The Tribune

By NEIL HARTNELL 

Tribune Business Editor 

hartnell@tribunemedia.net

RESORTS World Bimini’s original developer is demanding its Genting partner pay more than $600m in damages for allegedly turning the project into a “financial wasteland” via a near-billion dollar liability “dump”.

The spectacular breakdown in the longstanding relationship between Gerardo Capo’s RAV Bahamas and the multi-billion dollar Malaysian conglomerate is revealed in a law- suit filed with the south Florida federal court on Monday, with the former asserting that “a massive and co-ordinated fraud” has left the real estate and other assets it contributed to their Bimini partnership “essentially worthless”.

RAV Bahamas is essentially accusing Genting of using its 78 percent majority ownership, plus Board and management control, to conceal how it funnelled hundreds of millions of dollars in liabilities incurred elsewhere in its global empire on to the Bimini resort’s books.

Complaining that this has undermined the value of its investment, while also “depriving” it of expected profits, RAV Bahamas claimed that Genting “has deliberately kneecapped” its attempts to gain a true understanding of Resorts World Bimini’s true financial position by denying “full access” to the property’s financial records and its calls for an independent audit.

The financial statements for BB Entertainment, the Bahamian-incorporated holding company for Resorts World Bimini, reveal that the project has consistently incurred annual losses amounting to tens of millions of dollars ever since RAV Bahamas teamed with Genting some 12 years ago in 2012.

BB Entertainment’s 2022 audited financials saw the EY (Ernst & Young) accounting firm qualify the report by noting a “material uncertainty related to going concern”. It wrote: “We draw attention to note two in the financial statements, which indicates that the company incurred a net loss of $151.284m during the year ended December 31, 2022.

“As of that date, the company’s current liabilities exceeded its current assets by $70.546m and had a net equity deficit of $693.665m. As stated in note two, these events or conditions, along with other matters as set forth in note two indicate that a material uncertainty exists that may cast significant doubt on the company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.”

That year’s $151.284m loss followed $114.22m worth of ‘red ink’ that Resorts World Bimini incurred in 2021, which both exceeded the $105.581m loss generated in 2020 when the COVID-19 pandemic was at its height and the $69.624m hit sustained in 2019.

BB Entertainment’s financials showed that, at year-end 2022, the company was effectively insolvent with some $191.511m in assets dwarfed by $885.176m in total liabilities to produce the $693.665m solvency deficiency. Of the $191.511m in total assets, the majority - $165.254m - represented the value of Resorts World Bimini’s real estate, with its holding entity possessing just under $3m in cash and equivalents.

The majority of BB Entertainment’s liabilities, some $795.452m, was described in the financials as “borrowings” from BB Investment Holdings, the entity through which Genting holds its 78 percent majority stake in the project. Some $578.848m of this sum was said to be “interest bearing” at a rate of Bahamian Prime plus 5 percent, which would be 9.25 percent.

It is unclear how RAV Bahamas lawsuit will impact Resorts World Bimini’s operations, with the hotel and associated amenities responsible for employing several hundred Bahamians and serving as the ‘anchor’ project and main economic activity driver for the island. However, the nature of the dispute between the project’s sole two shareholders, and Boardroom divide, can only be negative for all concerned.

One source who does business with Resorts World, speaking on condition of anonymity, said bluntly of the shareholder dispute: “I hope this doesn’t lead to catastrophe happening there.” Tribune Business efforts to yesterday obtain comment from Genting Americas proved fruitless.

This newspaper contacted its US offices, which said they would refer its inquiries to “legal”, and was then called itself by a PR firm acting for Genting. Upon explaining the nature of the inquiry, this newspaper was told they would try to get someone from Genting Americas to call back but

no response was received before press time.

Setting out the crux of its complaint, RAV Bahamas alleged in its lawsuit: “To date, BB Entertainment has not distributed any profits to RAV from this venture because Genting Americas, who controls BB Entertainment’s finances, has used BB Entertainment as its financial wasteland.

“Through its stranglehold over BB Entertainment and its finances, Genting Americas has used BB Entertainment to conceal a medley of fraudulent activities.” Detailing at least five such sins, Mr Capo and RAV Bahamas said that, through their minority interest in Resorts World Bimini, they have been forced “to absorb 22 percent of various costs and expenses illegitimately shifted in to BB Entertainment’s” accounts.

“What is clear is that Genting Americas’ fraudulent accounting practices have drowned BB Entertainment in hundreds of millions of dollars in illegitimate debt,” RAV Bahamas blasted. “BB Entertainment’s 2022 audited financial reports reflect total liabilities of nearly a billion dollars ($885.176m).

“Only a massive and coordinated fraud could dump nearly a billion dollars of debt on a small island resort where RAV had already developed most of the significant infrastructure. Genting Americas buried the nearly-billion dollar liabilities in consolidated statements using vague categories of expenses to conceal the fraud from RAV.

“Genting Americas, at every turn, has deliberately kneecapped RAV’s efforts to obtain clarity into the financials, including denying RAV full access to BB Entertainment’s financial records and denying its requests for an independent audit,” RAV Bahamas continued.

“This lawsuit seeks the damages that Genting Americas’ continuing fraud has caused, which include but are certainly not limited to rendering RAV’s contribution to BB Entertainment - the 20 acres of land - entirely worthless.” As a result, Miami-based Mr Capo and his development vehicle are demanding that the south Florida court award damages that “exceed $600m”.

The lawsuit asserted that Mr Capo first met Genting’s chairman, KT Lim, and “right-hand” man, Colin Au, more than a quarter-of-a-century ago in 1998 when the Bimini project was in its infancy. It claimed that both men voiced interest “in pursuing a venture with RAV” on the island but no deal materialised.

This interest did not reignite until 2011, and after RAV Bahamas had itself already constructed “villas, marinas, recreational areas, retail and other amenities in North Bimini” to form Bimini Bay. Discussions between Mr Capo and Genting resumed after the latter invited him to a party “to celebrate the Genting Group’s purchase of the Miami Herald building and surrounding properties in downtown Miami - the Hilton and Omni hotels”.

After a series of talks in 2012, RAV Bahamas and Genting agreed to partner to further develop the then-Bimini Bay by creating BB Entertainment as the project’s holding vehicle. The two were initially 50/50 partners but, by end-December 2015, RAV Bahamas’ stake was “diluted” to 22 percent with the Malaysian conglomerate taking majority ownership.

In return for its minority stake, RAV Bahamas agreed to transfer to BB Entertainment a total of 20 acres upon which Resorts World Bimini sits. The first four-acre parcel was allegedly valued at $12m, which was described as “a capital contribution” to the Resorts World holding vehicle, with the final 16 acres valued at $25.5m when transferred in September 2014. Collectively, the real estate was valued at $37.5m.

RAV Bahamas said it received $12m in cash for the second land transfer, with the $13.5m balance recorded as another “capital contribution” to BB Entertainment. Combined, the two capital contributions stood at $25.5m.

“In addition to its land contributions, RAV Bahamas transferred governmental licenses and approvals to BB Entertainment, or otherwise assisted BB Entertainment in acquiring them as necessary,” the lawsuit alleged.

“Currently, BB Entertainment owns an island resort comprised of a 10,000 square foot casino, a 305-room hotel with surrounding restaurants, lounges, and a jetty used to dock cruise ships. BB Entertainment’s resort is branded and advertised as ‘Resorts World Bimini’.”

Using words such as “labyrinth” and “vast and deliberately tangled web” to describe Genting’s corporate structure, which allegedly features 150 different subsidiaries, RAV Bahamas claimed: “Ultimately, Genting Americas used Genting Group’s corporate structure to saddle BB Entertainment with almost a billion dollars of illegitimate debt, effectively wiping out any value from RAV’s investment in BB Entertainment.”

It alleged that this was achieved through Genting exploiting its majority ownership, and Board and management control, to shift millions in liabilities incurred elsewhere in its empire on to the books of the Bimini resort. And two entities formed to manage the resort and casino, namely RWBB Resort Management and RWBB Management, were alleged to serve Genting’s interests rather than both shareholders equally.

Breaking down Resorts World’s Bimini’s financial performance since it partnered with Genting in 2012, RAV Bahamas asserted that the $22.224m average annual revenues generated for the ten years to 2022 were dwarfed by an average $63.684m in operating expenses. When the annual $25.403m interest (debt servicing) bill was added, total expenses averaged $89.087m per year.

“Only an outright fraud can explain how a small island resort that averaged $22m in revenue per year for ten years can accumulate almost a billion dollars of debt in that same span (an average of $89.907m in debt (sic, costs) per year),” RAV Bahamas alleged. “No commercially reasonable actor would incur $89m of costs and interest per year to operate a small hotel that generates $22m in revenue per year.

“As of December 31, 2022, Genting Americas had managed to drown BB Entertainment with a staggering $885.176m of liabilities or debt. To put Genting Americas’ plundering in perspective, as of December 31, 2022, Genting Malaysia (which has over 150 subsidiaries, including BB Entertainment) had a total of approximately $803.972m in liabilities.

“Stated differently, as of December 31, 2022, BB Entertainment’s liabilities were greater than the combined liabilities of Genting Malaysia and its approximately 150 subsidiaries ($803.972m). Not surprisingly, 99.4 percent of BB Entertainment’s total liabilities in 2022 constituted monies owed to Genting Malaysia’s subsidiaries.”

RAV Bahamas, challenging assertions in BB Entertainment’s financial statements that the annual accounts from 2013 to 2022 had all been approved by the latter’s Board of Directors, said they were never sent its Board representatives and that the Board did not meet on the days given. For the first few years it claimed Genting concealed Resorts World’s performance by only providing financial “summaries”.

Amid concerns that Resorts World Bimini was not achieving Genting’s financial projections with

the 2016 operating Budget allegedly over-estimating revenue performance by 120 percent and under-estimating costs by 40 percent, RAV Bahamas said it moved to have “closer oversight” of the financials. However, it claimed Genting failed to deliver on promises to address an “exorbitant expense structure”.

“Notably, at the January 25, 2019, BB Entertainment Board Meeting, Genting Americas presented a budget showing that BB Entertainment would only lose $19m in 2019, yet BB Entertainment went on to lose $69m in 2019,” RAV Bahamas asserted.

Then, at a March 3, 2020, Board meeting it alleged that Genting Americas “admitted that it had been ‘overcharging’ BB Entertainment for the salaries of other Genting affiliates’ employees”. And, when RAV Bahamas pointed to the debt owed to the Bimini Superfast ferry operations, it claimed a Resorts World executive made a major admission.

“In response, Edward Farrell - who at the time occupied a..... role as Genting Americas’ president, BB Entertainment’s president, RWBB Management’s president and RWBB Resort Management’s president—admitted ‘there was about $150m in expenses that we [Genting Americas] could not figure out what to do with, and they ended up in BB Entertainment’s books’,” RAV Bahamas claimed.

Alleging that its efforts to obtain better and greater financial information on Resorts World Bimini were repeatedly frustrated, RAV Bahamas said it only learnt this year that Genting Americas was exploring the resort’s potential sale.

“During the March 2024 shareholders’ meeting, RAV learned that Genting Americas had ‘approached realtors’ in an effort to sell BB Entertainment’s resort. It was at that time that RAV realised that Genting Americas’ plan was to sell the BB Entertainment resort without ever addressing or rectifying the massive misallocations of debt and expenses reflected in BB Entertainment’s financial records,” it claimed.

“Because the estimated value of BB Entertainment’s resort is substantially less than the approximately $900m in liabilities that remain on BB Entertainment’s financials, Genting Americas has effectively deprived RAV of the entire value of RAV’s over 20-acre contribution without having ever received any return for that contribution.

“Genting Americas has also deprived RAV of any upside or profit from the sale of BB Entertainment’s resort. After the March 2024 shareholders’ meeting had adjourned, RAV made its final demands for Genting Americas to correct its accounting but, to date, Genting Americas has failed to do so.”