story behind the numbers. A case may very well be won or lost based on the ability to find out the story that is often hidden from view. How, then, can a party best get to the truth?

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Fraud Prevention on the Cheap

One common misconception among small business owners is that fraud prevention is expensive. And like anything else in this world, it can be expensive. A company that strives to eliminate virtually all opportunities for fraud by employees can spend a chunk of money doing so.

But it’s not always necessary to spend lots of money on fraud prevention. And it’s not always possible for a small business owner to spend a lot on fraud prevention. Let’s face it… budgets are tight and big new projects aren’t often possible.

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