The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A well-known accountant has described a Supreme Court judge’s decision to remove him as the receiver for a multi-million dollar Abaco resort/marina development as “baffling and perplexing”, adding that the verdict was “detached from reality”.

Paul ‘Andy’ Gomez, the Grant Thornton (Bahamas) partner, told Tribune Business that the January 14 Order from Justice Stephen Isaacs, which removed him as receiver over the 203-acre Orchid Bay Resort & Marina, was a potential “black eye” for the Bahamian judicial system.

He added that the US bank, which had previously obtained a Supreme Court Order appointing Mr Gomez, in its bid to recover a $6 million debt owed by Orchid Bay’s owner, was “furious” at the decision.

And Mr Gomez suggested that the verdict might also undermine investor confidence in the Bahamas and its Judicial system.

The subject of Mr Gomez’s ire is the decision by Justice Isaacs to remove him as receiver, and return the development’s control to Coastal Property Services, the company that holds a debenture secured over a portion of Orchid Bay’s real estate, and its receiver, James Albury.

The Grant Thornton (Bahamas) partner argued that Justice Isaacs, who removed him at a hearing where only Coastal Property Services and Mr Albury were represented by counsel, appeared not to have considered appraisal evidence suggesting the two parties had sold real estate valued at around $16 million for close to $1 million - a significant undervaluation - in a bid to clear the debenture.

Such criticism of a judge’s verdict is both unusual and surprising, especially considering that Justice Isaacs is understood to have yet to render a decision on the bid by Mr Gomez and his attorney, Jacy Whittaker, to overturn the Order removing the receiver.

Yet Mr Gomez told Tribune Business: “I’m still baffled. Justice Isaacs’ ruling is baffling and confusing, and to return the property to them, it’s not tied to reality. It’s detached from reality and the facts of the case, and a black eye to the Judicial system in the Bahamas.

“I am baffled and perplexed at this decision to return the property to the Alburys, who have no ownership in the property and have transferred $16 million worth of real estate against a $1 million debenture.

“They have no financial systems in place, and no accounting systems in place for the marina and rentals elsewhere,” Mr Gomez added of Chris Albury’s father and mother. “His decision is baffling, concerning and detached from reality.

“When we went to court, he never asked for an appraisal. I’m still struggling to figure out how he made the decision to return the property to those people.”

Mr Gomez was previously appointed by another Supreme Court judge, Estelle Gray-Evans, upon Synovus’s application to secure Orchid Bay for the benefit of itself and other creditors.

The Georgia-headquartered bank had obtained a judgment against American investor, William B. Johnson, and his William B. Johnson Investment Company, and has been seeking to recover the $6.008 million they owe to it. Mr Johnson and his firm owe the entire 1,000-strong share capital in Great Guana Cay (Abaco) Development Company, which is the holding company for - and trades as - Orchid Bay.

“The bank [Synovus] is furious about the Judicial system in the Bahamas,” Mr Gomez told Tribune Business. “One has to wonder, as a foreign investor, when you need legal redress or Judicial relief, at the end of the day, you have to wonder what you’re going to get.”

The action brought before Justice Isaacs was somewhat unusual in that all proceedings relating to Orchid Bay and Great Guana Cay (Abaco) Development Company had previously been heard in Freeport before Justice Gray-Evans.

Coastal Property Services and Mr Albury had suffered a succession of court defeats there, and Grant Thornton (Bahamas) and its attorneys are attempting to consolidate the filing before Justice Isaacs and bring it to Freeport.

Mr Gomez, though, did last month obtain a Supreme Court Order from Justice Gray-Evans allowing him to sell the Johnson entities’ shares on behalf of Synovus. He can now go ahead and seek a buyer for Great Guana Cay (Abaco) Development’s capital.

Roy Sweeting, the Glinton, Sweeting & O’Brien partner who represents Coastal Property Services and Mr Albury, recently told Tribune Business that Justice Gray-Evans’s ruling had helped “lower the temperature” between his clients and Mr Gomez.

He struck a conciliatory tone, suggesting that his clients were prepared to co-operate and work with Mr Gomez for the mutual benefit of both parties. Coastal Property Services is still in effective control of the underlying real estate, and Mr Gomez will likely need to work with them to calculate the true worth of Orchid Bay - and, ultimately, its share capital.

“We don’t have any interest in appealing that,” Mr Sweeting said of the ‘share sale’ Order. “The judge struck out Synovus’s claim against Great Guana Cay (Abaco) Development Company, and gave them leave to sell the shares of Great Guana Cay (Abaco) Development Company.”

Mr Sweeting said the differences between the two parties related to the fact that Synovus was a judgment creditor against the company’s shares, while his clients were secured creditors over its real estate assets via the debenture.

Coastal and Mr Albury’s position is that having a charge against the shares does not give Synovus and Mr Gomez the right to ‘look through’ to the underlying real estate and seize control over that, or make themselves shareholders and directors.

“We are proceeding on realising our interest over the assets of the company,” Mr Sweeting said. “That’s what the whole dispute was about.

“I think the temperature has been lowered a bit by the ruling. It served to clarify a few things between us and them, and lower the temperature.”

Mr Gomez had previously alleged that Mr Albury had placed himself in “numerous conflicting positions”, and sold Orchid Bay property valued at $16 million for just over $1 million.

Apart from his role as Orchid Bay’s vice-president of operations, Mr Albury is also the administrator and a director of Coastal, the company holding the charge over its real estate.

And, in addition, Mr Albury and his wife, and their companies, had also obtained default judgments worth more than $434,000 against Orchid Bay and its parent over salaries and other sums allegedly owed to them.

Mr Gomez had also alleged the Alburys were incorrectly adding these default judgment debts to the $1 million-plus debenture, despite having no legal basis to do such ‘upstamping’. He and his attorneys are claiming that the initial real estate sale had raised enough money to discharge the debenture, and it should no longer exist.

But, in the ex-parte hearing before Justice Isaacs that saw Mr Gomez removed, Mr Sweeting alleged that the beach front land involved in the initial debenture-related sale was “boggy”, and had much less value than that ascribed to it by Mr Gomez and his appraiser, TR Associates.

Mr Sweeting alleged that Mr Johnson, Orchid Bay’s former owner, “was in the habit of wildly inflating the values”, having told one of the US banks that sued him the Bahamian property was “worth hundreds of millions of dollars”.

“It was never worth anything remotely close to that,” the attorney told Justice Isaacs. “There is about $8 million worth of property right there. It’s not a big place.”

Coastal Property Services purchased the $1 million debenture from Royal Bank of Canada (RBC), with what Mr Sweeting described as money borrowed from a private lender in a deal arranged by an Orchid Bay home owner.

“We listed the property as a whole package and tried to sell for a year,” Mr Sweeting told the court. “So we never got any sensible offers, all we got was ridiculously low offers.

“One of the offers, we understood that it went away because they found out the paper date on the loan that Chris Albury was taking was approaching.”

Describing the ultimate $1.2 million deal, Mr Sweeting said of the real estate involved: “It’s beach front, but it’s -the land itself just back of the beach is boggy, low-lying land not good for building on.

“It has been left as beach access for some of the home owners. Mr Johnson had a plan to develop this into a hotel. And eventually one of the home owners bought it in order to get the land, and also to prevent that from happening. None of the homeowners want a hotel built inside there.”