The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A former Baha Mar director is arguing that Sarkis Izmirlian’s ouster resulted in the multi-billion dollar Cable Bach mega resort project becoming akin to a ‘loan to own scheme”.

Dionisio D’Aguilar, who sat on Baha Mar’s Board under the original developer, told Tribune Business he “has to believe that was not the intent” when China Export-Import Bank and China Construction America (CCA) first partnered with Mr Izmirlian around 2010 to, respectively, finance and construct the project.

However, when the dispute erupted between Mr Izmirlian and CCA after the project’s agreed March 27, 2015, completion date was blown, he added that the contractor knew China Export-Import Bank was bound to side with it as both entities are owned and controlled by the same Beijing government.

The two Chinese state-owned entities, as confirmed in last week’s New York State Supreme Court verdict, united to push Baha Mar’s original developer out after his Chapter 11 bankruptcy protection bid was dismissed by the Delaware court. The bank called in its loan security, appointed Deloitte & Touche as receivers and ultimately sold the project to Hong Kong-based Chow Tai Fook Enterprises (CTFE).

Agreeing that the outcome had the hallmarks of a ‘loan to own’ type scheme, Mr D’Aguilar told this newspaper: “I don’t know if that was the intent at the beginning. I have to believe that it was not. But I guess the players in the construction company always knew the bank would be on their side.

“The construction people, knowing they would not be able to complete on time, sought to convince everyone it was Sarkis’ fault when it was their fault. The fact they sent 700 workers home, the fact they sent their main scheduler to work on a project in Panama, made an emergency claim for money they had no intention of using on the project [the $54m that the court found was instead used to acquire the British Colonial].

“When the decision was made to do that, I don’t know if it was a loan to own scheme at the outset but that was how it turned out.” Mr D’Aguilar said Judge Andrew Borrok’s verdict, which comprehensively found for Mr Izmirlian in awarding him $1.6m in combined damages and interest, was “a lot more scathing” than even Baha Mar’s original developer had anticipated.

The former director said the New York judge’s ruling was “easy to follow and digestible”, and clearly showed what had happened in the run-up to Baha Mar’s 2015 failure by identifying when, where and how CCA’s contract breaches and frauds had occurred.

“He came to the conclusion that Sarkis lost his entire investment because of the duplicity of the Chinese,” Mr D’Aguilar told Tribune Business. “It was quite remarkable that no one else knew they [CCA] were talking out of both sides of their mouth in the sense they were saying the March 27 deadline was achievable yet they were clearly not in any position to meet that deadline.

“Where the fraud occurred more than ever, having no plan to complete the project, they tried to turn it on Sarkis Izmirlian and his team... They didn’t have the manpower, didn’t have the resources to complete when they missed the deadline because they didn’t have the technical, financial and manpower required.”

Judge Borrok in his ruling found that Tiger Wu, CCA Bahamas’ executive vice-president, voted as the contractor’s director representative “to authorise a Baha Mar board resolution” confirming the March 27, 2015, opening date publicly “without any plan in place to achieve it”.

And, at the same time, he was persuading Ning Yuan, CCA’s president, to write to the contractor’s parent, China State Construction and Engineering Corporation (CSCEC), to demand that it immediately dispatch 450 personnel in early 2015 otherwise “the completion target of the Bahamas project will not be achieved, and the consequences will be disastrous”.

Judge Borrok found this was one of numerous ways in which Mr Wu breached his and CCA’s investors’ agreement with Mr Izmirlian and his BML Properties vehicle, which required him to act in the Baha Mar project’s best interests at all times.

“I remember that Board meeting,” Mr D’Aguilar told Tribune Business. “I remember everyone being questioned, I remember Tiger Wu being there and saying, yes, we can finish on that date. Yes, you can go out and start marketing, yes you can go out and start training your staff, yes you can sign agreements with restaurant partners and those who will help run your hotels and casinos.

“They really unscrupulously led him down the garden path and then screwed him.... Ning Yuan, CCA’s president, was in The Bahamas on March 27, 2015, staying at the Atlantis resort. Never once did he call Sarkis. The day just passed without him saying a word.

“When we pressed them [CCA] for when they would get it done, and the project would be completed, their response was: ‘Pay us $140m and we’ll let you know’. Then they got parties in the Government to help perpetuate this story that said it was Sarkis’ fault, that he was not paying the money, was not putting more money in. The project failed and the bank called in the loan.”

The then-Christie administration sought to broker a resolution that involved both CCA and Baha Mar contributing $75m each, with the China Export-Import Bank providing the $150m balance of the $300m initially estimated as required to complete Baha Mar. This, though, also required Mr Izmirlian to provide a personal guarantee - something he did not do given the total breakdown in trust with CCA.

The original developer than filed for Chapter 11 bankruptcy protection in Delaware - a move the Christie administration appeared to interpret as going behind its back - and almost a personal betrayal - while it was seeking to find a solution that would get Baha Mar open in the quickest possible time and boost its 2017 general election prospects.

The then-government quickly sided with CCA and China Export-Import Bank to oppose Mr Izmirlian’s application for recognition of the Chapter 11 process in the Bahamian Supreme Court. This they were ultimately successful in doing, as then-justice Ian Winder found the application was technically flawed and that Baha Mar’s creditors had legitimate expectations that any dispute would be dealt with in The Bahamas.

This ruling, and the Bahamian government’s stance, convinced the Delaware judge to dismiss Mr Izmirlian’s Chapter 11 protection on jurisdictional grounds as nothing he decided would be accepted in this nation. The Government then petitioned for Baha Mar to be placed into provisional liquidation, paving the way for the bank’s receivers to take over the project and facilitate the sale to CTFE.

Mr D’Aguilar argued that all this, when set against Judge Borrok’s ruling, meant the Christie administration was “complicit” in Mr Izmirlian losing control of Baha Mar because it sided with the party, CCA, which has now been found to have committed multiple frauds and breaches of contract against the original developer.

Describing this as “the ultimate error in judgment by the Bahamian government”, he added: “In hindsight, the decision by the Government to side with the Chinese against Sarkis has proved to be a disastrously wrong decision....

“The Government supporting the liquidation in The Bahamas versus the bankruptcy in the US was ultimately the wrong decision. Had they had the bankruptcy in the US, Sarkis could have reorganised, fired the contractor, got a new contractor and completed the project.

“Bahamian law has no bankruptcy protection, only receivership and liquidation. That put the nail in the coffin of the project. By the time the government changed, the project had gone through liquidation and been sold to new owners. That would have been extremely hard to unwind and the Government had to keep the project open,” Mr D’Aguilar said.

“The decision to follow the liquidation as opposed to the bankruptcy was the nail in the coffin for Mr Izmirlian prevailing and retaining control of the project, and the Government was complicit in that.”