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Judge: 'Now clear' Baha Mar sabotaged by CCA

Baha Mar's original developer Sarkis Izmirlian.

Baha Mar's original developer Sarkis Izmirlian.

• Found to have orchestrated ouster of Sarkis

• Original developer wins on every single issue

• Developer lost $830m; contractor's gain $700m

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Sarkis Izmirlian yesterday secured a major legal victory after a New York judge ruled "it is now clear" that China Construction America (CCA) sabotaged Baha Mar's completion and orchestrated the developer's removal.

Judge Andrew Borrok shredded the Chinese-state owned contractor's bid to obtain a summary judgment that would have dismissed Mr Izmirlian's $2.25bn fraud claim, and instead found for the mega resort's original developer on every legal issue raised.

Besides dismissing the "breach of contract" counterclaim made by CCA and its ultimate parent, China State Construction and Engineering Corporation (CSCEC), the New York State Supreme Court judge also threw out multiple defences raised by the Chinese contractor - including assertions that Mr Izmirlian's claims were "discharged" by the Bahamian Supreme Court proceedings that ultimately saw Baha Mar acquired by Hong Kong-based Chow Tai Fook Enterprises (CTFE).

The ruling paves the way for the full two-week trial of Mr Izmirlian's $2.25bn fraud and breach of contract claim against CCA, which is due to be heard by the New York court between August 1-16, 2024. Justice Borrok said prior court decisions, which had upheld the original Baha Mar developer's accusations, had only been strengthened by what has emerged during the legal 'discovery' process where both sides produce their respective documentary evidence.

Among yesterday's findings, Judge Borrok ruled that this evidence has revealed:

  • Tiger Wu, CCA (Bahamas) executive vice-president, approved some 700 Chinese construction workers leaving the Baha Mar work site between December 2014 and February 2015 "despite knowing that those workers may have helped the project reach the substantial completion date on time". As a result, CCA had "disingenuously" informed then-prime minister, Perry Christie, that the Cable Beach mega resort would meet its March 27, 2015, completion date.

  • Mr Wu allowed the workers to leave "with the express purpose of causing CCA to stop work" so the contractor would have leverage over Baha Mar to demand it be paid more money. The judge said it was "also clear" that CCA "diverted resources and key personnel" to its newly-acquired British Colonial resort in downtown Nassau, which was a precursor to the $200m development of The Pointe on adjacent land.

  • Judge Borrok said the documents showed CCA and its affiliates were "actively pursuing their own interests to the detriment" of Mr Izmirlian, his BML Properties vehicle, and the Baha Mar project. He ruled that they "actively sought" to secure the original developer's removal, working with Baha Mar's financier, China Export-Import Bank, which is also owned by the Beijing government.

After succeeding in this goal, CCA received some $700m to finish Baha Mar's construction while Mr Izmirlian and his family lost their entire $830m investment. Referring to the New York State Supreme Court's prior dismissals of CCA's efforts to have the original developer's case thrown out, Judge Borrok yesterday wrote: "Discovery has only served to underscore the wisdom of the prior decision.

"It is now clear that Taizhong 'Tiger' Wu, one of the CSCEC representatives and CCA (Bahamas) executive vice-president, approved over 700 workers leaving the project between December 2014 and February 2015 in the final months leading up to the projected date for substantial completion, March 27, 2015."

This the judge added, occurred "without approval from BML Properties despite knowing that those workers may well have helped the project reach the substantial completion date on time, which it did not.

"Mr Wu did this after CCA sent a letter to CSCEC on January 21, 2015, stating that 'the project has entered the critical stage of final full-scale shock work' and that 'the production situation of the project is extremely severe, and if the situation cannot be fundamentally reversed, it will cause irreparable and catastrophic losses'," Judge Borrok added. "Indeed, CCA made clear that the joint venture partner needed to do the opposite of what Mr Wu did.

"To put this in context, Sarkis Izmirlian, president of BML Properties, witnessed CCA disingenuously - given the plan to divert workers and resources - tell the Prime Minister of The Bahamas and the Chinese Ambassador to The Bahamas that the project would be finished by March 27, 2015. Indeed, it is now clear that Mr Wu sent workers away with the express purpose of causing CCA to stop work so that they could force Baha Mar and BML Properties to negotiate funding.

"It is also clear on the fully developed record before the court that CCA diverted resources and key personnel to other projects in which Baha Mar had no interest whatsoever. For example, according to David Liu, one of CCA (Bahamas) vice-presidents and a CSCEC representative, while the project was ongoing, CCA (Bahamas) acquired another resort near to the project in which Baha Mar had no interest."

That was the British Colonial, and Judge Borrok said of CCA: "It is also clear that the defendants were actively pursuing their own interests to the detriment of Baha Mar and BML Properties. By letter dated March 18, 2015, Yuan Ning, president of CCA, wrote to Chen Guacai, vice-president of CSCEC, that to bring BML Properties back to the negotiating table, CCA suggested 'taking extreme measures such as a complete shutdown of the work'.

"The next day, CCA instructed its personnel to freeze handing over rooms. By e-mail dated July 6, 2015, from Mr Liu to, among others, Mr Wu, Mr Liu wrote: '[w]e should take advantage of The Bahamas government. If the Government, Export-Import Bank of China and CCA join forces, we can turn passive into active!' Put another way, Mr Liu saw an opportunity to fundamentally change the relationship between the joint venture partners and worked to cause this to occur.

"Indeed, at a meeting between the defendants and the Export-Import Bank of China on September 28, 2015, the defendants indicated that they should push for the Export-Import Bank of China to be named receiver of the project so that, among other things, they could 'protect the interests of China Construction’s $150m preferred stock'," the judge continued.

"In other words, the fully-developed record now indicates that the defendants actively sought to remove BML Properties from the project so that they could protect their own investments and to the detriment of the joint venture partner. As is clear, they were successful as this is exactly what occurred."

Judge Borrok, in rejecting CCA's bid to dismiss Mr Izmirlian's case, ruled: "Discovery confirmed that BML Properties sustained a disproportionate loss, and that its losses stem from various breaches of duty and contract that the defendants owed to BML Properties.

"BML Properties lost its entire investment, which David Bones, BML Properties' expert, estimates to total $830m in tangible and intangible assets, including land and leased facilities, improvements, personal property, contracts, approvals, hotel assets, intellectual property, intangible personal property, casino operations and licence, and cash. The defendants, by contrast, made over $700m."

Judge Borrok found that there are multiple factual disputes that need to be determined, including whether CCA failed to use $54m in emergency funding obtained by Mr Izmirlian and Baha Mar as intended to pay sub-contractors working on the project and advance it to completion.

Also ruling that Mr Izmirlian can seek to recover lost profits by virtue of his ousting from Baha Mar's ownership, he added: "The CSCEC representatives had an obligation to act in the best interest of Baha Mar. On the record before the court, this they did not do.

"Contrary to the defendants’ arguments, it does not matter that the CSCEC representatives 'wore different hats' in their different roles for different parties. When they changed their hats, they could not simply shed their responsibilities." Judge Borrok also determined that Mr Izmirlian's claims were not released by the Supreme Court proceedings in the Bahamas that wound-up the original Baha Mar because he was not a party to that case.

And he dismissed CCA's claims that Mr Izmirlian breached their investors' agreement by filing for Chapter 11 bankruptcy protection in the US without the contractor's permission. "The problem, however, is that Luming (Lawrence) Gao, CSCEC’s representative, was unable to identify any damages stemming from this alleged breach and instead only indicated that damages were demonstrated by looking at the investors agreement. This is plainly insufficient to create an issue of fact for trial," Judge Borrok ruled.

"For the avoidance of doubt, the defendants’ argument that they are entitled to damages because Baha Mar's soft cost expenditures were excessive is belied by the report of Ernst & Young finding that the majority of invoices audited were complete and accurate, and that the Baha Mar soft cost budget was reasonable and appropriate......

"Finally, the defendants argue that BML Properties breached Section 4.8 (1) of the investors agreement by causing Baha Mar to procure a loan outside of the regular course of business. However, the record facts establish that the loan was both necessary to continue the ordinary course of business and on terms favourable to Baha Mar," the judge continued.

"Among other things, the interest was payable in kind, there was no pre-payment penalty, Baha Mar could avail itself of better financing without penalty if another lender emerged, and the term of the loan was sufficient to allow restructuring of business while in Chapter 11. The loan came just days after the Baha Mar Board discussed at a June 24, 2015, meeting that Baha Mar's financial situation was worsening."

Comments

AnObserver 1 year, 2 months ago

Can we finally all agree to stop supporting China? "Gave" us a stadium that is falling apart after a few years, screwed over the country and our investors on this mega-resort, and now they're selling us death trap electric cars.

LastManStanding 1 year, 2 months ago

Would be a bad idea in the long term. The US will always be our primary trading partner due to location, but the truth is that the US is in the death throes of an empire and China is ascending in prominence. What happened to Izmirlian is wrong, but we have to plan for a future in which the US is not the biggest player on the world stage.

Baha10 1 year, 2 months ago

… “big time”compensatory Damages in play here!

KapunkleUp 1 year, 2 months ago

Just another example of people needing to go outside of our jurisdiction in order to receive justice in court.

ThisIsOurs 1 year, 2 months ago

So true! We have gate blockers everywhere. I seriously doubt local govt will change it because we are such a superficial society.

mandela 1 year, 2 months ago

Way to go Mr. Izmirlian. It was a nasty dirty trick the Chinese did to take away your dream, I hope you stick it to the thieves of your dream hotel good and make them pay. The Chinese come to the Caribbean with one intention, to deceive. A friend to Russia should be looked at with skepticism.

moncurcool 1 year, 2 months ago

And the PLP government was right up there supporting the Chinese to steal this man's hotel.

DontAssume 1 year, 1 month ago

And many of them (politicians) pocketed boatloads of money, for their roles in the fleece. They should all pay!!!!

benniesun 1 year, 2 months ago

"When elephants fight, it is the grass that suffers. African proverb, meaning that the weak get hurt in conflicts between the powerful."

The trial's timing is disastrous, as it will be added to next year's chaos. We - the grass - should take no sides in this.

moncurcool 1 year, 2 months ago

The only thing necessary for the triumph of evil if for good men to do nothing. The grass better do nothing, otherwise the grass will suffer.

stillwaters 1 year, 2 months ago

Amen Moncurcool. I hope Sarkis wins big time

ExposedU2C 1 year, 2 months ago

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rosiepi 1 year, 2 months ago

One can only hope!!

ThisIsOurs 1 year, 2 months ago

Lol, is Liu the same guy who wrote in another email, "cant you fake the work better?"

ThisIsOurs 1 year, 2 months ago

Judge Winder isnt corrupt... other than that...

stillwaters 1 year, 2 months ago

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ExposedU2C 1 year, 2 months ago

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ThisIsOurs 1 year, 2 months ago

So I give you the right to your opinion. I just happen to disagree I think he is where he is based on merit

hrysippus 1 year, 2 months ago

I think Expo onto summit here. Wouldn't it be great if a non corrupt Bahamian government could lobby those off shore banks in Cayman and Turks to see just how many tens of millions are being stashed there by politicians and their cronies? A shame it will not happen.

Maximilianotto 1 year, 2 months ago

CCA officials with U.S. citizenship will sing first…

TalRussell 1 year, 2 months ago

A sign from above not to allow Bahamian courts handle any part much -- Politically tainted FTX Bahamas. -- As of today, no Bahamian judge has done a damn thing about the 600+ millions of dollars of Sam Bankman-Fried/FTX Bahamas owned properties on the island -- or whatnot. -- Talk about potential sabotage political and local careers -- If tis true that -- Three volumes--- of "diary penned by Sam Bankman-Fried" - has been discovered locally?– No. Yes? -- Your thoughts?

ThisIsOurs 1 year, 2 months ago

Tal tell the truth, are you a CIA operative?

GodSpeed 1 year, 2 months ago

Justice for Sarkis 👏👏 couldn't get it here. They robbed that man and I hope he gets every penny back and more. These politicians are bold criminals.

stillwaters 1 year, 2 months ago

Dangerous political gangsters

TalRussell 1 year, 2 months ago

First off, not fair paint -- All -- with the same criminals' brush -- But enough to indicate -- Why the popoulaces' -- Feel that local politics --Can be -- a conflicted business. --Yes. No?

The_Oracle 1 year, 2 months ago

I still want to know which politicos got concessions to operate restaurants/shops, and no doubt pressured the dirty deal. Seems all our former Prime Ministers legacies turn to fertilizer.

ThisIsOurs 1 year, 2 months ago

There should be a law against any sitting MP, PS diplomat or their families to have any beneficial interest in any foreign direct investment project. Its impossible for it not to be a conflict of interest.

ExposedU2C 1 year, 1 month ago

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SP 1 year, 2 months ago

Sarkis had no chance whatsoever of getting justice in the Bahamas! The PLP and Winder had stacked the cards high as they could get against him!

Unfortunately, the Bahamas is still a backward, corrupt country starting from the top elite politicians and echelons of society.

DillyTree 1 year, 2 months ago

CCA will settle rather than go to trial.

They have to, as by US law, a foreign company found guilty of fraud is not longer permitted to obtain contracts in the US. CCA has far too much at stake to risk a trial.

Locally, the question remains -- what liability and/or responsibility does the Bahamas government have in the matter? Once Mr. Izmirlian has his NY judgement, will he then use it to gain justice in the Bahamas? This is where things will get very interesting indeed!

TalRussell 1 year, 2 months ago

@ComradeDilyTree, is this where the movie about was once on more friendly dealing terms with local politicians/officials and politically connected, -- The Double Crossing of "Mr. Izmirlian". -- Can Turn Popcorn Scary. -- No. Yes?

sheeprunner12 1 year, 2 months ago

Sarkis will not waste his time trying to get justice in this country ....... The same judge that sold him out to the Chinese, now sits as CJ.

Maybe when the PLP is kicked out .........

Maximilianotto 1 year, 2 months ago

Considering all damages cases the Bahamian government is involved in the sovereign debt may well go up to $20,000,000,000. $20 billion.Interesting scenarios

Maximilianotto 1 year, 2 months ago

All trials set for 2024 total $9,000,000,000 wondering what bondholders and IMF will comment.

TalRussell 1 year, 2 months ago

Renounced or has lost his Bahamian citizenship, -- I do not recall such important clarification either Armenian Mr. Izmirlian. -- No. Yes?

Observer 1 year, 1 month ago

Tiger never was government of the Commonwealth of the Bahamas. He could not determine who obtained work permits. The judge needs to search below the surface to discover the truth.

SP 1 year, 1 month ago

I hope and pray Sarkis gets fair retribution for ALL those that tried to swindle him out of his own project!

DontAssume 1 year, 1 month ago

I pray that retribution lands a few of our former and present PLP politicians in the pits of legal hell. These politicians have been and continue to be the thorn in the side of Bahamians, as the working class is held accountable for their corrupt and deplorable behavior.

Well_mudda_take_sic 1 year, 1 month ago

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TalRussell 1 year, 1 month ago

@ComradeDon'tAssme, you mean the kind of – Equal and direct retribution, as expressed in Exodus 21:24, as – “An eye for an eye.” – "Aye" or "nah?"

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