The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Baha Mar’s Chinese contractor has accused it of “violating” Bahamian criminal law by seizing, and copying, documents and electronically-stored information that do not belong to it.

China Construction America, in filings with the Delaware Bankruptcy Court on Friday, accused the $3.5 billion developer of “malicious conduct” by seizing 152 computers and the same number of smartphones from its offices at the project site.

Baha Mar expelled China Construction America from its offices on June 30, a day after filing for Chapter 11 bankruptcy protection, and the contractor has now accused it of going on an improper “fishing expedition” against it.

And China Construction America officials also expressed concern that Baha Mar may have accessed confidential information unrelated to the $3.5 billion project.

In particular, it said Baha Mar may have obtained budget data for the Bahamas-based Morgan’s Point Development, which is believed to be the $200 million expansion adjacent to the British Colonial Hilton - the resort owned by China Construction America.

In objecting to Baha Mar’s demand for the Delaware court to order it to produce construction documents, and submit to an examination, the contractor reiterated that it had its own claims against the developer for “in excess of $140 million” for unpaid construction work.

Referring to the dispute over what it described as “Baha Mar’s failed business venture”, China Construction America alleged: “In relation to the contractual dispute between the parties, Baha Mar has engaged in malicious conduct against China Construction Bahamas that not only violates China Construction Bahamas’ contractual rights, but may also amount to violations of Bahamian civil and criminal law.

“Baha Mar expelled China Construction Bahamas from the China Construction Bahamas project site offices, seized China Construction Bahamas’ computers and documents, and is in the process of copying and reviewing documents and electronically-stored information.”

China Construction said this included material Baha Mar had no right to see, including attorney-privileged communications; “confidential and proprietary information”; and documents that had nothing to do with the $3.5 billion project.

“China Construction Bahamas’ has cause to defend itself against the grave violation of its rights in the Bahamas,” the contractor’s Delaware filing, made on Friday, alleged.

“Debtors [Baha Mar] are using their supposed need to collect ‘project documents’ as a means to conduct a fishing expedition against China Construction Bahamas, as well as China Construction America and other unspecified entities.”

Baha Mar, in its filings the previous week, had alleged that China Construction America and its Bahamian subsidiary were withholding construction drawings and other documents vital to the project’s completion.

The developer alleged that it if it did not obtain this information, it would be at a disadvantage in negotiations with its Chinese partners and the Government to resolve the disputes over the $3.5 billion development.

And Baha Mar added that it was vital it possessed a complete construction record should it elect to hire a new contractor- giving every indication it wants to ditch China Construction America as construction manager.

China Construction, though, said it “has never taken the position” that Baha Mar was not entitled to the documents. It said the developer already had access to everything it needed via a shared electronic platform developed by BIW Technologies.

The contractor did not respond directly to Baha Mar’s allegations of “sabotage”, over claims it shut down power to the project site in the wake of the Chapter 11 filing, instead merely accusing the developer of “impugning” it via the media.

China Construction also did not respond to Baha Mar’s allegations about “fraudulent accounting practices” and the inflating of expenses, nor the claims that a significant number of contractor and sub-contractor staff claims related to personal expenses such as “groceries and cosmetics”.

Still, China Construction’s response provides further evidence of the increasingly poisonous relationship between Baha Mar and its main contractor as the two sides prepare to resume battle in the Delaware and Bahamian Supreme Court today.

The nature and tone of China Construction America’s filings indicates that hopes of a negotiated settlement to the Baha Mar impasse, and the avoidance of a protracted legal battle, appear as remote as ever.

Meanwhile, acknowledging that Baha Mar blamed it for the development’s woes, China Construction America and its Bahamian subsidiary hit back by pointing the finger squarely at the developer in their latest filings.

They accused Baha Mar of failing to “provide a completed design for the project” as per the construction contract schedule; violating the construction contract by issuing hundreds of design and scope changes without “an estimate of the cost and time associated with the change or any method for payment”; and the developer’s failure to speedily process the changes.

“On June 30, 2015, Baha Mar expelled China Construction Bahamas from the project site and locked China Construction Bahamas out of its project offices,” the contractor alleged.

“Following China Construction Bahamas’ expulsion from the project site offices, Baha Mar seized approximately 152 computers (both laptop and desktop computers), one data server, 152 smartphones and boxes of China Construction Bahamas’ documents.”

One of Baha Mar’s attorneys, David McGill, admitted to China Construction America’s attorneys via e-mail on July 8 that the developer was ‘copying hard drives and documents’ before returning them to the contractor’s Bahamian offices.

Alleging that its legal rights had been violated, China Construction America alleged: “Baha Mar did not have the right to take possession of the China Construction Bahamas property, and it does not have the right to unfettered access to the information contained in the China Construction Bahamas property.

“As Baha Mar was advised, the China Construction Bahamas property contains proprietary and confidential information relating to the company’s finances and profit margins, business operations and strategic plans......

“Baha Mar’s actions are an illegitimate, and potentially illegal, attempt to engage in pre-litigation discovery in violation of applicable rules of procedure, and China Construction Bahamas’ procedural and substantive rights thereunder.”

Jun Li, a China Construction Bahamas vice-president, alleged in an affidavit that the company’s computers and phones were not encrypted, and some may not be password protected.

He claimed that Baha Mar was even dismantling the company’s computers, so it could remove and copy the hard drives.

Mr Li also alleged that among the non-Baha Mar material that may have been accessed was “the budget for the Morgan’s Point Development project, which is an unrelated project in the Bahamas for which China Construction Bahamas provided services”. That is thought to be the $200 million development adjacent to the British Colonial Hilton.

The contractor, meanwhile, alleged that all project drawings, queries, tendering and costs were posted on an online platform created by BIW Technologies, which was accessible to all parties - including Baha Mar.

It added that Baha Mar had yet to respond to its July 10, 2015, letter demanding that the developer return all its property and copied information, plus identify all employees and outsiders who had seen the China Construction America documents.

China Construction America argued that there was no ‘good cause’ for the Delaware court to order an examination of itself, or demand document production, as Baha Mar could already access everything it required.

Describing Baha Mar’s demands as ‘invasive’, it added: “The debtors’ audacious position that they should be granted unfettered access to search (and likely copy and review) the laptops of China Construction Bahamas’ chief executive and other senior executives defies credulity.

“The debtors’ motion is a further illegitimate attempt to intrude upon China Construction America, China Construction Bahamas and other unspecified entities’ private business affairs.”

China Construction also said its filings were not a recognition that the Delaware Bankruptcy Court should have jurisdiction over, or was the appropriate forum for resolving, the Baha Mar dispute.

Confirming that it was backing the bid by the Government and China Export-Import Bank to wrest control of Baha Mar’s fate from Delaware, and back to the Supreme Court, China Construction America said: “In the Bahamas, China Construction Bahamas has objected to the debtors’ [Baha Mar’s] request that these [Chapter 11] proceedings be recognised under any circumstances.”