Lost profits analysis applied to fraud and embezzlement litigation: methodology, deliverables, and case-specific considerations.
Beyond the amounts taken, a fraud or embezzlement can starve a business of working capital, cause defaults, or interrupt operations, and those consequential losses can exceed the direct loss. The economist quantifies the lost profits from the business's financial records, links each element to the diversion with the causal chain explained, separates the effect of the fraud from market conditions and other causes, and presents the consequential loss alongside the amounts traced so the two are not confused. Interest, penalties, and the cost of replacement borrowing are included where the records support them.
Lost profits and related commercial damages for contract, business-tort, and business-interruption matters. The analysis builds the but-for revenue and cost path from the company's own history, its market, and the terms of the disputed relationship, links each claimed loss to the conduct at issue, addresses mitigation, and reasons through the period of loss so the damages figure answers the causation question as well as the amount.
The claim consists of the amounts diverted, reconstructed transaction by transaction from bank records, the general ledger, payroll, vendor files, and supporting documents; the consequential losses the diversion caused, such as lost profits when funds were unavailable to the business, penalties and interest, or the cost of borrowing to replace the funds; the cost of investigating and remediating the scheme; and, where the assets were converted into property or other holdings, the current value of what the funds bought. The drivers are the completeness of the bank and accounting records, the accounting system's audit trail, and third-party records that confirm or contradict the internal books.
We issue the final report and provide deposition and trial testimony and rebuttal of opposing damages models.
The direct loss is the amount diverted, established transaction by transaction. The consequential loss is what the business lost because those funds were unavailable, measured from the financial records with the causal link stated. The report presents the two separately so counsel can plead and prove each on its own record.
The economist analyzes the business's results against its market and its own history to separate the effect of the fraud from other causes, and states what portion of the shortfall the records attribute to the diversion. Where the separation cannot be made cleanly, the report says so.
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