Credit Suisse Ordered To Pay $287.5m Over Flawed Appraisal

[kaner]

From Appraiser News Online:
"A Texas court found that Credit Suisse used a flawed appraisal to "dupe" private equity firm Highland Capital Management into refinancing a Las Vegas-area development that ultimately went bankrupt, Bloomberg reported Sept. 4. Credit Suisse was ordered to pay Highland Capital Management $287.5 million for losses it suffered."
http://www.bloomberg.com/news/artic...ordered-to-pay-highland-capital-287-5-million

Does anyone have more details on the appraisal or the appraiser in this case? The quick googling I turned up sheds more light on the case and the opposing sides, but doesn't talk much about the appraisal or what was wrong with it. It would sure be an interesting report to read!

 

[Terrel L. Shields]

REVISED. I feel no sympathy whatsoever for either party however.

“It seems questionable that it’s reasonable for an investor as sophisticated as Highland to rely on an appraisal when it participated in a $540 million refinancing and not do an analysis of its own,” Gordon said.

​

Yep, I'm gonna invest half a billion and not do my own appraisal... might cost $1000 maybe more...too much money.

​

 

[George Hatch]

"not do my own appraisal" is a really good point. Of course, the counterpoint is that plaintiff's loss might not all be attributable to the appraisal.

 

[Terrel L. Shields]

They sued for $250 million and it has bounced around several courts.

 

[kiritf]

I did not do that appraisal, I swear! Credit Suisse is a reasonably good client for the most.

 

[Vernon Martin]

The appraisal was done by cushman and wakefield, who are also being sued for malpractice on this and several other resort loans syndicated by Credit Suisse. Credit Suisse requested cushman to use an unorthodox valuation methodology they called "total net value". One of the appraisals was posted online several years ago, and the methodology was merely a DCF analysis at a 0 percent discount rate, thus significantly inflating values. CS syndicated these loans without "skin in the game".
Meanwhile C&W is facing over $10 billion in class action lawsuits.

 

[TD Morgan]

REVISED. I feel no sympathy whatsoever for either party however.

“It seems questionable that it’s reasonable for an investor as sophisticated as Highland to rely on an appraisal when it participated in a $540 million refinancing and not do an analysis of its own,” Gordon said.

​

Yep, I'm gonna invest half a billion and not do my own appraisal... might cost $1000 maybe more...too much money.

​

I am going to guess that a proper appraisal from someone qualified in the property would be a few multiples of ten thousand dollars...

I was involved with a major deal with TPG involving a couple billion dollars and their finance folks were very qualified. Highland is responsible for using their funds without doing their own analysis.

Even if they wanted to rely on the appraisal completed by another, their due diligence should have included close scrutiny of all underlying data and assumption.

 

[glenn walker]

These kind of cases create a lot of interest in the appraisal community *** BUT** 75% of these are over-turned on appeal and even if the judgement stands NOBODY is going to pay it . The attorneys had probably already walked over to the bankruptcy court before the case was over. The judgement or ruling is not worth the paper it's written on especially in Texas : ) LOL

 

[Michael S]

I just finished reading Flash Boys recently (excellent book, highly recommend it) and it sounded like Credit Suisse was definitely one of the worst big banks.

 

[TD Morgan]

... the methodology was merely a DCF analysis at a 0 percent discount rate, thus significantly inflating values.

A zero percent risk-adjusted cost of capital sounds about right in this day and age... there is no inflation and the government guarantees everything.