SEC v. Bluepoint Inv. Counsel

The opinion digested here was a short ruling on three motions to exclude testimony. We discuss the motion to exclude (by inference) the testimony of the SEC’s expert, Ms. McMahon. The defendant’s motion asked the court to exclude any evidence of Amiran’s value that was not known to Greenpoint Target Interest Fund (GTIF) when it prepared its valuations “as GTIF did not and could not have known such information.” This would strike Ms. McMahon’s calculations of GTIF’s quarterly reports and the value of Amiran. 

“The SEC argues that Defendants misstate professional [valuation] standards.” The SEC noted that valuations are supposed to consider what the parties knew or could have known at the time. Mcmahon’s valuations contained information the defendants could have known at the time of the valuation. McMahon’s valuations included information that the defendants could very well have known.

The defendants also argued that their valuations could only contain the knowledge that GTIF and the defendants had but provided no support for this assertion. The plaintiff had provided a basis for a reasonable jury to find that McMahon followed a generally accepted business valuation method. The court will not strike her valuation testimony. “To the extent that defendants believe her valuation depended on information that could not be reasonably known, they are welcome to expose the weaknesses of McMahon’s testimony and valuations on cross-examination.”

The court had already ruled that McMahon could not use hindsight in her valuations. The SEC asserted that she had only used information from the appropriate periods for her valuations. She will be held to that assertion and “may only testify to quarterly valuation calculations that used information reasonably available before the report was issued.” The defendants criticized other statements of McMahon’s such as “[a]lthough Lincoln Financial was retained, nothing came of the effort. These efforts suggested that uncertainty regarding Amiran’s financial and operational prospects (e.g., whether it would be awarded the contract in Kuwait) were likely having a downward impact on Amiran’s perceived value proposition.” The defendants may cross-examine McMahon as to her assumptions and statements. The court did not find that any specific opinions rely on hindsight, and none will be stricken from the record. The defendant’s motion in limine was denied.

The court ruled on two other motions irrelevant to valuation-related issues.