Economic Analysis of Loss in the United States Sentencing Commission's Proposed Methodologies

Wed Feb 08 15:24:38 EST 2012
By Dr. David Tabak

On 19 January 2012, the US Sentencing Commission asked for public comment on various topics, including calculations of loss in securities fraud cases. In this NERA working paper, Senior Vice President Dr. David Tabak argues that, if they are to be reasonably accurate, the determinations of loss in cases involving securities fraud must necessarily be somewhat complex because different types of fraudulent schemes result in different types of losses. The paper examines the four methods discussed in the Commission’s request for comments, showing how they can either underestimate or overestimate losses depending on the fraudulent scheme involved. Dr. Tabak then outlines a method that will tend to reduce the degree of inaccuracy, noting, however, that no generic method will be appropriate in all scenarios. Dr. Tabak also explains that, while even more accurate calculations may involve some complexity, there is a rich history of such analyses in civil cases involving securities fraud, as well as a history of case law providing guidance on the types of analyses that experts have performed in order to survive Daubert challenges and to convince a court of the correctness of their conclusions.