The Tribune

• Project principals charged in $122m Ponzi plan

• Public EIA hearing scheduled for next Tuesday

• SEC: Diverted funds financed Bahamas deals

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government was last night urgently reviewing the legitimacy of a $60m Cat Island resort project after its principals were charged by US federal regulators with playing key roles in a multi-million dollar investment fraud.

A Davis administration spokesperson confirmed to Tribune Business that the Almost Paradise development, which is due to have a virtual public hearing on its Environmental Impact Assessment (EIA) next Tuesday, was being examined by officials after this newspaper’s investigation raised numerous concerns about its promoters, the Sahota family.

Legal filings in the north Texas federal court, obtained by Tribune Business, reveal that Manjit ‘Roger’ Sahota, and his family’s corporate entities were allegedly the largest recipients of funds from what the US Securities & Exchange Commission (SEC) has branded as “an oil and gas offering fraud conducted over three years”.

Describing the venture as a classic Ponzi scheme, in which new investor monies were used to repay those who had been lured in earlier, the US capital markets regulator alleged that a collection of investment funds known as Heartland Group Ventures raised a total $122m from more than 700 investors via five “unregistered” securities offerings.

The funds raised were supposed to be invested in oil and gas drilling projects “producing hundreds of barrels of oil per day”, yet the SEC is claiming that these wells have yet to deliver a single barrel. Instead, investor monies were diverted for other purposes, with the regulator’s December 1, 2021, lawsuit alleging that some $54m - just over 44 percent of the total raised - went to Mr Sahota and three family entities - ArcoOil Corp, Barron Petroleum and Dallas Resources.

“The Sahota defendants and Dallas Resources used millions of dollars in Heartland investor funds to purchase a private jet, a helicopter, real estate in The Bahamas and on other non-oil and gas expenditures for themselves,” the SEC alleged. It also accused Mr Sahota and the family’s companies of making “material misrepresentations” about oil well production, inflating and altering volumes and revenues.

Mr Sahota’s wife, Harpit, and sons Monrose and Sonny, are all named as “relief defendants” in the SEC’s lawsuit because they either attended field trips used to promote the projects to Heartland investors or held corporate positions with the three family companies. 

While Mr Sahota and his family have vehemently denied the claims against them, multiple documents directly link them to the proposed Almost Paradise project. The EIA, which has been seen by Tribune Business, is titled Sahota Cat Island EIA, and virtually every page has Cat Island Sahota/December 2021 affixed at the bottom. Plans showing the purported boutique resort’s layout are also branded Sahota Development: Cat Island, Bahamas in multiple places. 

“The proposed Sahota development is situated on approximately 50 acres in the vicinity of Greenwood, Cat Island, The Bahamas,” said the EIA, conducted by Bahamas-based Waypoint Consulting together with several sub-contractors. “The mixed-use development features 20-room boutique hotel, 18 villas, four hilltop villas, one private residence, and amenity/recreational facilities to be constructed over three phases.”

Further evidence of the ties between the Sahota’s and the Almost Paradise project comes from the SEC’s court filings. They refer to the vacation rental listing for one of the Sahota’s existing Cat Island properties via the VBRO website. One of the VBRO photos, while cropped slightly differently, is an exact match for a photo on the Almost Paradise project’s website home page, while both sites give similar descriptions for what is the same property.

Under the heading Available Villas to Rent, the Almost Paradise website states: “One of our best kept secrets of The Bahamas. There’s much to see here at this nine-acre property in Port Howe. The villa is newly built and comprised of three bedrooms and two bathrooms, which has enough room to sleep eight people comfortably. The villa is approximately 1,450 square feet. Come stay here and enjoy a piece of paradise.”

The VBRO posting, by Monraaj (likely Monrose) Sahota, states: “Welcome to Almost Paradise Villas. This villa on nine acres has a one-of-a-kind tranquil feeling with its own private lookout and sandy beach just steps away.”

Meanwhile, the Almost Paradise website also features a photo of a jet with the words: “Almost Paradise Resort is offering guests and members the opportunity to fly into Cat Island like a boss in the company’s Challenger 601 private jet. New Bight Airport has a 5,000 foot runway, which is suitable for a private jet, and is only 30 minutes away from Almost Paradise resort.”

The jet’s registration number, N486BG, can clearly be seen on one of its engines and is an exact match for the number disclosed in the SEC’s court filings in reference to the plane owned by the Sahota’s that was allegedly purchased using diverted investor monies. The US capital markets regulator is also claiming that some $1.5m in investor funds was used to purchase the family’s existing real estate holdings in The Bahamas/Cat Island.

Efforts to contact the Sahota’s proved fruitless as the number on the Almost Paradise website has been engaged or dead for four days, while an e-mail sent via the site was not replied to via press time. The Government, meanwhile, appeared to be unaware of the family’s SEC legal woes, or connection to a $60m resort project targeted at the Prime Minister’s very own constituency, until contacted by this newspaper.

The Davis administration spokesperson declined to comment further on the Almost Paradise affair other than to assert that it had been approved by the former Minnis government. They added that the Bahamas Investment Authority (BIA), upon being informed of Tribune Business’ inquiry, had delved into its files and found the project was approved from 2020. 

“It was approved by the former administration. I can confirm to you that it was approved by the prior administration in 2020,” the spokesperson said. “ However, both Dr Hubert Minnis and his former senior policy adviser, Joshua Sears, said they knew nothing about the Almost Paradise project or the Sahota’s when contacted by this newspaper.

The former prime minister said he could not recall the project coming before the National Economic Council (NEC), which in reality is the Cabinet or a Cabinet committee/sub-committee, during his time in office. And Mr Sears, who was responsible for bringing complete foreign direct investment (FDI) applications through the BIA to the NEC, also said he was unfamiliar with the development.

“While I was at the Office of the Prime Minister, this project never went to the NEC,” Mr Sears said. “It may have been dormant. Sometimes they gain interest, and they they wane. This project may have been submitted, and for various reasons lost momentum. We do due diligence on every investment project or international investor to make sure they’re credible.”

However, the Sahota’s and Waypoint Consulting must have received some kind of encouragement to proceed as the EIA reveals that field work for the assessment was conducted in February, April and May 2021. A joint site visit with the Department of Environmental Planning and Protection (DEPP) was held on April 16. Melissa Alexiou, Waypoint’s environmental and project management consultant, declined to discuss the identity of her clients yesterday.

While the SEC lawsuit was filed both after the EIA was completed, and the receipt of any approvals by the Minnis administration, Tribune Business’ findings raise disturbing questions surrounding the strength, and scope, of the Government’s due diligence on foreign investors and whether their backgrounds, and source of funds, are vetted sufficiently.

And, while the Government is especially eager to rapidly bring FDI projects out of the pipeline in its efforts to revive the Bahamian economy post-COVID-19, the Almost Paradise situation suggests more caution is required. It is unclear why the DEPP is still entertaining the project given the existence of the SEC lawsuit, which has frozen the Sahota’s assets, and resulted in the regulator and receivers seeking to sell-off the family’s aircraft to recover monies for investors.

Dr Rhianna Neely, the DEPP’s acting director, could not be reached for comment yesterday. However, Ezra Russell, a prominent Cat Island resident, said he was aware of both the Almost Paradise project and planned virtual meeting, as well as the Sahota’s legal difficulties in the US.

Revealing that the family looked at his Fortune Bay property, before deciding to take its interest elsewhere, Mr Russell said: “I don’t understand how the Government doesn’t vet these guys. This government has to tell them: We don’t need this Heads of Agreement; don’t sign that. We have to put a full stop to that. We can’t let it happen. We need to make sure these deals are above board.”

Voicing concern that large tracts of prime Bahamian real estate could be tied-up in legal battles such as that involving the Sahota’s, he added: “We don’t need these investments to be tied up in court cases once they get started in Cat Island. The Government needs to do due diligence before they sign these agreements. They need to know who these people are, and where their money is coming from. Cat Island wants to know.”

Rebecca Hollenbeck, an SEC accountant, alleged in an affidavit: “Based on my review of the bank records of the Sahota defendants and [their companies], those entities used funds transferred from the Heartland defendants for expenditures related to two private aircraft and real estate in The Bahamas, and they would have been unable to make those purchases without Heartland funds according to my analysis of the bank record activity....

“On March 18, 2021, and March 23, 2021, Barron Petroleum’s account at First State Bank wired approximately $779,000 and $640,000 respectively to a third party for the purchase of certain real estate in The Bahamas. Approximately $641,000 of that $1.41 total was funded with Heartland monies received from Dallas Resources’ account at Wells Fargo Bank.”

This raises the spectre that the Almost Paradise project would potentially be funded from misappropriated investor monies. And Magistrate Judge Hal Ray, in a March 18, 2022, verdict that rejected the Sahota’s bid to remove or adjust the freeze on their assets, noted: “On cross examination, Sunny Sahota testified his family could not have purchased the airplane, helicopter and properties in The Bahamas but for the $54m they received from Heartland.”

The Almost Paradise project is targeted at a 50-acre parcel of land known as the Butler Tract. “The proposed development, ‘Almost Paradise’, is located on approximately 50 acres in southern Cat Island to the immediate south of Greenwood subdivision,” the EIA said.

“Almost Paradise is a $60m capital expenditure for a mixed-use development featuring a resort, villas, single family home, amenities and back-of-house operations to be constructed over three phases. Total developed areas including built infrastructure comprise approximately 60 percent of total land area.

“Land use in the area is characterised by haphazard development of the residential Greenwood Subdivision and the Greenwood Resort (hotel/restaurant). Several homes are located along the road to the proposed Sahota development though the subdivision remains largely undeveloped. The nearest settlement is Port Howe, Cat Island,” the document added.

“Over the past several decades, Cat Island has experienced a contraction of its population. Almost Paradise offers a mixed-use development with opportunities for local employment. The development may also spur construction activity in the adjacent Greenwood subdivision.”

However, it appears that the land purchase has yet to close. John Christie, president of real estate firm, H. G. Christie, confirmed that he was representing the vendor but declined to go into detail citing confidentiality conditions. “Hopefully it all goes through,” he said. “I haven’t seen any plans. It would be good for Cat Island and its residents. It’s a beautiful location, beautiful beach and Cat Island certainly needs it. Everything has got to be approved by the Government.”