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comfortable that with the investment we were making at least we
had assets worth as much as we were investing and that it could
be considerably more if managed properly.”
Other than Mr. Lerner’s testimony, we have no basis for
gauging Mr. Lerner’s reliance on this appraisal. Although Mr.
Kutner’s appraisal report would seem to form a critical part of
his case, petitioner did not call Mr. Kutner as a witness.
Consequently, Mr. Kutner’s appraisal report has not been received
into evidence and cannot be relied upon for establishing the
value of the film library.
The appraisal report itself indicates that it is limited to
a financial analysis of the film library and its potential
earnings. The report states that Mr. Kutner did not physically
inspect the materials for the various film titles, and he assumed
that the legal and physical status of the EBD film library “is in
good condition”. The report does not provide any analysis of the
rights that SMHC acquired in the film titles (except for the
general reference to “U.S. Video Film Rights”) and appears to
assume that SMHC actually owned the full bundle of rights
associated with the EBD film titles. The report also appraised
the EBD film library “as if it was free and clear of debt and
under responsible ownership and competent management”.
Presumably, however, when the EBD film library was assigned to
SMHC, it became subject to the $1 billion debt that SMHC owed.
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