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© 2018 Association of Certified Fraud Examiners, Inc.

How to Testify

Testimony About Damages

and Other Remedies

© 2018 Association of Certified Fraud Examiners, Inc. 2 of 27

Introduction

▪ In fraud cases, the bottom line for success is to

efficiently find, support, and recover an

appropriate remedy.

▪ Ultimate jury question: What sum of money, if

any, if paid now in cash, would fairly and

reasonably compensate the defendant for the

damages, if any, that were proximately caused

by such fraud?


Steps to Calculate Damages

Identify

elements of

damages.

Identify

valuation

issues.

Document

damages for

presentation

in legal

proceedings.


Identify the Damages

▪ Direct or general

damages

▪ Consequential or

special damages

▪ Punitive or

exemplary damages


Direct or General Damages

▪ Out-of-pocket losses: Damages sufficient in

amount to replace what the perpetrator

wrongfully took or to repair what the perpetrator

wrongfully damaged

▪ Benefit-of-the-bargain losses: The difference

between the fair market value of the property

received by the victim and the value if the facts

had been as represented by the defendant


Consequential or Special Damages

▪ Lost profits

▪ Opportunity costs

▪ Mitigation expenses

▪ Reliance expenses

▪ Incidental expenses incurred in the

transportation, care, and custody of goods or

property


Consequential or Special Damages

▪ Loss of use

▪ Consideration or compensation paid

▪ Lost time

▪ Lost credit or damage to credit reputation

▪ Mental anguish

▪ Court costs and costs for trial preparation


Punitive or Exemplary Damages

▪ Awarded in addition to

actual damages

▪ Awarded to punish the

wrongdoer and deter

others from similar

misconduct


Punitive or Exemplary Damages

▪ Criticized by some as a windfall to the victim

▪ Calculations are based on some multiple of the

actual damages

▪ Calculations can be related to the economic

circumstance of the fraudster


Identify Valuation Issues

▪ Expert testimony and industry-accepted

valuation standards

▪ Lost profits

▪ The time of valuation

▪ Future damages and discounts to present value

▪ Interest


Expert Testimony and Industry-Accepted

Valuation Standards

▪ Valuation testimony generally requires that the

witness be established as an expert.

▪ Market information is usually inadmissible

hearsay unless it is gathered and relied upon in

the opinions of a qualified expert.

▪ It is necessary to identify and follow any

available professional or industry standards that

are applicable to the valuation issue at hand.


Lost Profits

▪ Lost profits can be a loss related to a particular

venture, a segment of business, or the entire

business.

▪ Considerations in calculating lost profits:

• Performance history

• Market information

• Alternatives


The Time of Valuation

▪ Fraud damages are usually valued as of the

time of the fraud.

▪ Market fluctuations can cut both ways in terms

of the amount of recoverable damages.

▪ Appreciation can be overcome in cases where

lost profit damages are appropriate.


Future Damages and Discounts to

Present Value

▪ If any element of damages extends into the

future, the expert must carefully delineate the

amount of such damage element attributable to

the future.

▪ Factors used to discount the component of

future damages to present value typically

include analysis of the time value of money and

applicable risk factors.


Interest

▪ Interest calculations

generally not part of

fraud damage

calculations

▪ Pre-judgment interest

▪ Post-judgment

interest

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