By NEIL HARTNELL
Tribune Business Editor
WEEKS after Baha Mar’s contractor assured Prime Minister Perry Christie and the developer, Sarkis Izmirlian, that all was on track for a scheduled opening at the end of March 2015, the mega-resort’s contractor knew the $3.5 billion project was likely to miss the deadline.
In a confidential memo sent to its Beijing parent company on January 20, 2015, China Construction America (CCA) warned that the Cable Beach project and its stakeholders faced “irreversible and catastrophic loss” unless drastic action was taken.
The memo, entitled ‘Report regarding request for extra workforce for the Baha Mar project’ and obtained by The Tribune, shows CCA requesting that China State Construction Engineering Corporation (CSCEC) send it at least another 450 Chinese workers to give it a chance of hitting the March 27 target.
CCA warned that the construction situation at Baha Mar “is very difficult” and in urgent need of fixing.
It admitted that several deadlines for key Baha Mar components had already been missed and blamed this on the failure of CSCEC “sub-contractors” to supply an adequate workforce.
“Currently, the project is at a crucial dash to meet the final deadline,” CCA warned in the note addressed to Mr Yi, a CSCEC director, adding that it would incur a $250,000 daily fine for each day beyond the deadline that the project remained incomplete.
The memo was sent two weeks after the Prime Minister and a Bahamian ministerial delegation visited China in early January 2015. Mr Christie and Mr Izmirlian and their respective teams held joint meetings with officials from CCA and the China Export-Import Bank, Baha Mar’s financier, during which they were assured that the March 27 opening would be hit.
It was also written three weeks before the Prime Minister’s Office and Baha Mar issued a joint statement on February 10, 2015, in which they said: “Prime Minister Christie and the chairman of Baha Mar, Sarkis Izmirlian, jointly met with officials from China Construction of America (CCA) and the Export-Import Bank in Beijing in January. In that meeting, they received the necessary assurances that the resort will be ready for guests on March 27.”
Baha Mar’s president, Tom Dunlap, had earlier gone public with confirmation of the March date on January 9, following the meeting in China.
The contents of the memo raise several questions, not least whether CCA and its Beijing parent misled both Mr Christie and Mr Izmirlian during their January meetings in China over the construction status of the project. In particular, those meetings seemingly induced Mr Izmirlian to “ramp up” hirings for Baha Mar’s workforce in anticipation of hitting the March 27 opening.
Had CCA seemingly been more forthright, and informed Mr Izmirlian as soon as it feared missing March, it is possible the 2,000-plus Baha Mar lay-offs last October – and other significant financial losses – could have been avoided.
The nature of the CCA plea also raises the issue of why the government threw the full weight of its support behind the Chinese after Baha Mar filed for Chapter 11 bankruptcy protection in late June, given that the document admits the contractor was at least partially responsible for the construction delays.
The CCA memo is attached to documents filed in the Supreme Court on Friday as an exhibit to an affidavit sworn the previous day by a former Baha Mar executive, who described its contents as “particularly striking”. Whitney Thier, Baha Mar’s ex-general counsel, said it was “all the more extraordinary” that CCA failed to inform the developer that the March 27 target would be missed, given that the two sides’ senior executives had been meeting weekly.
Set alongside Baha Mar’s repeated complaints about CCA’s workmanship quality, Ms Thier alleged: “The letter is particularly striking when viewed in the context of the evidence. At a Board meeting of the company on December 5, 2014, CCA had assured the company that the project would open on March 27, 2015, prompting the company to commence accepting reservations from the public. In meetings in Beijing in early January 2015, CCA had assured not only the company, but also the Prime Minister of the Bahamas and the China Export-Import Bank, that the project would open as agreed on March 27, 2015.”
The former Baha Mar executive added that the memo also provided “strong corroboration” of the developer’s complaints against CCA. “The letter makes it all the more extraordinary that CCA failed to raise with the company its likely inability to complete the project on March 27, 2015, despite weekly meetings at a senior level with the company during early 2015 and – as is clear from this letter – when at least its own parent company was plainly aware of that likelihood as early as mid-January 2015.”
The CCA memo, originally in Mandarin but also translated into English, is understood to have been among documents that were part of “discovery” exchanges last year, amid the battle between Baha Mar and the Chinese in the Delaware Bankruptcy Court over the former’s Chapter 11 filing.
The request for more workers outlined in the memo also backs one of Baha Mar’s main complaints that CCA did not provide enough construction workers to ensure the development would meet its various milestones. Baha Mar had already been forced to postpone its planned December 2014 opening, due to the fact construction was not completed. The developer’s relationship with CCA, never strong, had already been deteriorating progressively for months.
“However, because the professional sub-contractors failed to provide a sufficient workforce in time, several deadlines for sub-projects were missed and the target completion for several sections got delayed,” the CCA memo said. “This will directly impact the target of opening on March 27. The situation is now very difficult which, if it cannot be turned around, will soon cause irreversible and catastrophic loss.”
It added that “unmeasurable damages to the brand and reputation of CSCEC will also be caused” should Baha Mar’s target opening date be missed. “CCA gratefully requests CSCEC to co-ordinate and order the sub-contractors to take emergency measures, organise the labour force in a timely manner and provide extra technical workers and experienced managers to the project by the end of January in order to meet the target of opening by March 27, 2015,” CCA pleaded.
CCA subsequently blamed Baha Mar for “mismanaging” the $3.5 billion development, suggesting that it was never compensated for – or given adequate time to perform – more than 1,000 construction change orders.
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