The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Florida supplier at the centre of the Baha Mar 'completion' controversy yesterday hit back by accusing the project's main contractor of reneging on promises to make it "100 per cent financially whole".

Gerald Shavartsman, Source Outdoor's chief executive, alleged in an affidavit filed with the south Florida federal court that China Construction America's (CCA) Bahamas contract manager, Natalia Dwornik, had initially pledged to "make good monies owed".

That referred to sums owed to Source Outdoor prior to Baha Mar's Chapter 11 bankruptcy protection filing in June 2015, and Mr Shavartsman said this promise induced it to resume working with CCA on the project's lounge chairs.

However, he claims that just two months after Ms Dwornik's promise, CCA performed a 'u-turn' and warned Source Outdoor that it was "unlikely any further payments can be made".

The Florida supplier is claiming to still be owed more than $332,000, and its legal filings yesterday questioned the motivation for CCA (Bahamas) assertion that it may suffer "irreparable harm" as a result of its potential failure to deliver 1,420 lounge chairs.

Source Outdoor said it was personally aware of two-three other companies that manufactured a similar product, yet argued that CCA was making its products out to be the equivalent of "a Monet or a Picasso", or "a basketball that is signed by Michael Jordan".

And it openly questioned in its legal filings whether CCA was using the 'lounge chairs' dispute as a smokescreen, or cover, for other unknown reasons that might cause it to miss Baha Mar's October 15 'substantial completion' deadline.

"Nowhere does CCA's affidavit indicate that CCA is otherwise on schedule for timely completion, absent delivery of these particular chaise lounges," Source Outdoor alleged. "Are they? Are there any other delays or issues that may impact substantial completion?

"Logically, it is also important to remember that we are talking about chaise lounges here. We are not talking about a product (eg delivery of drywall framing) that one would assume may hold up completion of other items necessary to achieve substantial completion (hanging drywall, achieving a particular level finish, and painting).

"In addition, because the CCA affidavit did not see fit to include a copy of the underlying contract related to such liquidated damages, the claimed 'facts' here leave more questions than answers. For example, how is that clause drafted? Are there limitations on it or conditions related to it?"

Source Outdoor, bizarrely, relied on Tribune Business's July 3 report on CCA's complaint for much of its evidence. This newspaper pointed out that CCA's failure to complete Baha Mar on time, and on budget, and missing three previous completion deadlines was what forced the original developer, Sarkis Izmirlian, to file for Chapter 11 protection.

The Florida supplier also picked up on this newspaper's reporting of CCA's relationship with its fellow Chinese state-owned entity, the China Export-Import Bank, and the contractor's seat on the claims committee that disbursed $101.5 million to the project's creditors.

"One is left to wonder at least what is the true relationship between CCA and others involved in connection with the project," Source Outdoor added. "If the relationship is closer than is alluded to thus far by CCA, that would tend to refute CCA's claimed separation from any responsibility of others, and instead support a connection that may render CCA liable in and of itself."

And, emphasising that there is nothing "peculiar or unique" about its products, Source Outdoor added: "Simply put: We are not talking here about a Monet or a Picasso; a basketball that is signed by Michael Jordan or any NBA player for that matter; a baseball card of Hank Aaron or any Hall of Fame MLB player for that matter; a personal memento that carries with it memories of times past for one who claims to be its rightful owner; or even an antique piece of furniture. In this particular instance, we are simply talking about chaise lounge chairs that can be purchased openly on the market."

Mr Shavartsman, meanwhile, said Source Outdoor had initially sold $1.886 million worth of furniture to Baha Mar via its purchasing agent, Purchasing Solutions International (PSI), prior to the Chapter 11 filing.

The company then received a letter from Raymond Winder, the Deloitte & Touche (Bahamas) partner who was one of Baha Mar's receivers, confirming that they had "authorised CCA to complete transactions carried out with you on behalf of the Baha Mar companies".

This was accompanied by a November 28, 2016, e-mail from CCA Bahamas' Ms Dwornik, who corresponded with Source Outdoor's national accounts manager, Candice McCarthy.

Ms McCarthy informed the CCA executive on December 7, 2016: "Unfortunately, we're owed a lot of money from Baha Mar. If you're willing to pay for what's owed, we'll be willing to help you with anything we can."

This prompted Ms Dwornik to reply the same day: "We appreciate the debt situation and we are making good the monies owed. So please send me all the details as requested.

"I can then make out new CCA purchase orders so we can settle the debts and have all the outstanding orders completed."

Mr Shavartsman said Source Outdoor began dealing with CCA (Bahamas) as a result of that e-mail, but was then informed on February 8 that "it is unlikely any further payments can be made" due to a review by management.

Ms Dwornik had warned in a February 1 e-mail that Baha Mar's Deloitte &Touche receivers "have a fundamental problem with the $450,000 deposit monies paid previously, none of which is being honoured by Source Outdoor".

This prompted Mr Shavartsman to write that Source Outdoor had been forced to apply $352,677 to "mitigate losses" caused by an inability to deliver product to Baha Mar when it was in Chapter 11, while a further $32,822 was incurred for storage fees.

"You have also advised us that it is unlikely that any further payments can be made," he told Ms Dwornik. "That is certainly problematic as we will need a resolution of any and all financial matters prior to manufacture of and/or delivery of further materials.

"We need to start with some sort of assurance that Source Outdoor will be made 100 per cent financially whole."

This prompted CCA (Bahamas) contract manager to reply on April 12, 2017: "Your debt with Baha Mar Ltd is not something that CCA Bahamas are responsible for".

Mr Shavartsman alleged: "Had CCA not indicated that they would make good on the outstanding financial responsibilities to Source, Source would not have proceeded with CCA as it did.

"Despite such indications from CCA, CCA failed to - and refused to - make good on such promises and responsibilities."