The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Baha Mar’s contractor says Sarkis Izmirlian is “betraying his concern” that its appeal will overturn the $1.642bn damages awarded to him by seeking to “frustrate the orderly” Chapter 11 process. 

A CCA Construction Inc spokesperson, responding to the original Baha Mar developer’s bid for an “independent examiner” to be appointed to probe its pre-Chapter 11 bankruptcy protection dealings with other CCA affiliates for alleged “fraud, dishonesty, incompetence, misconduct, mismanagement” or other irregularities, asserted that it contrary to Mr Izmirlian’s claims it is providing him with “extensive discovery”.

Referring to Mr Izmirlian’s corporate vehicle, they said: “BML Properties’ latest attempt to frustrate the orderly administration of the Chapter 11 proceedings betrays its concern about our appeal of the trial court’s wrongful decision, and we look forward to arguing our case before the New York appellate court.

“In the meantime, CCA Construction Inc is complying fully with the bankruptcy court’s requirements, including by providing extensive discovery to BML Properties.” CCA Construction is one of three China Construction America (CCA) affiliates, the others both domiciled in The Bahamas, which is liable for the $1.642bn damages payout awarded to Mr Izmirlian by the New York State Supreme Court over the Baha Mar project’s 2015 failure.

Mr Izmirlian and his BML Properties vehicle, in filings with the New Jersey federal bankruptcy court, argued that the examiner’s appointment is justified because CCA Construction Inc has shown “clear bias” against themselves even though the damages awarded against the Chinese state-owned contractor makes them its largest creditor by far.

With no official creditors committee likely to be appointed, and China Construction Inc purportedly “stonewalling” Mr Izmirlian’s information requests following its December 22, 2024, filing for Chapter 11 bankruptcy protection, Baha Mar’s original developer argued that appointing an independent examiner would be the best way to protect all creditors given the contractor’s “history of serious - and already proven - fraud claims”.

“Based on CCA’s clear bias against BML Properties - its largest creditor by orders of magnitude - it is apparent that CCA is not acting as a true fiduciary for its estate,” Mr Izmirlian argued. “Exacerbating the situation, no official creditors’ committee will be formed by the Office of the United States Trustee for this district, and CCA has stonewalled BML Properties’ requests for information.....

“CCA’s insistence that all future requests for information go through formal discovery, rather than freely disclosing the information requested by the estate’s largest creditor, bespeaks the level of obstruction that CCA (likely acting at the behest of CSCEC) will impose on these proceedings. Rather than efficiently providing information, CCA insists on making BML Properties’ efforts to obtain information as complicated and costly as possible.

“For these reasons, BML Properties seeks the appointment of an independent examiner to investigate.. the dealings between CCA and its nominal affiliates to identify instances of fraud, dishonesty, incompetence, misconduct, mismanagement or irregularity in the management of CCA’s affairs in the lead up to, and throughout, this Chapter 11 case.”

And Baha Mar’s original developer further argued: “An examiner will serve at least three important functions. One, allowing an independent investigation into claims that CCA’s estate may possess that could significantly enhance creditor recoveries, including potential avoidance actions, alter ego claims and breach of fiduciary duty claims.

“Two, protecting the interests of creditors and the public at large, and three, providing stakeholders, the US trustee and the court with much needed transparency that the debtor has resisted in this Chapter 11 case. Because CCA’s fixed, liquidated and unsecured debts well exceed $5m, the appointment of an examiner is mandatory under binding third circuit precedent.

“Moreover, an examiner is in the best interests of CCA’s creditors given the history of serious - and already proven - allegations of fraud. An examiner should thus be appointed, and BML Properties respectfully requests that it be granted broad investigatory powers.” 

Mr Izmirlian’s independent examiner move appears to be part of a concerted strategy to build on his New York State Supreme Court victory, and the multi-billion damages award in his favour, by keeping the pressure on CCA’s affiliates in the Bahamas and US as he seeks to enforce the judgment against them.

Another part of this plan is the winding-up petitions filed in the Bahamian Supreme Court against CCA (Bahamas) and CSCEC (Bahamas) on the basis that they are insolvent. These petitions were advertised in Tribune Business last Wednesday to give the Chinese-state owned contractor and any other creditors an opportunity to appear before the Supreme Court in the case.

CCA (Bahamas) and CSCEC (Bahamas) are the other two CCA-related defendants liable to pay Mr Izmirlian’s judgment award, and the former is the immediate parent entity for both the contractor’s Bahamian resort interests - the British Colonial and Margaritaville Beach Resort, which are located adjacent to each other in downtown Nassau.

Mr Izmirlian, in his New Jersey bankruptcy court filings last week, pointed out that the New York State Supreme Court had “rejected CCA’s feigned corporate separateness” in “piercing the corporate veil” and made the two Bahamian affiliates as well as CCA Construction Inc liable for the $1.642bn damages award.

“Now in bankruptcy, CCA remains inextricably linked to its affiliates and its Chinese state-owned parent, China State Construction Engineering Corporation,” Baha Mar’s original developer asserted. He also argued that of the initial $8m tranche in Chapter 11 financing to be provided to CCA Construction by its parent, the majority or $5.9m appeared to be earmarked for other affiliates via “shared services” transfers.