Question 1 - A whistle-blower in her allegations made in a qui tam suit, alleged that her former employer fired her because she told the company that it was "padding the bills" to the federal government for the cost-plus contract it had to build ejection seats for fighter aircraft. She alleges that the company overcharged for materials, ran up labor costs, threw "all kinds of stuff in overhead," and illegally plugged corporate administrative costs into the contract billings.
As the forensic accountant hired by the U. S. Justice Department to litigate this case, answer the following:
a. What documents will you seek during the discovery to address the whistle-blower's allegations?
b. What are you looking for in each of the requested documents?
c. What will be the basis /foundation for the opinions you will provide in this case?
d. How will you utilize the whistle-blower in pursuing your opinions in the case?
Question 2 - Jamestown Electric has a contract with an agency of the federal government to provide electrical power to the agency for a five-year period. The contract stipulates, in part, that the power will be provided "at the lowest reasonable cost without compromising safety." In connection with this contract, Jamestown Electric buys and uses coal from its wholly-owned subsidiary Great Plains Coal Company. The sale of this coal to Jamestown Electric specifically for this contract represents 40 percent of the coal sales for Great Plains. The profit for Great Plains Coal Company during the life of the contract averaged $1.2 million per year.
Jed Jones, a former employee of Jamestown Electric was fired by the firm and immediately filed a qui tam suit alleging Jamestown had intentionally overcharged the government throughout the life of the power supply agreement.
a. You are the forensic accountant for the whistle-blower's attorney. What are the accounting issues in this case? What are the damages in this case? What documents and other information do you intend to seek? What is the basis for your opinion?
b. You are the forensic accountant for Jamestown Electric. What are the accounting issues in this case? What are the damages in this case? What documents and other information do you intend to seek? What is the basis for your opinion?
Question 3 - Up North Marina is and has been the only marina on Lake Woodward for the last 20 years. There have been numerous efforts to open other marinas during this time period. Each attempt, however, was unsuccessful. A recent lawsuit was successful in proving liability on the part of Up North Marina management is keeping many of those other marina operations off the lake. The court is now addressing the liability issue in this case.
a. You are the forensic accountant for the plaintiff in the case. What documents and other information will you seek to compute damages? What will be the basis for the damage estimate? What is your theory of damages, and what are the components of your damage model?
b. You are the forensic accountant for the defendant in the case. What documents and other information will you seek to compute damages? What will be the basis for the damage estimate? What is your theory of damages, and what are the components of your damage model? What are your plans to counter the plaintiffs' damage calculations?
Review questions:
When measuring lost profits or other damages, it is necessary for the plaintiff to:
a. Attempt to mitigate its damages.
b. Show that the defendant's actions clearly call for punitive damages.
c. Prove that fraud was involved in the case.
d. Prove that there was no liability in the case.
As a general rule it can be stated that:
a. Association and causation are two terms that mean the same thing as regression-correlation analysis.
b. Correlation shows association but does not prove causation.
c. Regression analysis shows causation and correlation analysis proves causation.
d. All of the above are correct.