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From banks to hedge funds to venture capital firms, the world of investments is large and multifaceted. All investment options come with risks\u2014but if fraud or misrepresentation takes place during the investment process, it can end up in a lawsuit.<\/p>\n
Common lawsuits include financial advisor malpractice, stockbroker misconduct, and securities fraud. There has been a magnitude of investment litigation in all areas since the collapse of global financial services firm\u00a0Lehman Brothers in September 2008. Then the fourth-largest investment bank in the United States, the firm filed for bankruptcy with $639 billion in assets and $619 billion in debt.<\/p>\n
In investment cases, lawyers often bring in an expert witness who specializes in investment litigation to explain complex investment procedures to the jury. \u201cThe expert witness has to bring market knowledge and technical knowledge of a particular subsector of the financial world,\u201d explains FrancoisPages, the managing partner and CEO at Galileo Global Securities, a cross-border investment bank based in New York City. Pages recently acted as an expert witness for the first time on a case he calls demanding and intense.<\/p>\n
Most investment cases involve either large investors and corporations or large investors and banks. \u201cIt\u2019s not a mom-and-pop kind of litigation,\u201d Pages says. His first case as an expert witness was a $200 million case, where he says his role was to \u201cspecifically opine and describe for the arbitrators what was the proper practice in the frame of investment to venture capital funds.\u201d<\/p>\n
Another source we spoke to for this story, who asked to remain anonymous due to his participation in an ongoing case, says his first case involved a bank that was sued over a loss of more than $2 billion. Since then, this expert witness\u2014who worked in the financial sector for several decades\u2014has provided services in nearly two dozen cases with most of the major law firms in New York City, as well as in other states across the country. Some of the cases were settled, but he\u2019s been to trial several times. \u201cThe cases I\u2019m typically involved in involve those with money suing other institutions with money,\u201d he says. \u201cIt\u2019s difficult and costly to litigate, so only those who can afford to will do it.\u201d<\/p>\n
Being an expert witness first requires understanding all the nuisances of the case. That means reviewing every document provided by both sides. After reviewing thousands upon thousands of documents\u2014such as emails, phone records, and financial data\u2014the expert will write a report that outlines his or her qualifications as an expert, research methods, findings, and final opinions on the case.<\/p>\n
Then comes the deposition, in which the expert gives a sworn testimony that may be used in arbitration or trial. In the case Pages worked on, he was deposed in San Francisco for a full week. He had to write three expert reports: the initial one, a second report that included criticisms of the opposing party\u2019s expert report, and a third that showed a more in-depth view of the case after the release of additional documents.<\/p>\n
One of the challenges an expert witness faces is explaining the ins and outs of the field to people who are not professionals in the industry. Pages relishes that part of being an expert witness. \u201cYou have to be very didactic and explain everything in a very plain language,\u201d he says.<\/p>\n
Our anonymous expert is also a fan of that challenge. \u201cOne example I always give is that even if you sell government bonds at the wrong time, you can lose money,\u201d he says. \u201cNo investment is safe; everything has risks. Being able to break down information like that is part of communicating to the jury.\u201d<\/p>\n
Both expert witnesses we talked to enjoy acting as witnesses for investment cases. \u201cBeing an expert witness allows me to be detail-oriented, go much deeper in explanation of the market or market practice, and it forces me to dig even more into the technicality of my business,\u201d Pages says. \u201cIt\u2019s also the thrill of the case. It\u2019s quite different from my day-to-day business.\u201d<\/p>\n
Our anonymous source agrees. \u201cIt\u2019s the best job I\u2019ve ever had,\u201d he says. \u201cYou have to work at a company for decades to know how nice it is to not get dressed up, drive to work or take the subway, day after day. You have more control over your life. There\u2019s so much flexibility, but you know that you\u2019re adding value for a client and serving their needs.\u201d<\/p>\n
As expert witnesses for investment litigation, financial specialists who are impartial, credible, and articulate provide a valuable service to the legal process\u2014and in turn, receive the unique opportunity to examine their field in a whole new light.<\/p>\n