The Tribune

By NEIL HARTNELL Tribune Business Editor CLICO (Bahamas) liquidator has freed up "significant cash" worth some $670,000 by negotiating a settlement of the US Internal Revenue Service's (IRS) tax claim against its major asset, which is currently attracting interest from "five to six" potential buyers. A hearing has been scheduled before the US Bankruptcy Court for the southern district of Florida on April 5, 2012, to confirm the agreement between Craig 'Tony' Gomez, the Baker Tilly Gomez accountant and partner, and the IRS over the alleged 2005-2006 tax liabilities owed by the Wellington Preserve real estate development. The project accounts for about 63 per cent of the insolvent Bahamian insurer's total assets, and Mr Gomez and his US attorneys have negotiated a settlement that will see Wellington Preserve pay the IRS a total of $1 million, rather than the $1.525 million the latter had been claiming. And, since Wellington Preserve had placed a sum equivalent to $1.67 million or 110 per cent of the IRS claim in reserve while the matter was being resolved, the settlement is set to release $670,000 into Mr Gomez's hands for use in maintaining the key CLICO (Bahamas) asset while he seeks to sell its remaining 420-425 acres. Explaining the rationale for the settlement with the IRS, Mr Gomez and his attorneys said in court filings: "A settlement would eliminate the time, expense, and other resources that would need to be allocated to continue the prosecution of [Wellington Preserve's] objection to the IRS' claim, with the potential for adverse ruling, appeal, and further delay. "The proposed settlement results in a significant reduction of the IRS' claim - $521,247. Since the Debtor had reserved 110 per cent of the gross amount of the claim pending the outcome of the dispute, this will "free up' significant cash for other uses by [Wellington Preserve]." Mr Gomez argued that it was in the "best interest" of both Wellington Preserve and its 100 per cent owner, CLICO Enterprises, a subsidiary fully controlled by CLICO (Bahamas), to settle the IRS dispute and thus focus on maximising recovery for the insolvent insurer's Bahamian creditors." Mr Gomez's US-based attorney, Ronald Neiwirth, yesterday explained to Tribune Business that the April 5, 2012, hearing in south Florida to approve the IRS settlement was a procedural step, as there was "no one out there to object to it". Once the IRS was out of the equation, the only players left in the game were Mr Gomez and CLICO Enterprises, the latter waiting on Wellington Preserve sales proceeds to be "upstreamed to the Bahamas". Explaining that Mr Gomez had disputed the size of the IRS claim against Wellington Preserve, Mr Neiwirth said the procedure under US Chapter 11 bankruptcy law was that the debtor had to reserve a sum to meet the full sum once its reorganisation plan was court-approved. Confirming that some $1.67 million, a sum equivalent to 110 per cent of the IRS claim, was reserved by the CLICO (Bahamas) liquidator, Mr Neiwirth told Tribune Business: "If we only have to pay $1 million, it's going to free up in excess of $670,000 for other purposes. "Liquidity is good. Some of it is going to pay some outstanding stuff out there, and we're probably going to hang on to most of the funds for the moment. We have to pay the Homeowners Association and underlying carrying stuff on the property while we chase a sale. "This gives us monies to do that without having to reach out. At one point Wellington was loaned money from CLICO (Bahamas) to keep things going." Mr Neiwirth said the $670,000 generated from the IRS settlement would enable Wellington Preserve to 'pay its own way' until a sale of the remaining real estate was achieved. Detailing how a settlement was reached, he explained that both sides took depositions and assembled the relevant evidence, the IRS interviewing Mr Gomez and the liquidator obtaining testimony from Wellington Preserve's accountants at the time relevant to the disputed claim. Both parties than assessed all the material, and their chances of winning/losing a case. "What can I say? The IRS blinked a little bit," Mr Neiwirth told Tribune Business. "It's a significant step, as any time you save over $500,000 it's a good day. This is a true settlement. This is purely consensual. No one's arm was twisted." He added that Mr Gomez had been attempting to sell Wellington Preserve's remaining 420-425 acres "in bulk, but we've had a series of deals fall through for one reason or another". Two potential sales have collapsed, but Mr Neiwirth said "five to six different suitors" were now at the table, seeking to buy Wellington Preserve either in whole or in part. This, the US attorney said, had left Mr Gomez and the Bahamian courts with a tough call to make. With demand and real estate prices in southern Florida seemingly improving, Mr Neiwirth said they could try to sell Wellington Preserve in bulk, which was the least risky option, or attempt to carve it into parcels and sell to different buyers. The latter option, he added, might fetch a higher per acre price, thereby maximising financial recovery to CLICO (Bahamas) creditors. "The question is getting as much money as you want out of it in the circumstances," Mr Neiwirth told Tribune Business. "With the market rising in that area, and prices going up, it's leading us to think more seriously about parcelling it up and selling it in bulk than we would have done a year ago." A previous $10 million sale of about 100 acres at Wellington Preserve had generated a per acre sales price of $97,000-$100,000 per acre, and the question confronting Mr Gomez is whether, by cutting it up into multiple parcels, he could achieve a higher per acre price. And, in doing so, whether it was better to hold on to Wellington Preserve for a "longer period of time". "It's a difficult decision, but that's Mr Gomez's department," Mr Neiwirth said. "But we seem to be getting there. "At the current time he's been approached by suitors both ways - he's got one or two out there wishing to acquire the bulk, and a number interested in smaller parcels. "While we have the luxury of a lot of people kicking the tyres, it's not the same as buying the car. But at least we're moving in the right direction. I'd like nothing more than to generate a few tens of millions of dollars to throw back into CLICO (Bahamas) and let the Bahamian courts work that out."