Divorce War Story Time: Forensic Accounting Testimony Wins the Day
The Forensic Accounting Deskbook by Miles Mason, Sr. JD, CPA, published by the ABA Family Law Section
Miles Mason, Sr. JD, CPA is the author of The Forensic Accounting Deskbook: A Practical Guide to Financial Investigation and Analysis for Family Lawyers, Second Edition, published by the ABA Family Law Section. This updated edition of one the ABA’s most popular resources explains the practice of forensic accounting and business valuation and how to apply it in family law cases. It provides a practice-focused introduction to the core financial concepts in divorce, such as asset identification, classification, and valuation, income determination, expenses, and more.
VIDEO TRANSCRIPT:
Tracy Coenen: Tell me one of your best experiences with an expert who was testifying at trial?
Miles Mason: Well, we had had a difficult case where $2 million was gone from a marital estate, and we knew it was gone, because we had tax returns during that period. We had a reliable financial statement that was submitted to a bank at the beginning of the period, and another financial statement, namely the divorce financial statement, issued by one of the spouses for the divorce purposes. And we were able to prove that $2 million was gone. And we had a likely scenario of where it was, and we had some withdrawals that we could prove too. We didn’t have the other side of the transaction.
But the great thing about the divorce case, we didn’t have to prove where the money was, we just had to prove that it was gone at the behest and control of the other spouse. So essentially my client ended up with, $1 million that did not exist was awarded to her from the marital estate that did exist. So very much a big victory.
Tracy Coenen: And this required the help of an expert witness to prove that this money was missing, obviously?
Miles Mason: Yes.
Tracy Coenen: And the testimony of that expert witness, was it a complicated issue to prove, or was it something that once it had been sorted out, it was fairly easy to testify about?
Miles Mason: Well, the forensic accountant in that particular case did a great job of laying out, here’s where we started, we know we’ve made this much money, we know what was spent, and therefore, X amount of dollars should be there. And that number amount that was claimed to be there was $2 million less than what should have been there. So the forensic accountant did a great job in that case.
Tracy Coenen: Okay. So what about the flip side of that? What about one of your experiences where your expert did not do so well in court for you and did not help you win a case?
Miles Mason: Well, actually, almost the same case, almost exactly the same case. And the forensic accountant did a great job on this case. It was just too old. The judge, we proved in a separate case, that $3 million was missing out of a marital estate, but that it went missing eight years prior. Because we had tax returns going back 10 years, so we could do the same exact analysis.
And it was very frustrating, because the judge would not accept any analysis financially going back eight years. He just said it was too, in that particular case, said it went back too far. So even though we had reliable financial statements, even though we had copies of tax returns, it didn’t work out as well. And that’s unfortunate.
Thank you to Tracy Coenen, CPA, CFF for inviting me to join her in this video series. Tracy is a nationally recognized forensic accountant practicing in Milwaukee and Chicago.
