Question Number: 159

Question descriptionUsing 100 words or more, please respond to the following post:The article I chose to write about is the Connecticut Bankruptcy Court's ruling in the Xerox Corporation Securities Litigation, this case is unique in court cases that in involve the use of expert witnesses, unlike other cases that use one this case uses three, each of the expert witnesses are financial and economic experts. Xerox is accused of allegedly artificially inflating its common stock after it misrepresentation of the impact of a reorganization of its Customer Business Organization,(CBO). Under the revised Federal Rules of Evidence regarding discovery the courts would focus on the merits of the experts testimony and opinions. Each of the experts were asked to opine in several aspects of the price inflation due to Xerox's misrepresentation.The first expert witness is a professor from New York University's Stern of Business, he was asked to quantify any artificial inflation in the stock price caused by the allegedly false and misleading statements made by Xerox. This expert employed several statistical anaylsis including an study that went from 1997 to 2000. He estimated that from 1999 the price of common stock was inflated by $8.72 and for a one month period in 1999 it was inflated by $4.84.The second expert witness is an investment banker and financial advisor, who was asked to determine whether its restructuring had a material impact on operations and if so were they known or hound have been known. This expert reviewed press releases, internal correspondence, and various documentation. His conclusion after review was that the CBO reorganization had material negative impacts on operations. He also concluded that statements made by Xerox were misleading in terms of the nature of the information presented also the information regarding the adverse effects of the CBO reorganization which was omitted.The third expert who was not identify as to his profession, but was asked if the public statements by Xerox durning its reorganization fairly described the effects of such restructuring which resulted in false and misleading public statements. Expert 3 was also asked state whether management knew of or recklessly disregarded any discrepancies. This expert pointed several wrong accounting practices and misstatements and concluded that they continuously concealed significant adverse restructuring effects in its public statements, thus these public statements were unreliable and deceptive cause it deprived investors of vital information.These expert witnesses were questioned on several areas that there assertions and opinions were not admissible due to there failure to use proper methodology and employ non-subjective approaches, and base opinions on sufficient facts and data. The three expert witnesses were argued to be dismissed by the defendant but ultimately the courts allowed the testimony of the first expert and the third expert was allowed but the second was excluded and the testimony was not allowed.An expert must demonstrate they have applied principles and methodologies consistent with generally accepted methodologies in their field of expertise.A Tale of Three Experts: Expert Admissibility in the Xerox Securities Litigation, NA, March 01, 2011, Retrieved from: www.stoutadvisory.com