Steering clear of the 'expert' trap

Steering clear of the 'expert' trap

Steering clear of the

In this issue, we introduce you to the potentially lucrative world of providing expert analysis and testimony as a broker. What better way to cap that discussion than with a candid Q&A featuring the one of the industry’s leaders in that niche area. In fact, with 10 years of expert testimony under his belt, David O’Gorman, broker/owner of MortgageLand Inc. in Markham, Ont., know all the challenges waiting to ensnare brokers looking to enter that arena. He also has some tips for those looking to come through the process without a nick. Rule one: Know what you’re talking about.

CMP: How did you become involved in providing expert testimonies?
O’Gorman: It’s not something you wake up one morning and decide “Today I am going to be an expert witness.” What you are offering is your opinion based on experience, so in my case it’s 35 years of mortgage lending, including 10 years in banking, 25 years owning a brokerage, 25 years of teaching something in the order of 16,000 real estate agents, brokers and appraisers, and developing educational courses, including one on preventing real estate fraud, and participating in a number of professional boards, associations and committees. After writing a number of expert reports I was finally put on the stand to give testimony and was acknowledged by the courts as an “expert.” I am an “overnight sensation” that took 25 years to develop.

CMP: What was the first file that you worked on?
O’Gorman: About ten years ago, one of my teaching colleagues at the Ontario Real Estate Association recommended me to a lawyer looking for someone to provide an opinion in a case where a mortgage agent had put together a fraudulent transaction and submitted it to an institutional lender. Subsequently the lender had the property appraised, approved the deal and advanced the funds to a lawyer to close. At the closing, the lawyer was given fake ID by the fraudsters. The institutional lender was suing the lawyer and the mortgage brokerage to recover the total mortgage, about $200,000.

I was hired by the Law Society’s E&O insurance company’s lawyers. My job was to review the documents from examination for discovery, including those submitted by the broker, plus the FIs underwriting docs.  My report outlined the lack of supervision of the agent by the brokerage, the fact that the FI’s underwriter did not catch inconsistencies in the CB report and the fact that the underwriter wrote up the deal like it was an owner-occupied property, yet twice in the appraisal report the appraiser noted that it was a rental property. Ultimately, the court found the lawyer responsible for 20 per cent of the loss, the brokerage 30 per cent and the lender 50 per cent.

CMP: What kinds of challenges do you face in doing this work?
O’Gorman: There are dozens of challenges in every case. First and foremost, Is the lawyer who is hiring me someone I can work with? They are the quarterback calling the signals to some extent, but as the expert you might not run the pattern they call. There can be conflict. Second, is ensuring I don’t have any conflicts of interest with any of the parties involved in the litigation. Have I done significant business with a private lender, or do I own any shares in the FI? Are there any close friends or relations involved? You have to be independent and avoid any appearance of conflict of interest. Next and this is often a “deal killer,” What is the timeframe within which the lawyer wants the report? In many cases an expert is brought in just before the case goes to court or arbitration as an aid to mitigating a loss either side may anticipate. You may have less than a month from beginning until you provide your completed opinion.

For example, in August, I agreed to provide a report within three weeks in a case where a private lender was suing a mortgage broker, an appraiser and a lawyer for several million dollars. In those three weeks I had to read and re-read more than 2,000 pages of documents from examination to discovery, looking for information and inconsistencies, evaluate the allegations against the mortgage broker in relation to the laws and regulations in effect at the time the incidents occurred and write two drafts of my report. There were several mornings I was in my office until 2 or 3 a.m. working on that file as well as working on it throughout the Labour Day weekend.

Finally the biggest challenge is not to appoint yourself judge, jury and executioner. You are a friend of the court providing experience and independent insight into a transaction. Your report must be balanced. If your client is in the wrong, you acknowledge it. You are not an advocate for the guy who is writing the cheques that compensate you. In the case I mentioned above, five days after receiving and reading the 2,000 pages and before I wrote my first draft report, I called the lawyer and told him his client was “toast,” there wasn’t going to be a lot that I would be able to write that was positive about the actions of his mortgage-broker client. I subsequently learned that they already had one expert opinion report that was negative and, given the significant number of dollars involved in the case, they wanted to verify the negative responses before determining if they would continue to litigate or settle. In essence I was being used as a “double-blind test” to validate the report of another expert’s opinion.

CMP: What kind of fees do you charge?
O’Gorman: That question is like the mortgage borrower calling a broker and asking what is the best rate you can get for them. I don’t quote rates until I know the facts: who are the parties involved, what is my “brief;” i.e. the issues the lawyer wants me to address in the report? Also, how much documentation is there to review? and the timeframe I have to provide the report. There is not a flat fee. There is a retainer paid up front and we agree in writing on an hourly rate and how that will be paid. As in all cases, the fee is not contingent on the outcome of the case.

CMP: What was the most memorable case you have worked on?
O’Gorman: It’s interesting you ask that question immediately after asking what fees I charge, because it is the case in which I made the least amount of money, but left me with the greatest feeling of accomplishment.

I was hired by the lawyer of the estate and the family of a deceased male mortgage borrower. A husband and wife, working folks and parents of three young daughters, bought a house in December of 2001, and arranged an $180,000 mortgage through a mortgage agent who had the borrowers sign an application for group creditor life insurance. A month later the husband was diagnosed with terminal cancer, the deal closed in April and the husband died in June. The surviving spouse claimed against the life insurance policy. The insurance company claimed they didn’t get any forms or payments so the claim was denied. It was alleged that the agent did not get the borrowers to sign the insurance form in the proper place, he did not get a void cheque from the borrowers for the PAD and the agent did not submit the insurance form to the insurance company.

The brokerage that the agent worked for at the time of the transaction had been wound down, and they did not have E&O insurance, so the lawyer sued the mortgage agent personally and the insurance company for $300,000. My job was to go in and prove the agent had not performed to a reasonable standard, which apparently I did. The day before we were to go to court I received a call from the lawyer thanking me for my work and telling me I did not have to appear in court the next day as the other side settled.

Unfortunately, he could not tell me for how much as there had been a confidentiality agreement signed, but he did say the widow was very satisfied with the result and had asked the lawyer to thank me personally for my efforts. Somethings money can’t buy.