AACG financial economists and statisticians have assisted counsel and financial service providers as experts in a broad range of areas, including the following:
- Predatory lending
- Securities class actions
- Consumer fraud
- Market and index manipulation
- Inappropriate securities trading (front-running, portfolio pumping/window dressing)
- Market timing
- Deceptive marketing of annuity products
- Health insurance, employer health plans (ERISA)
- Mutual Funds and Hedge Funds
- AACG economists assisted in damages calculations of allegedly predatory lending practices by payday lenders, including but-for re-allocations of payments to interest and principal and calculations of overpayments.
Securities Class Actions
- AACG economists have worked for the Securities and Exchange Commission, class plaintiffs and defendants in 10b-5 cases. In some cases, AACG economists analyzed the behavior at the heart of the 10b-5 allegation to help determine whether the behavior was inappropriate. In other cases, AACG economists analyzed the potential damages following the alleged behavior, determining what other factors were associated with stock price movements and the flow of trades over the class damages period.
Market and Index Manipulation
- AACG economists analyzed the one-month U.S. Dollar London Interbank Offer Rate (LIBOR) since 1987 to identify signs of manipulation based on a previously published test that has appeared in a peer-reviewed economics journal and been cited in the business press and legal filings of major financial disputes. We found evidence of LIBOR manipulation throughout the years since 1987, suggesting that LIBOR has been consistently manipulated or that the proposed test has no power to distinguish periods of LIBOR manipulation from periods of non-manipulation. The results and other insights were presented in three webinars, see below.
- AACG economists have analyzed market manipulation of options on foreign exchange rates traded in many markets. This work includes an analysis of damages assessed by the court appointed Special Master.
- Economists at AACG have analyzed manipulation in indexed commodity prices. This analysis included both analysis of liability and damages asserted by a class of plaintiffs.
SPOTLIGHT: LIBOR Litigation
The alleged LIBOR manipulations may have impacted interest rates used by banks, companies and consumers around the globe. Some have claimed that it could have influenced global economic growth. The alleged activities in the LIBOR litigations include a coordinated manipulation of a set of the most important, widely used interest rates in the world. It is this potentially global impact through a fundamental financial building block that sets the alleged LIBOR manipulations apart from this year’s other risk and regulatory-based banking scandals. It will likely be the source of considerable debate, discussion and litigation, as a broad range of market participants from banking giants, global corporations, and pension funds, to single family mortgage payers and savings account holders assess whether they were damaged and by how much.
Is LIBOR Still Being Manipulated?: Identifying Colluders with Methods of Detecting LIBOR Tampering
We analyze the one-month U.S. Dollar London Interbank Offer Rate (LIBOR) between January 1987 and February 2015 to determine whether there are signs of manipulation based on a previously published test that has appeared in a peer reviewed economics journal and been cited in the business press and legal filings of major financial disputes. Our analysis starts with the period from February 1, 2014 to February 28, 2015, after the Intercontinental Exchange (ICE) took over the publication of LIBOR from the British Bankers’ Association (BBA) and after significant time for reforms to be implemented related to the widely publicized LIBOR fixing messages between bankers, as detailed to the British government in the Wheatley Report. We find that this previously published test still indicates the presence of LIBOR manipulation from February 2014 and into 2015. We then perform the previously published test for tracking the integrity of important market indicators, such as LIBOR, from 1987 through February 2015, and find that this test would nearly always trigger a finding of suspicious behavior, either indicating that LIBOR has been consistently manipulated since 1987 to 2015 or that the proposed test has no power to distinguish periods of LIBOR manipulation from periods of non-manipulation. We further discuss the nature of scientific evidence and how the use of non-scientific methods, if taken seriously, can lead to the misallocation of corporate, regulatory, enforcement, and potentially, in the case of such a widely use financial measure as LIBOR, global economic resources.
Inappropriate securities trading (front-running, portfolio pumping/window dressing)
- AACG economists have developed monitoring tools and protocols to identify inappropriate trading behavior, such as Front-Running, Portfolio Pumping/Window Dressing and other trading behaviors that suggest an individual portfolio manager, group, or an entire firm is trading inappropriately. We help Hedge Fund and Mutual Fund clients develop tests that fit the regulatory environment and that are rigorous enough to convince investors that they have the right controls in place to protect investments. We have testified for the SEC in this area.
- AACG economists have analyzed the economic mechanisms behind various tax issues including whether there is an economic rationale for various types of options transactions market participants have constructed.
- In several distinct putative class actions, AACG economists testified on issues related to the sale of deferred annuities. Based on so-called suitability forms filled out by prospective applicants, we quantified the objectives of policyholders and demonstrated that favorable financial returns often went hand-in-hand with estate planning, avoidance of investment risks, and peace of mind with respect to financial security in old age.
- The U.S. Department of Labor engaged AACG to study Qualifying Longevity Annuity Contracts (QLACs) and other types of annuity products. Click here for the final report.
- The U.S. Department of Labor commissioned AACG to analyze whether individual investors manage to beat the market by fortuitous timing of purchases and sales of mutual funds. We found that investors, on average, earn lower returns than a buy-and-hold strategy would deliver, and that timing errors were larger for investors who traded with the assistance of brokers. Click here for the final report.
- In numerous engagements, AACG experts have assisted in disputes over reimbursement of medical claims. The issues involved non-payment for out-of-network claims; usual, customary, and reasonable (UCR) reimbursement rates; patient responsibilities (co-payments, deductibles, co-insurance, out-of-pocket maximums); patient payments that exceeded provided charges; alleged upcoding (assignment of high-severity CPT or DRG codes to low-severity cases); patient assessments for Medicare Advantage plans; and many more. Some matters involved manual reviews of a statistical sample of claims; we have both designed/implemented and critiqued such sampling processes.
- In the context of employer-provided (ERISA) health plans, AACG economists have assisted with disputes involving fully insured and self-insured plans.
- AACG economists have assisted the U.S. Secretary of Labor with statutorily required annual reports to Congress on self-insured health plans. See the 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018, 2019, 2020 and 2021 reports.
Mutual Funds and Hedge Funds
We have developed monitoring tools and protocols to identify inappropriate trading behavior, such as Front-Running, Portfolio Pumping/Window Dressing and other trading behaviors that suggest an individual portfolio manager, group, or an entire firm is trading inappropriately. We help Hedge Fund and Mutual Fund clients develop tests that fit the regulatory environment and that are rigorous enough to convince investors that they have the right controls in place to protect investments.
AACG Economic Consulting’s expertise in this area is built on our experience developing scientifically defensible analyses of trading behavior for clients who want to test and verify the quality of their trade monitoring. We also have related experience in litigation and have testified for the SEC in this area. See our Scientific Fraud Detection page.