The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Baha Mar's contractor "could not keep straight" reports on its construction progress, with completion of specific work elements allegedly "regressing" on a monthly basis.

Sarkis Izmirlian, the $4.2 billion project's original developer, is citing numerous alleged incidents where China Construction America's (CCA) monthly reports suggested construction progress had gone backwards - something that should be impossible on any building project.

His $2.25 billion damages lawsuit, filed in the New York State Supreme Court on Boxing Day, picked out CCA's October 13, 2013, 'monthly report' as an example of the alleged "false and misleading statements" designed to mislead himself - and Baha Mar executives - about the extent of construction progress.

"CCA could not even keep straight the extent to which MEP (mechanical, engineering and plumbing) work had been completed month to month," Mr Izmirlian and his BML Properties vehicle claimed.

"By way of example only, CCA reported in the September 2013 report that its MEP work was 44.2 per cent complete, but then a mere 30 days later claimed that the same MEP work was only 39 per cent complete, a retrograde movement of 5.2 per cent, without explanation."

Mr Izmirlian identified a similar issue in CCA's December 10, 2013, monthly report, and alleged: "CCA stated that all buildings were, as of the end of November 2013, ahead of schedule when in fact each and every building was behind schedule.

"CCA's statement that the completion percentage as of the end of November 2013 was 42.3 per cent is contradicted by CCA's October 2013 report, in which CCA claimed that such was 55 per cent complete (never explaining how 'completion' could move 12.7 percentage points retrograde)."

And, referring to the same CCA report, Mr Izmirlian continued: "CCA stated that as of the end of November 2013 that the MEP work was 48.5 per cent complete, which level of completion was contradicted in the agreed CCA payment application for that same time period as 41 per cent complete."

Mr Izmirlian cited these alleged discrepancies to back up his fraud and breach of contract claims on the basis that CCA consistently misrepresented and covered up its progress, or lack of it, on Baha Mar's construction.

CCA last week hit back at Mr Izmirlian's allegations, describing them as "vindictive and baseless," and a "gross abuse of the American judicial system". It did not explain why any of the former developer's extensive claims was "baseless", but pledged that the lawsuit will be "vigorously defended".

The Chinese state-owned contractor has long argued that Baha Mar's collapse into Chapter 11 bankruptcy protection, and subsequent receivership and liquidation, resulted from mismanagement by Mr Izmirlian and his executive team.

It has cited numerous design changes, and hundreds of alterations to already-completed building work, known as construction change directives (CCDs), as reasons for both cost overruns and its inability to complete Baha Mar 'on time and on budget'.

Mr Izmirlian's lawsuit, though, refutes all these claims. While CCA had argued it was "entitled to extra time or money, or both" because of an alleged 'late design' for Baha Mar's cooling wells, the former developer hit back by claiming any delay resulted from the contractor's "failure" to investigate and order the necessary pumps on time.

"Numerous (well over 50) claims of design delay made by CCA were false on their face, with documented delivery of the allegedly delayed designs existing in correspondence and other documents in the possession of CCA even before CCA made the statement in its September 2013 report," Mr Izmirlian alleged.

Turning to similar claims in CCA's December 2013 report, he further claimed: "By way of example as to the specious basis for CCA's claimed 'design delays', CCA claimed 28 days of delay in the Podium [Baha Mar's 'back of house' facilities] due to 'additional roof drains', and blamed Baha Mar Ltd for adding numerous drains to the plans.

"Oddly, this same event was reported as two days ahead of schedule in the immediately preceding monthly report authored by CCA, and thus in a month with only 30 calendar days, CCA claimed it incurred that entire 30-day period in delays.

"Regardless of these obviously improperly prepared aspects of the reports (and thus inherently inaccurate reporting by CCA), CCA blamed Baha Mar Ltd for the delays," Mr Izmirlian continued.

"However, the number of roof drains had increased by only four (out of 300 total locations) since Construction Change Directive (CCD) 233 had been issued ten months earlier on February 27, 2013. As of the end of November, CCA had only installed two such roof drains (out of the 300)."

And, in a final salvo directed at CCA's construction change directive claims, Mr Izmirlian alleged: "CCA claimed delays in the Convention Centre 'due to 39 CCDs issued in September and October' 2013, yet the reports for those months make no mention of this and, in any event, elsewhere in the November 2013 report CCA advises that the Convention Centre would be completed on schedule by March 31, 2014."

Mr Izmirlian and BML Properties are alleging that CCA used the 'delays' as excuses for its failure to meet project deadlines, and to conceal its "true intent" from them.

"It intended to finish as and when it chose, and certainly not complete until it had collected (via extortion if need be) every penny available under the [$2.45 billion] loan from China Export-Import Bank, all while maintaining as best it could the appearance that it would complete these elements and the whole of the resort on time and on budget," the former developer alleged.

His lawsuit also revealed an April 18, 2014, report sent to CCA chief executive, Ning Yuan, which disclosed that the Government had "recently issues two 'stop work orders' due to 'questionable workmanship'" on the project.

This, again, suggests that the former Christie administration knew - or should have known - about Baha Mar's construction woes, and alleged problems with CCA's workmanship, long before the Chapter 11 filing. And it again raises questions about why it so eagerly sided with the Chinese against Mr Izmirlian.

The former developer's April 14, 2014, to the chairman of CCA's parent, China State Construction Engineering Corporation (CSCEC), warning that Baha Mar was "running out of time and urgent decisions are needed", also failed to provoke a response.

The end result was that, just two months before Baha Mar's first (ultimately missed) December 2014 opening deadline, just "a mere 10 hotel rooms" had been brought by CCA to the point of 'punch listing' for minor corrections.

"CCA stated that during the week commencing December 15, 2014, CCA would turn over 18 floors across four different hotels for Baha Mar for its consultants to 'punch' (or inspect for minor repairs or painting needed), totalling approximately 350 rooms," Mr Izmirlian alleged.

"CCA did not come anywhere close to that. Indeed, by December 15, only 10 rooms in one hotel had been turned over in that condition.... CCA stated in the Version 5 schedule that CCA had already handed over for 'punch' 61 separate rooms in the Podium [back of house].

"CCA knew when it created that this claim was not true - CCA had only handed over five rooms, nine were close to being handed over, and the balance of 49 rooms were not complete, creating further delays in the schedule.. and requiring diversion of resources from elsewhere to address the key 'Critical Path' components found in the Podium."