by the SEC on various cases
Jerry Arnold, PhD, CPA, JurEcon's most senior
accounting expert since 1987, provided expert testimony recently
for the Securities and Exchange Commission on several
different matters. In each case the Defendants were senior officers
of a company. Dr. Jerry Arnold's testimony included the following
issues: Definition of assets under GAAP; Valuation of assets; Role
of financial statements in interim filings; Role of officers and
directors in assuring compliance with GAAP; Violations of Section
13b-2 of the Exchange Act regarding internal controls. July 2004.
In several other cases for the SEC which settled, Dr. Jerry Arnold opined about additional accounting/auditing
topics including: Recording fictitious sales at quarter and year-end;
Premature revenue recognition; Role of financial statements in interim
filings; Valuation of receivables and establishment of appropriate
reserves; Related-party sale of business and improper recognition
of a gain on sale; Violations of Section 13b-2 of the Exchange Act
regarding internal controls and lying to auditors.
In a Pending Case against senior officers of a Fortune 500 Company,
additional issues about which Dr. Arnold is opining include: Earnings
management; Revenue recognition policies; Reserves for loan losses,
warranties, legal liabilities; Treatment of sale/leaseback; Required
disclosures in MD&A; Violations of Section 13b-2 of the Exchange
Act regarding internal controls and lying to auditors. August 2004.
Engaged by U.S. Attorney on Three
Dr. Jerry Arnold, CPA and Professsor of
Accounting has been engaged by the U.S. Attorney
for the Central District of California within the Department
of Justice three times in the last several years, and has testified
in two cases. The issues upon which he opined included: 1. Nature
and role of GAAP and GAAS; 2. Revenue recognition policies; 3. Role
of officers and directors in assuring compliance with GAAP; 4. Necessary
disclosures in MD&A; 5. Asset valuation, including accounts
receivable and inventory.
Wells Submission for a national law
firm and Fortune 500 company
Dr. Jerry Arnold of JurEcon Inc.
was engaged by a national law firm representing a Fortune 500 Company
and its senior financial executives to prepare an extensive declaration
in support of a Wells submission. The issues upon which he opined
were: the propriety of the treatment of restructuring and related
reserves in connection with a major acquisition. 2004.
Employment Law Experiment Helps Kill
At the request of Paul Grossman, Esq. of Paul, Hastings, Janofsky & Walker, JurEcon
undertook a unique study for the California Employment Law Council
and the California Legislature on the practicality of comparable
worth. Paul Grossman had wondered if a real world experiment could
be conducted to test the feasibility of comparable worth quite apart
from its theoretical complaints. He asked E. Jane Arnault,
PhD if she might be able to design and run such an experiment.
Jane found a large company with complex job classifications and
several commercial job evaluation firms which were willing to participate
anonymously and test the feasibility of comparable worth and accuracy
of measurements of jobs' comparable worth. Economics and complicated
statistics were involved. Some of the results appeared as "An
Experimental Study of Job Evaluation and Comparable Worth"
in Industrial & Labor Relations Review, July 2001.
Paul Grossman said: "We feel the work of Jane Arnault and
her JurEcon team had a significant impact on debunking the idea
that laws could be passed to force the valuing of jobs outside of
the market. As result, California politicians stopped trying to
legislate comparable worth, and we have not heard about it in over
a decade. Jane and JurEcon were responsive, excellent and
creative." February 2003
Telecommunication Industry: Big Dollar
David Eisen, Esq. of Arnold & Porter,
Los Angeles, was the lead attorney in a large dollar dispute (originally
about a billion dollars) among providors of electronic and telecommunications
products and services at the cutting edge of their industry. Eisen,
an Arnold & Porter partner, specializes in complex business
litigation, intellectual property litigation, and the representation
of law firms in partnership disputes and malpractice actions.
JurEcon's Dr. Jerry Arnold, an extraordinarily
skilled professor of accounting, led a JurEcon team in designing
and implementing a broad-based damages analysis. The issues involved
assessing profits lost by the defendant from numerous breaches of
contract by the sole provider of products and services. JurEcon's
analysis addressed the profits that would have been generated in
the absence of each breach. The JurEcon team defined, isolated,
and modeled the impact of many variables, including: the projected
demand for the products and services, the prices and direct costs,
the allocation of indirect costs, and appropriate sharing between
the parties of cost savings and rebates received from customers
and vendors. The issues were sufficiently broad and complex that
the Arnold & Porter legal team consisted of several partners
and associates, each focusing on specific aspects of the case. The
case and our involvement extended continuously over a three year
period ending in 2004.
Lost Profits Testimony Greatly Appreciated
Ronald S. Rosen, Esquire of Troy
& Gould and colleagues prevailed in defending dick
clark productions, inc. and MCA Television LTD.
against a number of claims asserted by the plaintiff in this litigation
brought by Lip Sinc International. At the time trial commenced,
the claims remaining were breach of contract, unjust enrichment
and quantum meruit. At the conclusion of the plaintiff’s case,
the defendants were granted a directed verdict on the unjust enrichment
and quantum meruit claims.
JurEcon's economic expert Dr. Richard Eastin was
retained to render expert advice and to testify regarding the $5,000,000
damages for lost profits which plaintiff claimed it would have realized,
but for the alleged breach of the defendants. Mr. Rosen argued that
given the plaintiffs past history, the claimed damages were speculative.
Mr. Rosen said, "In my opinion Dr. Rich Eastin made a significant
contribution to the overall atmosphere of credibility and probity
we sought to convey to the Jury. The graphs and bar charts he prepared
were excellent and numerically summarized the history of the plaintiffs
business operations. Though we did not reach the question of damages
in view of the jury's findings that the parties did not enter into
a contract with the terms and provisions plaintiff claimed, the
Eastin testimony had telling impact on the jury, because he illustrated
how speculative the plaintiffs theories were." - June 23, 1989
Trial Strategy, Jury Selection &
Serge Tomassian, Esq. of Throckmorton,
Beckstrom & Tomassian in Irvine, California has used Dr. Leo Snowiss in five cases involving major damage
to highly valued residential properties caused by construction defects,
landslides, or defective drainage. In his most recent case Rozbicka,
et. al. v. Estralla Properties #791529 decided December 12, 2002,
Mr. Tomassian won a $1.5 million jury verdict in an inverse condemnation,
negligence, nuisance case versus the City of San Juan Capistrano.
The issue was the role of the City in the planning, construction
and operation of a roadway that triggered a 9 acres landslide which
substantially damaged his clients' properties. The case was difficult
because Mr. Tomassian had to prove the liability of a public entity
on behalf of clients who owned expensive properties in an exclusive
Mr. Tomassian said, "We prevailed with a $1.5 million verdict
due to our hard work and detailed preparation of the case as well
as the team work that made this very difficult case a success for
our clients. The City of San Juan Capistrano will also be liable
for attorney fees and investigative costs which could raise the
verdict to in excess of $2 Million. Dr. Leo Snowiss through JurEcon
Inc. was an integral part of the winning team. His insight into
trial presentation of the evidence as well as witness testimony
were important components our success. His assistance in voir dire
was also critical in selecting a fair and balanced jury panel. We
wish to thank both JurEcon and Dr. Leo Snowiss for working with
us as a team to achieve this positive result for our clients.
Dr. Snowiss has an excellent sense about people and is very perceptive
about themes and overall strategy. He can see the overall theme
and structure of a case. It is always a pleasure to work with him."
- January 2003
This case involved a computer programmer who worked on a program
for one firm and then left to join another firm. This second firm
then offered a similar, computer software product within months.
The question: Was a significant portion of the "source code"
for the original product copied onto the new product? The question
was complicated by the fact that many programmers have built up
"tool kits” of commonly used subroutines and procedures
that they use for much of their programming, and they tend to program
similar functions in similar manners (from habit, experience, and
JurEcon's computer expert, Dr. Robert Anderson (Harvard, Ph.D. in Mathematics and Computer Science), compared thousands
of lines of source code from each program to form an expert judgment
regarding whether copying took place.
Kindel & Anderson attorney Manuel Klausner, Esq. said, "Bob Anderson is one of the most
impressive experts I have ever seen. He is a quick study and has
a flair for discussing technical subjects in plain words. His deposition
and testimony and written report are models of clarity."
Mr. Klausner is now with the Law Offices of Manuel S. Klausner in Los Angeles.
Jury Selection for
Paul, Hastings, Janofsky & Walker
JurEcon assisted Paul, Hastings, Janofsky & Walker attorneys Geoffrey L. Thomas and Ronald
M. Oster in a complex insurance matter.
Said Geoffrey Thomas: "One of the most valuable things we
did in a multi-million dollar insurance coverage case was to consult
JurEcon and Dr. Jim Press. Specifically, we wanted
to identify (1) the types of jurors who would be most responsive
to our asbestos manufacturing client, and (2) which handful of arguments
among scores of possible arguments would appeal most to those jurors.
We followed Jim's advice very closely on what kind of jurors to
challenge and what kind to accept, which arguments to eliminate
and which to emphasize, and how to deal with the detrimental aspects
of this case, that is, how to put our best foot forward.
"I found the interest and input from Jim Press and JurEcon
to be exceptionally helpful. They significantly shaped the presentation
we made in a five month trial, by refining, clarifying and enhancing
the presentation of complex issues into concepts which lay jurors
could relate and believe." December 1988
Geoffrey Thomas added, "While much of what we learned was
particular to the specific location and time, other things we learned
had a lot of value in subsequent cases involving the same kind of
subject matter." January 21, 2003
JurEcon Aids UC Regents in Discrimination
JurEcon’s expert labor economist provided testimony for the University of California in a suit alleging ethnic
discrimination in the promotion of Hispanic faculty. The University
of California prevailed on the ethnic discrimination claim and cited
the testimony of JurEcon’s expert witness Dr. Mark
Killingsworth as central to its decision.
The key issue, the judge said, was whether or not there was a statistical
disparity between UCSB’s tenure-track faculty and the qualified
labor market. The judge wrote in her decision: “Defendants
have demonstrated that … representation of Hispanics in faculty
positions at UCSB was substantially greater than what would have
been expected given their representation in the qualified labor
market… “Plaintiff has failed to produce sufficient
evidence to rebut Professor Killingsworth’s findings.”
Referring to the Supreme Court decision in Wards Cove, the trial
court reiterated the principle that in a discrimination case plaintiff
“does not make out a case of disparate impact simply by showing
that ‘at the bottom line’ there is a racial imbalance
in the work force.” JurEcon’s analysis and testimony
thus was at the foundation of the case on which the defendant prevailed.
“We were pleased with the professionalism and responsiveness
of JurEcon’s Prof. Killingsworth and with the accuracy of
his analysis. We were so pleased that we retained JurEcon's expert
on another matter as well,” said Ian Fellerman, Esq. of Corbett & Kane (1997).
Mr. Fellerman is now with Reed Smith Crosby Heafey in Oakland (2003).
JurEcon Consults with Attorney General
on the $5.4 Billion Marriage of the
Southern Pacific and Union Pacific Railroads
JurEcon, Inc. was asked to provide an opinion as to whether the
Southern Pacific Rail Corporation (“SPR”) would continue
to be a “viable” railroad if it were unable to merge
with Union Pacific. For purposes of this report, “viability”
was defined as the ability of SPR to continually access capital
on acceptable terms to meet its minimum cash needs in order to continue
its business as a major western railroad in the markets it presently
JurEcon’s financial expert Professor Lloyd Levitin,
JD, MBA, CPA, analyzed the financial condition of SPR’s rail
operations and SPR’s access to capital. He also reviewed the
testimony and exhibits submitted by various parties to the case.
Lloyd’s opinion was that SPR would continue to generate negative
net cash from operating activities for the foreseeable future. Therefore
SPR would have to continue to rely on asset sales, borrowings and
equity issuance to finance its cash deficit. Lloyd believed that
it would be unlikely that SPR would be able to obtain the cash required,
when required, and on acceptable terms. Therefore, he did not expect
that SPR on a stand-alone basis would remain a viable major western
The California Attorney General’s office and the US Department of Justice accepted their
reasons and the merger was approved.
Canadian Pay Equity
Dispute Favorably Resolved
Thomas Brady, Esq. of Heenan Blaikie in Montreal, Canada and his partners in Toronto and Vancouver represented
a territorial government in an equal pay dispute with a public employees
union. Mr. Brady knew of E. Jane Arnault, Ph.D.
and JurEcon Inc. from her labor law and economics work years earlier.
He invited Jane to enlist several of her colleagues in labor economics
and statistics to help the attorneys strategize and plan the approach
to organizing the data and evidentiary arguments supporting the
government's position. JurEcon also provided another group of top
academics to prepare expert testimony in both economics and statistics
should it be needed. The matter was settled favorably before the
Canadian Human Rights Tribunal after the evidence was compiled but
before the government's case began.
Thomas Brady, Esq. said: "JurEcon was able to provide us with
quick and efficient access to experts in several fields relevant
to the issues in the case. They were highly qualified, worked easily
with our lawyers and provided views and information which were very
helpful to the ultimate favourable resolution of the case."
- April 2003
Case for Munger, Tolles & Olson
Munger, Tolles & Olson attorney D.
Barclay Edmundson represented Westinghouse Electric
Corporation in an age discrimination case. Close to the
time of trial, the plaintiff shifted his strategy from arguing that
there was discrimination against him individually to arguing that
the company's general hiring statistics proved a tendency to discriminate
against older applicants. Mr. Edmondson needed to discuss this new
emphasis with a statistician to determine if the applicant and hiring
data indicated any unexplained bias in favor of younger applicants.
Mr. Edmundson said:
“You recommended Dr. S. James Press, who
has an excellent background and who proved to be extremely responsive.
Although the time remaining before the projected trial date was
very short. Dr. Press dug into the figures and completed two regression
analyses in record time. I was also impressed with the dedicated
work of JurEcon’s research assistant, who reviewed many of
our clients' files to insure that the information for the statistical
analysis was accurate and reliable.
"Ultimately, Dr. Press determined that there was no statistical
correlation between applicants' ages and their rate of hiring by
our client. His analysis of the company’s hiring pattern was
very thorough and persuasive, notwithstanding the fact that he and
his assistant had less than a month to gather the information, conduct
the analysis and graph the results in a form which could he presented
to a jury.
JurEcon’s team was very professional in its approach to the
problem presented. Their work contributed significantly to the overall
trial preparation.” (1988)
Mr. Edmundson is now with Howrey Simon Arnold & White in Los Angeles.
WALL STREET JOURNAL: MMI SETTLEMENT
WILL REDUCE HEALTH CARE COSTS
“In a move expected to ripple through the multibillion dollar
medical equipment industry, General Electric quietly abandoned its
long legal fight keep small California company from servicing its
high-technology diagnostic machines. The battle against MMI Medical
Inc. of Pomona, California was widely watched by hospitals, health-care
agencies, and a burgeoning industry of third-party providers of
diagnostic and maintenance services. Some of them described the
settlement a “watershed” event. They predicted it would
open up competition in the service business, which has accounted
for about half of equipment makers profits and a large part of the
cost of radiology departments operating budgets.” Wall
Street Journal, 3/19/91.
MMI’s Chief Executive Officer, Dudley A. Rauch,
wrote: “The economic methodology and evaluation developed
by JurEcon played a significant role in our preparation for the
negotiation which resulted in our obtaining a favorable settlement.
Of particular importance to us was your ability to successfully
bring substantial resources to this situation on short notice. My
thanks go to Jane Arnault and others of your staff
who worked on this project.”
JurEcon on CBS Evening News
Channel 2 Action News interviewed JurEcon’s Dr. Jane Arnault and Dr. Leo Snowiss about
the usefulness and the benefits of jury research and trial strategy.
The Rodney King Trial and the attitudes of potential jurors in Simi
Valley was of particular interest. 1992
JurEcon in the Press
The Los Angeles Times, Orange County Edition,
called JurEcon in 1992 to discuss the effects a delay in a trial
could possibly have in favor of one side. Dr. Jim Press began writing an article formally analyzing this topic. The article
was published in Jurimetrics (Winter 1994) and presented
a probability model which addressed the perennial dispute about
whether a sudden interruption in a jury trial substantially affects
the outcome. Dr. Press concludes that "as the length of trail
interruption increases, the strength of a juror's belief about a
'guilty' verdict for the accused decreases..." Dr. Press argues
that even if jurors' opinions about guilt or innocence remain unchanged
during the hiatus, "their memories become less reliable...,"
making it more difficult for them to recall the facts and arguments
that led them to support the conclusions they had previously reached.
"...[T]he chances for a hung jury should increase...Furthermore,
after a hiatus in the trial, it will take quite a bit more evidence
to make the jurors feel confident about their decision. Lacking
this confidence, they may feel 'reasonable doubt' about their beliefs.
Delay appears to be on the side of the defendant..."
The Los Angeles Business Journal interviewed JurEcon
about developments in jury research, focus groups, and voir dire
The Daily Journal carried an article on the increasing
uses and roles of experts in litigation today. Much of the article
was based on an interview with E. Jane Arnault, Ph.D.,
President of JurEcon, Inc. 1992
Pro-Bono Work for Central District
Civil Justice Reform Committee
JurEcon assisted the Central District Civil Justice Reform Committee
last year when members sought assistance with structuring questionnaires
to be administered to federal judges, magistrates, attorneys, and
their clients. The results are now in, and JurEcon, led by Dr.
Ben Enis, will continue to assist this Committee, headed
by Don Smaltz, Esquire in quantifying the results
and suggesting reforms. There is wide concern that our legal system
become more efficient. 1992