1 United States Bankruptcy Court Eastern District of Michigan
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UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF MICHIGAN ) ) In re ) Chapter 9 ) CITY OF DETROIT, MICHIGAN ) Case No.: 13-53846 ) Hon. Steven W. Rhodes Debtor. ) ) ) CITY OF DETROIT’S CORRECTED MOTION TO EXCLUDE TESTIMONY OF VICTOR WIENER The City of Detroit, Michigan (the “City”) submits its corrected motion to exclude the testimony of Victor Wiener, a putative expert offered by Financial Guaranty Insurance Company (“FGIC”).1 In support of its Motion, the City states as follows: INTRODUCTION 1. Victor Wiener is an appraiser who purported to appraise the entire 60,000-plus collection of art at the Detroit Institute of Arts (“DIA”) in less than 1 The City’s corrected motion is identical to the City’s Motion To Exclude Victor Wiener filed on August 22, 2014 (Doc. 7000), except that the corrected motion removes the paragraphs originally numbered 56, 57, and 58, which referred to an order entered by a federal court in In Re Asset Resolution, LLC, No. 09- 32824 (Bankr. D. Nev. May 25, 2010). The City has been made aware that the referenced order was vacated more than two years after it was entered. The corrected motion removes any reference to the vacated order, but this change does not affect the substance of the Motion or any of the grounds for relief that the City identifies. 1 13-53846-swr Doc 7453 Filed 09/12/14 Entered 09/12/14 16:23:50 Page 1 of 361 two weeks—a feat that even Mr. Wiener admits had never been achieved in the history of art appraisal. Mr. Wiener and his consultants, however, did not achieve it either. Instead, Mr. Wiener cut corners and employed a mishmash method that he invented for this litigation and that—as even he concedes—has never been used by any other appraiser or endorsed by any professional publication. Because FGIC cannot meet its burden to prove that Mr. Wiener’s opinions are admissible, the Court should exclude Mr. Wiener from testifying at trial. 2. Mr. Wiener’s process for determining the DIA collection’s “marketable cash value” proceeded in five steps, each involving an entirely different approach. Unsurprisingly, this novel, slapdash method reveals its unreliability at every step. In fact, just two days ago, Mr. Wiener acknowledged and sought to correct numerous “errors” in his report that had caused him to overstate the value of the DIA collection by more than $400 million. At Step 1, Mr. Wiener claims to have independently appraised 387 DIA works—and many of his appraisals vary wildly from appraisals performed by other experts in this case, including a work that he appraised at a value 172 times larger than any other appraiser. Moreover, even though Mr. Wiener testified that it is not appropriate to appraise a work’s marketable cash value simply by taking a percentage of its fair market value calculated by one of the other experts, he did precisely that with regard to numerous works. Step 2 required no expert method at all, and nothing more than a calculator, because Mr. Wiener merely took the average value for 596 DIA works appraised by the three other experts in the case. But the values provided by the three other experts are “fair market value” figures, which Mr. Wiener repeatedly distinguished from his 2 13-53846-swr Doc 7453 Filed 09/12/14 Entered 09/12/14 16:23:50 Page 2 of 361 “marketable cash value” approach in Step 1. For Step 3, Mr. Wiener used a list of 16,388 DIA works that he assumed contained “insurance value” information. Mr. Wiener never attempted to verify that the list actually provided “insurance values” or that any of the information on the list, some of which was more than a decade old, was accurate. As Mr. Wiener now acknowledges, this failure to verify the underlying data distorted Step 3: for example, Mr. Wiener initially valued each of the 501 pages of a manuscript at the total value of the entire manuscript. Mr. Wiener now concedes that this error may have been repeated for other works he valued at Step 3—but instead of correcting his data, Mr. Wiener merely applies an arbitrary, unexplained 3.5% discount to address this risk of error. And despite the fact that insurance values undeniably yield the highest valuations among competing approaches, Mr. Wiener actually added a massive across-the-board premium to increase the purported insurance values. At Step 4, Mr. Wiener then purported to appraise a staggering 42,854 DIA works all at once, but he did not base this computation on any appraisal of any of those works. Instead, he constructed a “pricing matrix” of the average sales price, by category, of works sold at Christie’s and Sotheby’s in 2013, and from there assigned an average value to each DIA work. This was no apples-to-apples comparison: Mr. Wiener (1) did not assess whether the Christie’s and Sotheby’s works and the DIA works were comparable; (2) ignored that all sold works by definition have value while a large number of DIA works (i.e., pot shards, textile fragments, arrowheads, and similar pieces held for academic purposes) do not; and (3) compared all works (including the most valuable pieces) sold by two of the premium auction houses in the world to the bottom two-thirds of the DIA collection left over after Mr. Wiener removed the most valuable DIA works in Steps 1, 2, and 3. Mr. Wiener therefore chose a multiplier derived from values of some of the top art sales in the world and applied it to the DIA’s lowest-value (and nil-value) pieces. This Step alone yielded an astounding $3.5 billion in value, almost half of Mr. Wiener’s total valuation of the DIA collection. Despite admitting no prior use or peer approval of the “methodology” in Steps 2, 3, and 4, Mr. Wiener compounded all of these flaws at Step 3 13-53846-swr Doc 7453 Filed 09/12/14 Entered 09/12/14 16:23:50 Page 3 of 361 5, where he simply added together the subtotals he generated in Steps 1 through 4. Mr. Wiener thus attempted to fuse marketable cash value appraisals (Step 1), fair market value averages (Step 2), insurance values multiplied by an across-the-board premium (Step 3), and average sales prices by category for unrelated works (Step 4) to divine the marketable cash value of the entire DIA collection. This haphazard method, all done in less than two weeks, predictably led to untenable results that already had to be corrected once and leave serious questions as to their reliability. 3. Finally, Mr. Wiener also was asked to critique the economic and financial analysis performed by Michael Plummer, one of the City’s experts. But Mr. Wiener is not an expert in economics and, therefore, had to outsource this assignment to others. He thus attached to his report the written analysis and conclusions of these other individuals, Mr. Zhang Yi and Dr. Jannette M. Barth, who have not been disclosed as experts and are not testifying in this case. But the Federal Rules do not permit Mr. Wiener to serve as the vehicle through which other witnesses in entirely different specialties, and who are not subject to cross- examination at trial, are allowed to testify indirectly. 4. Mr. Wiener thus rests his opinions on an unreliable and unprecedented method necessarily slapped together in less than two weeks and on the opinions of non-testifying persons on topics far beyond his area of expertise. FGIC cannot establish that Mr. Wiener’s testimony is reliable, and the Court should exclude it. BACKGROUND 5. Mr. Wiener is an appraiser who, along with his consultants at Victor 4 13-53846-swr Doc 7453 Filed 09/12/14 Entered 09/12/14 16:23:50 Page 4 of 361 Wiener Associates (VWA), was retained by FGIC’s counsel to appraise the “marketable cash value” of the DIA’s entire 60,000-work collection. See Wiener Rep. 6 (Ex. A); Wiener Dep. 42 (Ex. B). Mr. Wiener distinguished “marketable cash value” from other approaches like “fair market value” taken by other experts in this case. See Wiener Rep. 15–16; Wiener Dep. 132–33. 6. Mr. Wiener executed his retention agreement with FGIC’s counsel on July 11, 2014, and submitted his report two weeks later on July 25, 2014. See Wiener Rep. 6. Mr. Wiener “felt time constraints” in performing his appraisal in less than two weeks and is not “aware of any appraiser in history ever performing a valuation of 60,000 works of art in two weeks.” Wiener Dep. 348. 7. Mr. Wiener repeatedly described his report as “preliminary.” See Wiener Rep. 6, 7, 19, 31, 46, 47, 48; Wiener Dep. 188. Mr. Wiener served a corrected expert report on August 20, 2014. See Wiener Rep. 1. Mr. Wiener sought to correct “errors” in his report, but continues to refer to his conclusions as “preliminary.” Wiener Rep. 6, 7, 19, 31, 46, 47, 48, 50. 8. Mr. Wiener followed five steps to appraise the DIA collection’s “marketable cash value.” See Wiener Rep. 3, 45–47. At Step 1, Mr. Wiener independently appraised 387 DIA works. See id. at 3, 45; Wiener Dep. 196. 9. At Step 2, Mr. Wiener computed the average value for 596 DIA works appraised in the three other expert reports in the case. See Wiener Rep. 3, 45–46. 5 13-53846-swr Doc 7453 Filed 09/12/14 Entered 09/12/14 16:23:50 Page 5 of 361 Those expert reports are the Christie’s Report on behalf of the City and the DIA; the Artvest Report authored by Michael Plummer on behalf of the City; and the Winston Report authored by Elizabeth von Habsburg on behalf of Syncora.