The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Baha Mar’s main contractor was claiming as recently as two months ago that it could not produce documents for a New York court case because Sarkis Izmirlian had “locked it out” of the project site.

The “incredible” claim was blasted by attorneys representing one of China Construction America’s (CCA) US sub-contractors, who accused the company of “stonewalling” in response to its request for documents as part of the legal ‘discovery’ process.

Theodore Hacht, the attorney representing Controlled Demolition Inc (CDI), which is demanding that CCA (Bahamas) pay it the outstanding $754,704 balance for work completed on the $3.5 billion project, told the southern New York court on August 18, 2016, that his client’s case was being “prejudiced” as a result.

He told Judge John Koetl that in late June 2016, CCA (Bahamas) said it could not discuss ‘discovery’ relating to the production - and exchange - of electronic documents because it was still unable to access its former offices at the Baha Mar construction site.

“On June 23, 2016, defendant [CCA] asserted that it could not meaningfully discuss electronic discovery because the owner had allegedly locked it out of the project site,” Mr Hacht wrote on CDI’s behalf.

His letter makes it clear that, by ‘owner’, CCA meant Baha Mar’s original developer, Sarkis Izmirlian, who was effectively removed from ownership and control of the $3.5 billion development last September by the provisional liquidators and, subsequently, the China Export-Import Bank’s creditors.

Mr Izmirlian, and others involved with the Baha Mar project, especially its still unpaid Bahamian creditors, are likely to be amused by CCA’s ‘excuse’, which was effectively shredded by CDI’s attorneys.

“[CCA’s] assertion was not otherwise substantiated,” Mr Hacht wrote, “and without more it seems incredible that a sophisticated construction management firm, that is affiliated with an international construction conglomerate, whose parent is the government of the People’s Republic of China, simply lost all access to the company’s information systems, local hard drives, back-up systems and cloud storage because its physical accessibility to a job site was compromised.”

Mr Hacht and CDI are wise to be suspicious of CCA’s assertions. While the contractor was ‘locked out’ of its offices in the immediate aftermath of Baha Mar’s Chapter 11 bankruptcy protection filing in late June 2015, Mr Izmirlian’s control over the project’s assets was ended by the Supreme Court in late September.

The Baha Mar project site is now under the control of the Deloitte & Touche receivership team, which acts as agents for the China Export-Import Bank, the development’s $2.45 billion secured creditor and CCA ‘affiliate’, given that both are owned by the Beijing government.

As a result, CCA, which had already removed many of its computers and files around the time of the Chapter 11 filing, should have no difficulty ‘accessing’ the Baha Mar site - especially since it is also negotiating a construction contract with the China Export-Import Bank for Baha Mar’s completion.

Meanwhile, Mr Izmirlian and his team are likely to be interested in CDI’s allegation that CCA is “stonewalling” over its request for documents related to claims that the Chinese contractor was “incompetent” and engaged in “misconduct”.

Mr Hacht, on CDI’s behalf, alleged that CCA had on July 11, 2016, “frivolously objected to each and every request” for documents that was served upon it.

Document discovery is a key part of the legal process, as it enables all parties to obtain and exchange evidence that is relevant to their respective cases.

However, Mr Hacht’s letter reveals that CCA objected to his client’s demand for documents relating to Baha Mar/Mr Izmirlian’s claims that it had breached its construction contract on the grounds that this was irrelevant.

“Defendant is merely stonewalling,” Mr Hacht alleged of CCA. “These requests seek information concerning the owner’s [Mr Izmirlian’s] allegations that [CCA] has breached the prime contract, performed incompetently and engaged in misconduct.

“In this lawsuit, [CCA] is alleging that, as a condition precedent to payment to plaintiff, [CCA] must receive payment from the owner.

“Plaintiff’s requests are targeted....to obtain information showing that the owner failed to pay [CCA] for reasons having nothing to do with CDI’s completed work.”

Mr Hacht’s letter also revealed that CCA (Bahamas) was refusing to divulge documents showing how it “allocated payments” received from Baha Mar for work on the $3.5 billion project.

CCA wanted to restrict this to documents relating to payments received for CDI’s work, but the latter wants much broader discovery on this issue.

“Plaintiff is entitled to seek discovery as to all payments received from the owner [Mr Izmirlian] to determine whether [CCA] received payment sufficient to pay plaintiff, but improperly diverted such payments for its own benefit; and/or [CCA] wrongfully failed to invoice the owner for plaintiff’s work,” Mr Hacht wrote on CDI’s behalf.

The attorney also alleged that CCA was refusing to produce documents related to its parent company’s, China State Construction Engineering Corporation (CSCEC), ownership stake in Baha Mar.

CSCEC held a $150 million preference share investment in Baha Mar, and Mr Hacht’s said this “would render CCA’s “pay-if-paid defense a sham”.