The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Resorts World Bimini’s majority owner is accusing its minority partner of trying “to extract an exorbitant payment” by demanding $600m in damages via an alleged “massive” accounting fraud claim.

Genting Americas’ Malaysian parent has blasted the lawsuit launched against it by RAV Bahamas, the vehicle owned by Miami-based developer Gerardo Capo and his family, as an attempt to “inflict severe reputational damage” on the publicly-listed resort, gaming and leisure group through a series of “baseless” allegations.

The conglomerate, which was required to provide greater disclosure on its Bimini legal woes by the Malaysian stock exchange, has asserted that RAV Bahamas’ action will not have “any material impact” on its financial or operating performance because the allegations are “entirely baseless and without merit”.

With no financial losses anticipated, apart from legal costs involved in defending the claim in the south Florida federal court, Genting told the markets and investors that it is preparing “a comprehensive response” to RAV Bahamas’ allegations that will be filed with the court soon.

“RAV Bahamas and Genting Americas have had a long-standing business relationship to develop and operate the Resorts World Bimini resort in The Bahamas through BB Entertainment Ltd. RAV recently filed a complaint in the US District Court for the southern district of Florida asserting baseless allegations against Genting Americas,” Genting said in its stock market filing. 

“The suit is nothing more than a shareholder dispute in which RAV seeks unsubstantiated damages in excess of $600m, and also requests pre and post-judgment interest at unspecified rates. These malicious and baseless claims are an attempt by RAV and its principals to extract an exorbitant payment from Genting Americas and inflict severe reputational damage upon Genting Americas.....

“As the complaint is entirely baseless and without merit, we do not expect there to be any material impact on the financial results or operations of the Genting Group from such claims. There are no expected losses, other than the cost of defence... Genting Americas is preparing a comprehensive response to the complaint, which will be filed with the court in the coming weeks.”

RAV Bahamas, which holds 22 percent equity ownership of Resorts World Bimini and BB Entertainment, is alleging that Genting Americas turned the project into a “financial wasteland” via a near-billion dollar liability “dump”.

The spectacular breakdown in the longstanding relationship with the multi-billion dollar Malaysian conglomerate was revealed in a lawsuit filed with the south Florida federal court on Monday, October 7, with RAV Bahamas 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 if RAV Bahamas lawsuit is impacting 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.

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”.