By NEIL HARTNELL
Tribune Business Editor
Sarkis Izmirlian has accused Baha Mar’s former receivers of violating a Bahamian Supreme Court Order by passing confidential legal documents to the project’s main contractor.
The $4.2bn mega resort’s original developer, in a letter to the New York State Supreme Court, is alleging that the Deloitte & Touche accountants who took possession of the property following his ousting “surreptitiously delivered” papers crafted by his attorneys to China Construction America (CCA).
Mr Izmirlian and his BML Properties vehicle, in their August 9 letter, claimed that the hand over of “patently privileged” legal opinions occurred just one day before the Bahamian Supreme Court heard arguments over CCA’s bid to gain access to them.
The Chinese state-owned contractor’s push to have the papers “unsealed” was rejected by the Bahamian courts, and Mr Izmirlian is effectively accusing it of circumventing this nation’s judicial system to obtain an advantage in their battle over his $2.4bn fraud and breach of contract claim.
The allegations surfaced in New York court filings that reveal the extent of the two sides’ dispute over which documents and evidence will be admissible at the substantive trial over Mr Izmirlian’s claims against Baha Mar’s main contractor.
Peter Sheridan, a US attorney representing Baha Mar’s original developer, told Justice Saliann Scarpulla that his client is seeking an immediate injunction and protective Order requiring CCA to either destroy or return the four documents in dispute.
He alleged that they were “acquired in violation of an Order of the Supreme Court of the Commonwealth of The Bahamas sealing them” but, despite this, CCA had indicated on July 17, 2019, that it intended to use them in defending Mr Izmirlian’s claim against it.
“The documents at issue are patently privileged,” Mr Sheridan argued. “Two of the documents are legal opinions written by this law firm and another outside counsel analysing Baha Mar Ltd’s potential claims against defendant [CCA].
“At the time the legal opinions were prepared, it had become clear that Baha Mar’s and plaintiff’s [Mr Izmirlian/BML Properties] interests were in direct conflict with defendants’. In fact, the legal opinions were prepared in anticipation of litigation actually filed in April and June 2015.”
That period featured the run-up to Mr Izmirlian’s Chapter 11 bankruptcy protection filing, which was ultimately unsuccessful in preserving his and his family’s control and ownership of the project. However, Mr Sheridan’s letter reveals that the legal opinions have again assumed importance as a result of the original Baha Mar developer’s latest action against CCA.
“The legal opinions have long been sealed by the Bahamian Supreme Court, and were the subject of a recent hearing on March 26, 2019, in The Bahamas involving plaintiff, defendant and the joint receivers/managers appointed by the China Export-Import Bank during which the defendants [CCA] vigorously sought to ‘unseal’ the legal opinions in order to gain access to plaintiff’s privileged work,” Mr Izmirlian’s attorney wrote.
“On May 1, 2019, the Bahamian Supreme Court ruled that the legal opinions were unquestionably privileged, the privilege had not been waived, and they should remain under seal as they had been for the prior three years.
“Unbeknownst to plaintiff, and contrary to the representations defendants’ counsel made to the Bahamian Supreme Court, the joint-receiver managers had surreptitiously delivered copies of the legal opinions to defendants in China the day before the hearing in violation of the existing sealing Order,” Mr Sheridan continued.
“Defendants now seek to benefit from these purloined documents by using plaintiff’s privileged information in this litigation.”
Three Deloitte & Touche accountants were appointed as receiver/managers for Baha Mar by China Export-Import Bank following Mr Izmirlian’s ousting. They were Raymond Winder, then-senior partner at Deloitte & Touche (Bahamas), and his two Hong Kong-based colleagues, Lai Kar Yan and Darach Haughey.
Mr Winder now serves as president for BISX-listed Commonwealth Bank, and Tribune Business sources yesterday confirmed he had no connection to the recent Bahamian Supreme Court proceedings given that he departed Deloitte & Touche (Bahamas) some months ago.
The joint receivers-managers were effectively agents for the Chinese government-owned lender that provided the multi-billion dollar debt financing for Baha Mar’s construction. They took control of all the mega resorts assets and properties, and oversaw the sales process that ultimately resulted in Chow Tai Fook Enterprises (CTFE) acquiring the development.
Given that CCA and the China Export-Import Bank share the same owner, namely the Beijing government, co-operation between the two in seeing off Mr Izmirlian’s latest legal attack would not be entirely unexpected.
However, some Tribune Business sources yesterday questioned whether there had been any violation of the Bahamian Supreme Court’s Order. They pointed out that the “sealing” was designed to keep the documents out of the public domain - but not necessarily the parties with an interest in Baha Mar, such as CCA and the China Export-Import Bank.
However, Mr Izmirlian’s attorneys argued that the legal opinions in question were submitted to the Bahamian Supreme Court “under seal” after the joint receiver-managers obtained them when they took possession of all Baha Mar’s records under the receivership.
“The other two documents at issue are two reports commissioned by the joint receiver-managers in 2016 to value Baha Mar’s claims against [CCA],” Mr Sheridan added, “that quote and cite the legal opinions dozens of times.
“Defendants have refused to answer our inquiries regarding how they came into possession of these documents. In any event, these valuation reports are privileged work product to which the defendants have no right.”
Mr Sheridan said there was “no set of facts, and no distortion of the law”, that could support CCA’s intent to use these documents as key elements in fighting off Mr Izmirlian’s latest claim.