Providing Economic Analysis Support for Revised Loss Calculation in Securities Fraud Sentencing

The US Attorney’s Office indicted a former public company executive for their role in a securities fraud matter involving the company’s financial reporting. The former executive pled guilty to multiple counts. 

NERA was retained by counsel for the defendant to provide expert economic analysis to assist the court in determining a reasonable estimate of the public shareholders’ losses attributable solely to the defendant’s conduct. For sentencing purposes, the government calculated the loss to the company shareholders using a hypothetical scenario in which the alleged misconduct had not occurred and estimated the resulting impact on the company’s market capitalization.

NERA filed a declaration with the court evaluating the government’s loss calculation, identifying multiple methodological flaws, and opining on whether the government’s chosen event study was appropriate and whether the calculation accurately incorporated the facts of the case. Notwithstanding the methodological flaws in the government’s analysis, NERA also presented alternative loss calculations, solely for purposes of correcting certain other errors in the government’s calculation, which had the effect of lowering the estimated loss. 

Following NERA’s declaration, the government presented a revised loss calculation lower than its original estimate and in line with NERA’s declaration. NERA’s work reflected in the court’s sentence.