The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Baha Mar's main contractor yesterday denied reneging on promises to make a supplier 'whole', and instead alleged it had "misappropriated" its $390,500 lounge chairs payment.

Natalia Dwornik, China Construction America's (CCA) Bahamas contract manager, said the company was "dumbfounded" to learn that Source Outdoor had applied the payment for 1,420 chairs to instead cover debts owed by Baha Mar's former developer.

Her affidavit, filed with the south Florida federal court yesterday, claimed that CCA "never received complete information" from the lounge chair manufacturer to enable it to cover debts owed prior to the Chapter 11 bankruptcy protection filing.

Ms Dwornik said payment could not be made because Baha Mar's receivers, Raymond Winder, the Deloitte & Touche (Bahamas) managing partner, and two Hong Kong-based colleagues, were alleging that Source Outdoor had "refused to honour" $450,000 in deposits already paid.

Responding to claims by Gerald Shavartsman, Source Outdoor's chief executive, the CCA (Bahamas) manager said she wanted "to clarify" the contractor's "undertaking" in relation to the debt owed by Baha Mar.

"In my initial correspondence, I indicated that CCA wished to complete outstanding orders that were in limbo due to the bankruptcy of Baha Mar," Ms Dwornik alleged.

"In that e-mail and in a number of subsequent communications, I requested information about the status of those prior orders and of the deposits associated with those orders.

"CCA never received the necessary, complete information requested. We were unable to determine what remained to be paid as to which prior orders from our predecessor," the CCA (Bahamas) executive continued.

"We were further advised by the receiver of the Baha Mar project that Source Outdoor was refusing to honour $450,000 in deposits previously paid.

"This information was essential. CCA needed to know what had been ordered by its predecessor company, what deposits had been paid and what remained to be paid to those previous orders.

"We were prepared to issue purchase orders for the amounts remaining due, and purchase orders for any items as to which no deposit had been paid. We could do neither without the requested information."

Ms Dwornik added: "Under those circumstances, CCA could not process any additional orders at that time. CCA did not renege on its offer to make Source whole. It simply never received the complete information required for it to do so."

Her affidavit is intended to rebut allegations by Mr Shavartsman that CCA performed a 'u-turn' on promises to make Source Outdoor "100 per cent financially whole", and compensate it for debts incurred by Baha Mar during Sarkis Izmirlian's ownership.

CCA's bid to obtain an injunction, which would force Source Outdoor to deliver the 1,420 chairs to its Miami-based shipper, is due to be heard by the south Florida federal court today.

The contractor has warned that failing to get its hands on the lounge chairs will jeopardise the October 15, 2017, deadline by which it must 'substantially complete' Baha Mar.

While the chairs' potential absence is unlikely to endanger the opening of the 300-room SLS Lux property, and related plans of prospective owner, Chow Tai Fook Enterprises (CTFE), it could make CCA non-compliant with the terms of its construction contract.

CCA (Bahamas) court filings concede that the contractor has assumed responsibility for procuring Baha Mar's fixtures, furnishings and other equipment, as well as completing the project's construction at an additional cost of $600-$700 million.

Ms Dwornik's affidavit, meanwhile, said Source Outdoor had only recently taken the position "it need not honour" CCA's $390,500 purchase order.

She added that there had been "no indication" from the Florida-based supplier that the chairs were not being manufactured, or would not be delivered by May 26, 2017, until their dispute arose.

"CCA was dumbfounded to be advised by Mr Shavartsman that its $390,500 had been applied by Source, without CCA's knowledge or consent, to expenses attributable to entities other than CCA [the Baha Mar debts]," Ms Dwornik's affidavit alleged.

"That money had been paid by CCA in good faith in January 2017. An no time prior to Mr Shavartsman's April 17, 2017, letter was CCA ever advised of the misappropriation of its funds in this manner."

Source Outdoor had queried why CCA (Bahamas) was getting so hung up on its lounge chairs, pointing out that it knew of two-three other suppliers who made a similar product.

Yet CCA was making its products out to be the equivalent of "a Monet or a Picasso", or "a basketball that is signed by Michael Jordan".

And Source Outdoor openly questioned in its legal filings whether CCA was using the 'lounge chairs' dispute as a smokescreen, or cover, for other unknown reasons that might cause it to miss Baha Mar's October 15 'substantial completion' deadline.

Ms Dwornik, though, claimed that the chairs were "made to order for the Baha Mar project" and "are not off-the-shelf items". She added that they were designed to match the 1,400 chairs already delivered, and repeated CCA's claims that Source Outdoor was selling the ones it was holding via the Internet.