The Tribune

• Slams ‘11th hour’ Tiger WU affidavit

• ‘Privileged papers’ used to slash claim

• Nine-figure damages cut to ‘net $30m’

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Sarkis Izmirlian is blasting the explanation given by Baha Mar’s contractor for how it obtained his legal papers, later used to cut a nine-figure damages claim to just $30m, for “failing to pass the smell test”.

The $4.2bn Cable Beach mega resort’s original developer, in papers filed with the New York State Supreme Court last week, alleged that the “11th hour” account by a senior China Construction America (CCA) executive supports his assertion that he retains “privileged” legal ownership of two reports that valued his legal claims against the state-owned contractor.

Mr Izmirlian slammed the “late-breaking explanation” given by Tiger Wu, CCA (Bahamas) chairman, as he seeks to prevent the Chinese contractor from using the two reports to bolster its defence to his $2.25bn fraud and breach of contract claim over events that led to Baha Mar’s plunge into Chapter 11 bankruptcy protection and, ultimately, his loss of the project’s ownership.

His intervention came after Mr Wu, in an April 30, 2021, affidavit alleged that he already knew most of the disputed reports’ contents from leading CCA’s negotiations with agents representing China Export-Import Bank, Baha Mar’s main financiers, about restarting construction in the wake of Mr Izmirlian’s removal and fixing a price for the work.

Arguing that the final construction completion price was “significantly lower” than CCA’s initial offer, after both sides agreed to offset their competing claims against one another, Mr Wu said the Chinese contractor gave its fellow state-owned lender a “net $30m” reduction on building costs to settle the matter.

This sum pales against the $192m “completion guarantee” that Mr Izmirlian sought to enforce against China State Construction Engineering Corporation (CSCEC), CCA’s parent, in the UK courts, as well as the original developer’s multi-million dollar claims for “construction delays, scheduling issues, the construction workforce, design delays, and failures to report problems on the project”.

Mr Wu, meanwhile, said he negotiated the construction completion and price with Norbert Chan, the Shanghai-based Deloitte & Touche accountant who handed over the two claims valuation reports that Mr Izmirlian alleges were improperly disclosed due to him retaining legal privilege over them.

That, though, is being disputed by CCA and its New York attorneys. And Mr Wu, some three years’ after his 2016 negotiations with Mr Chan, alleged he merely called the latter in March 2019 - with CCA now deeply embroiled in its legal battle with Mr Izmirlian - to see if he could obtain the reports on the basis that “fairness” required the contractor to possess the same legal information.

Mr Chan, who led the sale of Baha Mar’s real estate assets to Asset SPV and the various vehicles created by China Export-Import Bank, ahead of the deal with Baha Mar’s present owner, Chow Tai Fook Enterprises (CTFE), duly obliged. 

“In March 2019, while this litigation [with Mr Izmirlian] was proceeding, I called Mr Chan, who was still an employee of Deloitte, and we had a short conversation. I asked him: ‘Do you remember when we talked about those reports in 2016’, and also whether I could get a copy of the four reports from him,” Mr Wu alleged./ 

“I also told Mr Chan that, in fairness, defendants should have a copy of the Reports because CSCEC (Bahamas) was a shareholder and joint venture partner in Baha Mar Ltd, and the reports dealt with important affairs of Baha Mar Ltd during the time I was a director of the company.

“I mentioned that my assistant was in China and could pick up the reports for me. Mr Chan agreed to give me copies of the reports. He did not say that he needed to check if he was allowed to do so.”

Mr Izmirlian and his attorneys were distinctly unimpressed by this explanation. “Even were it credible, Tiger Wu’s 11th-hour affidavit regarding conversations with Norbert Chan in 2016 confirms that there was no waiver and highlights the impropriety of CCA’s possession of the legal opinions and valuations,” they argued. 

“As an initial matter, CCA had the opportunity two years ago to explain to the Bahamian Supreme Court why the legal opinions were no longer privileged as a result of the receivership in 2016. CCA did not because it knew Chan was not authorised to sneak CCA the sealed legal opinions in 2019.

“Nor did CCA offer Mr Wu’s explanation to this court when it opposed Baha Mar Properties’ motion for a protective order in 2019. This late-breaking explanation does not pass the smell test.”

CCA obtained the disputed legal papers one day before a court hearing on the matter. Justice Ian Winder, in a November 3, 2020, verdict, disclosed that he was “troubled” by China Construction America’s (CCA) failure to inform himself - and its own Bahamian attorneys - of that development prior to hearing arguments on whether the Supreme Court should “unseal” the documents in question.

The papers in question are legal opinions prepared by two foreign law firms, Kobre & Kim (UK) and Glaser Weil LLP, for Mr Izmirlian in 2015 when he was still Baha Mar’s principal developer. They provided estimates of the value of Baha Mar’s legal claims against CCA.

Recalling his dealings with Mr Chan, the CCA (Bahamas) chairman said securing a release of the claims and counter-claims between Baha Mar and the contractor was vital to completing the project’s construction - something that the then-Christie administration was especially interested in with a general election looming.

“In 2016, Mr Chan was responsible for negotiating on behalf of the Asset SPV with CCA (which I represented) regarding the price to complete the construction of the project, and for a mutual release of the potential litigation claims between CCA and Baha Mar Ltd arising out of the project,” Mr Wu alleged.

“The Bahamian government was especially interested in the construction being completed, because the Baha Mar resort would bring jobs, tourism and other business opportunities to The Bahamas, and enable CCA to pay Bahamian workers and suppliers who remained unpaid for work on the project before it went into receivership.”

Denying that he had ever known Mr Chan before 2016, and that their relationship was “entirely arms’ length” due to being on different sides of the negotiations, Mr Wu said the Glaser Weil report dealt with Mr Izmirlian’s claims for “delays, workforce sufficiency, and alleged failures by CCA to disclose that it allegedly could not achieve construction completion dates”.

The Kobre & Kim (UK) document related to the $192m completion guarantee, and he learned of the reports through Mr Chan. The duo discussed the contents, as well as two reports commissioned by Baha Mar’s Deloitte & Touche receiver managers, to help settle the competing claims.

“When we discussed the reports, he never said they were legally privileged, and he did not express any concerns about discussing their contents with me,” Mr Wu alleged. “In fact, in 2016, Mr Chan broadly disclosed to me the substance of the Baha Mar reports and the receiver/manager reports during our negotiations over the cost for CCA to complete the construction on the project and for a potential mutual release of all claims.

“The value analyses of the potential litigation claims and counterclaims in the Baha Mar reports and the draft receiver/manager reports were very important to our completion price negotiations, because the value of the claims and counterclaims would impact the project completion costs.

‘The value of the claims and counterclaims also would impact how much additional funding the Asset SPV would need to acquire Baha Mar’s assets and complete the project. As a result, when Mr Chan provided the reports to me in March of 2019, I already knew the substance of the reports because of my 2016 conversations with him.”

Recalling their talks, Mr Wu alleged: “Mr Chan and I initially discussed a value range for all claims of between $50m and $60m, before consideration of CCA’s counterclaims. During those negotiations, Mr Chan told me that the receiver/managers’ Bahamian lawyers [Lennox Paton] had recommended a net value of $30m for release of Baha Mar Ltd’s claims after considering CCA’s counterclaims.

“It took some time for us to agree to a final completion price for the project. Because we had been able to reach agreement on a complete release of all claims, the final price was significantly lower than our starting point.

“I recall discussing with Mr Chan his view that, taking account of the potential claims against and by CCA and Baha Mar Ltd, the Asset SPV would need about $30m less in funding from the lender for the project’s completion, the Export-Import Bank of China.

“Mr Chan described that the Asset SPV would receive a credit against the loan on the project from [the bank] equal to the agreed net value of Baha Mar Ltd’s claims, and further, that the Asset SPV would need to get Bahamas court approval for that arrangement.”