Electronically Stored Information: The Case Study
By Kelly J. Todd and Jeffrey Windham
You might not think that a small business would have useful or accessible electronically stored information (ESI). Consider this example of identifying and obtaining relevant forensic evidence to determine lost profit damages with this particular small business.
Green Fuel (“Green”) was a small gasoline distributor who provided fuel to local gas stations. Green was owned by a gentleman in his late seventies. He did not use a computer and his limited oﬃce staﬀ included two oﬃce administrators, an accounting clerk, and a manager.
Green was a defendant in a state court case where numerous claims were made by Morris, a gas station owner. Morris alleged that Green overcharged him for fuel delivered to Morris’s two small-town gas stations during an eight year period.
Morris claimed that Green failed to transact business pursuant to their contract, and as a result, Morris suﬀered economic damages of $1 million dollars arising from overcharges and a failure to share proﬁts as speciﬁed by their contract.
At ﬁrst glance, both parties appeared to have inadequate documentation of fuel deliveries and payments. The only documentation maintained by the gas station owner, Morris, was some sparse paper receipts and logs regarding fuel delivery.
Moreover, Morris’ stations used unsophisticated point-of-sale cash registers and did not utilize a computer system to maintain accounting records or other records of fuel deliveries. Morris said in his deposition testimony that he relied on Green to keep detailed records of fuel orders and deliveries which allowed Green to overcharge him.
Green’s documentation of fuel deliveries was only slightly better than Morris’. Although Green used an antiquated DOS-based computer system to maintain limited accounting records, Green’s management vehemently maintained that no electronic record existed of fuel delivery or receipt of payment.
Left with such sparse information to determine losses, the attorneys for both parties were highly doubtful that any meaningful analysis of the transactions could be conducted.
The Green case epitomizes not only the challenges faced in extracting useful forensic evidence in small business lost proﬁt cases, but also the need for persistence in seeking ESI.
The ESI challenge is rarely accomplished through force or the use of highly technical jargon; rather, success will come through an understanding and observation of the key personnel’s daily routines, which we’ll discuss in next week’s post.
Adapted from: “Unlocking the Potential of Electronically Stored Information in Damages Cases.” Dunn on Damages – The Economic Damages Report for Litigators and Experts 4 (2011): 20-21. For more information, visit http://www.valuationproducts.com/dunn.html
Forensic Strategic Solutions, P.C. is a national financial investigation firm specializing in fraud examination and investigative financial consulting services for businesses and organizations across numerous sectors, including insurance companies, accounting firms, law firms and legal entities, government agencies, and corporate stakeholders.