The Tribune

• Lyford Cay resident’s deals hit by ‘undue influence’

• Fury over $25m Treasure Cay performance bond

• PM told controversial Austrian: ‘Don’t let me down’

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A controversial Austrian developer is demanding an astonishing $3bn-plus in damages and interest from the Government after it blocked his bid to acquire Abaco’s Treasure Cay project.

Dr Mirko Kovats, a Lyford Cay homeowner who has permanent resident status in The Bahamas, is alleging that this and his other local real estate deals “have been subject to undue influence by the Government” which he is accusing of “interference in a private commercial transaction”.

Legal filings in the US and The Bahamas, which have been obtained by Tribune Business, disclose the extent of Dr Kovats’ legal battles that have embroiled not only Treasure Cay but also the 384-acre South Ocean development in southwestern New Providence. And he is also setting his sights on south Long Island, and some 3,200 acres of real estate located in close proximity to the newly-unveiled $250m Calypso Cove cruise port.

The papers reveal that the Austrian, who lives at McCullough on Clifton Bay Drive, initiated Judicial Review proceedings against the Government on October 27, 2022, after the Bahamas Investment Authority (BIA) rejected his efforts to acquire the remaining 1,600 acres at Treasure Cay from Robert and Stefan Meister via a $22.325m deal.

Documents detail a series of meetings between with the Prime Minister, Cabinet ministers and other senior government officials, with Philip Davis KC at one point purportedly telling Dr Kovats: “Don’t let me down” were the Government to approve the Treasure Cay sale. The Davis administration ultimately decided against this, confirming its decision to Dr Kovats in the BIA’s June 16, 2022, letter.

The Lyford Cay resident appears especially unhappy with the Government’s escalating demands that he post a performance bond to guarantee the Treasure Cay redevelopment he promised will actually happen. The sum required rose from an initial $5m to $25m by the time that Dr Kovats’ commercial attorney, Greg Cottis, met with the Prime Minister on August 24, 2022, in a final bid to avoid litigation and move the project forward.

It is unclear how the total $3.127bn damages sought by Dr Kovats have been calculated, although they appear to represent lost sales revenues and profits that would accrue to him if his Treasure Cay plans were approved. They seem to have been calculated using a report produced by the CBRE Group, an international real estate firm, for “updated Albany/South Ocean development plan proceeds” as well as based on property values at Abaco’s Baker’s Bay project.

Many observers are likely to be highly sceptical at the damages calculation submitted by Dr Kovats and his attorney, Damian Gomez KC, the former minister of state for legal affairs, as well as their prospects of Judicial Review success. One source, speaking on condition of anonymity, told Tribune Business: “How he can take the Government to court and expect to win is beyond me. They can turn anyone down. That’s the nature of the beast.”

The concern for The Bahamas is that prime tracts of real estate, extremely valuable for driving future development, investment and job creation, face being potentially tied-up for years in expensive, time-consuming court fights. Several sources have suggested that litigation is frequently employed as a hardball negotiating tactic by Dr Kovats as a means to an end in securing his desired outcome.

His various legal battles have been exposed through documents filed in the US federal district court for Delaware on Friday. Dr Kovats is seeking “discovery” from a somewhat bizarre set of parties, including Elektra America Hospitality Group, the failed Grand Lucayan buyer; the principals behind the proposed $250m Calypso Cove cruise port for Long Island; rival Treasure Cay purchasers; and Rothschild & Co, the Government’s debt adviser.

The purpose appears to be to uncover evidence that Dr Kovats has been treated in a harsh and discriminatory manner, thus supporting the Judicial Review bid to “quash” rejection of his Treasure Cay purchase obtain Supreme Court declarations that the BIA and National Economic Council (really the Cabinet) “failed to act fairly” and “acted irrationally” over how they treated him.

In his filings, Dr Kovats said it took almost two years of negotiations before he secured a deal to acquire Treasure Cay’s remaining undeveloped 595 acres, plus 1,000 acres of additional property, from the Meisters on February 9, 2021. To consummate the purchase, exchange control approval from the Central Bank was required by Dr Kovats is a non-Bahamian. To achieve this, a “no objection” letter was needed from the BIA.

Following the September 16, 2021, general election, Dr Kovats alleged that himself and Mr Cottis were asked to attend a meeting one week later by Chester Cooper, deputy prime minister, to update the new administration on his various real estate projects in The Bahamas. Also present was John Pinder, parliamentary secretary in the Ministry of Tourism, Investments and Aviation, and then-BIA director, Candia Ferguson.

Besides Treasure Cay and South Ocean, the Austrian has also been pursuing development of a 121-unit condo complex at Love Beach which received Town Planning Committee approval just prior to the 2021 general election. After the BIA did not reply to “follow-up correspondence” sent after the meeting, Dr Kovats alleged he was then informed by The Meisters of a December 2021 meeting that took place without his knowledge.

Present were the Meisters; M. Craig Roberts, their attorney; Phylicia Hanna-Woods, current director of investments; and Jerome Fitzgerald, the Prime Minister’s senior policy adviser. Eventually, Dr Kovats and Mr Cottis, his attorney, met with Mrs Hanna-Woods and Mr Fitzgerald on January 25, 2022, at which the latter allegedly said “the Government of The Bahamas has no desire to interfere in a private commercial transaction”.

The Austrian then met briefly with the Mr Davis and Myles Laroda, minister of state in the Prime Minister’s Office, on February 4 but this “was cut short by the Prime Minister due to unexpected and unrelated business”. They reconvened on February 7, 2022, when Mr Davis was briefed on the Treasure Cay redevelopment plans and both Love Beach and South Ocean.

“Noting that the Love Beach project was undergoing final construction architecture for permitting, the Prime Minister questioned Dr Kovats’ ability to also pursue both his Treasure Cay and South Ocean projects,” the Judicial Review action alleged.

“Dr Kovats explained that although the South Ocean project had commenced in 2014, his immediate focus and priority was Treasure Cay following the devastation caused by Hurricane Dorian. To this end, Dr Kovats explained that he wished to commence reconstruction of the marina immediately and had already had multiple discussions with Jimmy Mosko of Bahamas Marine Construction in this regard.

“Dr Kovats further explained to the Prime Minister that two restaurants would be immediately constructed, one at the marina and the other on the beach, as currently there existed no proper food and beverage facilities within Treasure Cay. In response, the Prime Minister said: ‘If I approve Treasure Cay, don’t let me down’.”

The Austrian investor described the next several months as “a back-and-forth” with the Government as he sought to obtain the necessary approvals to close Treasure Cay’s purchase. However, it was at an April 7, 2022, meeting that the Prime Minister “intimated concerns had been expressed to him by unknown sources that Dr Kovats would not develop Treasure Cay”.

To ease such fears, Mr Davis inquired as to whether the developer would lodge a $5m performance bond to be released once the marina was completed. This was increased to $10m at a subsequent meeting on May 4, 2022, but Dr Kovats “did not consider such a request appropriate in the context of a private commercial transaction”.

“On June 20, 2022, I received a copy of a letter from the BIA refusing my application to the Central Bank to acquire the shares of Treasure Cay Ltd. Amazingly, that same letter contended that an application had never been made formally,” Dr Kovats alleged.

“On August 24, 2022, one of my attorneys [Mr Cottis] met with Bahamian Prime Minister ‘Brave’ Davis in an attempt to resolve the dispute. My attorney also provided a set of renderings in furtherance of the master plan delivered previously to the BIA and Prime Minister.

“During that meeting, the Prime Minster again demanded a performance bond for a private, commercial transaction. While I was not amenable to a bond, the Government had previously suggested bonds of $5m or $10m. During this meeting, my attorney inquired about the bond that would be required,” Dr Kovats continued.

“The Prime Minister responded that a $25m bond would be required, representing 10 percent of the $250m project value. In lieu of a bond, I provided a financial reference statement from my bank and offered a personal guarantee, even though these were not required to purchase private property.” His Judicial Review added: “There is no lawful basis for imposing any bond upon Dr Kovats.”

The Austrian financier has also initiated legal action against the Meisters and their company, Family Adventure Holdings, demanding that they uphold the February 2021 sales contract or, in the alternative, return his $2.233m deposit equivalent to 10 percent of the purchase price.

“Notwithstanding this inexplicable aversion to my investment in rebuilding Treasure Cay in the wake of the devastation caused by Hurricane Dorian, I remain deeply committed to not only acquiring Treasure Cay but restoring it beyond its former glory as not merely the pride of the Bahamian Family Islands but, more so, the entire Caribbean,” Dr Kovats alleged.

“It follows that I will not be dissuaded and certainly have no intention of walking away and reneging on my contractual obligations with the Meister family, who have been seeking to sell and exit Treasure Cay for over 25 years..... I am already here 27 years, but now denied the ability to complete my contractual obligations under a significant commercial transaction between private parties.

“With all due respect to Mr Fitzgerald, this is very much government ‘interference in a private commercial transaction’.” However, the Government will likely feel it had solid reasons to reject Dr Kovats as Treasure Cay’s buyer despite his production of clean police records from both The Bahamas and his native Austria.

Amid previous assertions that he has a tendency to sit on property in The Bahamas and do nothing to develop it, the financier has also attracted controversy back home throughout his business and investing career, despite building his publicly-listed industrial group, A-Tec Industries, into a conglomerate that once featured over 70 companies and more than 10,000 employees, with turnover pegged at more than one billion euros.

Numerous companies he was involved with early in his business career became insolvent, and Dr Kovats has faced numerous civil lawsuits during his business career, being criminally indicted twice. He was sentenced to six months’ probation in 2000 by the Vienna High Court over the bankruptcy of a nightclub he had invested in. Dr Kovats was also charged over another nightclub insolvency in 2007, although he was never convicted.

Tribune Business’s own research also found that Dr Kovats and a fellow executive were fined by Austrian regulators in 2012 for providing misleading information to the capital markets, thus harming investors. Following a two-year period of turbulence that began in 2011, A-Tec moved to restart business activities in 2013, after undergoing a reorganisation.