One of the hot button legal issues in white collar criminal prosecutions these days is the calculation of the financial damage resulting from the defendant’s allegedly criminal actions. Inasmuch as the federal sentencing guidelines correlate the length of a sentence to the amount of financial damage resulting from the criminal act, the government has developed damage models that maximize the amount of financial damage to buttress the prosecution’s argument in favor of draconian prison terms for business defendants.
In that regard, the Chronicle’s Tom Fowler weighs in with this article that reports on the prosecution’s damage claims in the group of criminal cases against Houston business figures categorized as “the trader cases” (previous posts here, here, here, here and here.

These particular trader cases involve alleged efforts to manipulate the trading indexes, which are used to value billions of dollars in gas contracts and derivatives. Industry publications, such as the Inside FERC Gas Market Report, use data from traders to calculate the index price of natural gas. Accordingly, movement in index prices often affects the level of profits traders can generate. In these particular cases, it remains unclear whether the publication actually used the false information provided, but the government contends that it needs only to prove that fake trades were reported and not that the trades were actually published or affected the markets.
Despite that position, Mr. Fowler reports that the government has recently explained the process under which its expert consultants — the Brattle Group — uses to calculate damage figures resulting from the alleged false trades. Using the data that the publishers gathered from the trading companies, the government experts strip out the allegedly false data to create a new price index for that trading hub. This adjusted number is then used to calculate how much the companies that employed the traders would have gained (or presumably, lost) based on the transactions made. As you would expect, the defendants contest the government expert’s model and will present their own experts, who will contend that the false trading data did not materially affect the amount of trading gains of the various companies.
So, much of the trading cases will come down to a duel between experts. Assuming comparable levels of competence and methodology between the competing experts, one has to wonder how a jury could ever conclude beyond a reasonable doubt based on the evidence that the government’s high level of damages is the correct measure of financial damages. But the current wave of prosecution of business figures is not all about the evidence, is it?