The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Baha Mar’s contractor did not dispute that a senior executive admitted before then-prime minister Perry Christie that it was deliberately slowing work down to force payment from the project’s original developer.

Judge Andrew Borrok, in a New York State Supreme Court verdict that awarded Sarkis Izmirlian $1.6bn in combined damages and interest over his fraud and breach of contract claim against China Construction America (CCA), ruled that the evidence before him was “replete with numerous other examples” of the Chinese state-owned contractor “threatening work stoppages” over disputed payments.

However, he zeroed on a April 7, 2015, meeting when Tiger Wu, CCA’s most senior Bahamas-based executive, allegedly admitted in the presence of Mr Christie, Mr Izmirlian and the Chinese ambassador to this country that the contractor was “deliberately slowing the work”.

This “shocking statement” sparked a letter from Mr Izmirlian to Ning Yuan, CCA’s president, which was among the documents tabled as evidence during the two-week New York trial. He noted that the comments had been made before a “broad audience, including the Prime Minister, numerous government ministers and representatives, Ambassador Yuan and Baha Mar that CCA has been deliberately slowing down construction at the Baha Mar project.

“Tiger repeatedly confirmed to the Prime Minister that CCA is delaying works on purpose,” Mr Izmirlian added, noting that CCA’s failure to meet the mega resort’s March 27, 2015, construction completion deadline had already cost the original developer some $165m at that stage.

Asked about his reaction to this confession during his testimony, Mr Izmirlian said: “It was one of those moments you felt like you were in a movie. It was dead silence in the room. The Prime Minister is looking at me. The ambassador is looking at me.

“I’m looking at them, going ‘did he just say what we think he said?’ So, the Prime Minister asked him again and he admitted they had been deliberately slowing down the project for their commercial benefit.” This did not escape Judge Borrok’s attention in a withering conclusion on both CCA and its parent, China State Construction and Engineering Corporation (CSCEC).

“If there were any doubt as to whether CSCEC Bahamas caused CCA Bahamas to deliberately slow its work against the interests of Baha Mar, Mr Izmirlian gave unrebutted testimony that Mr Wu admitted during an April 7, 2015, meeting attended by the Prime Minister of the Bahamas, Ambassador Yuan and Mr Izmirlian himself that CCA Bahamas was deliberately slowing the work,” the judge wrote.

“Slowing down the work was a breach of [CCA’s and Mr Wu’s obligation to act in Baha Mar’s best interests. Mr Wu himself admitted this at trial. The trial record was replete with numerous other examples of CCA Bahamas’ employees threatening or suggesting work stoppages.

“On November 10, 2014, CCA Bahamas employee Pengfei Yu suggested that CCA Bahamas should slow down the work in order to pressure Baha Mar to pay disputed change orders because CCA Bahamas wouldn’t have as much negotiating leverage after the project was completed.”

Referring to Mr Izmirlian’s corporate vehicle, Judge Borrok added: “BML Properties adduced evidence of several instances in which CCA Bahamas recommended delaying or did purposefully delay work on the project, often in connection with attempts to resolve so-called ‘commercial issues’.

“On November 14, 2014, just days before the November 2014 Beijing meeting at which the parties would discuss and resolve pending disagreements about the scope of the work, the new opening date and commercial issues”, Baha Mar protested against CCA Bahamas “deliberately turning off the lights on the project work site, which both stopped all work after dark and presented an immediate danger to the safety of workers”.

This, Mr Izmirlian’s team alleged, was done “to pressure Baha Mar to yield on a disputed commercial issue”. And, on  February 5, 2015, CCA Bahamas “ordered its workmen not to allow any furniture, fixtures and equipment loading or use of elevators for such purpose pending resolution of yet another disputed commercial issue”.

Some 200 workers downed tools over payment issues on February 9, 2015, and Judge Borrok reiterated: “To be clear, the evidence at trial suggested that there would have been no money issues had $54m not been diverted away from the project to buy the British Colonial.”

David Wang, CCA’s vice-president, also wrote on March 3, 2015, that in addition to the contractor’s normal progress payment Baha Mar “also pay it 70 percent of change orders under review; some $13m of mechanical, electrical and plumbing allowance under review, and  50 percent of withheld retainage”.

Thomas Dunlap, Baha Mar’s then-president, objected to this as “totally improper” as the requirement to release retainage - substantial completion of Baha Mar - had yet to be met. “Despite this, rather than negotiating in good faith to resolve these disputes, Mr Wang wrote on March 10, 2015, to express disappointment with the amount of money Baha Mar had authorised to be released,” Judge Borrok said.

“He wrote ‘I think it is unacceptable to CCA and will cause significant impact to CCA’s performance’. After raising the issue of a possible additional equity contribution, Mr. Wang continued ‘[t]he project is at the critical moment, if we couldn’t raise enough fund, there will be no way to timely complete the project’.”

The judge added: “Mr Wang’s tying the progress of the project to Baha Mar’s payment, in full, of disputed amounts of change orders and other funds can only be seen as a veiled threat to slow the work and purposefully endanger the achievement of the March 27, 2015 opening date.”