In terms of alleged damages, the biggest case pending against any appraisal firm in the United States — actually, I feel safe writing the biggest case ever — is the lawsuit filed in federal court in Idaho by a group of property owners in four luxury developments in Idaho, Montana, Nevada and the Bahamas, Gibson, et al. v. Credit Suisse, Cushman & Wakefield, et al.. In their original complaint, the property owners demanded $24 billion in damages (yes, that’s over-the-top) relating to development loans by Credit Suisse for which the appraisers provided appraisals. The present status of the case is that the plaintiffs have filed an amended complaint recasting some of their alleged claims against Credit Suisse and Cushman & Wakefield. In support of that complaint and a motion for summary judgment, the plaintiffs have obtained a 36-page declaration from an appraiser with the appraisal division of Grubb & Ellis, presumably a competitor to Cushman’s appraisal business.
As noted in the earlier story about this lawsuit, I expected that the defendant appraisal firm and its appraisers, like other appraisers dragged into litigation, would soon learn in the lawsuit that “their colleagues, or competition, are ready and willing to testify against them.” Here, the plaintiffs’ expert opines that USPAP applies to the appraisals at issue and details a long list of asserted USPAP errors. That’s nothing new — in the current appraisal and legal environment, we see appraisers attacking other appraisers everyday for profit, whether by expert testimony or by “forensic” reviews for borrowers, GSEs, the FDIC, investors or mortgage insurers. We routinely see appraisers hired as experts testify eagerly about alleged errors by their colleagues and also often see appraisers crossover into advocacy without making it clear they are no longer acting as appraisers.
The declaration in this case goes farther and offers that the defendant appraisers further intended for their appraisals to serve as a means to defraud those individual lot and property owners. Here are some highlights of the appraiser’s declared opinions in that regard:
- “Therefore, the document reviewed does not even qualify as an appraisal, and, like the three appraisals discussed earlier, is, at best, a sham and likely a premeditated commission of a scheme and crime to defraud.”
- “In my opinion, the procurement and use of the appraisals was designed to artificially inflate values so as to defraud developers, and others who had, and would, purchase lots or homes or otherwise invest in the resorts.”
- “In my view, it appears these appraisals were part of a much broader premeditated scheme and crime to defraud the developers and everyone else that owned, held, or acquired an interest in the developments.” [emphasis added]
(As a side note for appraisers reading this, statements like those quoted above giving legal opinions or opinions about violations of law would not be admissible.)
In our defense of appraisers, we repeatedly observe truth behind the cliche that “what goes around, comes around.” Here, the declaration testimony arguing that third parties like the individual property owners in the Idaho case were intended beneficiaries of commercial appraisal work for a lender could well come back to haunt Grubb & Ellis itself, while also generally serving to continue eroding the concepts of intended user and intended use to the detriment of all appraisers.
The following excerpts are from the declaration filed last month by the plaintiffs from their expert witness appraiser in Gibson, et al. v. Credit Suisse, Cushman & Wakefield, et al.:
