CROSS EXAMINATION OF A DEFENSE ATTORNEY
By: Mr. Hegarty
Q: When were you born sir?
A: July 8, 1939.
Q: How old are you?
Q: What’s your occupation?
A: I am an actuary and manager of the Chicago office of Whiteacre Company. (The name is changed) (3 pages of qualifications omitted)
Q: Now, what does an actuarial clerk do?
A: Performs actuarial calculations.
Q: What are actuarial calculations?
A: Primarily calculations of present values of annuities, the insurance premiums required to provide life insurance, cash surrender values, dividends.
Q: Did you major in mathematics in the last two years of your undergraduate training?
A The school I went to, Honors Mathematics, I took practically nothing but mathematics.
Q: Now, that in itself had nothing to do with actuarial science, did it?
A: It had quite a bit to do with actuarial science because actuarial science is primarily mathematics.
Q: Yes, but it’s not actuarial science, is it? It’s pure mathematics, it could be used for anything, couldn’t it?
A: Some of it could, but some of the courses I took were actuarial mathematics courses.
Q: How many of those did you take?
A: Two specifically that were actuarial mathematics courses.
Q: Two courses? What were they called?
A: Theory of Interest and Finite Difference and Life contingencies.
Q: Okay. And where did you go to work after the Standard Life Company?
A: The Chicago office of the Whiteacre Company.
Q: Have you been employed there from ’66 until today?
A: From January ’67 until today, yes sir.
Q: And what kind of company is the Whiteacre Company?
A: Consulting actuaries and employee benefit consultants.
Q: Consulting actuaries. What else?
A: And employee benefit consultants.
Q: Employee benefit consultants. Okay. Are you an economist, sir?
A: No, sir.
Q: Do you have any education of any kind in economy, economic theories or the science of economics?
A: I took an undergraduate course at the University of Western Ontario. I took a commercial course at the University of Chicago. There were some economics involved in my study of the actuarial exams.
Q: So we have two courses in economics, more or less, and a third course partially involved in math, is that right?
A: The Society of Actuaries course, it’s a course of reading, not a formal-taught course, but that’s approximately correct.
Q: You consider yourself to be an expert in the science of economics?
A: No, sir.
(three pages are skipped)
Q: What background expertise in school do you have to predict future economic events, if any?
A: The only economic events that I would consider myself to have any expertise are in the area of rates of return on funds invested. I did take in school one course in investment.
Q: Are you through?
Q: And how many courses does an economist need to take to become a Ph.D. economist, if you know?
A: I have no idea.
(skipped one page)
Q: In your work at the Whiteacre Company, have you had occasion to determine the present value of a wage earner’s future income, sir?
A: Yes, sir.
Q: And when would be the first time you did that?
A: Probably January 1967,
Q: And what would be the occasion for that, sir?
A: I routinely calculate to the present value of future wages of employees for my clients.
Q: Why would you do that?
A: To determine the costs of my client’s pension plans.
Q: What would pension plans have to do with wages, sir?
A: We routinely compute the cost of pension plan as a percentage of wages.
Q: You mean to tell me that in determining a pension plan benefit, you have to take into account a future wage growth rate and an inflationary rate, sir?
A: Yes, sir?
Q: Do you do that every time you determine pension benefits?
A: Any pension benefit that is related to pay or related to an inflation-driven component.
Q: Do you have any pension clients, sir, that you do that for now?
A: Yes, sir.
Q: Who are they?
A: Blackacre Retirement System.
(The client name is changed)
Q: Now, before you go any further, what’s your assumption in that pension plan of future money growth, do you know?
A: I’m quite sure I recall the number exactly.
Q: What is it?
A: It’s 8 percent.
Q: And what is your assumption, if you can recall, in that particular pension plan of the consumer price index?
A: I don’t believe there is a specific assumption for the consumer price index in that plan.
Q: Well, how could you determine what I have just asked you about, present value of future earnings of a wage earner, without that component, sir?
A: You need not assume a rate of inflation. You could assume a rate of increase in pay directly. (Future wage growth rate)
Q: Well, what do you assume, then, for that?
A: To the best of my recollection, it’s 8 percent.
Q: So there is no differential between the two?
A: In that case, that’s correct.
Q: And you do that for your clients where you assume the interest rate (Money Growth Rate) to be 8 percent and the real growth pay (Wage Growth Rate) to be 8 percent, but in this case, you have assumed the interest rate to be 9.5 or 9.15 and the Wage Growth Rate to be only 5.5, is that right?
A: No, that is not right.
Q: What is right?
A: The assumptions I use for the Blackacre retirement system are for a specific purpose.
Q: What’s the purpose?
A: The purpose is to determine a level of contributions from the Blackacre entity which will support the benefits provided by that system.
Q: I thought you just told me that in a pension plan, you take into account your job, and you have in the past, and you do now, determine the present value of the future wages of an earner. I think I asked you that. You said you did in pension plans?
A: I did that, yes sir.
Q: Just a minute ago you said you are doing a pension plan now. You identified it. You indicated you did all that, and now you are telling me you don’t do that.
A: No. I said I did that, I do do that, and what I said so far is correct.
Q: Do you have documents back at your office indicating the assumption you made about interest rate and real growth rate showing 8 percent for each one?
A: For this particular pension plan we are talking about, the documents exist in the office, yes sir.
(These documents were subsequently produced)
Q: Okay. And how many documents would they be, numbers?
A: For this particular plan?
A: There is one per year.
Q: You have one for 1985?
A: Not yet.
A: Yes, sir.
Q: Can you produce that to your attorney?
Later on https://www.marketmymarket.com/10-reasons-your-on-page-content-isnt-working/