The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A New York judge says it is "a shocker" that Baha Mar's former receivers and contractor kept the Bahamian Supreme Court in the dark over their "backdoor" exchange of Sarkis Izmirlian's disputed legal papers.

Judge Saliann Scarpulla, during a February 26, 2020, hearing on the initial Baha Mar developer's $2.25bn fraud and breach of contract claim against China Construction America (CCA), slammed the non-disclosure as "really a miscarriage of justice".

She hit out at both the Chinese state-owned contractor and Deloitte & Touche, the $4.2bn project's ex-receivers, for failing to inform Justice Ian Winder that CCA had been provided with documents that were due to be the subject of a Bahamian Supreme Court hearing the very next day.

Justice Winder subsequently ruled that the two legal opinions and accompanying documents in question, which detail the potential value of Mr Izmirlian's legal claims against CCA over its failure to complete Baha Mar on time and on budget, should remain sealed from public view by the Supreme Court until further notice.

However, Justice Winder was unaware that one day before he heard arguments on the matter, Norbert Chan, a Deloitte & Touche accountant based in Shanghai, had provided the Chinese state-owned contractor with the exact same legal opinions and supporting documents.

The handover was eventually disclosed by CCA's New York attorneys to Mr Izmirlian's legal representatives last year, prompting the former Baha Mar developer to immediately petition the New York State Supreme Court for an injunction and protective Order requiring CCA to either destroy or return the four documents.

Mr Izmirlian is alleging that the disclosure breaches both Mr Winder's ruling and sealing Order plus his legal professional privilege as owner of the documents. The February 26 hearing, which was called to address the document dispute, resulted in an agreement by all parties to return to The Bahamas to update Justice Winder on the document handover and provide him with the transcript from New York.

Brian Simms QC, head of litigation at the Lennox Paton law firm, and the attorney for Baha Mar's former receivers, wrote on May 29, 2020, to the Bahamian legal representatives for Mr Izmirlian and CCA to inform them that the hearing before Justice Winder has been scheduled for August 14.

"We write to you in relation to disclosure of the Glaser Weil and Kobre & Kim [legal] opinions by Norbert Chan to CCA of which you will be aware," Mr Simms said. "The joint receiver managers (JRMs) have approached the Bahamian court to obtain a date in order to inform the court of the disclosure and to put before the court the recent transcript of the proceedings received by the joint receiver/managers at the direction of the New York court.

"Justice Winder has set the matter down for hearing on August 14, 2020. We expect to serve you with the joint receiver/managers' application and any supporting evidence by the end of July," he added in a letter sent to Ferron Bethell QC, of Harry B. Sands and Lobosky, as Mr Izmirlian's attorney, and Sean Moree at McKinney, Bancroft & Hughes, who acts for CCA.

In the meantime, though, the US attorneys for Mr Izmirlian and CCA are fighting over the former's developer desire to obtain testimony from Tiger Wu, one of the most senior CCA executives on the ground in The Bahamas during Baha Mar's ill-fated 2011-2015 construction.

He played a key role in passing the contested papers on to CCA's in-house general counsel and its US attorneys, who are resisting this request. "The issues to be taken up by Justice Winder at the August 14, 2020, hearing pertain to the disclosure of the two reports to CCA, and thus will bear directly on this [New York] court’s inquiry into the circumstances of that disclosure; on plaintiff’s related allegation of wrongdoing, as well as this court’s 'ability to right a wrong if a wrong did occur," CCA's attorneys wrote.

Justice Scarpulla was especially vexed during the February 26 hearing over assertions by CCA's attorneys that the receivers provided the disputed documents to their clients to help correct an "evidence imbalance".

Mitchell Berger, CCA's lead attorney, alleged in an affidavit: "By providing the Baha Mar reports to defendants [CCA], and through their subsequent letters to BML Properties' counsel challenging BML Properties' claim to share privilege rights in the reports, the joint receiver managers consistently have sought to rectify an evidentiary imbalance in this action, where BML Properties has access to the highly relevant reports and defendants do not have such access."

Describing the document exchange as "quite a shocker", Justice Scarpulla blasted: "What does it mean to level the playing field? That is crazy. So wrong and so bad. Actually, I'm going to ask you to talk about it a lot.....

"In his decision - this is what the judge in the Bahamas says - the document, which is the legal opinions, was received under seal by the court, and that has not been disclosed to anyone other than to the court. The joint receiver managers have not supplied the opinions to anyone other than in the context of that application. Now, at the time the judge wrote that in his opinion, in The Bahamas, that wasn't true, was it?"

Mr Berger admitted that neither CCA nor Deloitte & Touche, and their respective attorneys, had informed Justice Winder that the Chinese state-owned contractor had been passed the documents prior to his May 1, 2019, ruling that they remain under seal.

"What I can't figure out, and sadly the receivers aren't here, is why receivers would give a legal opinion analysing the claims and the statement that it's to even out or level the playing field. It makes no sense to me," Judge Scarpulla said, adding that the affair "seems so off the wall".

Mr Izmirlian's attorneys argued that the legal opinions were "handed out the backdoor to Beijing and went round the robin and came all the way back" to the US before the former developer became aware of what had happened.

"Their person, Norbert Chan, is the person who hands it out the backdoor. And the only reason they did is what you asked, and I don't think you were off the rails in asking it. What reason? Why did this happen? Well, we need to correct an evidentiary imbalance," Peter Sheridan argued on Mr Izmirlians behalf.

"Read that for what it means. It means that I want the other side in the litigation to have an evidentiary advantage. There is no imbalance. I don't even know what that means."

Mr Berger, for CCA, countered that the court had seen "an enormous amount of heat, but very little light". However, Justice Scarpulla retorted: "I was severely disturbed when I read these papers. So your statement that this is big hoo hoo about nothing is not my belief. I want to make that clear for the record. This is a big deal.....

"I, frankly, cannot fathom why the receivers would have given the defendants the legal opinion of the lawyers who are telling the clients here are the strengths and weaknesses of your case. That to me is the quintessential - this is not peripheral legal information. This goes to the heart of the claim, and I cannot imagine why anyone would think that that was an OK thing to do. The judge in The Bahamas clearly thought that it was not an OK thing to do.

"Before the judge issued this decision but after the argument, your client knew and your client didn't go back and say anything to the judge. That to me is really a miscarriage of justice. It really is. Causing this judge in The Bahamas to write something that your client knew wasn't true and you didn't correct before, that is a miscarriage."

Mr Berger, though, did persuade the New York court that testimony was required from Tom Dunlap, Baha Mar's former president, on the basis that five years before he had sworn an affidavit claiming to have no knowledge of BML Properties but was now "deeply intimately involved" with its affairs.

CCA is alleging that the disputed opinions belong to Baha Mar, rather than BML Properties, and that the latter and Mr Izmirlian have no legal professional privilege rights over them.