Condemnation deal irks Md. officials State to pay $5.9 million for land, but claims firm botched appraisal

July 08, 1993|By Timothy J. Mullaney | Timothy J. Mullaney,Staff Writer

The state of Maryland agreed this week to pay a $5.9 million settlement to condemn land adjacent to the Interstate 95 toll plaza in Perryville, leaving state officials fuming over an appraisal they claimed compromised their position.

The settlement came after what state officials allege was a botched appraisal by the accounting firm Arthur Andersen & Co. that was considered instrumental in a condemnation suit against the land's owner.

The dispute centered on the value of 17 acres belonging to MG Perryville L.P., the owners of the Perryville Outlet Center just north and east of the toll plaza, where the state plans to build a weigh station for trucks.

The state's condemnation suit, filed in 1991, led to a two-year dispute over how much the outlet center's owners deserved for their land; the case was scheduled to go to trial this past Tuesday.

But a series of depositions last month revealed major problems in appraisals by the Washington office of Arthur Andersen, which the state hired in January as an expert witness. The consultant initially placed a value of $630,000 on the land, only a fraction of the final settlement price.

"I would just like to tell the court I am not taking responsibility for what these people did," Assistant Attorney General Janet Bush Handy told Cecil County Circuit Judge Edward D. E. Rollins Jr. at a hearing last Friday, according to a transcript.

"I came to you and asked for a postponement because I knew their first appraisal was garbage. . . . I went through a week of depositions with what these people did, and it's appalling, and at some point it will be addressed."

Reached yesterday, Ms. Handy said the state was considering its options, including suing Andersen for alleged malpractice, but had yet to make a decision.

"We're still working on that," she said. "It's really difficult to quantify [how much the poor appraisal cost the state], but it put us in a completely different position. Normally in a condemnation action the appraisal is the cornerstone of your case."

Frederick Bunch, an Arthur Andersen national director who signed each of the firm's two appraisals, declined comment yesterday.

"I don't think there's any question" that problems with the appraisal forced the state to settle, said Arnold Weiner, a lawyer for MG Perryville, said yesterday.

According to Mr. Weiner, a partner in the law firm of Hazel & Thomas, Andersen submitted an initial appraisal report in May that put the land's value at $630,000 -- a figure not only far less than the $8.4 million the owners wanted but also less than the state's initial deposit put aside as part of the condemnation process.

Ms. Handy said in court that "when I received that [Andersen] appraisal, I was speechless."

The owners claimed the land was especially valuable because it was located where they planned to build a 210,000-square foot expansion of the center, which opened in 1990. MG Perryville is affiliated with McArthur Glen Group Inc., a development company in McLean, Va.

The first appraisal, for which the state agreed to pay Arthur Andersen $27,000, did not offer adequate documentation for key assertions, including the claim that preparing the land for an expansion of the shopping center would cost $1.8 million, more than three times the developers' estimates, according to David Polashuk, another Hazel & Thomas attorney.

The report also said the expanded center would be too small to be successful. At the same time, it claimed that the market area near Perryville didn't have enough people to support more than a 120,000-square-foot expansion.

Worst of all, Mr. Polashuk said, the report inaccurately contended that much of the site was wetlands because the map of the site in the Andersen report put a stream in the wrong place.

The wetlands, and most of the stream, are actually in an adjacent piece of land that MG Perryville also owns.

Andersen and the state were forced to back away from those contentions in the report in depositions taken last month by attorneys for MG Perryville.

The state forced Andersen to conduct a second appraisal after the depositions, using a different group of employees, and the second report raised the estimated value to $4.2 million, Mr. Weiner said.

Ms. Handy said that the state and Arthur Andersen are now fighting over whether Andersen can bill the state for the second report.

Mr. Weiner added that Andersen ignored specific financial information it was provided about the mall that would have helped in the appraisal. The box containing the files was put under a desk in Andersen's office and not used to prepare the report, he said.

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