Credit Suisse Found by Judge to Inflate Las Vegas Appraisal

  • Texas judge agrees Highland was duped by faulty appraisal
  • Highland blamed bank for loss on Lake Las Vegas Refinancing

Credit Suisse Group AG inflated an appraisal so it could sell a Nevada land deal to Highland Capital Management LP, a Texas judge said, in supporting his earlier award of $287.5 million to Highland.

The judge’s explanation of his September ruling backed Highland’s claim that one of its affiliates was bamboozled by Credit Suisse through a faulty appraisal. Highland blamed Credit Suisse for losses on a $540 million refinancing of Lake Las Vegas, a resort that went bankrupt in 2008.

State court judge Dale Tillery in Dallas said in Monday’s ruling that the initial draft of the appraisal didn’t give Credit Suisse a high enough figure to close the 2007 refinancing. The judge cited an e-mail from a banker who wrote, “This appraisal does not work!” The banker added, “At this level we don’t have a deal we can sell.”

The judge detailed how Credit Suisse inflated the appraisal and failed to tell lenders such as Highland about ways the figure were massaged. Central to the process was a conference call involving at least five Credit Suisse bankers and the appraiser in April 2007, according to Monday’s filing.

None of them could recall “even a single detail” of what was discussed, Tillery wrote. The judge concluded the bankers’ testimony wasn’t credible.

Tillery also found that the bank “knowingly misrepresented” that the appraisal complied with federal standards.

“Credit Suisse’s witnesses testified that they would have corrected errors in the appraisal if they noticed them,” Tillery wrote. “Yet the contemporaneous records overwhelmingly shows this was not the case.”

The judge cited an e-mail in which one Credit Suisse banker wrote, “We’re going to maintain ignorance” on a particular miscalculation because it led to a higher value.

“We respectfully disagree with the court’s decision and are seeking its reversal,” Drew Benson, a Credit Suisse spokesman, said in an e-mailed statement.

Tillery awarded Highland $211.9 million plus interest last month, without detailing his reasoning. Tillery said he took earlier settlements into account, deducting them before reaching the total owed.

That order followed a jury’s December $40 million verdict for Highland on its claim that Credit Suisse used the faulty appraisal to dupe Highland’s Claymore Holdings LLC affiliate. The $40 million jury award won’t be added to Tillery’s judgment.

The case is Claymore Holdings LLC v. Credit Suisse AG, 13-07858, District Court, Dallas County, Texas.

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