By NEIL HARTNELL
Tribune Business Editor
The Prime Minister was yesterday urged to “take the long view” by the Opposition’s deputy leader, who warned him not to jeopardise the Bahamas’ international reputation by rapidly approving Baha Mar’s new owner.
K P Turnquest told Tribune Business there was “ample evidence” that the development’s prospective purchaser, Chow Tai Fook Enterprises (CTFE), had “some questionable connections to unsavoury organisations”.
These claims have been refuted by CTFE, the Hong Kong-based conglomerate controlled by the Cheng family, who have emphasised their commitment to the highest standards of integrity and corporate governance wherever they operate.
However, Mr Turnquest warned Mr Christie not to sacrifice the Bahamas’ reputation as “a blue chip gaming destination” in his haste to secure Baha Mar’s opening - and the employment of thousands of Bahamians - prior to the upcoming PLP convention and 2017 general election.
The Prime Minister, in his Friday address to the Bahamas Hotel and Tourism Association (BHTA), gave every impression that CTFE’s Baha Mar acquisition was effectively ‘a done deal’, confirming that it planned to hire 1,500 Bahamian workers early in the New Year.
As a result, Mr Turnquest called on the Government to release all details of the Baha Mar agreement and purchase, which are currently ‘sealed’ by Order of the Supreme Court.
Given that CTFE appears to be the buyer, Mr Turnquest said the rationale for sealing the agreement - to protect the integrity of the Baha Mar sales process - seemed to have disappeared.
He added that it was vital for Bahamians to understand the investment incentives being given to CTFE as part of the purchase, particularly whether the 10 per cent Stamp Duty/Value-Added Tax combination will be paid on the sale price, so taxpayers know if they are “picking up the tab”.
Urging caution, Mr Turnquest told Tribune Business of CTFE: “Based on what we do know, there seems to be questions as to the suitability of the potential buyer in terms of their connections to unsavoury organisations.
“We have ample evidence that there are some questionable connections that we have to be very careful about.”
Mr Turnquest’s concerns, which echo those of DNA leader, Branville McCartney, and former Baha Mar director and FNM Montagu candidate, Dionisio D’Aguilar, appear to be based on a May 18, 2009, report by the US state of New Jersey’s gaming enforcement division.
This dealt with a proposed Macau casino joint venture between MGM Mirage and Stanley Ho’s daughter, Pansy, which focused on concerns that Macau’s VIP gaming rooms were vulnerable to exploitation by Chinese/Asian crime gangs known as Triads.
Efforts have been made to link the Cheng family and CTFE’s publicly traded subsidiary, New World Development, to these activities via their investment in Mr Ho’s STDM and SJM companies.
However, while the New Jersey regulator’s report made adverse findings against Mr Ho, describing him as “unsuitable”, no such conclusions were reached about the Cheng family or their companies - who are investors in Mr Ho’s main gaming company.
In response, CTFE, which is controlled by the family of the late billionaire, Cheng Yu Tung, emphasised its commitment “to integrity and good governance in all of our business operations worldwide”.
It also indicated that its gaming reputation was in ‘good standing’ with regulators throughout the world, as the $3 billion Queen’s Wharf consortium in Brisbane, of which it is part, had just been approved for a casino licence by Australian regulators.
Mr Turnquest, though, told Tribune Business: “I think we have to be very careful. We are a blue chip gaming destination and we want to remain as such.
“We have had experience with unsavoury developers involved in the casino industry before, and we don’t want to go back in time to that. We want to remain a blue chip casino destination.”
CTFE moved with speed to distance itself from Mr Ho when the concerns were first raised, emphasising that neither he nor his companies were involved with their plans for Baha Mar.
It also sought to disassociate itself from the operating activities of Mr Ho’s companies, stating: “The Cheng family’s role in the Macau casino is strictly as an investor, with no involvement in day-to-day management of the casino or oversight of the gaming industry in Macau.”
This, though, raises questions as to why CTFE/the Chengs continue to maintain their holdings in STDM and SJM, despite the concerns and negative publicity, and whether the Hong Kong conglomerate and its principals really were ‘passive investors’.
The CTFE/Cheng move to distance themselves from Mr Ho also raises questions as to why the Government is sending a ministerial delegation to Hong Kong and Macau to assess the company’s business operations, including the very casinos it is disassociating itself from.
Obie Wilchcombe, minister of tourism, who has responsibility for gaming, confirmed that the delegation, of which he is part, would explore the Macau casino scene.
Mr Turnquest, meanwhile, said the Prime Minister’s comments on the CTFE purchase “give the impression it’s a done deal”.
But, with the ministerial delegation headed to Hong Kong and Macau, the FNM deputy leader questioned whether the Prime Minister was being “premature” or if his Cabinet colleagues were heading a long way - at taxpayer expense - to assess something that had already been approved.
“I know the Prime Minister wants to have a win before his [party] convention and the election,” Mr Turnquest told Tribune Business, “but it’s prudent for him to take time, look at the long view and make sure any agreement is in the best interests of the Bahamian people and there’s no damage to our reputation.
“I’m sure the Prime Minister is anxious to have a deal. It’s important to his government. We have to be concerned that it’s not the best deal for the Prime Minister and his government, but the best deal for the Bahamas.”
With CTFE all but confirmed as Baha Mar’s new purchaser, Mr Turnquest urged the Government to ‘unseal’ all details of the sale, plus its agreement for the project’s construction completion and opening with the secured creditor, the China Export-Import Bank.
Justice Ian Winder, in his late September 2016 ruling, explained that he ‘sealed’ the agreement to “preserve the integrity” of the Baha Mar sales process, which was then “commercially live”.
Based on the Prime Minister’s comments, that stage seems to have passed, and Mr Turnquest said: “They should unseal the deal.
“Let us know what’s involved in terms of the concessions to given to CTFE...The Bahamian people are being asked to give up something, and we ought to know what that is and the cost of that for the long-term.”
Mr Turnquest said it was “critically important” to know whether CTFE, or a combination of CTFE and the China Export-Import Bank’s Perfect Luck Holdings vehicle, are paying the 10 per cent ‘transaction tax’ on Baha Mar’s sales price.
This is split into 7.5 per cent VAT/2.5 per cent Stamp Duty and, based on Justice Winder’s ruling that bids to acquire Baha Mar are less than the $2.45 billion-plus that the bank is seeking to recover, the amount of tax normally due would likely be between $100-$200 million.
“Many Bahamian companies and international companies are crying about the huge weight of taxation on the cost and ease of doing business,” Mr Turnquest told Tribune Business.
“If we find a deal is structured where Stamp Duty and VAT are exempt from this transaction, worth hundreds of millions of dollars, we ought to know why and how much.
“We ought to know the extent these concessions continue to subsequent [Baha Mar] transfers, and any continued concessions on VAT, in particular.”
Mr Turnquest continued: “At a time when the Treasury needs every dollar it can collect, it’s clearly of interest to our fiscal situation and the Bahamian people to know what concessions have been granted, especially if the Bahamian people have to pick up the tab.
“In a circumstance like this, I hope the Government do their due diligence and understand there’s more at stake than just an election.”