The Tribune

Baha Mar’s main contractor has accused Sarkis Izmirlian of “a nakedly xenophobic attempt to inflame anti-Chinese sentiment” while asserting there is “no evidence” it misused $54m to acquire the then-British Colonial Hilton.

China Construction America (CCA) and its affiliates, blasting back at allegations by Baha Mar’s original developer that it conspired with other Beijing-owned entities to seize control of the multi-billion project, accused him of implying that the Bahamian court proceedings that oversaw the mega resort’s emergence from receivership “were improper or tainted”.

And it also dismissed Mr Izmirlian’s accusations that it “diverted” $54.6m in “emergency funding” intended to speed up, and secure, Baha Mar’s timely construction completion to instead acquire downtown Nassau’s British Colonial resort and the adjacent six-acre land parcel that has now become The Pointe complex and Margaritaville resort.

A report commissioned by Mr Izmirlian from Paul Pocalyko, a certified financial forensics and fraud examiner with the HKA advisory firm, found that the $54.6m - intended to pay debts owed to CCA’s Bahamian and foreign sub-contractors - hit the Chinese state-owned company’s bank accounts just 18 days before it withdrew “at least $57m” to pay for the British Colonial acquisition.

However, in its Friday legal filings in the New York State Supreme Court, CCA asserted that there is nothing to prove that the financing destined for Baha Mar was switched to its own Nassau resort interests. It argued that the bank account which received the $54.6m already held some $106.8m, taking the total sum on deposit to $161.4m.

As a result, the contractor said it already possessed “more than double” the sum required to acquire the now-closed British Colonial, and therefore had no need to misuse the $54.6m provided by fellow state-owned entity, the China Export-Import Bank, which was Baha Mar’s main $2.45bn financier.

The heated accusations and denials are contained in the latest legal salvos fired by Mr Izmirlian and CCA in their $2.25bn fraud and breach of contract claims stemming from the disputed events that eventually resulted in Baha Mar’s original developer filing for Chapter 11 bankruptcy protection at end-June 2015 in an ultimately futile attempt to prevent his ousting via a receivership/joint provisional liquidation process that sold the project to Chow Tai Fook Enterprises (CTFE).

CCA, though, in its December 16, 2022, court papers denied that there was any conspiracy involving itself, the China Export-Import Bank and other Beijing-owned entities to force Mr Izmirlian out and wrest control of an asset critical to The Bahamas’ future economic growth and employment levels.

Referring to Baha Mar’s receivership, from which the project was eventually removed and sold, CCA said: “Baha Mar Properties (Mr Izmirlian’s vehicle) writes in its memorandum that this judicially-supervised process reflects a conspiracy among ‘Chinese entities . . . to ensure that the resort and casino were transferred fully over to Chinese control’.

“But Baha Mar Properties does not include an evidentiary cite for this assertion, or otherwise cite evidence to support its implicit accusation that the end results of the Bahamian judicial proceedings were improper or tainted. Instead, the accusation appears to be a nakedly xenophobic attempt to capitalise on and inflame anti-Chinese sentiment.”

Tribune Business, though, previously reported on evidence filed as part of the dispute that showed both CCA and the China Export-Import Bank were treating the mega resort project as “state-owned assets” even prior to Mr Izmirlian’s ousting.

The “meeting minutes” from a September 28, 2015, encounter at the China Export-Import Bank’s conference room in Beijing also raised questions over whether the process to sell Baha Mar in early 2016 was effectively a sham given that the two Chinese state-owned entities had already agreed that they would “give priority to Chinese companies” in the search for a buyer.

The meeting, which was held just after Mr Izmirlian’s Chapter 11 bankruptcy protection bid had been rejected by the Delaware court, was chaired by CCA chairman Guan Qing, and attended by the China Export-Import Bank’s president, Liu Lange. They discussed how to appoint a receiver for Baha Mar and “generally achieve the goal of maintaining the value of state-owned assets”

And CCA was just as dismissive of Mr Izmirlian’s court-filed analysis purporting to show it effectively misappropriated the $54.6m in Baha Mar financing for its own purposes to fund the British Colonial’s purchase. “Baha Mar Properties’ assertion that CCA (Bahamas) ‘diverted the $54m they had demanded for sub-contractors to finance the Hilton’ is based solely on a citation to an expert report,” the Chinese contractor blasted.

“In the report, Baha Mar Properties’ expert states that the $54m received under the meeting minutes was used to buy the Hilton because the money was received by CCA (Bahamas) 18 days before CCA (Bahamas) closed on the Hilton. The undisputed evidence, however, shows that the bank account in question held approximately $106.8m even prior to the deposit of the $54m on December 5, 2014.

“The December 5 deposit increased the account balance to $161.4m. Therefore, even prior to the receipt of the $54m, CCA (Bahamas) had sufficient funds in its account (nearly twice as much as needed) to consummate the Hilton purchase. Since money is fungible, there is no evidence to support the expert’s opinion that the $54m received from Baha Mar [the China Export-Import Bank] was used to purchase the Hilton.”

Mr Pocalyko, in his report, found CCA signed the agreements to acquire the British Colonial and adjacent six-acre parcel on October 21, 2014. This was less than a month before the November 17-18 meetings in Beijing, during which Baha Mar and the contractor sought to resolve their commercial and scheduling disputes under the China Export-Import Bank’s watchful eyes.

This produced the agreed March 27, 2015, opening and substantial completion date that was ultimately missed and triggered the Chapter 11 crisis. In return, Baha Mar agreed to pay $54.6m to CCA by submitting an “emergency” request to the China Export-Import Bank for release of such funding.

Some $7.551m of this sum represented 50 percent of costs in dispute; a further $32.071m was to cover 70 percent of costs in review; and the $15m balance as to settle all outstanding commercial disputes. However, Mr Pocalyko concluded:  “Based on my analysis, CCA (Bahamas) utilised the cash it obtained from Baha Mar to fund the acquisition of the Hilton transaction as opposed to paying the sub-contractors and suppliers for the project.”

CCA identified just five sub-contractors as receiving a collective $7.41m out of the $54.6m total, with the balance going to unidentified companies, and the forensic accountant said it was unusual that all payments were rounded to the nearest ten thousand. Mr Pocalyko said numerous sub-contractors continued to complain about non-payment for months after the $54.6m was received, including Bahamas Hot Mix and Bahamas Marine Construction.

These assertions, though, were vehemently denied by CCA.