Daubert in a Nutshell

For many years, the admissibility of expert scientific evidence was governed by a common law rule of thumb known as the Frye test, after a 1923 decision by the District of Columbia Court of Appeals in which it was first articulated.  Under the Frye test, expert scientific evidence was admissible only if the principles on which it was based had gained "general acceptance" in the scientific community.

Despite its widespread adoption by the courts, this "general acceptance" standard was viewed by many as unduly restrictive, because it sometimes operated to bar testimony based on intellectually credible but somewhat novel scientific approaches.

In Daubert, the Supreme Court was asked to decide whether the Frye test had been superceded by the adoption, in 1973, of the Federal Rules of Evidence.  After all, Fed. R. Evid. 702, the rule broadly governing the admissibility of expert testimony, did not even mention "general acceptance," but simply provided: "If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise."

The majority opinion in Daubert, authored by Justice Blackmun, held that Rule 702 did indeed supplant Frye.  This did not mean, however, that all expert testimony purporting to be scientific was now to be admissible without further ado.  Rule 702 did require, after all, that the testimony actually be founded on "scientific knowledge."  This implied, according to the Court, that the testimony must be grounded in the methods and procedures of science -- a.k.a. "the scientific method."  Evidence thus grounded, said the Court, would possess the requisite scientific validity to establish evidentiary reliability.  

The Court also noted Rule 702's requirement that expert testimony assist the trier of fact.  This, according to Daubert, was primarily a question of relevance or "fit."  The testimony must be sufficiently tied to the facts of the case, the Court held, to aid in the resolution of an issue in dispute.

The Court explicitly refused to adopt any "definitive checklist or test" for determining the reliability of expert scientific testimony, and emphasized the need for flexibility.  The Court did list several factors, however, that it thought would commonly be pertinent:

• whether the theories and techniques employed by the scientific expert have been tested;

• whether they have been subjected to peer review and publication;

• whether the techniques employed by the expert have a known error rate;

• whether they are subject to standards governing their application; and

• whether the theories and techniques employed by the expert enjoy widespread acceptance.

By way of offering further guidance, the Court emphasized that the admissibility inquiry must focus "solely" on the expert's "principles and methodology," and "not on the conclusions that they generate."

To assuage fears that its ruling would result in a "free for all" in which juries would be confounded by "absurd and irrational pseudoscientific assertions," the Court emphasized the continued availability of traditional tools under the adversary system, including vigorous cross-examination, presentation of contrary evidence, and careful instructions to jurors on burdens of proof.  The Court also noted the availability of other mechanisms of judicial control, including summary judgment and the ability to exclude confusing or prejudicial evidence under Fed. R. Evid. 403.

In response to the fear that its new evidentiary standards would sometimes stifle courtroom debate, the Court acknowledged that those standards would occasionally prevent juries from "learning of authentic insights and innovations," but concluded that such was the inevitable consequence of evidentiary rules "designed not for the exhaustive search for cosmic understanding but for the particularized resolution of legal disputes."

Source: http://www.daubertontheweb.com/Chapter_2.htm

TRAINING

Association of Certified Fraud Examiners

19th Annual ACFE Fraud Conference and Exhibition
Boston, MA • July 13-18

Tampa Bay Chapter

Dinner Meetings

April 8, 2008
"Testifying as an Expert Witness"
John Gudavich, Retired Investigator, United States Attorney's Office

9th Annual Fraud & Computer Crimes Seminar

May 6-7, 2008
Ruth Eckerd Hall
Clearwater, Florida
1111 McMullen Booth Road
Clearwater, FL 33759

2006 - 2007
OFFICERS & DIRECTORS

PRESIDENT
Christine Dever, CPA, CFE
Accountabilties Consulting Services
(813) 417-1825

VICE PRESIDENT
Steve Hooper, CIA, CFE, CCSA
Clerk of the Circuit Court Hillsborough County, FL
(813) 276-2029 x3703

SECRETARY
Clark J. Bolton, CFE
Bolton Risk Management LLC
(727) 771-5255

TREASURER
Laura Krueger Brock, CPA, CFE
Kirkland, Russ, Murphy & Tapp, P.A.
(727) 572-1400

DIRECTOR
Mark Dubina, CFE
Florida Department of Law Enforcement
(813) 878-7366

DIRECTOR
Ellen Wilcox, CFE
Florida Department of Law Enforcement
(727) 298-2482

DIRECTOR
Gary Chapman, CFE, CGAP
City of Tampa, Internal Audit
(813) 274-7163

CHAPTER TRAINING
Wayne Boytim, CFE
Retired

When do you need an expert?

Under the Federal Rules of Evidence, an expert is appropriate when scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or determine a fact at issue in a case. A client and his attorney would ordinarily seek the assistance of an expert where a key issue in the case depends on understanding evidence that is not within the common knowledge of the judge and jury.

For example, experts are often used in cases dealing with medical malpractice, toxic torts, racial or gender discrimination, and environmental pollution because these cases call for the introduction of evidence that is grounded in obscure terminology, specialized knowledge, and mathematical or scientific analyses not ordinarily within the common knowledge of the court and jury hearing the case. The increasing role of computers and electronic information systems in everyday transactions forms a good example of the need for experts because although both court and jury may be familiar with the use of a computer for electronic communications, neither is likely to have a common-sense understanding of how electronic information is stored, retrieved, destroyed, or reconstructed.

Source: http://research.lawyers.com/Role-of-the-Expert.html

News from the ACFE

The 19th Annual ACFE Fraud Conference attracts professionals from around the world who are involved with any aspect of identifying, preventing and detecting fraud and white-collar crime within organizations.  In addition to accountants, auditors, investigators, law enforcement and anti-fraud specialists, professionals in governance, risk management, compliance, corporate security, loss prevention and the legal field are some of the many groups who will participate in the conference.

Gather with more than 2,000 anti-fraud professionals from around the world to share knowledge, exchange ideas and realize your full potential in the global fight against fraud. With informational educational sessions, presentations and various networking opportunities, you'll walk away with even more tools, resources and contacts than ever before.

Register by April 18th and save up to $200.

Chapter News

9th Annual Fraud & Computer Crimes Seminar

The Tampa Bay Chapter of the Association of Certified Fraud Examiner is offering 14 hours of CPE for as little as $170.00. Date: May 6 and 7. Location: Ruth Eckerd Hall, Clearwater, Florida. For more information visit http://www.tampabaycfe.org/seminar.htm.

Members in the News

One of our Chapter Members, John L. Gudavich, announced that he has established a new company known as J. Lewis & Associates Consulting, specializing in forensic fraud examinations, documentary and physical evidence analysis, system and physical security evaluations and expert witness testimony, to name a few.

John has been a Federal Criminal Investigator for close to 30 years, specializing in the investigation of bank fraud, identity fraud, contract fraud, embezzlement and business malfeasance. He has testified in numerous federal, state and county Grand Jury proceedings as well as numerous criminal prosecutions, civil tort and administrative proceedings.

John can be contacted at (352) 467-9338 or by e-mail at Jlewisconsulting@verizon.net 

Student Scholarships Awarded

Florida Southern College
Melinda Santiesteban  - $1,000.00

Tampa Police Explorer Donation

On March 18, 2008, Gary Chapman presented the Tampa Police Explorers, Post 275, with a donation of $500.00. Police Explorers are youths ranging in age from 14 years to 21 years. They go on ride-a-longs with officers, assist in records, crime analysis, communications, and other areas of the department. Explorers obtain training to assist them in possible Law Enforcement careers to include but not limited to, traffic control, report writing, fingerprinting, and many other Law Enforcement related topics. Community service is a main function of Post 275. They take part in events such as children's finger printing; Kids expo's, and other special events within the community. The Post Color Guard has had the honor of presenting the colors at several community events. This is a specialty team within the Post.

Bylaws Amended

Article VI, Section 6.01, of the Chapter Bylaws allows the Board of Directors to increase or decrease the number of directors. A motion was made, seconded, and passed by a majority vote of the Directors to increase the number of Directors to nine (9) for our fiscal year 2008 - 2009.

FY2008 - 2009 Chapter Election Ballot

Chapter Elections will run through to April 6th, 2008.  According to the Tampa Bay Chapter's Bylaws, only Chapter Members and Chapter Associates may vote.  Results will be announced at the Chapter's Annual Meeting on April 8, 2008. To cast your vote, go to: Chapter Ballot

Tampa Bay Chapter - Student Board

On 3/11/08, during a regularly scheduled dinner meeting, the Chapter hosted college students interested in participating in the newly formed Student Board.  The Student Board will serve to represent student members of the local chapter at regular chapter board meetings as well as launching student focused initiatives and recruitment.  Please contact Clark Bolton, Chapter Secretary at cbolton@boltonrmllc.com for those students interested in participating in chapter events.

Pictured from left to right: Kristin Prentice, Student, USF St Pete; Katherine Barker , Ph.D., CPA, CFE, Assistant Professor, USF St Pete;  Christine Dever, CFE, CPA, Chapter President; Clark Bolton, MA, CFE, CCP, Chapter Secretary; Anthony Villari, Student, USF St Pete;  Justin Bertsch, Student, Florida Southern College and Kelly Gregg, Student, USF St Pete

Dinner Meeting News

Our next Dinner Meeting is scheduled for April 8th

John L. Gudavich, MA, CFE, CPP, will be presenting "Testifying as an Expert Witness." John is a local chapter member and has over 30 years as a Police Officer and Federal Criminal Investigator (Special Agent) of which 20 years were dedicated to either the management of or the investigation and prosecution of felony level white collar fraud type crimes such as bank fraud, construction fraud, contract fraud, research and development contracts, tax evasion, etc.

John has extensive experience testifying in the presence of Federal Magistrates to obtain subpoenas and search warrants, in Federal Grand Juries, Federal and State Criminal Courts, as well as Civil and Administrative Proceedings. He is a former Adjunct Professor, in a Master of Arts program, University of Southern New Hampshire, lecturing in various financial fraud topics, including the investigation of fraud, collection, organization and presentation of financial forensic evidence and testifying in prosecutorial proceedings.

John has been a guest speaker for Federal, State and County Government agencies, academic and private symposiums. He is retired from U.S. Department of Justice and presently the President/Owner of J. Lewis & Associates Consulting, a firm performing fraud examinations, evidence evaluation, economic threat assessments and security analysis of various systems and physical facilities.

An expert witness is a person, who by virtue of education, training, skill, and experience, is believed to have sufficient knowledge in a particular subject matter that others may officially and legally rely upon the witness’ specialized opinion about evidence or fact issues within the scope of their expertise, referred to as their expert opinion. Typically, expert witnesses may be relied on by both sides to a dispute for opinions to assist a fact-finder.

As Certified Fraud Examiners we possess a wide range of expertise because of our formal education and training which combined with fraud prevention and detection experience may qualify us as professional expert witnesses.

We also need to recognize when we lack the expertise in a fact-finding matter in order for us to obtain the services of an expert witness to provide critical services to aid us in not only determining the truth in a matter, but establish relevance and authentication in the matters under dispute.

This presentation will discuss who can be an expert witness, the types of evidence that can be authenticated and the relevance of testimony in administrative, civil and criminal proceedings and the challenges an expert witness can expect to face in such an endeavor.

The dinner meeting will be held at the Westshore Hotel, located at 1200 N. Westshore Blvd. The hotel is just north of I-275 and Cypress Avenue on the east side of Westshore (map). Evenings will begin with a social at 6:00 P.M., followed by a buffet dinner at 6:30 and a presentation at 7:00. The cost is $20, payable at the door.

To make your reservation, please use the following link Chapter Meeting Reservation and complete the form at the bottom of the page.  You can also make your reservation by emailing Wayne Boytim by the Friday before the meeting date. Reservations will be accepted after that date and walk-ups are always welcome. Please remember that cancellations are accepted up to the afternoon of the meeting. No shows will be billed after the second missed meeting. Please help us keep our costs down by letting us know if you are unable to attend.

March 11th Dinner Meeting

On Tuesday, 3/11/08, Allison Jimenez, President of Tanjeble Inc. provided a 60 minute presentation entitled "Vending Gender and the Race to Defraud: Supplier Diversity Fraud" to the chapter members at the West Shore Hotel in Tampa.

Ms. Jimenez’s presentation began at 7:00 p.m. She prefaced her remarks by providing a brief biography. Below are a few of the highlights from her discussion:

• Supplier Diversity Fraud has significant risk exposure to include: potential civil action from competitors, negative media coverage and government or regulatory intervention.

• Common schemes may include but not limited to: figurehead, pass through, false eligibility and false reporting.

• Supplier Diversity Fraud flourishes under the following conditions: Lack of oversight, Lack of training, Inconsistent enforcement and regulation, Lack of audits, and Political patronage

• Certification for minority or disadvantaged status requires the owner(s) of the organization meet the definition of minority and or disadvantaged persons and have 51% controlling interest.

• Ownership red flags include: Owner has no industry knowledge or experience, Owner has no risk in profit commensurate to ownership, and Owner has no operational control & signing control

• Operational red flags include: Certified company works for 1 contractor, Volume of work is beyond certified scope, Equipment used by certified company is owned by prime contractor, and Employees work for both certified company and prime contractor

• Accounting red flags: Financial statements noticeably different from peers, Higher velocity of funds
  Corporate accounts with little or no regular activity, and Joint checking account with prime contractor

• Best Practices: Educating work force, Dis-incentivize fraud by monitoring contract size, Don’t tie employee compensation to number certified companies, Increase oversight staff levels, and Conduct audits

• In 1999 an internal United States Postal Service study regarding certified minority or disadvantaged companies found that paperwork for 48% of minority and 31% women owned businesses were determined to be inaccurate or unsupported.

Alison Jimenez is a forensic economist, a member of the Association of Certified Fraud Examiners and a Certified Anti-Money Laundering Specialist. Jimenez is the author of Vending Gender and the Race to Defraud: Fraud by Women and Minority Owned Businesses published in the August edition of Fraud Magazine.

Submitted by Clark Bolton, Chapter Secretary

"Expert" Quotes

An expert is an ordinary man away from home giving advice. - Oscar Wilde

If the world blows itself up, the last sound would be an expert saying it can't be done. - Peter Ustinov

An expert's someone who's never in doubt but often in error. - R. Rinkle

An expert's a person who knows enough about what's going on to be really scared. - P.J. Plauger

Daubert Challenges

Although expert witnesses aren’t required to testify from personal knowledge, they must be qualified to give opinions, the Supreme Court has said. As a result there has been a series of precedent-setting Supreme Court cases involving expert witnessing, starting with Daubert v. Merrill Dow Pharmaceuticals, Inc.

Because of Daubert, a court must now, in substance, make a preliminary finding regarding whether the reasoning and methodology employed by an expert is scientifically valid and whether it can be applied to the facts of the particular dispute (see “Expert Testimony After Daubert…,” JofA, Jul.01, page 59).

The Kumho Tire Co. v. Carmichael decision extended the Daubert concept to all expert testimony, regardless of the subject matter. CPAs who testify as expert witnesses must describe what CPA certification requires and why they should be considered experts in a particular case. Experts must state what methodology they’ve used, whether it is reliable and why. Experts should put the evidence in the trial record in every case.

Daubert has had substantive impact on the admissibility of expert testimony; there now is heightened scrutiny of both the methods used and the factual support for the conclusions expert witnesses present. A motion in limine (a pretrial request to the court to prevent an opposing party from introducing inadmissible evidence) under federal rule of evidence 104 may be used to exclude an expert witness’s report and/or testimony.

The five factors that determine Daubert acceptability for expert testimony are:

• Whether the theory or technique used by the accounting expert can be or has been tested.

• Whether the theory or technique has been subjected to peer review and publication.

• The known or potential rate of error of the method used.

• The degree to which the method or conclusion has been accepted within the relevant community.Whether the theory existed before litigation began.

• Courts, in general, will not exclude testimony on the basis of one factor alone.

Source: http://www.aicpa.org/pubs/jofa/oct2004/crumbley.htm

President's Message

The response from the survey sent out has been fairly good. The input is being used for the development of our meetings next year and setting potential goals. Thank you for participating. If you have not responded, please try and send in by next week. It only takes a few minutes and it will allow the Chapter to do more of what you would like.

As you know through past newsletters and meetings one of our top goals is to set up a student board. We now have a group of students from a couple of the participating local Universities. The initial group has been drafted from the Business schools in Accounting and Forensics. We are in the process of working with the Criminology departments and eventually the Law students. The students are excited and full of energy. The next direction will be completing their formal set up and introductions to the membership. They will develop a set of goals in order to assist the board with Chapter development. From there our next step will be a mentor program where we will need your participation! We are very excited about this new step and look forward to sharing more with you very soon. By now you will have received a survey via an email blast. We will send a second reminder as well. If you have been kind enough to respond already, please ignore the reminder and thank you in advance for your cooperation. Clark Bolton and I will be contacting you directly to assist us with this project goal.

The other primary goal at this moment is Chapter of the year. Again, the questionnaire will greatly help us in accomplishing that.

Please make sure to visit the website and participate in the elections! Our annual meeting is the April meeting and we look forward to seeing you there on April 8th!

Until then, best wishes!

Christine A. Dever, CPA, CFE