Accounting Expert Allowed to Testify Despite Lacking Forensic Accounting Expertise
Posted on March 21, 2025 by Expert Witness Profiler
This case involves a dispute over the alleged misuse of funds from two New Mexico payday lending businesses, Cashco, Inc. and Budget Payday Loans, L.P. The Light Defendants (John Ernest Light, Tina S. Light, and Investors Services, Inc.) were hired to manage the financial operations of these businesses, including record-keeping and transaction processing.
They were given access to the operating accounts in exchange for a monthly fee. The owners of the businesses (Randall C. Roche, Ronald Tsuchiyama, Michael Harada, and William Montelongo), through their entity HiTex, LLC, claim that the Light Defendants abused this access, diverting approximately $360,000 for their own use, rather than distributing it to the rightful owners. HiTex, LLC, has filed a lawsuit asserting claims of breach of contract, breach of fiduciary duty, conversion, fraud, unjust enrichment, and negligence, seeking $320,000 in damages.
Plaintiff sought to exclude the opinions and testimony of the Light Defendants’ retained expert, Ted Blodgett. The Light Defendants, in turn, sought to exclude the opinions and testimony of Plaintiff’s retained expert, David Bloom.
Accounting Expert Witnesses
Ted Blodgett, managing partner of Gray, Blodgett & Company, PLLC, possesses 30 years of public accounting expertise. He specializes in tax planning, business valuations for estate and gift tax, and litigation support. A seasoned expert witness, he regularly testifies in Oklahoma courts on complex accounting and tax matters, including marital dissolution.
David Bloom has over 40 years of public accounting experience as a private business executive, business consultant, and forensic accountant, has served as Chief Financial Officer, interim Chief Financial Officer, and consultant to private businesses of various sizes on matters of taxation, accounting policy, and audit. He is an active Certified Public Accountant in the State of Oklahoma, license number 15384 and a graduate from Southern Nazarene University.
Discussion by the Court
The Blodgett Motion
Blodgett is Qualified to Offer his Opinions
Blodgett’s expertise is unchallenged by the Plaintiff, and the Court confirmed that Blodgett’s accounting and valuation background qualified him to provide expert opinions.
Blodgett’s Opinions are Sufficiently Reliable
Plaintiff argued that Blodgett’s analysis is flawed, claiming he failed to adequately consider the case’s documents and evidence. Specifically, they criticized his hypothetical, stating that “Plaintiff cannot have suffered damages if a distribution was recorded as a distribution payable and then later distributed,” rendering his opinions “inconsistent with the evidence produced.”
The Light Defendants countered that the Plaintiff’s interpretation of Blodgett’s hypothetical “are contrary to Blodgett’s own explanation of his hypothetical.” They further asserted that Blodgett’s limited scope of work justified reviewing only a “narrow set of documents,” and therefore, any omissions affect “the weight of Blodgett’s testimony, not its admissibility.”
The Court concurred with the Light Defendants. It found that the Plaintiff’s concerns primarily address the weight of Blodgett’s testimony, not its admissibility. The fact that Blodgett did not review all evidence deemed relevant by the Plaintiff does not automatically disqualify his testimony. The Plaintiff retained the right to challenge Blodgett’s analysis during cross-examination.
Given the limited scope of Blodgett’s testimony, the Court concluded that his conclusions are reasonably based and will aid the fact-finder. The Plaintiff’s objections pertain to the “weight of Blodgett’s testimony” and are more appropriately explored during cross-examination at trial.
The Bloom Motion
Bloom is qualified to offer his opinions
The Light Defendants contended that although Bloom may possess general accounting qualifications, he lacks the specific expertise in “forensic accounting, financial forensics, and/or fraud investigation” necessary to testify in this case. Consequently, they argue that his opinions should be excluded. Conversely, the Plaintiff asserts that Bloom’s “rigorous education” as a Certified Public Accountant qualifies him. Furthermore, addressing the Light Defendants’ claim of insufficient specialized knowledge, the Plaintiff cites the Association of International Certified Professional Accountants, stating that “all CPAs, including Bloom, possess the specialized knowledge and investigative skills required to perform forensic accounting services.”
Ultimately, after reviewing Bloom’s report and deposition testimony, the Court, even though acknowledging it’s a close decision, finds Bloom qualified to offer opinions on the topics presented. Indeed, while Bloom may not have the specific forensic accounting credentials the Light Defendants deem crucial, this perceived deficiency relates to the weight a jury should assign to his testimony, rather than its admissibility. Therefore, the Court determines that Bloom is qualified by knowledge, skill, experience, training, or education to provide the opinions outlined in his report.
Bloom’s Opinions are Sufficiently Relevant
The Light Defendants further argued that, in their view, Bloom’s opinions lacked relevance, asserting they did not “fit with the issues of this case.” In particular, they claimed Bloom addressed matters beyond the “four (4) transactions giving rise to the distributions allegedly owed to the Owners and the damages the Owners sustained in not receiving those distributions.”
On the other hand, the Plaintiff maintained that Bloom’s challenged opinions are relevant to demonstrate “that Defendants no longer have access to the funds intended to be used for distributions and, therefore, such distributions cannot be paid to Plaintiff.” Furthermore, the Plaintiff asserted that Bloom’s opinions bolster their theory that the Defendants commingled funds, effectively rendering them untraceable.
Ultimately, after careful consideration, and for reasons largely consistent with those discussed later, the Court deemed Bloom’s opinions sufficiently relevant. To be sure, the Light Defendants retained the right to scrutinize the perceived weaknesses in Bloom’s analysis during cross-examination, particularly regarding the four transactions outlined in the Complaint, or any other perceived deficiencies. Nevertheless, the Court is convinced that Bloom’s testimony is “sufficiently tied to the facts of the case [such] that it will aid the jury.”
Bloom’s opinions are sufficiently reliable
The Light Defendants then argued that Bloom’s opinions lacked reliability, claiming they did not “rely upon any explained methodology.” Specifically, they criticized Bloom for failing to “connect the dots between the materials he reviewed and his own education or experience to then detail the supporting bases for his opinions.”
Conversely, the Plaintiff asserted that “any trained CPA with Bloom’s experience and education would be able to conduct the same analysis Bloom had done with the same documents.” Moreover, the Plaintiff contended that, because Bloom had based his opinions on both his experience and the case’s documents, rather than solely one or the other, his opinions were sufficiently reliable.
Ultimately, after careful consideration, the Court determined that Bloom’s opinions were sufficiently reliable, and that the Light Defendants’ arguments pertained to the weight of those opinions, not their admissibility. In essence, the Court disagreed with the assertion that Bloom’s report “was unreliable because [he] either did not employ or failed to disclose any particular methodology.”
Held
- The Court denied the Plaintiff’s Daubert motion to strike the testimony of Defendants’ expert witness Ted Blodgett.
- The Court denied the Defendants John Ernest Light, Tina S. Light, and Investors Services, Inc.’s motion to exclude the testimony of the Plaintiff’s expert witness David Bloom.
Key Takeaway:
Despite challenges regarding the scope of reviewed materials, specialized expertise, relevance, and methodology, the Court found both experts, Blodgett and Bloom, qualified to offer their opinions. The Court emphasized that critiques concerning the experts’ analysis, including perceived omissions or methodological shortcomings, primarily affect the weight of their testimony, not its admissibility. Consequently, the Court deemed cross-examination the appropriate venue for addressing these concerns, ensuring the jury could properly evaluate the experts’ credibility and the strength of their conclusions.
Case Details:
| Case Caption: | Hitex, LLC V. Vorel Et Al |
| Docket Number: | 5:21cv1125 |
| Court: | United States District Court, Oklahoma Western |
| Order Date: | March 20, 2025 |
