By NEIL HARTNELL
Tribune Business Editor
An outspoken QC yesterday said Sarkis Izmirlian did what “any other businessman would have done” in filing for Chapter 11 bankruptcy protection to safeguard his family’s $850-$900 million investment in the Baha Mar project.
Fred Smith QC, the Callenders & Co attorney and partner, told Tribune Business it was “regrettable” that Prime Minister Perry Christie regarded Mr Izmirlian’s Chapter 11 filing as a personal betrayal, as he called for a radical overhaul of the Government’s dealings with foreign investors.
Suggesting that Baha Mar represented the latest failure of Mr Christie’s so-called ‘anchor project’ strategy, Mr Smith said the episode again questioned the wisdom of using ‘Heads of Agreement’ to conclude deals with major investors.
And he called for Bahamian governments to divorce themselves from commercial negotiations regardless of which party was in power, arguing that the politicians were regularly “eclipsed” by investors and their “army of lawyers and financial advisers”.
Mr Smith instead suggested that the Government hire teams of Bahamian and foreign professionals, with the necessary expertise, to deal with sophisticated foreign investors and negotiate appropriate agreements that maximised the benefits for Bahamians.
He suggested that the Prime Minister was inevitably looking at Baha Mar’s travails from a political perspective, not realising the commercial imperatives that drove Mr Izmirlian to file for Chapter 11 in the Delaware Bankruptcy courts.
“It is regrettable that the Prime Minister should feel betrayed by Mr Izmirlian personally,” Mr Smith told Tribune Business.
“He [Mr Izmirlian], as a businessman, is doing no more or no less than any other businessman would do in protecting his commercial interests. His interests are not political.”
Mr Smith’s comments are almost the first public recognition of why Mr Izmirlian put the $3.5 billion Baha Mar project into Chapter 11 bankruptcy protection since the filing was made on June 29, more than two weeks ago.
Baha Mar’s chairman and chief executive has taken a pasting over the Chapter 11 filing, with some public figures and commentators calling for him to apologise publicly to the Bahamian people for a supposed affront to this nation’s sovereignty by taking the dispute over the $3.5 billion project to Delaware.
With Baha Mar out of cash, and vulnerable to either foreclosure by its main lender, the China Export-Import Bank, or a winding-up petition by any other creditor, Mr Izmirlian did what he had to do to protect his family’s original $850 million investment.
Baha Mar’s filings claim this is now approaching $900 million, and Mr Izmirlian chose Delaware over the Bahamas because this nation offers no Chapter 11-style protection or reliefs. Our laws only offer ‘death’ - receivership and/or winding-up /liquidation.
And he could not have given advance notice to the Government of his Chapter 11 intentions for fear the move would have leaked to the Chinese or other creditors, and they would have moved to either block this or foreclose on their security.
Mr Smith, meanwhile, said the Bahamas should reappraise its approach to negotiating with foreign investors in light of the Baha Mar debacle, and separate the commercial from the political.
“I have repeatedly condemned the fallibility, inexperience and lack of commercial expertise by our politicians, many of whom are lawyers, in business matters,” he told Tribune Business.
“Our politicians are eclipsed by the commercial expertise and transactional experience of international investors and their legion of international lawyers.
“Any foreign investor is able to pull the wool over the Office of the Prime Minister’s eyes, whether PLP or FNM, by getting out their glossy brochures and sweet promises, which our politicians lap up and present to the Bahamian voting public as political brownie points in their favour.”
Calling for there to be “a clear distinction” between politicians and businessmen in the Bahamas, Mr Smith urged the Government to follow the lead of former US president, George W. Bush, who freely admitted he was not an expert in many areas and compensated by surrounding himself with persons who were.
He called on administrations of both hues, FNM and PLP, to “get out of the business of commerce and focus on governance”, instead leaving negotiations with major investors to a hired team of Bahamian and overseas professionals.
Such professionals would include commercial transaction attorneys and financial advisers, who would negotiate areas such as Crown Land leases and sales, and tax concessions.
The Government would have oversight of their work, and be able to sign off on the negotiations. And, to further boost transparency and accountability to the Bahamian people, Mr Smith said any investment deals should be debated and passed by Parliament.
“Instead of having secretive Heads of Agreement, they should negotiate deals, present them to Parliament, have them debated in public, and have them legislated, just like the Hawksbill Creek Agreement,” he told Tribune Business.
“There would be transparency, there would be accountability, there would be objective scrutiny as to the merits of these negotiations.
“Leaving transactional Heads of Agreement to be negotiated by the Office of the Prime Minister and its minions is recipe for disaster for the Bahamas. All it does is provide opportunities for smart and clever foreign investors to take advantage of us locals.”
Mr Smith said Baha Mar was now in danger of joining the likes of the I-Group development in Mayaguana and the former Ginn project in Grand Bahama’s West End as failed ‘anchor projects’ that had failed to materialise.
“When they collapse, it’s commercial egg all over the faces of our local politicians,” Mr Smith told Tribune Business, reiterating that so-called ‘Heads of Agreement’ had no basis in law.
He added that the Government’s current negotiating approach was potentially compromising the future for thousands of Bahamians.