Accounting Expert Allowed to Opine on Loss From a Failed Project

This case originally arose from Defendants Ainsworth, Inc.'s ("Ainsworth") and GDI Integrated Facility Services, Inc.'s ("GDI") (collectively, "Defendants") alleged failure to pay Plaintiff James C. Mooney, in his Capacity as the Representative of the Former Members of Enginuity LLC ("Sellers"), pursuant to the terms of a Membership Interest Purchase Agreement ("MIPA").

Plaintiff hired an expert, Brad S. Steinweg, to provide expert testimony in the case. Defendants sought to exclude Steinweg's opinion.

Accounting Expert Witness

Brad Stephen Steinweg earned his Bachelor of Science in Accounting from Messiah University. Steinweg is a Certified Public Accountant (CPA), licensed in Pennsylvania. He additionally holds certifications as a Certified Valuation Analyst (CVA) and a Certified Fraud Examiner (CFE). Steinweg is also a member of several professional organizations, including the American Institute of Certified Public Accountants (AICPA), the Pennsylvania Institute of Certified Public Accountants (PICPA), the National Association of Certified Valuation Analysts (NACVA), and the Association of Certified Fraud Examiners (ACFE).

Want to know more about the challenges Brad Steinweg has faced? Get the full details with our Challenge Study report.

Discussion by the Court

a. Qualification

Defendants argued that Steinweg is not qualified to offer opinions on forensic accounting in this case. Defendants provide two primary reasons for this position: first, that Steinweg previously denied being an expert in forensic accounting, and second, that an attorney from Plaintiff's counsel's firm previously sought to preclude expert testimony from Steinweg.

Regarding its first argument, Defendants directed the Court to testimony Steinweg gave in an Adams County Court of Common Pleas case. However, the Court does not know the context of Steinweg's testimony in that case and has no way of knowing whether Steinweg's testimony and expert opinion in that case provide any analogous facts to the instant case.

Nor are Defendants correct that the Court should give weight to arguments by Platiniff's counsel's firm in a prior, unrelated case.

Turning to Steinweg's actual credentials, he holds a Bachelor of Science in Accounting and is a Certified Public Accountant, with additional certifications as a Certified Valuation Analyst and Certified Fraud Examiner. He has years of experience in the accounting field and has served as a qualified expert in cases across the Commonwealth. Accordingly, the Court found that Steinweg is qualified to offer an expert opinion.

b. Reliability

First, Defendants challenged Steinweg's conclusion that a directive issued by Ainsworth materially impaired Enginuity's ability to reach its adjusted EBITDA target for 2024. Defendants' main dispute with this opinion in Steinweg's report is that it is based on assumptions and information from Mooney.

Plaintiff acknowledged that Steinweg does rely on information from Mooney but argued that Steinweg independently reviewed this information and that his opinions reflect his review of testimony from various individuals, email communications, and schedules and reports prepared by Defendants' employees.

While Steinweg does rely on evidence from Plaintiff, the Court agreed with Plaintiff that this is not the only evidence on which he relies. Steinweg's report considers, for example, email communications and testimony from other witnesses. He also purports to consider and opine on this information in accordance with accepted accounting and consulting methodology - a claim which has not been challenged by Defendants.

Defendants also challenged Steinweg's opinions regarding how the loss from a failed project - known as the Mars Project - was allocated. Plaintiff noted that experts from both parties agree the relevant accounting standard requires a contract loss to be recognized as soon as the loss becomes evident.

Plaintiff argued that in addition to the email referenced by Defendants, Steinweg also reviewed deposition transcripts and Enginuity schedules which support his opinion that the loss was knowable by February 2024. Plaintiff further argued that Defendants challenged Steinweg's application of the facts but did not challenge his methodology.

Plaintiff has shown that Steinweg has relied on sufficient evidence to support his opinion that the loss from the Mars Project was knowable by February 2024 and thus should be allocated on the 2023 financial statement. Defendants are not challenging the methods or processes used by Steinweg or even really arguing that his opinions are wholly unsupported by evidence. Instead, they take issue with the sufficiency of the evidence on which he relies and argue they have better support for their conclusions. This is not enough to preclude Steinweg's opinions, and these arguments would be better addressed on cross-examination.

Held

The Court denied Defendants' motion to exclude the testimony of Plaintiff's expert Brad Steinweg.

Key Takeaway

Vigorous cross-examination, presentation of contrary evidence, and careful instruction on the burden of proof are the traditional and appropriate means of attacking shaky but admissible evidence.

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