Published On:Tuesday, September 07, 2010

By NEIL HARTNELL

Tribune Business

Editor

A US court has stayed legal action over an alleged $7 million fraud involving an upscale West Bay Street condominium project in favour of a similar case currently before the Bahamian Supreme Court, Tribune Business can reveal.

US District Judge Kenneth Ryskamp, sitting in the south Florida courts, on August 31, 2010, ruled that the action brought by developer Allure (Bahamas) and its Canadian parent, B. E. Groupe Development & Media Inc, in relation to the 16-unit 'The Terraces' project, be 'stayed and closed' until court proceedings in the Bahamas were completed.

The 'stay and closure' applies to all actions originating in the case, but the judge said any parties - including defendants Cordell Funding, its president Robin Rodriguez and Joseph Simmons - could re-open the litigation once the Bahamian courts had dealt with the matter.

The Ryskamp ruling thus settles this initial skirmish in favour of Rodriguez and Cordell, who had attempted to dismiss the Allure (Bahamas) action in favour of the Bahamian court proceedings.

Recalling events to date, the US judge ruled: "This action involves a condominium project in the Bahamas...... The facts in the instant case and the Bahamian action are complicated, and have been framed for the court in a convoluted manner.

'"In rough sketch, Cordell allegedly made a money purchase loan to North Andros Assets, which used the proceeds to purchase a Bahamian property known as The Terraces. North Andros fell into default, and Cordell commenced a foreclosure action in the Bahamas.

"While in default, North Andros Assets entered into a contract with Allure, whereby Allure was to build and sell condominium units on The Terraces property for the benefit of North Andros Assets. Allure brings this action to avoid Cordell's mortgage lien, and to obtain The Terraces property without paying the outstanding mortgage."

While Allure (Bahamas) complaint in the south Florida courts alleged eight counts, Judge Ryskamp said the Bahamian Supreme Court action, filed on August 1, 2009, consisted of similar allegations against Cordell Funding and North Andros Assets in relation to The Terraces project.

The action, which is before the court, is seeking an Order from a Bahamian judge directing Cordell to release The Terraces property; an injunction to prevent the lender from selling it; and damages.

Referring to the action before the south Florida district courts, Judge Ryskamp said: "The court sees no reason to allow this action to proceed in light of the pendency of the similar Bahamian action. Allowing such would create the spectre of inconsistent rulings and would waste judicial resources.

"Accordingly, this court will administratively close this case and deny all pending motions as moot. Once the Bahamian action closes, any party may move to reopen this case."

Cordell, in a case which has also embroiled former PLP MP and Senator Philip Galanis, and the Evans & Co law firm headed by Thomas Evans QC (none of whom are listed as defendants and have done nothing wrong), had previously alleged that the August 2009 Bahamian lawsuit filed against it and North Andros Assets, the project's initial owner, raised facts and legal issues that were "substantially the same or related" to those contained in the Florida action.

Convenient

Referring to the case, which was initiated by Allure (Bahamas), Cordell argued that the Bahamas was a "more convenient" forum for settling the dispute. It also alleged that Allure (Bahamas) and its owners, Canada-domiciled B. E. Groupe and its principals, Brian Hopkins and Jack Cohen, had failed to show a "cause of action" against it or its head, Robin Rodriguez.

Allure (Bahamas) had alleged that Cordell, Rodriguez and Simmons were "agents of each other, who from January 2008 to the present date conspired to defraud the plaintiffs out of their investment of in excess of $7 million in construction improvements of 16 luxury condominiums on 1.45 acres in Nassau, Bahamas, known as the 'Terraces'".

North Andros Assets had initially acquired some 5.925, a portion of which was used for The Terraces, and Cordell had provided $4 million in financing to fund construction. As security for its loan, it had taken a mortgage over the land.

The crux of Allure's case is that Simmons allegedly "misrepresented" Cordell's position, namely that the lender had agreed to release The Terraces from the mortgage once it received $2.2 million, and that it would then "execute a declaration of condominium to induce a developer to build condominium improvements on the Terraces' portion". This, Cordell is alleging, was never the case.

Nor, Allure alleges, was it informed that the mortgage had been in default from October 2006 and that Cordell had filed a foreclosure lawsuit "until in excess of $7 million in improvements in 16 luxury condominiums were over 85 per cent complete.

"The lack of notice of the mortgage default was intentionally omitted from the February 20, 2008, Heads of Agreement construction contract executed by the defendants and their agents, despite the Heads of Agreement section requiring fairness and no detriment to the interests of the other parties."

Cordell is sticking to its position that it simply commenced a foreclosure action in the Bahamas to recover the $4 million it advanced after North Andros Assets fell into default. It added that it was never a party to the contract between Allure (Bahamas) and North Andros Assets. Effectively, Cordell is alleging that Allure (Bahamas) was a victim of its own failure to carry out proper due diligence before investing the $7 million.