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Cca’S Baha Mar Creditor Committee ‘Conflict’ Slammed

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Opposition’s deputy leader yesterday slammed the ‘conflict of interest’ created by the inclusion of a senior China Construction America (CCA) executive on the committee that will handle Baha Mar creditor payouts.

K P Turnquest told Tribune Business there was a clear conflict between Tiger Wu’s appointment and CCA’s status as Baha Mar’s largest unsecured creditor when the project filed for Chapter 11 bankruptcy protection in June 2015.

He described this as “very unfair” to the Bahamian creditors, especially those local contractors who were hired as sub-contractors by CCA, given that the latter could use its position on the committee to ‘beat down’ the value of their claims.

Mr Turnquest said that apart from being able to exploit its committee membership to ensure it was paid first, and made ‘whole’, CCA was perfectly placed to “mitigate its liabilities” to the Bahamian construction industry by reducing the compensation they received.

He called instead for Baha Mar creditor claims, and the eventual payouts, to be overseen by a panel of arbitrators rather than the five-person committee named by the Government on Sunday evening.

“I think it is,” Mr Turnquest replied, when asked whether CCA’s inclusion on the Baha Mar creditor committee represented a ‘conflict of interest’.

“They are a creditor themselves, one. And, two, a lot of the claims coming from Bahamian contractors would be sub-contractors of them.

“The Bahamian contractors will thus have to prove their claims against CCA, which is obviously trying to mitigate its liabilities (payouts to its creditors). It’s very unfair.”

Besides implying that CCA’s inclusion on the committee is equivalent to ‘leaving the fox guarding the hen coop’, Mr Turnquest said Baha Mar’s main contractor was likely to be supported by other members in determining the value of claims it owes.

Apart from a representative from the China Export-Import Bank, Baha Mar’s $2.45 billion secured creditor, the committee also includes Norbert Chan from the Deloitte & Touche accounting firm.

Given that CCA and the China Export-Import Bank share the same owner in the Beijing government, each is likely to back the other on decisions/actions taken in relation to Bahamian creditor claims. And since Deloitte & Touche, as Baha Mar’s receivers, are the bank’s agent, its representative will also be under pressure to lean towards the Chinese entities.

“When you look at the other members of the committee, one or two of them are going to be in favour of CCA,” Mr Turnquest told Tribune Business. “I think the creditors will find themselves having to fight all of them.

“It puts the Bahamian creditors in a very unfair position..... Surely there’s got to be some independent people that can be appointed to that committee who creditors can trust will treat their claims impartially and fairly? Will these creditors have a fair shake given the make-up of the committee?”

It remains to be seen how the committee will deal with CCA’s own demands, given the almost $68 million discrepancy between what Baha Mar (under Sarkis Izmirlian) alleged its main contractor was owed, and what the Chinese state-owned company was actually claiming.

Tribune Business’s review of documents filed with the Delaware Bankruptcy Court at the time of Baha Mar’s ill-fated Chapter 11 bid show CCA as the largest unsecured creditor, with the contractor owned some $72.635 million.

Much of this sum is likely owed, in turn, to its Bahamian sub-contractors. Yet Tom Dunlap, Baha Mar’s former president, alleged in an affidavit accompanying the Chapter 11 filing that CCA had been claiming it was owed around $140 million.

“CCA has alleged it has accrued but unpaid construction amounts and claims of approximately $140 million in the aggregate,”Mr Dunlap alleged at the time.

“[Baha Mar], in reliance upon the opinion of their chartered quantity surveyors, vigorously dispute most if not all of these allegations, and many of the disputed claims are subject to pending or future litigation between [Baha Mar] and CCA, its sub-contractors, and/or China State Construction Engineering Company.”

How the committee resolves CCA’s own claim, and the discrepancy between what it was demanding and what Baha Mar alleged it was owed, will thus be a key early test for it.

The China Export-Import Bank’s attitude towards CCA’s own claim will also be interesting, given Mr Dunlap’s allegation that its own project monitors, Ryder, Levitt and Bucknall, found that the contractor had completed just 22 per cent of the work it had claimed for.

“CCA began to submit inflated invoices for work,” Mr Dunlap said back in June 2015. “For example, the debtors received monthly pay applications from CCA for the period February through May 2015 in an aggregate amount of $343.8 million for work in respect of which China Export-Import Bank’s own independent project monitor countersigned at a value stated to be worth only $76.1 million.”

And, in another irony, Tiger Wu, the very same executive named to the Baha Mar creditors committee, is also listed as the CCA contact person on the list of the $3.5 billion project’s 20 largest unsecured creditors.

Emphasising that he meant “no disrespect” to former Cabinet minister James Smith who, together with liquidation adviser, Grant Lyon, are the Government’s representatives on the Baha Mar committee, Mr Turnquest suggested that member should have instead been drawn from bodies such as the Bahamas Institute of Chartered Arbitrators.

“It’s unfortunate they decided not to go to an independent arbitration panel to review these claims and oversee the payouts,” he told Tribune Business. “True to form, the Government wants to oversee everything. It’s unfortunate.”

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