As a forensic accountant, I was recently involved in the mediation process of a very complex divorce case. Due the nature of the case, preparing for trial would be a long and expensive process for my client. In addition, in order to resolve the issues satisfactorily for both parties, a creative, and somewhat nontraditional, approach was needed.
A forensic accountant can be a valuable asset in the mediation or arbitration process. The parties will have a better chance of settling the case if they are well prepared and have a good understanding of the financial aspects of the case. Forensic accountants can prepare schedules and documents to support a position, as well as provide a comparative analysis of the two opposing positions to help the parties understand where they may be in agreement and where they are in dispute.
After many years of being involved in litigation support services, I have seen first-hand that the litigation process can be extremely wearing, as it becomes an emotional and financial drain on the parties. Some of the reasons that I have seen parties look for alternative solutions are as follows:
- Mounting attorney and expert fees associated with the case;
- Numerous delays caused by the court docket or other issues;
- Risk of an unsympathetic or unsophisticated jury, that may not understand the complexities of the case;
- Sensitive or embarrassing personal or business information (such as cheating on taxes);
- Emotional strain on the parties, their families and/or employees and business associates.
These factors combined with the possibility of losing their case in court may cause clients to be open to an alternative resolution. Two of the most popular alternatives are mediation and arbitration. Mediation allows the parties involved to air their differences in a more relaxed environment. Both parties will generally describe their version of the dispute to a mediator. The mediator does not make any decisions, but acts as a bridge to help the parties discuss their differences, see both sides of the issue(s) and come to a voluntary settlement. One of the benefits of mediation is that it can often foster a creative solution that both parties feel is acceptable. However, due to the voluntary nature of mediation, a highly controversial issue often will not be resolved in mediation.
Arbitration involves a forced settlement in a less formal environment than a courtroom. The arbitrator will objectively listen to the explanation of both parties before making a decision on the issue, similar to a judge. The decision may be binding or non-binding. Arbitration is beneficial when there is a highly contentious or emotional issue, but is generally not as likely as mediation to please both sides.
A forensic accountant can be extremely beneficial in preparing the parties and attorneys for mediation and arbitration. In addition, the forensic accountant may attend the conference/hearing, or be available by phone to assist in explaining a financial issue when needed. Furthermore, if the parties do not come to a settlement, then the forensic accountant will be in a situation to assist in preparing for trial.