The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bimini Bay’s original developer says it is “impossible” for the project to have borrowed $795m to construct its 300-room hotel and casino because actual costs were less than one-third of this sum.

RAV Bahamas, the vehicle controlled by Miami-based developer Gerardo Capo, has claimed in legal documents filed with the south Florida federal court that its Genting Americas partner inflated construction costs for the Hilton-branded resort so as to disguise its “dumping” of close to $1bn in liabilities on Resorts World Bimini’s books despite these being incurred elsewhere in its corporate empire.

Instead, it is asserting that the resort and casino cost just $240m - a sum equivalent to just 30 percent of what Genting Americas claims it cost to build. Putting a $26m price tag on the casino, which was finished in two phases in June 2013 and June 2015, respectively, it added that the bulk of the construction spend - some $185m - went on the 305-room resort that was completed by June 2016. 

The $29.7m balance was allocated to development of a jetty that was completed in January 2020. Referring to BB Entertainment, the immediate holding vehicle for Resorts World Bimini, RAV Bahamas alleged: “According to BB Entertainment’s 2022 audited financials, BB Entertainment borrowed $795m ‘primarily to finance the construction of the gaming facility in Bimini including the construction of a 300room [sic] hotel.

“Contrary to BB Entertainment’s 2022 audited financials, BB Entertainment’s actual construction costs were not $795m. Rather, BB Entertainment’s construction costs were approximately $240m. The statement in BB Entertainment’s 2022 audited financials.... is false because it is impossible for BB Entertainment to have borrowed $795m to construct assets that, altogether, cost $240m to construct.”

Genting Americas yesterday declined to comment on RAV Bahamas’ $600m damages claim against it or the allegations that it used its 78 percent Resorts World Bimini majority ownership, and Board and management control, to perpetrate an accounting “fraud” that has rendered its minority partner’s investment “worthless” and deprived it of expected profits.

Meanwhile, other documents filed with the south Florida district court reveal how BB Entertainment in 2022 had to write-off $2.1m after Chester Cooper, deputy prime minister and minister of tourism, investments and aviation decided to both end the Government’s annual marketing support for Resorts World Bimini and not pay the balance allegedly owed for 2021.

BB Entertainment’s 2022 annual financial statements, audited by the EY accounting firm, reveal that the Government initially agreed to provide $2m in annual marketing support to the resort for a five-year period. This annual payment was then increased by the last Christie administration to $2.8m, coinciding with when Bimini’s then-MP, the late Obie Wilchcombe, would have been in office as minister of tourism.

“The Government agreed to provide an annual contribution of $2m in marketing support for a period of five years to promote and market the island of Bimini and the project, as agreed between the minister of tourism and RAV,” BB Entertainment’s 2022 financials said.

“On November 20, 2015, the Government agreed to amend the annual contribution to $2.8m in marketing support effective July 1, 2015, until the end of 2017 to promote and market the island of Bimini and the Project. During 2021, the company received contributions amounting to $1.767m.” However, the Government’s stance then seemingly changed.

“As of December 31, 2021, the company recorded a receivable of $2.1m from the minister of tourism representing marketing support contributions for the period of April 1 through December 31, 2021,” BB Entertainment’s 2022 financial statements added.

“In March 2022, the minister of tourism informed the company that it will no longer provide marketing support contributions nor will it make payments relating to the 2021 outstanding balance recorded as a receivable by the company, and therefore the company has deemed it uncollectable. The company wrote off the receivable as of March 31, 2022 totalling $2.1m.”

BB Entertainment’s financials also reveal that Resorts World Bimini’s owners enjoyed a 17-year tax break on Customs/import duties that otherwise would have been incurred on more than $233m worth of materials imported for the development’s construction. And those concessions were extended by a decade, or ten years, beyond their original 2014 expiry date.

“The initial Hotels Encouragement Agreement (HEA) was entered into between the Government and RAV on March 6, 2007, and was amended on March 15, 2011. This agreement pertains to the exemption from payment of all import duties in connection with materials used to develop the hotel. It was agreed that the total costs of the materials would be $233.395m,” the 2022 financial statements said.

“Further to RAV entering into a joint venture with Genting to form the company for the construction of a casino, those exemptions were extended to the company [BB Entertainment] and were included in a supplemental agreement between the minister responsible for Hotels Encouragement dated January 24, 2013, which outlined exemptions from the payment of all Customs duties which would otherwise be paid in respect of materials for the casino and housing for employees totaling $8.685m.

“The deadline for the expiration of all exemptions was initially set as March 14, 2014. On March 28, 2014, the Government extended all exemptions to March 15, 2019. On April 29, 2020, the Government granted approval for a supplemental Hotels Encouragement Act agreement that further extends the exemptions to March 15, 2024.”

The BB Entertainment financials give Bahamians an insight into the breadth and value of the tax breaks, variously called concessions or investment incentives, that the Government routinely gives away to resort and real estate developers in return for jobs, growth and economic activity.

Resorts World Bimini also received a 10-year real property tax exemption on the casino and “any further contributed property” that was due to expire in 2023. “The casino was granted a concessionary rate of 10 percent on the first $10m of gross gaming winnings and 5 percent thereafter in addition to an annual basic tax of $200,000,” BB Entertainment’s financials reveal.

And, in return for Resorts World Bimini and its owners financing upgrades to the island’s airport and other infrastructure, the Government on November 20, 2015, agreed to increase the deduction from casino winnings taxes from $10m to $15m to offset their investment.

“On December 20, 2012, the company entered into a supplement to its initial Heads of Agreement with the Government of The Bahamas whereby in exchange for agreeing to undertake certain infrastructure upgrades and enhancements to the airport at South Bimini and other infrastructural upgrades to the island of Bimini, the Government agreed to deduct the amounts spent from future casino winnings taxes payable by the Company up to a maximum of $10m,” the 2022 financial statements revealed.

“The maximum was increased to $15m effective November 20, 2015. As of December 31, 2022, the company incurred $12.893m in airport and general infrastructure upgrades on the island of Bimini and has recognised the amount as a prepaid asset on the statement of financial position, net of taxes due to be paid.”

Meanwhile, to buttress its accounting fraud claims against Genting Americas, RAV Bahamas and Mr Capo are arguing that BB Entertainment’s audited financials “contradict” the supposed construction costs while the sums owed to an aviation provider “make no sense”.

“According to BB Entertainment’s 2016 audited financials, as of December 31, 2016, several Genting Malaysia subsidiaries - Bimini Superfast Operations, the RWBB Management, Resorts World Miami and Resorts World Omni, and ABC Biscayne LLC - had purportedly lent $179.114m to BB Entertainment for its ‘working capital needs’,” RAV Bahamas claimed in its lawsuit.

“But, as of December 31, 2016, BB Entertainment’s resort had only been fully operational for a mere six-month period. Even if BB Entertainment’s resort had been fully functioning for the full three years from 2013 to 2016, it would not justify ‘working capital’ expenditures of $179m.”

And, focusing on Resorts World Aviation specifically, RAV Bahamas added: “According to BB Entertainment’s 2018 audited financials, BB Entertainment owed $35m of accrued debt to Resorts World Aviation (RWA), a Genting Malaysia subsidiary, because RWA has purportedly ‘provided airlift services to patrons to and from the casino in Bimini’.

“Additionally, from 2013 to 2018, BB Entertainment paid tens of millions of dollars to different airlines that had purportedly provided airlift services to BB Entertainment. However, the accrued debt to RWA and the amounts paid to different airlines contradict the expenses that BB Entertainment purportedly incurred for ‘players transportation’ from its inception to 2018. 

“The $6.5m in “players transportation’ expenses only represents a fraction of the over $45m that BB Entertainment owes, or paid to, RWA and other airlines. No basis has been provided as to how or why BB Entertainment has incurred a debt that far exceeds the expenses it incurred for ‘airlift services to patrons to and from the casino in Bimini’.”