There are two kinds of people in the world, says finance expert Tom E. Greene: word people and number people.
Most lawyers fall into the first group, which explains why they either panic or gloss over when faced with financial
concepts in litigation.
But Greene – himself a lawyer as well as a financial consultant – says lawyers' fear of finance often stems from
their failure to grasp a simple concept. His job as an expert, he believes, is to help them see through that seeming complexity.
"I find that most attorneys tend to believe that financial concepts can't be boiled down into an understandable
narrative," Greene explains. "What I try to do is to help them go through the translation process. I help to take
the numbers and turn them into a narrative."
Greene is president of Liberty Street Financial Group, which he founded in New York in 1980 and later moved to
Athens, Ga., near the campus of the University of Georgia Terry College of Business. He has also held positions
as senior investment banker with Goldman, Sachs & Co., senior vice president of Lehman Brothers, and principal
of Paine Webber.
In addition to providing investment and banking services, Greene serves as an expert witness and consultant in
cases involving a range of financial matters, including securities, corporate finance and financial and retirement
planning. He is a graduate of Emory University Law School.
Searching for Simplicity
While the array of financial matters lawyers confront is broad, lawyers' responses share a common theme, Greene believes.
They let their lack of financial fluency interfere with their perception of the facts. As a result, they see complexity
where the bottom line is actually quite simple.
To illustrate his point, Greene recounts a case he worked on that involved a bank's action to recover its alleged losses
in a series of hedging transactions. Based on the documents submitted, the transactions appeared to be quite complex.
Greene was brought in to help evaluate the numbers and find a way to make the complex calculations understandable.
As he went through the documents, he discovered that what had been made to look complex really was not. In fact,
he concluded, the transactions were not even hedges.
A hedge allows a business to manage risk by shifting it elsewhere. Here, the business had never actually shifted
the risk. Rather, it had manipulated its internal bookkeeping to create the appearance of a hedge through dual sets of
books. If there was a loss on one set, it would be offset by a gain on the other.
"So it was very simple to convert these seemingly complex numbers into a narrative," Greene recalls. "Out of
that jumble of numbers came a very simple fact."
The Human Factor
Lawyers share another common misunderstanding about corporate finance, Greene says, which is that they forget
the human factor.
"Attorneys think that large financial institutions have agnostic, computer-based models for financial transactions,"
he explains. "Usually, that's not true. Usually, it's a couple of individuals somewhere and it is very much subject
Consider the example of a financial professional preparing an Excel projection model. Because such a model is
complex and involves a multitude of assumptions, one small change can rip through and alter all the numbers.
"It's the human factor very much at work," Greene says. "Just because someone sends you print-outs from computers
and pictures of computer screens, as if all this involved some financial magic, it isn't magic at all."
Greene points back to his earlier example, where the purported hedge losses presumably involved a daunting number
of complex calculations. The truth turned out to be that the case was not at all about the math.
"That's usually the case – there's a simple story that underlines what happened. What the attorney needs is to work
with someone who can help bring out that simple story."
Complex numbers often are little more than a smokescreen, he believes, obscuring the straightforward narrative
that lies just out of view.
"The second you say derivative, SWOT or option, lawyers' minds glaze over and they assume there's a titanium
black box that can't easily be cracked. It's our job to show them the narrative story – and it's usually not
in a black box."
For Greene, lawyers involved in financial cases too often overlook the fact that behind every transaction,
there is the work not of computers and calculators, but of humans. In every case, that means, there is the
possibility of human manipulation, fault and fallibility.
The human factor, in other words, almost always provides the basic story a trial lawyer hopes to hone in on,
even in the seemingly complex realm of high finance.