The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A former Bahamian Cabinet Minister’s legal evidence was key to a New York court’s dismissal of fraud allegations against Jamie Dingman over the failure of his Nassau restaurant empire.

The declaration by Damian Gomez QC, the former minister of state for legal affairs, that foreign purchases of equity stakes in Bahamian companies require approval from both the Investments Board and Central Bank, undermined the damages lawsuit brought against Mr Dingman by two former partners.

Two US citizens, Erik Gordon and Ryan Giunta, had claimed that Mr Dingman, a Lyford Cay resident and son of world-renowned entrepreneur, Michael, had breached agreements to provide them with an equity interest in Out West Hospitality.

That was the holding company for a planned Nassau restaurant conglomerate that included the iconic Traveller’s Restaurant and several other properties, but the venture fell apart and collapsed in 2014.

Gordon alleged that the $250,000 he paid to Mr Dingman in exchange for a 50 per cent equity stake in Out West Hospitality was a transaction which, under US law, the latter had to complete.

But US judge Naomi Buchwald, sitting in the southern New York federal court, found against Gordon over this issue on the basis of Mr Gomez’s explanation of Bahamian Exchange Control Regulations.

She ruled that the need to obtain Investment Board and Central Bank approval, given Gordon’s status as a non-Bahamian, was “a condition precedent” that had to be completed before the Out West Hospitality purchase closed.

Given that these approvals were never obtained, Judge Buchwald found that Gordon’s claim of “irrevocable liability” on Mr Dingman’s part in relation to the deal had not been met. As a result, the whole case was undermined.

Gordon attempted to argue that the Out West Hospitality share deal was governed by US securities laws, given that the negotiations and communications between himself and Mr Dingman occurred in New York.

This argument, too, found little favour with the US court, which effectively found that Bahamian law trumped its US counterpart given the need for regulatory approvals in this nation.

“Gordon alleges that it was ‘[d]uring the November 2013 communications that Dingman offered, and Gordon accepted, that Gordon would invest capital in Out West and/or its subsidiaries in exchange for a 50 per cent equity stake’,” Judge Buchwald noted.

“Gordon also alleges that on November 22 and December 17, 2013, he wired $100,000 and $150,000 respectively from his personal bank account in New York to an account to which Dingman directed him.

“Both times, Dingman sent letters to Gordon on Out West letterhead confirming his investments. The letters acknowledge receipt of the amount just wired by Gordon, ‘made out to Traveller’s Restaurant’, and state that the funds were to be used for certain operations.

“Both letters say that ‘the investment will represent a 10 per cent stake in the holding company of Out West [sic] Hospitality.’ The second letter further states that ‘January 15, Out West will issue shares that will represent a total investment of $250,000’.”

Judge Buchwald, though, turned to Mr Gomez’s evidence that approval from the Government and Central Bank was required before Gordon could “even be issued any shares in Out West or any of its purported subsidiaries, since they were all Bahamian corporations”.

She added that it was “appropriate to defer” to Mr Gomez’s evidence given that neither of Mr Dingman’s accusers disputed it, and added: “The approval of the Bahamian authorities clearly constituted a condition precedent to Gordon’s right and ability to take title to the shares allegedly promised by Dingman in exchange for Gordon’s investment.

“Even if we assume that a binding contract was formed between Gordon and Dingman during the November 2013 communications, as Gordon alleges and contends, we believe that the approval of the Bahamian authorities is best viewed as a condition that had to be satisfied before defendants became irrevocably bound to ‘deliver’ shares in Out West to Gordon, and before Gordon became irrevocably bound to ‘take’ or ‘pay for’ the same.”

Gordon alleged that Mr Dingman had promised to register his share purchase, and equity ownership, with the relevant Bahamian regulators.

This, he argued, meant Mr Dingman was “bound to attempt in good faith” to obtain the necessary Bahamian approvals and, if these were not forthcoming, to return the monies. However, Judge Buchwald said this did not cure the lawsuit’s problem - that there was nothing binding on Mr Dingman to complete the deal.

Finding that US law was not intended to apply outside the country’s territorial borders, she added: “Gordon’s securities claim clearly implicates questions of Bahamian laws and procedures, since he could not even receive the securities at issue without approval of the Bahamian authorities under Bahamian law.

“We believe that his securities claim thus presents the type of risk for conflict with foreign law with which the Supreme Court was concerned - a risk that Congress would not have wanted to create without expressly addressing the matter.”

Judge Buchwald also ruled that Gordon and Giunta had failed to disprove Mr Dingman’s assertion that he remains a permanent resident of the Bahamas, and remain in this nation as his primary domicile.

“It is not surprising that Dingman would reside in the Bahamas, given his family’s presence there, their alleged wealth, and the country’s significant tax advantages (not to mention climate and beaches),” the judge ruled, dismissing the complaint.

Mr Dingman’s efforts to build a Nassau-based restaurant and hospitality business included taking over Traveller’s Rest in western New Providence via a lease arrangement.

That venture failed and the property shut again, until members of the Bain family, its owners, re-opened it again.

He also leased two units in the Klonaris brothers’ Elizabeth on Bay plaza on Bay Street for two other restaurant formats, both of which have also closed.

Tribune Business also revealed how Mr Dingman leased the Beach Club Cafe from Sandyport’s developers, viewing this as his “signature property”. The venture never opened, and the lease was pulled.

The initial action against Mr Dingman included numerous Bahamian plaintiffs, such as the well-known Wulff Road-based building materials suppliers, FYP and Tile King, the People First (Bahamas) employment agency, IDNet, and Young Digerati (YNG).

Individual Bahamians also suing Mr Dingman included Jason Rolle, his former general manager, who claimed to be owed $46,113 in unpaid salary and benefits, plus Tyrone Adderley, a contractor seeking more than $2,000 for work on the Beach Club Cafe at Sandyport.

However, all the Bahamian plaintiffs “voluntarily” withdrew their claims for thousands of dollars in damages against Mr Dingman, leaving the action to Messrs Gordon and Giunta. Their action was likely due to Mr Dingman’s efforts to dismiss the case on jurisdictional grounds, with the argument that the Bahamas was the proper forum to hear the matter.