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Securities and Exchange Commission v. The Nutmeg Group, LLC

United States District Court, N.D. Illinois, Eastern Division

April 28, 2017



          Jeffrey T. Gilbert United States Magistrate Judge

         Before the Court are Plaintiff's Motion to Exclude Proposed Testimony by Anthony Garvy (“SEC's Motion”) [ECF No. 847] and Defendants' and Relief Defendants' Motion in Limine to Bar the Testimony of Mari Reidy and Peter Hickey and the Admission of Their Respective Reports (“Defendants' Motion”) [ECF No. 852]. For the reasons stated below, the SEC's Motion [ECF No. 847] is granted in part and denied in part, and Defendants' Motion [ECF No. 852] is granted in part and denied in part.

         I. BACKGROUND

         Plaintiff Securities and Exchange Commission (the “SEC”) sued three defendants and five relief defendants. In a nine-count complaint, the SEC alleged that the defendants-The Nutmeg Group, LLC (“Nutmeg”); Randall Goulding (“Randall”); and David Goulding (“David”)-violated the Investment Advisers Act of 1940 (the “Advisers Act”), 15 U.S.C. § 80a- 1 et seq., and the rules promulgated thereunder. Amended Complaint, [ECF No. 314]. The SEC also asserted an equitable claim for unjust enrichment against the relief defendants-David Goulding, Inc.; David Samuel, LLC; Financial Alchemy, LLC; Philly Financial, LLC; and Eric Irrgang. Id. Throughout this Memorandum Opinion and Order, the Court will refer collectively to the defendants and the relief defendants as the “Defendants.”

         Several of the claims in this case where resolved in the Court's ruling on the parties' cross-motions for summary judgment. SEC v. Nutmeg Grp., LLC, 162 F.Supp.3d 754 (N.D. Ill. 2016), reconsideration denied, 2016 WL 3023291 (N.D. Ill. May 24, 2016). Specifically, the Court granted summary judgment in favor of the SEC on all of the alleged primary violations except for the portions of Count I that alleged misvaluation and misappropriation, on which the SEC did not seek summary judgment. Id. at 761-62, 777-78, 780, 782. But the Court also denied summary judgment to any party on all of the aiding and abetting counts. Id. at 784. No party sought summary judgment on Count IX, which is the only count against the relief defendants. Id. at 761-62.

         The parties are now preparing to try the remaining claims in this case. Toward that end, both parties have filed Daubert motions asking the Court to limit expert testimony that can be admitted during trial. The SEC has moved to exclude the testimony of Defendants' expert Anthony Garvy. SEC's Motion, [ECF No. 847]. Defendants have returned the favor by moving to exclude two of the SEC's witnesses, Mari Reidy and Peter Hickey. Defendants' Motion, [ECF No. 852].


         Federal Rule of Evidence 702 and Daubert v. Merrell Dow Pharmaceuticals, 509 U.S. 579 (1993) govern the admissibility of expert testimony. Hall v. Flannery, 840 F.3d 922, 926 (7th Cir. 2016). Expert testimony is admissible only “if the testimony is relevant to a fact in issue, is based on sufficient facts or data, and is the product of reliable scientific or other expert methods that are properly applied.” Stuhlmacher v. Home Depot U.S.A., Inc., 774 F.3d 405, 409 (7th Cir. 2014). It is the role of the district court to serve as “the gatekeeper of expert testimony” by admitting only testimony that is reliable and relevant. Id. The court will admit expert testimony only where the expert “(i) is qualified to offer opinion testimony under Rule 702, (ii) has employed a reliable methodology, (iii) proposes to offer opinions that follow rationally from the application of his knowledge, skill, experience, training, or education, and (iv) presents testimony on a matter that is relevant to the case at hand, and thus helpful to the trier of fact.” Mintel Int'l Grp., Ltd. v. Neergheen, 636 F.Supp.2d 677, 684-85 (N.D. Ill. 2009) (internal quotation marks omitted). The proponent of expert testimony bears the burden of proving the testimony is admissible. Fail-Safe, L.L.C. v. A.O. Smith Corp., 744 F.Supp.2d 870, 887 (E.D. Wis. 2010).

         An expert may be qualified “by knowledge, skill, experience, training or education.” Fed.R.Evid. 702. An expert need not have any “particular credentials” to be qualified. Tuf Racing Prod., Inc. v. Am. Suzuki Motor Corp., 223 F.3d 585, 591 (7th Cir. 2000). The court must consider “‘a proposed expert's full range of practical experience as well as academic or technical training when determining whether that expert is qualified to render an opinion in a given area.'” Trustees of Chicago Painters & Decorators Pension, Health & Welfare, & Deferred Sav. Plan Trust Funds v. Royal Int'l Drywall & Decorating, Inc., 493 F.3d 782, 788 (7th Cir. 2007) (quoting Smith v. Ford Motor Co., 215 F.3d 713, 718 (7th Cir. 2000)). When assessing whether an expert is qualified, the court is “not concerned with [her] general qualifications.” Hall, 840 F.3d at 926. Instead, the court examines whether the expert has the necessary qualifications to support “‘each of the conclusions [she] draws.'” Id. (quoting Gayton v. McCoy, 593 F.3d 610, 617 (7th Cir. 2010)). In other words, the expert must be “qualified to offer opinions in the specific area of his or her proposed testimony.” Bone Care Int'l LLC v. Pentech Pharm., Inc., 2010 WL 3928598, at *1 (N.D. Ill. Oct. 1, 2010).

         To be reliable, an expert's testimony must be “based on sufficient facts or data” and be “the product of reliable principles and methods” that the expert has “reliably applied . . . to the facts of the case.” Fed.R.Evid. 702(b), (c). Put more succinctly, the expert's testimony must demonstrate “‘the same level of intellectual rigor that characterizes the practice of an expert in the relevant field.'” Lapsley v. Xtek, Inc., 689 F.3d 802, 805 (7th Cir. 2012) (quoting Kumho Tire Co. v. Carmichael, 526 U.S. 137, 153 (1999)). This standard is not satisfied when an expert “simply assert[s] a ‘bottom line'” or bases her opinion on “subjective belief or speculation.” Metavante Corp. v. Emigrant Sav. Bank, 619 F.3d 748, 761 (7th Cir. 2010). The court has broad latitude when deciding whether an expert's testimony is reliable. Higgins v. Koch Dev. Corp., 794 F.3d 697, 704 (7th Cir. 2015).

         To be relevant, an expert's testimony must “assist[] the jury in determining any fact at issue in the case.” Stuhlmacher, 774 F.3d at 409. Expert testimony must be “pertinent to an issue in the case.” Id. at 410. If “the jury is able to evaluate the same evidence and is capable of drawing its own conclusions, ” then the expert's testimony is not helpful. Sanders v. City of Chicago Heights, 2016 WL 4398011, at *4 (N.D. Ill. Aug. 18, 2016). The relevance standard for expert testimony is a liberal one. Hale v. State Farm Mut. Auto. Ins. Co., 2016 WL 6947065, at *2 (S.D. Ill. June 2, 2016).

         The court's application of these admissibility standards for expert testimony “is not intended to supplant the adversarial process.” Ortiz v. City of Chicago, 656 F.3d 523, 536 (7th Cir. 2011). Even “shaky” testimony may satisfy Rule 702 and Daubert. Bielskis v. Louisville Ladder, Inc., 663 F.3d 887, 894 (7th Cir. 2011). It remains for the jury to determine the accuracy of admissible expert evidence that has been “tested” through “‘vigorous cross-examination, presentation of contrary evidence, and careful instruction on the burden of proof.'” Lapsley, 689 F.3d at 805 (quoting Daubert, 509 U.S. at 596).


         The Court will discuss the SEC's Daubert motion first and then turn to Defendants' motion.

         A. The SEC's Daubert Motion

         The SEC has moved to exclude the testimony of Anthony Garvy. The SEC argues Garvy is unqualified, and that his opinions are unreliable and irrelevant.[1] The Court will address each of these arguments in turn after providing some background information.

         1. Background

         Garvy prepared an expert report in this case, which the Court will refer to as “Garvy's Report.” Garvy's Report, [ECF No. 849-1]. Various opinions are scattered throughout the report, but they largely can be sorted into three categories. First, Garvy opines as to the fair value of the Mercury Fund on December 31, 2008. Most of the report is devoted to calculating this number, which Garvy determines is $7, 051, 642. Id. at 13. Second, Garvy opines on the adequacy of how Nutmeg calculated the value of the Mercury Fund. He concludes Nutmeg engaged in “unacceptable discounting, ” and thus ended up with a value that was too low. Id. at 15. But Garvy also says Nutmeg's valuation was “in good-faith” and “reasonably objective and approximate to the Fair Value of the assets.” Id. 13, 15. Third, Garvy opines on the adequacy of Crowe Horwath's calculations of the value of the Mercury Fund.[2] He asserts Crowe Horwath “aggressively discounted” assets “with no understandable basis per their limited discussion of their discounting of these fair value assets” and improperly determined the value of certain securities by extrapolating from the value of others. Id. at 13 n.7, 18-19. Garvy further claims Crowe Horwath did not comply with the Appraisal Foundation's Uniform Standards of Professional Appraisal Practice, the American Institute of Certified Public Accountants' Statement of Standards of Valuation Services, or the Fair Value Standards. Id. at 16-17. Garvy even contends one of Crowe Horwath's reports does not conform with the Federal Rules of Civil Procedure. Id. at 16. Although this is not a complete summary of every opinion contained in Garvy's report, it is sufficient for background purposes.

         2. Garvy's Qualifications

         The SEC contends Garvy is not qualified to render an opinion in this case because he does not have experience calculating the fair value of securities, particularly the type of illiquid or restricted microcap securities that the Mercury Fund held. Plaintiff's Reply in Support of the Motion to Exclude Proposed Testimony by Anthony Garvy (“SEC's Reply”), [ECF No. 866], at 2; see also SEC's Motion, [ECF No. 847], at 3. But the SEC also argues Garvy's opinion in this case is unreliable because he did not use the same methodology he used in a previous “similar” engagement. SEC's Motion, [ECF No. 847], at 8, 13; SEC's Reply, [ECF No. 866], at 1, 4. So, the SEC's premise is that Garvy's previous engagement is similar enough to this one that he should have used the same methodology in both engagements. It is odd, then, for the SEC to argue at the same time that Garvy has no experience conducting the type of valuation required in this case. Regardless, courts impose no requirement that an expert be a specialist in a given field. See In re Fluidmaster, Inc., Water Connector Components Prod. Liab. Litig., 2017 WL 1196990, at *5 (N.D. Ill. Mar. 31, 2017) (explaining that courts normally do not require an expert to be a specialist and that an expert's lack of specialization typically goes to weight, not admissibility); Taylor v. Union Pac. R. Co., 2010 WL 3724287, at *2 (S.D. Ill. Sept. 16, 2010) (“However, an expert need not have credentials narrowly tailored to the subject matter of a case in order to pass muster under Rule 702, so long as the expert is testifying to matters within the area of his or her expertise.”).

         Moreover, the Court is not convinced Garvy actually lacks the knowledge, experience, training, or education required to satisfy Rule 702. See Smith, 215 F.3d at 718 (“[A] court should consider a proposed expert's full range of practical experience as well as academic or technical training when determining whether that expert is qualified to render an opinion in a given area.”). Garvy received a Master of Business Administration from Northwestern University's Kellogg School of Management and completed some graduate level course work at the University of Chicago's Booth Graduate School of Business. Garvy's Report, [ECF No. 849-1], at 26. Garvy also has various accreditations, including Certified Public Accountant, Certified Valuation Analyst, and Accredited in Business Valuation. Id. at 26. Garvy was a Managing Partner for valuation and litigation support services at Chadwick & Garvy LLC until he became President of Corporate Valuation Services Inc., which is the position he currently holds. Id. at 23. Garvy says that, through his work, he “has appraised billions of dollars of equity interests” and that he has appraised assets using fair value standards. Id. This includes a fair market valuation of a hedge fund that owned public securities. Deposition of Anthony Garvy (“Garvy's Dep.”), [ECF No. 849-2], at 20-22. Therefore, the Court rejects the SEC's challenge to Garvy's qualifications to value the Mercury Fund.

         The SEC does raise one meritorious objection to Garvy's qualifications. The SEC notes Garvy opined in his report about whether reports prepared by Crowe Horwath comply with the Federal Rules of Civil Procedure. SEC's Motion, [ECF No. 847], at 6 n.5; see also Garvy's Report, [ECF No. 849-1], at 17. Garvy does not appear to be qualified to render such an opinion and Defendants have not explained why he is qualified to do so. Therefore, Garvy cannot testify about that opinion.

         3. Garvy's Reliability

         The SEC takes somewhat of a scattershot approach to challenging Garvy's opinions as unreliable. Apparently attempting to inflict death by a thousand cuts, the SEC identifies many potential weak spots in Garvy's opinions. While this method of attack may be sufficient to kill off some experts, the Court finds that most of the SEC's arguments leave only scratches on Garvy for the purpose of its Daubert motion, not mortal wounds, and are the stuff of cross-examination rather than disqualification. They do not render Garvy's testimony entirely inadmissible.[3]

         The SEC first advances several reasons why Garvy's opinions are “untrustworthy” and argues he took shortcuts in preparing his report. The Court notes, as an initial matter, that “untrustworthiness” is not a recognized basis for excluding an expert's opinion. The question of an expert's credibility is left to the jury. Smith, 215 F.3d at 719. The SEC never ties many of the supposed “untrustworthy” aspects of Garvy's report to a recognized legal principle that renders expert testimony inadmissible. As noted above, most of what the SEC has to say about Garvy is more appropriately addressed to the jury.

         The SEC contends Garvy spent so little time preparing his report that he could not have developed a reliable opinion. SEC's Motion, [ECF No. 847], at 3-4; SEC's Reply, [ECF No. 866], at 2. According to the SEC, Garvy spent only 26.5 hours working on his report. The SEC seems to have calculated this number by dividing the amount Garvy charged for his services ($10, 000) by his hourly rate ($375.00). At his deposition, Garvy testified that he did not recall how many hours he spent working on the report. Garvy's Dep., [ECF No. 849-2], at 44. But Garvy also testified that, by the time he sent Randall a $6, 000 bill in June, 2011, he had stopped billing by the hour. Id. at 45. That means the SEC's method of calculation is not necessarily reflective of the amount of time Garvy actually worked on his report. More fundamentally, the SEC has not shown that a competent report could not be prepared in 26.5 hours. Although the SEC can cross-examination Garvy about the amount of time he devoted to developing his opinions, his testimony should not be barred solely because of the number of hours he spent preparing his report. See Traharne v. Wayne Scott Fetzer Co., 156 F.Supp.2d 717, 724 (N.D. Ill. 2001) (“Defendant's main objections to [the expert's] testimony center around the short amount of time he spent studying the facts and documents in the case and the fact that he never personally examined the sump pump at issue. Although these are valid objections this Court believes that they are better explored on cross-examination.”).

         Next, the SEC contends Garvy's opinion is not trustworthy because he allowed Randall to file his report with exhibits that were not a part of the report. SEC's Motion, [ECF No. 847], at 2, 6; SEC's Reply, [ECF No. 866], at 5. Garvy's report has only one exhibit, which is just one page. See [ECF No. 297], at 23. The report includes a Table of Exhibits that lists only that one exhibit. Id. at 3. Randall filed the report, including its one exhibit, as ECF No. 297. He filed hundreds of pages of additional documents as ECF Nos. 297-1 through 297-9 and ECF Nos. 298 through 305. It is uncertain whether Garvy reviewed these additional documents when preparing his report. See Garvy's Dep., [ECF No. 849-2], at 219-21. The record also does not clearly reflect what Garvy knew about what Randall did, when he knew it, and what control, if any, Garvy had over Randall's decision. At his deposition, Garvy testified only that he “must have said[] that is fine” when Randall said he would file the report “with some of the debentures and documents.” Id. at 221, 232.[4]

         The Court does not believe that Randall's conduct justifies excluding Garvy's testimony. It should go without saying that the filing of the additional exhibits in no way bears on the actual soundness of the opinions in Garvy's report. Further, there is no indication that Randall's filings prejudiced the SEC or misled the Court. The version of the report filed by Randall specified that there was only one exhibit to the report and was docketed as a separate filing with attachments. To the extent the SEC thought this was improper, it easily could have moved to strike the filing and asked the Court to require Randall to file the report without the additional exhibits. The SEC did not do so. The SEC has not cited any case law barring an expert's report under similar circumstances or explained why such a severe result is justified in this case.

         Third, the SEC claims Garvy took a shortcut by pulling the “National Economic Outlook” section of his report for this case from a report that he prepared for another engagement. SEC's Motion, [ECF No. 847], at 2, 6-7; SEC's Reply, [ECF No. 866], at 5. The SEC concedes copying from a prior report is not prohibited. SEC's Motion, [ECF No. 847], at 7. The SEC says, though, that lifting the section undermines the reliability of Garvy's report. That may be so but, again, that is more of an issue for cross-examination than for wholesale disqualification.

         In addition, the record does not clearly support the SEC's theory that Garvy copied-and-pasted text from one report into another. Garvy did not deny that portions of the two reports could be similar. See Garvy's Dep., [ECF No. 849-2], at 96-97. But he said he “didn't rely anything on” or “derive anything” from the previous report. Id. at 91-92, 95. Garvy claimed he maintained an “[a]bsolute Chinese wall” between his previous engagement and his work for this case. Id. at 98. Garvy explained that he generally included an economic outlook section in his appraisal reports and that those sections tended to follow a “fairly similar” template with similar boilerplate language or data. Id. at 95, 97. He also noted that, in the case of the two reports at issue, he “probably was using the same service” to get the information in the outlooks. Id. at 96- 97. Again, this may be fodder for cross-examination but not flat disqualification The Court is not making a factual finding as to what actually happened because doing so is unnecessary to resolve the SEC's Daubert challenge.

         The SEC identifies two specific problems supposedly resulting from the inclusion of the “lifted” National Economic Outlook section. The first is that Garvy's opinion is untrustworthy because he could not explain why it was relevant. At his deposition, the SEC questioned Garvy about why he included this section in his report. The SEC specifically focused on agriculture and housing. Garvy explained that neither of those are directly related to the value of the assets held by the Mercury Fund. Id. at 116-17. But he also noted how “agriculture drives commodity prices and it also drives inflation” and housing is a factor “in the overall macro sense that could drive the market.” Id.

         The SEC also contends Garvy's opinion is untrustworthy because the National Economic Outlook section includes a statement contradicted by Defendants. The SEC focuses on Garvy's statement that “the downward volatility” in the national economy would be “magnified in the [Mercury] Fund's assets which comprise mostly of (sic) lower capitalized equities.” Garvy's Report, [ECF No. 849], at 10. The SEC contends that, to the contrary, Randall and David revalued the Mercury Fund in early 2009, leading to an increase in the Fund's value. What the SEC decided not to mention, however, is that the memorandum describing the revaluation, which the SEC cites in its briefs, shows that the revaluation occurred because Defendants supposedly discovered “two small errors” made in their initial valuation. [ECF No. 849-8], at 1. One error purportedly involved the incorrect entering of the terms of a note and the other was the overlooking of one certificate. Id. at 5-6. In other words, the revaluation may have no bearing on Garvy's statement regarding downward volatility.

         Fourth, as noted above, the SEC argues Garvy's opinion must be untrustworthy because he used a different approach in this case than in a previous engagement. SEC's Motion, [ECF No. 847], at 2, 8, 13; SEC's Reply, [ECF No. 866], at 1, 4. According to the SEC, in another case, Garvy used a fair market value approach instead of a fair value approach. The SEC says Garvy did not explain at his deposition why he used different approaches in these two engagements. It is undisputed, however, that the previous engagement did not involve the Advisers Act, which imposes specific requirements with respect to valuation. Moreover, the SEC itself identifies, tellingly, the proper vehicle for addressing this issue: cross-examination. See SEC's Reply, [ECF No. 866], at 4 (“If Garvy testifies at trial, he will be required to explain why, in a previous valuation engagement, he disregarded the standard he now claims apply . . . .”). A conflict between an expert's prior work and his work in a specific case is “prime territory for ‘vigorous cross-examination.'” Ernst v. City of Chicago, 39 F.Supp.3d 1005, 1011 (N.D. Ill. 2014) (quoting Daubert, 509 U.S. 596).

         The SEC's next set of arguments all drive towards the notion that Garvy blindly followed Defendants' lead without checking whether information they gave him was accurate. The SEC's first complaint in this area is that Garvy did not independently verify the Mercury Fund's holdings. SEC's Motion, [ECF No. 847], at 2, 5, 13-14; SEC's Reply, [ECF No. 866], at 1, 5. But “[a]nalyzing data assembled by others is neither illicit nor unusual, even if the data were prepared for litigation by an interested party.” Southwire Co. v. J.P. Morgan Chase & Co., 528 F.Supp.2d 908, 934 (W.D. Wis. 2007); see also Fluidmaster, 2017 WL 1196990, at *20 (rejecting a challenge to an expert's testimony based on his reliance on information provided by a party); City of Gary v. Shafer, 2009 WL 1605136, at *6 (N.D. Ind. June 2, 2009). Defendants, as the people and entities responsible for running the Mercury Fund, were well-suited to know of its holdings. Importantly, the SEC has not asserted or argued (much less shown) that, as of the valuation date, the Mercury Fund did not actually own any of the assets that Garvy included in his report.[5] Instead, the SEC merely notes the Mercury Fund was not a party to certain agreements that predate the December 31, 2008 date valuation date.[6] With no indication that Garvy lacked sufficient facts or data with respect to the Mercury Fund's holdings, “[f]actual inaccuracies are to be explored through cross-examination and go toward the weight and credibility of the evidence not admissibility.” Traharne v. Wayne Scott Fetzer Co., 156 F.Supp.2d 717, 723 (N.D. Ill. 2001); see also Sys. Dev. Integration, LLC v. Computer Scis. Corp., 886 F.Supp.2d 873, 882 (N.D. Ill. 2012) (“The Court must be mindful, however, not to usurp the jury's role of determining the ‘soundness of the factual underpinnings of the expert's analysis and the correctness of the expert's conclusions based on that analysis.'”) (quoting Bielskis, 663 F.3d at 896); Traharne v. Wayne Scott Fetzer Co., 156 F.Supp.2d 717, 724 (N.D. Ill. 2001) (“Also, ‘shaky' expert testimony and testimony with a weak factual basis is better revealed through cross-examination and it is not an abuse of discretion to admit such testimony.”).

         The SEC also asserts Garvy relied on unreliable price information supplied by Defendants. SEC's Motion, [ECF No. 847], at 2, 4-5, 12-13; SEC's Reply, [ECF No. 866], at 1, 4. As pointed out above, even if Garvy accepted such information from Defendants, this alone would not necessarily justify the exclusion of his opinion. The SEC contends the price information from Defendants that Garvy supposedly relied upon was inaccurate with respect to one security. The SEC notes Garvy listed in his report the price of USA Technologies, Inc. (“USAT”) as $2.16, but E*Trade reported a closing price of $2.11 on December 31, 2008. [ECF No. 849-13]. What the SEC does not say, however, is that the pricing information provided by Aegis Capital (“Aegis”) reported $2.16 as the price of USAT on December 31, 2008. [ECF No. 849-7], at 4. The SEC has not argued the data provided by Aegis is unreliable. That means the SEC has not shown conclusively that Garvy used inaccurate pricing information to value the Mercury Fund's holdings in USAT. Again, while this may be fodder for cross-examination, it does not justify disqualification.

         The SEC also says Garvy's pricing information was internally inconsistent. The SEC notes Garvy used a price of $0.16 for one security in Andover Medical, Inc. (“ADOV”) and $0.35 for another security in that same company. Garvy's Report, [ECF No. 849-1], at 27. Defendants say in response that the two securities are different, the former is a debenture and the latter is a warrant. Id. As such, Defendants say, Garvy used the market price for the debenture and the warrant exercise price for the warrant. The SEC does not respond in its reply brief to this explanation. The other supposed inconsistency identified by the SEC has to do with securities in Long E, Inc. (“LOGE”). Again, though, Garvy used different prices for two different types of securities in LOGE, a debenture and a warrant. Defendants offer the same explanation and the SEC again does not respond. Therefore, the Court is not convinced Garvy relied on inconsistent pricing data. Once again, fertile areas for cross-examination do not disqualify Garvy at the courthouse door.

         The SEC's last argument related to prices is that Garvy lied about the source of the data he relied upon by claiming he got it from Aegis. Garvy said during his deposition that he received some pricing information from Defendants but that he got most of it from Aegis. Garvy's Dep., [ECF No. 849-2], at 59-61. The SEC seizes on the fact that Garvy signed his report on May 26, 2011, but did not receive one specific email that contained pricing information from an employee at Aegis until the next day. Garvy's Report, [ECF No. 849-1], at 21; [ECF No. 849-7]. At his deposition, Garvy testified that he usually does not do work on a report after signing and dating it. Garvy's Dep., [ECF No. 849-2], at 65-67. He said he was not sure if the May 27, 2011 email contained all of the pricing information that he received from Aegis. Id. at 145. But, he said that, if it did, then he would have incorporated the information into his spreadsheet after he received the email. Id. Garvy testified that he told Defendants he needed a third party, such as Aegis, to provide confirmation of the pricing data contained in Defendants' memorandum. Id. at 289-91. In other words, it is possible that Defendants provided Garvy with pricing information that he used while preparing his report and that he confirmed the prices with the Aegis information that he received on May 27. So, while this may be ripe area for cross-examination, the Court does not find that it shows Garvy relied on pricing data that is so unreliable as to justify excluding his opinion.[7] See Manpower, Inc. v. Ins. Co. of Pennsylvania, 732 F.3d 796, 809 (7th Cir. 2013) (“Assuming a rational connection between the data and the opinion-as there was here-an expert's reliance on faulty information is a matter to be explored on cross-examination; it does not go to admissibility.”).

         The SEC next argues that Garvy's methodology was fundamentally flawed because he did not incorporate certain liabilities in his fair value calculation. SEC's Motion, [ECF No. 847], at 7-8; SEC's Reply, [ECF No. 866], at 1. The SEC identifies as the supposedly ignored liabilities “money owed to certain Mercury Fund investors, administrative fees, and early disbursements.” SEC's Motion, [ECF No. 847], at 7. In support of this argument, the SEC cites Garvy's deposition testimony and a memorandum prepared by Defendants. Both Garvy's testimony and the memorandum indicate that the $266, 168.23 due to Mercury Fund investors was owed by Nutmeg, not the Mercury Fund. Garvy's Dep., [ECF No. 849-2], at 292-95; [ECF No. 849-8], at 7-8. In other words, that amount was not a liability of the Mercury Fund. Moreover, the record does not clearly show that the amount was still due as of December 31, 2008. The memorandum says only that the entry reflecting payment of that amount “was placed on the books in January 2009” without stating whether the payment was made in that month or prior to it. [ECF No. 849-8], at 8. At his deposition, Garvy seemed to indicate that he thought the payment occurred before the date of his valuation, although his ...

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