The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Grand Lucayan's chairman yesterday revealed he plans to "go after" Hutchison Whampoa to recover the $6-$7m Memories lease guarantee payment, as he hit back at the PLP's leader.

Michael Scott, blasting Philip Davis's criticisms over the upcoming $2-$3m staff severance payouts, told Tribune Business that the Cat Island MP was "lost in space" and suffering from "Trumpian hypocrisy of the worst kind".

He branded the Official Opposition leader's comments as a "reverse engineering of the historical record", suggesting it was hypocritical for him to attack the payouts given that it, too, assumed responsibility for severance payments to staff of the former Grand Lucayan casino operator, Isle of Capri, when in government.

Pointing out that the Christie administration also used taxpayer dollars to pay casino workers their salaries and benefits under the subsequent operator, Treasure Bay, Mr Scott charged that such "financial appeasement" had led directly to the latest problems with Hutchison Whampoa.

With the Hong Kong-based conglomerate "used to getting its own way", and "indifferent" to the Grand Lucayan's plight and that of Freeport's wider economy, the hotel's chairman said the Minnis administration simply could not afford "to play roulette with the welfare of the employees" by leaving the former owner to determine their fate.

"Having completed the sale, I'm looking at going back after them [Hutchison Whampoa] for recovery of that $6m-$7m overpayment on the Memories support or guarantee agreement," Mr Scott disclosed to Tribune Business, hinting at the possibility of legal action.

This newspaper previously revealed that as part of the three-way agreement between the former Christie administration, Hutchison and Sunwing for the latter's Memories brand to operate one of the three Grand Lucayan properties, the then-government agreed to guarantee the latter's $300,000 monthly lease payments.

Mr Scott yesterday argued that the guarantee was "contingent on the survival of the lease", which was terminated by Memories/Sunwing in January 2017 after Hutchison Whampoa failed to repair damage caused to the property by Hurricane Matthew.

"Hutchison was asked to repair it, but they left with the insurance proceeds, and Sunwing said we're terminating the lease on the grounds of force majeure," he said. "A technical, or policy decision, was taken in the Office of the Prime Minister at the time to continue making those payments."

This was continued under the Minnis administration, but Mr Scott is arguing there was no legal justification to do so given the lease termination, and that the Government should now seek to reclaim the taxpayer monies paid to Hutchison Whampoa.

The attorney, who chairs Lucayan Renewal Holdings, the Government-owned special purpose vehicle (SPV) that now owns the Freeport resort, struck back at Mr Davis's concerns by playing up the multi-million dollar taxpayer support given to Hutchison Whampoa by the former PLP government.

"It's reverse engineering of the historical record," Mr Scott told Tribune Business. "I don't know what his criticisms are. He's lost in space as far as I'm concerned. We were laughing about it earlier. This is Trumpian hypocrisy of the worst kind. That's my answer to his criticisms.

"Before Treasure Bay there was Isle of Capri. They [the previous government] let them go and they walked off the casino property. They left about $2m in unpaid severance, which the then-government had to assume responsibility for. That's what happened then.

"For a while, they paid the salaries, wages and emoluments of the Treasure Bay workers to keep them there; to keep them operating. This was some misconceived strategy; it was totally misconceived. It amounted, in my respectful view, and having looked at the record, to financial appeasement of Hutchison Whampoa."

Mr Scott said this emboldened the Hong Kong-based conglomerate to believe that the Government would always jump to grant its financial demands, and that it could act with impunity, which manifested in the problems encountered over the Grand Lucayan's recent $65m purchase.

"Part of the problem with Hutchison was they were always making these inordinate demands without any thought to master plan what happens in the tourism industry in Grand Bahama, and what role Hutchison was going to play in that arena," he explained.

"There's a litany of fall-outs along the way, and I'll tell you why this becomes relevant and why the Government had to assume responsibility for the employees. When we took control on September 11, Hutchison had the keys in one hand and the phone in the other to the security people, telling them to remove the golf carts from the golf course.

"That would have completely paralysed that operation, and they were also going to remove computers, lap tops and other hardware. They were under the misconception that they could do whatever they wanted, because they were continually being appeased."

Mr Scott reiterated that the Prime Minister's personal intervention, and his own efforts, had resolved the situation, but said it showed that Hutchison Whampoa could not be trusted.

"We could not play roulette with the welfare of the employees of a hotel in a situation where the economy of Grand Bahama is already depressed," he told Tribune Business. "We were dealing with an owner used to getting their own way, and was completely indifferent to the welfare of Grand Bahama.

Mr Scott accused the Christie administration of squandering its leverage over Hutchison Whampoa through the 2016 Memorandum of Understanding (MoU) that granted a 20-year renewal of real property tax breaks for all its Grand Bahama-based subsidiaries.

There was nothing that made Hutchison Whampoa's "tax-free status contingent" on commitments to find a buyer for the Grand Lucayan, and he added: "This is the historical backdrop against which we find ourselves.

"It's not like we're on a policy of throwing away taxpayer money. This is a fait accompli we met, and are trying to achieve a couple of key objectives. One of those is for those people not wanting to stay, and want to leave and take voluntary packages, that has to be treated in accordance with the law."

Mr Scott said neither himself nor any Lucayan Renewal Holdings Board member was involved in negotiating the terms of the Grand Lucayan's $65m purchase agreement with Hutchison Whampoa, as this was concluded before they were appointed.

"We were very active after in the transfer, making sure everything was accounted for," he added.

Mr Davis had blasted the Government for using taxpayer dollars to finance the separation packages for around 150 Grand Lucayan staff who wish to leave the resort voluntarily.

This will slash the workforce from more than 450 to around 303, or by roughly one-third, "more closely aligning" staff with the demands of the 196-room Lighthouse Pointe property - the only one of the three Grand Lucayan hotels that is currently open. The separations will start towards the end of this month or the beginning of November.

As predicted by Tribune Business, the severance pay costs have reignited concerns about the Government's (taxpayer's) financial exposure to Freeport's last 'mega resort' property, especially if it is unable to fulfill its "quick exit" strategy by selling it to a new buyer within three to six months.

Besides the $65m purchase price, the Government also committed to a $2m subsidy to cover Hutchison Whampoa's operating losses between August 1 and September 11, and waived the payment of $3.25m in Stamp Duty on the conveyancing by the Hong Kong conglomerate. The latter also walked away with $80-$85m in Hurricane Matthew insurance proceeds, rather than put them into repairs.

The Government also faces a $35-$39m repair bill if it chooses to proceed with renovating all three Grand Lucayan properties. K P Turnquest, deputy prime minister, previously said the full financing costs could run as high as $124m - a sum still below the total subsidies demanded by Wynn Group and Sunwing, the last two private buyers to look at the property.