A Second Example of ABCD Irrelevance - The Endless Wait for Inquiry

UPDATED 11/1/2010

This case involves me so I am quite knowledgeable regarding all aspects of it. 

QUICK SUMMARY

An actuary who I will call PF and I were experts on opposite sides in a potential class action lawsuit dating from mid-2006 - nearly four years ago. 
In order to help his client in discrediting my expert testimony, PF filed an Affidavit with the court, sworn to under penalty of perjury, accusing me of violating the Code of Professional Conduct by not complying with certain ASOPs (ASOP 17, in particular) in testimony I had provided via oral deposition.  Although PF was not hesitant to report this supposed violation to the court, he never reported it to the ABCD - a violation of Precept 13.  Therefore, as required by Precept 13, I reported PF's apparent, material violation of the Code to the ABCD on May 16, 2006.
In the nearly four years that have elapsed since then, PF, every six months, has routinely requested the ABCD to defer inquiry because of the pending litigation and the ABCD has routinely granted that request.  During this entire period the litigation has been in settlement negotiations with no court activity involving either me or PF as experts.  My understanding is that a fairness hearing on the settlement agreement is set for February 10, 2010 which means this litigation is coming to an end.
I, in fact, did not violate any ASOP, a point argued in a rebuttal Affidavit I filed with the court.  The court is aware that I filed a complaint against PF with the ABCD.  I question the ABCD's logic in deferring its inquiry leaving this issue to, effectively, be argued in court.     

The Situation

On 5/16/2006 ( nearly four years ago as of this writing ) I filed a disclosure with the ABCD alleging an apparent, material violation of the Code by an actuary whom I shall refer to as PF. 

PF and I were actuarial expert witnesses on opposite sides in a potential class action litigation.  The case was being tried in a state court and, contrary to how experts usually testify in cases such as this, we each initiated our testimony with an oral depositions - that is, we did not provide any written report.  PF was an expert for the Defendant insurance company and I was an expert for the Plaintiffs who were potential representatives for the class.  At this stage, the case involved only class certification issues.

Following my oral deposition testimony, PF filed an Affidavit, sworn to under penalty of perjury, claiming that I had in various ways not complied with Actuarial Standards of Practice (ASOPs).  Although PF did not actually say it, he clearly indicated that he had well thought out and convincing knowledge ( remember he swore to this under oath subject to penalty of perjury ) that I had violated the Code of Professional Conduct . 

Now, it is not unusual for the other side to attempt to discredit the testimony of an expert against them.  In fact, it is reasonable to expect them as good legal practice to attempt to do that.  However, this is the first time the other side used the tactic of claiming the other side's actuary violated the Code.

A Diversion

While not wanting to use this forum to defend my actions in the above litigation, I must digress to, at least, to disclose my firm belief that I, in fact, violated no ASOPs.  In fact, by way of example, I'll tell you that PF claimed that I violated ASOP 17 (Expert Testimony by Actuaries) in that ASOP 17 requires that "the actuary should disclose all pertinent information, including 'the actuarial methods used'" per ¶4.1.  However, ASOP 17  ¶4.1 begins as follows (emphasis added ): " Written Reports - Expert testimony delivered by means of a written report should ...".  As noted previously, the testimony PF was objecting to was given orally - not in writing.  Therefore, ASOP 17 did not apply.  This is a good example of why it is a good idea to read and understand the ASOP before you accuse someone of violating it.

I pointed out these errors made by PF in a rebuttal Affidavit I filed with the court.  The court was made aware of the fact that I had filed a complaint against PF with the ABCD because of PF's apparent, material violation of the Code.

Back to the Story

Seeing that I had been accused of violating the Code by an actuary so convinced of this he swore to it in court under penalty of perjury , I sat back and waited for my letter from the ABCD.  Surely, one would think, someone so convinced would comply with the duty to report this apparent violation to the ABCD under Precept 13 of the Code.  I waited and waited but never heard anything from the ABCD.  This was not their fault, of course, since PF never disclosed the apparent violation he swore under penalty of perjury in court that I had committed .

Well, I now had convincing evidence that PF had violated Precept 13 of the Code.  Under Precept 13, an actuary "with knowledge of an apparent, unresolved, material violation of the Code by another actuary" has an absolute obligation to disclose that knowledge to the appropriate counseling and discipline body which in this instance was the ABCD.  I ask, rhetorically, of course, how much more convincing could PF's knowledge of my supposed violation have been - he swore to it under oath subject to penalty of perjury .  He either believed what he said or he perjured himself.  Either way, the circumstances indicate that he violated the Code himself.

The fact that I had irrefutable knowledge that PF had violated the Code required me to report him to the ABCD under Precept 13 - which is what I did on 5/16/2006 - almost four years ago.

What Has Happened Since?

In a word - nothing.

The litigation in which PF and I were involved is in settlement limbo.  Since very shortly after 5/16/2006 the case has been focused on legal arguments and eventually went into settlement which has turned out to be a very long process.  Neither PF nor I have testified in this case since May 2006.  A fairness hearing relative to the current settlement agreement has been set for February 10, 2010. 

However, since the case is not yet settled, PF has requested and the ABCD Chair or Vice Chair has granted a deferral in the ABCD proceeding every six months.  The ABCD, apparently, thinks it more important not to have its decisions or inquiries interfere with a pending law suit than it cares about addressing alleged claims of violation of the Code of Professional Conduct by actuaries.

While the ABCD has authority under the AAA Bylaws which created the ABCD to establish Rules of Procedure , I believe that it is far from clear that these Rules of Procedure could be written so as to allow the ABCD to avoid doing precisely what it was created to do - adjudicate matters involving actuarial practice under the Code.  That is, in effect, what the ABCD has done in this case - ignored its duty under the Bylaws.

UPDATE [5/13/2010]:  The litigation the subject actuary and I were involved in was finally settled in April 2010 and the ABCD inquiry is finally moving forward.  The subject actuary has provided a response.


UPDATE [11/1/2010]: Shortly after the above update, on 5/25/2010, I received a letter from Carol Sears (then chair of the ABCD) indicating that neither she nor the two ABCD Vice Chairs (Curtis Huntington & Paul Fleischacker) felt that there was an apparent or probably material violation of the Code in this case and, therefore, no reason to initate a full investigation. 

This puzzled me since it seemed that PF, the subject actuary, had clearly violated Precept 13 by assering under oath in court that I had violated the Code yet not reporting me to the ABCD as Precept 13 requires.  Although I asked the ABCD for clarification on this point, they refused to provide any.  Apparently, it is OK to accuse a fellow actuary of violating the Code in an attempt to gain advantage in a court case and not report that actuary to the ABCD.  Without further explanation from the ABCD, that is the only conclusion I am able to come to. 

In addition, of course, it is difficult to understand why it should take the ABCD four years to decide not to investigate a when their ultimate decision was that the matter was not an apparent or probably violation of the Code.    

Questions To Ask

We can certainly ask if it is appropriate for the ABCD to be worried about the impact its decisions might have on other outcomes.  However, one might also ask: Is it appropriate for the ABCD to risk adversely affecting other outcomes through inaction .  Isn't it better in all cases for the ABCD to dispose of, one way or another, as soon as possible, the disclosures made to it of possible actuarial malpractice?

We are going on four years since I first disclosed under Precept 13 this apparent Code violation.  I, of course, am concerned about its resolution because, although I do not believe I have violated the Code (and, in fact, have not officially been accused of doing so) it involves an accusation questioning my integrity and competence as an actuary which continues to remain outstanding for as long as the ABCD delays.

Understand this, the ABCD has not even begun an inquiry into this matter based on the reports made by the ABCD to me as the Claimant.  It has been nearly 4 years and the ABCD has not even begun an inquiry!   What is the word I am looking for to describe this situation?  

... shameful , perhaps?  

I would be interested in your opinions.

Tom Bakos, FSA, MAAA
last edited: 5/13/2010