The Tribune

• To pay $325,000 over ‘ghost employees’ scheme

• But still in charge of key West End project entities

• Was planning to sell real estate at ‘inflated values’

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government has rejected a US hotel group, which last week agreed to pay $325,000 in sanctions to settle COVID fraud allegations, as a buyer of the 2,012 acre former Ginn development in Grand Bahama’s West End.

Kingwood International Resorts, which has been pursuing a multi-year effort to obtain Bahamian government approval to acquire the project, had been accused by the US Justice Department of “knowingly providing false information” to secure pandemic-related financial assistance via a scheme involving “ghost” employees that was designed to “personally benefit” its principals.

The disclosures, and related fines and penalties, provide further justification for the Davis administration’s repeated rejections of Kingwood as a suitable purchaser for such a large and potentially valuable tract of resort development real estate. Chester Cooper, deputy prime minister, and minister of tourism, investments and aviation, did not respond to Tribune Business messages seeking updates on the status of Kingwood’s bid for the necessary approvals.

However, one well-placed source, speaking on condition of anonymity, told this newspaper simply and emphatically: “The Government has refused the application of the Kingwood group.” This newspaper revealed in July 2022 that Kingwood and its principals had been turned down by the Davis administration, yet subsequent information suggested the group was not dissuaded and made a second, fresh bid for the necessary permits and approvals. 

And last week’s confirmation of their rejection may still not be the end of the Kingwood saga. For Tribune Business has obtained documents revealing that, in August 2022, Ginn’s former financing partner attempted to conclude the project’s sale to Kingwood offshore and outside The Bahamas.

The papers reveal that executives from Lubert Adler, the Philadelphia-based investment bank that provided West End’s seed capital, and which took over the development after original developer, Bobby Ginn and his Ginn Clubs & Resorts, defaulted on their loan repayments in 2011, resigned en masse from their positions as officers and directors with a variety of project companies on August 3, 2022.

Those departing included Ira Lubert and Dan Adler, Lubert Adler’s principals, plus Amanda ‘Amy’ Wilde, who for more than a decade had served as Lubert Adler’s ‘point person’ in trying to secure a new buyer/investor. They were replaced on three separate corporate Boards by Richard Nasser and Anthony Carll, respectively Kingwood’s resort division president and general manager of its Reunion resort in Orlando, Florida.

Messrs Nasser and Carll, together with Kingwood’s ultimate chief and owner, Farbod ‘Fred’ Zohouri, are all named personally as defendants in the original US Department of Justice lawsuit that was finally unsealed last week to coincide with the settlement agreement.

However, the documents obtained by Tribune Business show that Messrs Nasser and Carll are now president and vice-president/secretary, respectively, of LRA-OBB Ltd, which stands for (Lubert-Adler-Old Bahama Bay), the entity which owns the common areas around the Old Bahama Bay resort’s condominiums, pool, beach, marina, shops, restaurants, undeveloped golf course, and much of the land previously controlled by Ginn.

Mr Zohouri’s signature appears on the documents affirming the officers and directors change in his capacity as head of Reunion Cay Island Resort Ltd, a Delaware-based company said to be the manager of LRA-OBB LLC, a Georgia company that is described as the sole shareholder of its Bahamian equivalent.

And, by virtue of LRA-OBB being the sole shareholder, the Kingwood group’s control of that company also enabled it to appoint Messrs Nasser and Carll as president and vice-president/secretary of Grand Bahama Resort Utility Services and Sur Mer Club Ltd. The former provides all utility services to the ex-Ginn project, while the latter is a hospitality services vehicle that collects maintenance fees and holds the common area, beach club and services operations.

The appointments of the Kingwood executives took place on August 4, 2022, just one day after the resignations of the Lubert Adler executives who they replaced. Tribune Business sources have confirmed that Kingwood, and Messrs Nasser and Carll, remain in these posts today, and have voiced fears that the situation threatens to create an impasse, or quagmire, that will prevent any resolution at West End in the form of fresh investment and a new buyer.

For while Kingwood cannot move forward in the absence of government approvals, it is seemingly not going anywhere and remains in control of corporate entities critical to progress at the 2,012-acre site. As a result, the concern is that no other viable investor will dare look at acquiring the Ginn project - and seek to realise its initial vision - until Mr Zohouri and his colleagues have finally departed.

“Lubert Adler tried to do the deal offshore,” one source said. “The deal cannot be done that way because the switching of beneficial interests needs to be approved for the person they’re vesting in by the Government of The Bahamas. That didn’t happen here. They may have made an application after they obtained control. At the end of the day the Government’s not going to approve that.

“I don’t know how they [Kingwood] can operate if they have no permissions. How are you going to get any licences and permits out of the Government of The Bahamas? It leaves the whole project in limbo; it cannot move forward. But there are other international buyers. We need to get them out so that we can have a real buyer come in. The longer they stay there, the longer it will be stuck.”

Resolving West End’s fate has previously had the added complication of dealing with two vendors. What would have been the core project is owned by Lubert Adler, which holds 280 acres that were earmarked as the site for the hotels and casino as well as much of Old Bahama Bay. Its landholdings also include key amenities such as the airport, marina and utilities.

Meanwhile, a Credit Suisse-led lending syndicate took possession of the remaining 1,476 acres after Ginn Development Company defaulted on its $276m loan. It effectively inherited the real estate component of the Ginn sur mer project.

Lubert Adler and the syndicate, though, have worked together in the belief this is the best way to maximise their exit price - and potential recovery - by selling the former Ginn sur mer as one. “All of it is under a giant sales agreement,” the source said. “As long as they’re [Kingwood] there, nothing is going to happen. They have to move.”

Another West End contact, familiar with developments but also speaking on condition of anonymity, said of Kingwood: “From what I understand the Government has pretty much cut them off. It just sounds like the deal is dead in the water. When they couldn’t show proof of funding or a business plan, it seems like Chester Cooper shut them down.

“For the benefit of The Bahamas we need to make these guys go away so we can get some money in there. I have two investment groups ready to go in there now, but it seems like Kingwood or Lubert Adler are stonewalling the transaction.” The potential consequences for The Bahamas are that more than 2,000 acres of prime resort development land, which have already been largely unused for more than a decade, could be tied up for many years to come.

Kingwood had planned to construct a 28-storey “iconic tower”, modelled on Alexandria’s ancient lighthouse, as its focal point if its project was approved. Its plans for the renamed Reunion Cay, which is still listed on its website, call for the construction of a “a new wonder-of-the-world” in Grand Bahama’s West End.

The tower, to be called The Lighthouse, would have stood almost 400 feet high and featured “a five-star luxury hotel” with 102 rooms; 40 two-bedroom condominiums and penthouse suites on the top four floors.

Meanwhile, the US Department of Justice lawsuit, filed in June 2020 and based on ‘whistleblower’ evidence from the then-director of human resources at Kingwood’s Reunion resort, alleges that Mr Zohouri and his senior executives planned to “inflate” the price of real estate lots sold to buyers if they were approved to acquire the former Ginn project.

The ‘whistleblower’, described as a “relator” in the lawsuit, was alleged to have been “told by Carll that a new project was being started, known as the Bahamas Grand Sur project, by defendant Kingwood. Under the new project, the company is starting to sell lots at $400,000 and that they planned to inflate the prices of the properties by half. Defendant Carll joked and told relator to ‘Google Fred and see what you find out about him inflating real estate’.”

The action related to Kingwood’s efforts to access the US government’s Paycheck Protection Programme (PPP), which was designed to help businesses stay open and keep their staff employed using federal taxpayer monies at the height of COVID-19.

Applicants had to testify to the truthfulness and accuracy of their submissions, but Kingwood’s scheme allegedly “violates nearly every single certification and aims to further deceive the government by attempting to obtain forgiveness of the ill-gotten PPP loans”.

Kingwood and Mr Zohouri allegedly wanted to add between 100-150 “employees” to their payroll for an eight-week period using persons working for APDC Cleaning Services, a contractor that provided cleaning, housekeeping and security services to the resort group, so it could qualify for the PPP loan forgiveness “with no intention of bringing back” staff who had already been furloughed due to the pandemic.

The lawsuit alleges numerous questionable business practices, including assertion that he was “planted” at the Reunion resort by Kingwood prior to the latter acquiring the property “so that they could obtain company information beyond the scope of what would ordinarily be known in a commercial real estate transaction”.

Carll also allegedly suggested that Kingwood was charging property buyers at its project’s artificially inflated bills. “APDC billed Kingwood $92,900 a month and then Kingwood turned around and billed the Homeowners Association $142,000 per month, which put $50,000 per month ‘in Fred’s pocket’,” the lawsuit alleged. 

“In addition, Kingwood had made money off a roofing job at Heritage Crossings by finding a local contractor to do the job for $40,000 and marking it up to the Homeowners Association.” As for the PPP fraud, the whistleblower alleged that Fred Zohouri himself was listed as a new hire, making $195,000 a year, at a Reunion property restaurant that was closed, along with his son, who was shown to be earning $91,000. Yet both lived in Georgia, not Florida.

“On May 21, 2020, relator learned that defendant Kingwood had added four new ‘hires’ to their payroll to inflate their PPP loan forgiveness numbers with no intention of actually paying these ghost employees,” the US Justice Department alleged. “As of this date, 31 ‘new hires’ have been added as managers for the closed Traditions Grille.

“On May 29, 2020, payroll cheques will be issued to ‘ghost employees’ masquerading as food and beverage managers for Traditions Restaurant as security employees and, possibly, other positions. Cheques issued on this day will be retained by defendants and deposited in accounts, yet unknown, for their benefit.” The whistleblower estimated that the US government and taxpayers would suffer a $2.6m rip-off as a result.

Tribune Business efforts to obtain comment from Kingwood proved fruitless. The phone number provided on the resort group’s website went to an answer phone during working hours on multiple days, and a detailed e-mail message was not responded to.

“PPP loans were intended to help small businesses retain employees and keep their doors open during the pandemic,” said principal deputy assistant attorney general Brian M. Boynton, head of the US Justice Department’s Civil Division, in relation to Kingwood. “The department is committed to holding accountable those who knowingly and improperly sought PPP loans or forgiveness of those loans.”

“This settlement demonstrates that attempts to wrongfully obtain loan forgiveness will not go unnoticed, and violators will be identified,” said special agent in charge, Amaleka McCall-Brathwaite, of the Small Business Administration Office of the Inspector General’s (SBA OIG) eastern region. “I want to thank the Department of Justice and our law enforcement partners for their support and dedication to pursuing justice in this case.”