Analyzing
Organizing
Preparing

Complex Financial Cases for Trial

Stephen J. Harhai

Introduction

A complex financial case presents multiple challenges.
bulletThe legal issues are likely to be quite complex, involving detailed analysis of a large volume of primary and secondary legal reference material.
bulletThe sheer volume of factual data may be overwhelming, encompassing boxes of financial reports, expert evaluations, tax records and transaction histories.
bulletThe theory building portion of the case will be more involved than usual, because the complex case will not fall neatly into established categories.

These challenges, and the corresponding opportunities to secure a competitive advantage for the client, require experience and creativity. But even the most experienced and creative lawyer can't do great work if the weight of the case details isn't managed effectively.

Key Skills for Case Preparation

There are two key skills in case preparation.

Analysis

Analysis is often thought of as the real fundament of lawyering. It involves determining the facts, finding the applicable law and creating a web of meaning from their interrelationship. It is usually the most fun and provides the most value for the client.

Organization

Einstein said: "The more I learn, the more I realize how much I don’t know." Harhai’s corollary is: "The more I learn, the less I can find of what I know." All of us constantly reinvent the wheel and waste countless hours because we have no effective means of accessing information that we have previously found and solutions that we have already created. Technology is a fine tool for capturing and organizing the priceless treasure of our best ideas and producing them on demand like an obedient genie.

Tools are Important

Your basic skill set is already in place. Your analytic and organizational skills should gradually improve over time with experience and practice, but you probably won't see dramatic changes. On the other hand, the tools you use to support your analysis and organization can produce dramatic changes instantly.

Tools can improve your case preparation in three basic ways.
bulletThey can make the structure of information clearer so that it is easier for you to understand it and to explain it to others.
bulletThey can make the information more easily accessible so that your thinking is not impeded by lack of crucial information when you need it.
bulletThey can speed up analytic tasks so that you can consider more alternatives and find optimum solutions more quickly.

Spreadsheets

Dividing the dollars is an important but sometimes laborious process that can consume a great deal of time and effort. A computer spreadsheet is a tool designed specifically to reduce the time and effort involved in financial calculations. With some planning and thought spreadsheets can reduce effort and improve results for lawyers and judges alike.

Spreadsheet Primer

The magic involved in spreadsheets is the ability to calculate and recalculate automatically, saving a lot of time and effort. This is accomplished by using formulas to perform calculations. For example, you might insert a formula that adds all the values in a column to create a dynamic total that changes when any of the values change.

Formulas can be quite sophisticated, including items like conditional calculations and the time value of money. The art of spreadsheet design involves using good layout and formulas to create an easy to use and easy to read presentation.

Divorce Examples

Take a typical list of marital property. The list may include dozens of items, many of which have uncertain or changing values. The manual method to track the assets and changes requires inserting new values and adding the entire column each time a value changes, wasting time and increasing the chances for error. A spreadsheet solution would look something like the following.

The assets are listed once with the best estimate of value at the time. As things change—new appraisals or market changes—the values can be changed in one place and the totals automatically recalculate.

Note that the example above goes beyond simply adding the columns. Since we have the calculation power of the spreadsheet at our disposal, we might as well do some additional calculations as well. We can add a column for debt associated with an asset to reduce its value. We also know that some assets have tax liabilities associated with them, so we can assume a tax rate to account for the anticipated tax. These adjustments make our values more realistic and useful for the task of dividing assets. These enhanced calculation capabilities are particularly useful in the complex financial case where the comparison of alternatives is essential. For example, there is often a trade off between periodic deductible payments and lump sum, tax-free payments. This comparison involves the calculation of the time value of money, tax effects on payments and potentially some discounting for risk. Effective comparison of this type can only be performed on a finely tuned financial model in a spreadsheet. The above is an example of how a cashflow financial model might look.

Here are some other tasks that spreadsheets perform well.
bulletChild support calculations.
bulletCashflow calculations showing spendable cash after child support, alimony and taxes.
bulletPresent value of pensions.
bulletProjections of future net worth based on assets, income, taxes and expenditures.
bulletMathematical models of valuations for businesses and professional practices.
bulletRecalculation of publicly traded securities from the Internet.

Updating values of securities from the Internet is an incredible time saver in large asset cases. You create a list of the securities using ticker symbols in the spreadsheet. Then enter formulas to create the values you need. For example, the current value of a stock that is all marital is simply the number of shares multiplied by the current price. More complex formulas can be devised to take care of other circumstances, such as assets that are part marital and part separate, adjustments for stock splits, etc.

Once the values are entered, they look something like this:

Using the spreadsheet as an organizational tool requires an initial investment of time in learning the operation of the program. The tremendous analytic power provided will repay the investment many times over.

 

Spreadsheet Checklist

Here are some things to watch for when using spreadsheets:
bulletThe spreadsheet can’t be any better than the underlying data. Be sure to check the accuracy of the figures entered in the spreadsheet.
bulletErrors in the formulas can be hard to detect. Review the sheet to make sure that the computations pass a "sensibility" review.
bulletDon’t be more skeptical of data because it is on a spreadsheet. Witnesses constantly make assumptions in testimony, just as spreadsheets are based on assumptions. The key in both instances is to understand what the assumptions are and whether you agree with them.
bulletWhen you create spreadsheets, always try to make them reusable. After putting in the work to create formulas and formatting, you should make the sheet generic enough so that you can apply it to similar problems.

Thinking and Technology

The need for thinking tools stems from the strengths and weaknesses of the mind. Humans are very skilled at recognizing patterns, creating abstract relationships and integrating disparate data. We are not very good at keeping large amounts of detail information organized for ready retrieval. While it is possible to use memory tricks like visualization and acronym cascading to improve detail manipulation when necessary, generally the better solution is to use an external memory and organization aid. This is succinctly summarized in the saying, "My dull pencil is better than your sharp mind at remembering."

This is the reason that all lawyers use tools as an aid to thinking. It may be notes for witness examination scribbled on a legal pad, a white board listing case issues or a well organized trial notebook. In each case, the physical tool is intended to organize and retrieve information as well as to aid in analysis and understanding. These tools work, but they have limitations. The effort required to change or restructure the information is substantial and these tools tend to be primarily linear in organization.

The linear vs. multidimensional issue also relates to the way the brain is organized. The storage method used by the brain is nothing like the lists of items or strings of text that we typically use for storing information on paper. The brain creates memories from networks of connections between cells that form multidimensional arrays. Perhaps for this reason, people are much more adept at recognizing graphical patterns than extracting information from text. For proof of this concept one need only look to the total dominance of modern graphical user interfaces on computers over the older text based interfaces. The ability to see and manipulate graphical images is a much easier system for the brain.

Take a list of cross-examination questions as an example. The ideas for the examination may come in random fashion and at different times. If the lawyer is superbly organized they may all get on the same pad or notebook. More often, they will be scattered over bits and pieces of paper in a rather haphazard fashion. When the time comes to begin the actual outline for the examination, the bits and pieces must be recopied to a new pad or notebook. If any creativity is to be applied to the examination, the questions will be modified many times and whole sections of the examination will be moved around to improve the effect of the examination. Each major change requires a complete rewrite.

The obvious first step is to put the examination in a word processing file as early as possible, making changes and moves much easier. The next incremental improvement is to use the outlining function of the word processor to aid in organization, comprehension and revision.

The outliner is exactly like the outlining process you learned in grammar school, but much easier. Each major topic has its own heading and subsidiary topics can be collapsed to create a simplified overview of the document. This is a great way to keep perspective on the big picture while working on the details. An outline topic can also be moved with its subtopics to reorganize the flow of the document.

As helpful as outlining can be, it suffers from many of the same limitations of paper-based tools. It is inherently linear in nature and it is difficult to portray or understand the relationships between pieces of information other than in a strict hierarchical arrangement. To get beyond these limitations we need to move to a new crop of multidimensional tools.

Multidimensional Tools

Multidimensional tool is my term for software tools that facilitate the organization and analysis of ideas by graphically representing the relationships between ideas. Much of the thinking in this area has its origins in the work of Tony Buzan who developed the concept of mindmapping in the 1970's. Mindmapping takes as its premise that people process graphical information more efficiently than text. Take the task of traveling to an unknown location. Most people would find it much easier to grasp the process of reaching the destination by examining a map than by reading a series of instructions. Buzan attributes the ready assimilation of graphical information to the way the brain organizes information. Our memories are stored in a network of associations, grouped by proximity. When we learn a new fact or skill it is not written on a clean sheet of paper, but rather overlaid on preexisting similar stores of information. That is why it is often easier to learn additional elements in a field already mastered.

The key element is that the brain does not organize information in a linear fashion, one element after another, but rather clumps similar information together with new ideas building on the old. This systems places great emphasis on the relationships between ideas, which is wholly lacking in paper and pencil systems. Multidimensional tools overcome this deficiency by allowing a visual representation of the relationships between ideas.

Daily life abounds with examples of the power of visual representation of ideas. Newspapers and magazines are filled with charts, diagrams and illustrations of key ideas in the stories. Textbooks likewise rely heavily on visual communication to explain complex concepts.

Practical Applications in Law

How does this actually work in the practice of law? Lets take the structure of litigation as an example. Here are the basic elements you have to work with:

Arguments ? Witnesses ? Exhibits ? Law ? Facts ? Strategy

Within each of these elements we can identify subtopics. After adding subtopics, the outline would look like the following.

1. Witnesses

1.1 Themes

1.2 Issues

1.3 Questions

1.4 Prior inconsistent

1.5 Evidence rules

2. Exhibits

2.1 Theme

2.2 Issue

2.3 Relate to fact

2.4 By witness

2.5 Admitted

2.6 Evidence rules

 

3. Argument

3.1 Themes

3.2 Issues

3.3 Standard

 

4. Facts

4.1 Theme

4.2 Issue

4.3 Track needed

4.4 Track proven

4.5 By witness

4.6 Relate to standard

 

 

5. Law

5.1 Standard

5.1.1 By issue

5.2 Rules

5.2.1 Evidence

5.2.2 Trial order

5.2.3 CRCP

6. Strategy

6.1 Themes

6.2 Issues

6.3 Facts

6.4 Law

6.5 Goal

 

 

The outline gives us an overall structure, but we still lack an easy way to grasp the relationships between the ideas. We can add a visual representation of the relationships by using a Buzan-style mindmap.

Now we have a visual sense of how the elements fit together. For most people, it is easier to grasp the relationships and overall structure in this format than in the linear format of an outline, and much easier than wading through a dense textual description.

Putting it in Practice

How do you actually make these ideas work? You already have an outliner built into your word processor. Both Word and Wordperfect have very adequate outliners. Word goes a step further by creating clickable outline map of your document that allows you to see the structure in a left side window and instantly navigate to any topic by clicking on the outline.

In either program you can immediately begin structuring your case by starting a case plan document with top level heading for the issues in the case. Then you can go back and fill in detail as you get facts or think of new ideas. The outline makes it easy to zoom in or out for greater or lesser levels of detail. You can also collapse all but one area to focus your thinking. When you run out of steam in an area, collapse to top level topics and look for another area that you can add to. This approach generates ideas by allowing you to concentrate on different aspects of the case with minimal effort.

Mindman

To move to the multidimensional tools will require a modest investment in additional software. Mindmapping was invented before personal computers existed and was therefore originally a paper and pencil exercise. Even in that format, mindmapping can be a useful tool for organizing and understanding ideas. It particular lends itself to complex financial cases where it is easy to lose the forest for the trees. The mindmap gives an instant overview of a case by taking advantage of the brain's inherently superior processing of images. Concepts and relationships that would take considerable time and effort to absorb from plain text are immediately clear when presented in an intelligent visual format.

The problem is that mindmapping is unduly labor-intensive for complex projects because of the effort involved in reorganizing and adding new material as a complicated structure evolves.

This is a perfect problem for a computer solution because of the inherent ability of the computer to create the maps in easily modifiable silicon memory rather than paper. With a computer mindmap the first effort is simply the beginning of multiple iterations that incrementally refine and expand the concepts until the map reflects the clearest and best thinking of the creator. Take this example of a case plan:

 

The mindmap above was created with Mindmanager, an easy and versatile mindmapping tool available on the web at www.mindman.com. There is a fully functional trial version online for download. Mindmanager is a very comfortable and powerful tool because it handles the details of the map layout while allowing considerable flexibility in creating a structure that communicates well. The ability to quickly and easily add graphics dramatically increases the impact and usefulness of the map.

The Brain

A different elaboration of the visual thinking tool is a software product called The Brain. The Brain also uses the visual organization concept unconstrained by the limitations of paper. The visual structure exists only on the computer so it is possible to create elaborate linking structures that are easily navigable and provide multiple views of the data. Our litigation structure would have a top level view like this.

You can link views in virtually unlimited ways, connect to files and generally create a pattern of knowledge as complex as necessary to represent and analyze your case. Brain's creator, Natrificial, has the same download and try program available at their website: www.thebrain.com. One limitation of The Brain is that you have very little control over layout, and in fact, it changes constantly as you add new ideas. This gives up some of the power of linking an idea to a particular physical location.

 

Decision Explorer

Decision Explorer is another visual tool, but with a different approach than the Mindmanager mindmapping paradigm. Decision Explorer is based on cognitive mapping. The most obvious difference is that unlike mindmaps, cognitive maps can have multiple start points and frequently loop back to create complex networks of interconnection. The documentation asserts that Decision Explorer is particularly useful for attempting to structure "messy" problems in research, an apt description of most legal entanglements.

By laying out the key elements of the problem with terse descriptions, then charting the connections between the elements with links, patterns begin to emerge that would be difficult or impossible to spot using traditional methods. The example below is part of a cognitive map that I have developed as part of a project to understand the systemic problems in the existing divorce procedures.

Once the concepts are laid out in the map, Decision Explorer can analyze the importance and relationships among them through the use of a command language. For example, commands can tell you how "central" a given concept is or find all "orphan" concepts that have no links to other concepts. In addition, by creating sets of concepts, you can selectively add and subtract categories. For example, you could create sets of assets that were actively managed and passively managed, or liquid and illiquid assets.

Decision Explorer is distributed by Sage Publications and information and a trial version can be found on the Web at www.sagepub.com/sagepage/SOFTWARE.HTM

 

Organizing and Retrieving with Lotus Notes

Analyzing the case is very important, but it is only half of the battle. To actually perform the analysis or present the case, you have to lay your hands on the raw material of the case, the documents, interview notes, depositions and other primary source material that supports your theory of the case. The category of software that supports this function is often referred to as case management software. There are commercially available, special purpose tools that do a creditable job of organizing your case. If you find one that performs the functions you need and suits your personal style, the law oriented tools are the least expensive, simplest way to solve the problem.

My experience several years ago was that no legal-specific program did everything I needed. I therefore created a case management system from scratch using Lotus Notes. While you would probably not want to undertake this rather complex task unless you have a great interest in programming, it is possible to hire a Notes consultant to customize a system to your specification. In any event, the methodology will be instructive as to the functions a good divorce case management system should perform.

 

The Right Information to the Right People at the Right Time

An efficient law office delegates work to the most cost-effective provider. At a given time, several attorneys and paralegals may (and should) be working on the same case at the same time. How does each service provider keep up to date on the case to avoid reinventing the wheel and appearing incompetent because of lack of access to information someone else has obtained?

Typical strategies to cope with information sharing are staff meetings and circulating memos. Both of these options take a great deal of time and still are passing on information that is somewhat stale.

Electronic Case File

The strategy we use to share information quickly with minimal effort is an electronic case file system that we developed in Notes. Here is how is works.

We create an electronic case file for every new client, much as you would create a new paper file. The electronic file, however, is always instantly available to everyone simultaneously, is never incomplete or out of date and allows electronic searching for information in the file.

Each file has the following views (similar to the index in a paper file):

bulletIssues
bulletFacts
bulletPleadings
bulletChronology
bulletLegal Authority
bulletCorrespondence Sent
bulletCorrespondence Received
bulletDocuments
bulletNotes
bulletExhibits
bulletIdeas
bulletWitnesses

 

Let’s track what happens when a document comes into the office. The receptionist scans it into the appropriate file (Smith, pleadings, for example) using a scanner and software. Notes then automatically sends email messages to each person working on the Smith case saying that a new document has arrived and including a link to the new document. By pointing at the link on screen the new document instantly appears.

Let’s recap what has been accomplished here. The paper document is converted to electronic form and is safely stored in an archive. It doesn’t circulate, get coffee spilled on it, get lost or marked up. Everyone associated with the case has gotten immediate notification of the arrival of a new document and has instant, simultaneous access to it. Furthermore, the next time the document is needed, to prepare a reply for example, it is available right where you need it without going to the file room or rummaging through desks and inboxes to find it. Once it's located, any part of the document can be processed by optical character recognition software (OCR) to convert it to useable text, to quote a section of a pleading for example.

The other major source of input to the electronic case file is notes of meetings and telephone conversations. When we start a phone conversation we open a document in the electronic case file for the client and begin taking notes on the keyboard (all of our phones are equipped with headsets to facilitate typing). For meetings, we have a conference table with a connection to our network and we take notes on a notebook computer. When the note is closed, an email is sent to all staff on the case with a link to the note. The net result is that everyone has immediate access to the most timely information about the case.

It’s a simple matter to update a remote copy of the client file anywhere in the world because that capability is built right into Notes. You can work from home, your hotel room on the ski slopes, or on a beach in Hawaii.

Above is an example of the kind of analysis that can be done when the case elements are presented in a Notes view.

When you are ready to get started improving the way you handle complex financial cases, don't worry about doing it all at once. Pick a tool that appeals to you and learn to use it effectively. Then add others as your time and interest dictate. You will soon wonder how you got along without them.

 

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