The Tribune

By NEIL HARTNELL 

Tribune Business Editor 

nhartnell@tribunemedia.net

BAHA Mar’s original developer would not have spent $500m on preparing for the failed March 2015 opening if he “had known the truth” that its main contractor was about to bust the deadline.

Sarkis Izmirlian and his BML Properties vehicle, in their post-trial filings with the New York State Supreme Court, asserted “there is only one just result” possible from the two-week August hearing - that China Construction America (CCA) be ordered to pay a minimum $1.623bn as compensation for losses stemming from the project’s failure and their subsequent ouster as developer.

With that figure allegedly increasing by $208,356 daily, given the 9 percent interest rate attached, Mr Izmirlian and his company recalled that during the trial he informed Judge Andrew Borrok he would have done “just about everything differently” if the Chinese state-owned contractor had been honest that “the deadline was in jeopardy”. But CCA, in its own post-trial briefing submitted to the court, argued it should be awarded $248.2m in damages over its counter-claims that Mr Izmirlian breached the two sides’ investors agreement by failing to give access to the Baha Mar’s books and not gaining its permission for the ultimately-doomed Chapter 11 bankruptcy protection filing (see other article on Page 3B).

The Chinese contractor also alleged it was unaware Baha Mar faced “severe financial trouble” prior to November 2014, alleging that Mr Izmirlian and the project were “in a liquidity crisis of their own making”, and that “insolvency was inevitable” because the developer had “admittedly ‘bombed’ its own deliverables” required to meet the March 27, 2017, opening deadline.

However, Mr Izmirlian and BML Properties countered that they would have done everything possible to conserve cash, and not ramped up operational preparations, if CCA had been straight about the likelihood the resort would not receive its temporary occupancy certificate (TCO) in time and the opening date would be missed.

“If BML Properties had known the truth it would have done ‘just about everything differently’: ‘Conserved cash’ - about $500m; not started marketing, hiring, training; removed work from CCA; and, possibly, filed suit earlier,” Mr Izmirlian and his corporate vehicle asserted.

“BML Properties, as Baha Mar’s day-to-day manager, directed Baha Mar to act in reliance upon CCA’s representations that it would meet the deadline by opening reservations; placing ads; hiring and training employees; scheduling entertainment; bringing in $4m-plus for the casino; obtaining equipment; loading mini-bars; and directing third-party operators to prepare to open.

“CCA argued that BML Properties relied unreasonably, but every witness who was asked believed that the project could be open by March 27. It is customary to rely on the construction manager regarding scheduling, manpower and life and fire safety. BML Properties did. CCA was responsible to inform Baha Mar if the deadline was in jeopardy. CCA did not.”

As a result of missing the March 27 target, Mr Izmirlian testified at trial: “We had to contact every single person that was coming on March 27. We had to reimburse them, not only for what they had paid us but their airfare. We had to tell the world that Baha Mar was not going to be open.....

“We had staff we were still paying. We had our power bills we had to pay. You know, think about having hired thousands of people who open thousands of rooms and now we’re at the end of June. So, basically three months later. Bills add up.”

David Bones, the specialist relied upon by Mr Izmirlian to determine the extent of his losses and damage, added: “The actual world is, as Mr Izmirlian testified, [they] had to spend $330m leading up to the opening, had no revenue coming in, had 2,400 employees burning at a payroll of between $5 and $7m a month with no cash flow coming in which caused the credit facility and the funds available to dry up very quickly.”

Baha Mar’s original developer added that CCA refused to restart construction and provide a new completion date while using the missed opening as leverage to demand payments it was not due. Given this situation, Mr Izmirlian said any new financing provided by himself would be akin to “throwing money into a black hole”, and thus Baha Mar headed for its liquidity crunch and Chapter 11 filing.

“After CCA missed the deadline, it continued attempting to force Baha Mar to pay undue money, refusing to provide a completion date,” Mr Izmirlian and BML Properties alleged. “CCA ‘reduc[ed] numbers and resources’ and work halted. [Tiger] Wu admitted before government officials that CCA ‘delayed works on purpose’.

“BML Properties tried to secure funding. CCA demanded more money while refusing to restart construction. Additional contributions from BML Properties would have been ‘“throwing money into a black hole’. Thus the project continued spending money without relief from, for example, key money, guests or condo sales, and plunged deeper into liquidity crisis, making bankruptcy inevitable.”

Summing up, they argued: “Two decades after Sarkis Izmirlian conceived of Baha Mar, BML Properties got its day in court. The evidence overwhelmingly confirmed that CCA defrauded BML Properties, breached their investors agreement by acting against ‘the best interests’ of the project and caused BML Properties to lose its entire $845m investment.

“CCA’s top executives took the stand but neither rebutted BML Properties’ veil-piercing case nor explained their interference with China Export-Import Bank or improper payments to the son of a Bahamian government official.

“Their testimony boiled down to the incredible claim that the March 27, 2015, deadline was not ‘firm’ and that CCA tried its best, notwithstanding work stoppages, diversion of resources and obfuscation. On this record, there is only one just result: The court should enter judgment against all defendants for $845m plus interest to compensate BML Properties for its loss.” That interest currently stands at $778.432m.

The Government official referred to is Sir Baltron Bethel, ex-prime minister Perry Christie’s senior policy adviser, who at the time was one of the administration’s point persons charged with handling the Baha Mar dispute. Tribune Business revealed in 2022 how CCA had paid $2.4m to Notarc Management Group, an entity headed by Sir Baltron’s son, Leslie, when the Baha Mar controversy was at its peak.

Both Sir Baltron and his son denied to this newspaper that CCA’s payments to Notarc Management Group influenced the former’s stance towards the dispute and its participants, or his advice to the Government and its actions, after Mr Izmirlian filed for a Chapter 11 bankruptcy protection in summer 2015.

Sir Baltron said he had acted “with complete integrity and objectivity” on the Government’s behalf in helping to resolve the Baha Mar controversy, and there was no connection or interaction between himself and Notarc “at that time”. Leslie Bethel, meanwhile, asserted that claims of anything untoward over the $2.4m payments were “political mischief”, and that they were “unrelated” to anything to do with Baha Mar.

CCA and its attorneys, too, denied that the $2.4m payments represented “a bribe or conspiracy” to influence the then-government.

John Burlingame, the US lawyer for CCA Bahamas and its affiliates, repeatedly told the New York State Supreme Court during a May 2023 hearing there was “no evidence” to back the “very, very serious” allegations.

However, Mr Izmirlian and his team have been unwilling to let the matter drop.

In last week’s legal filings they alleged: “CCA secretly paid Notarc (run by a Bahamian official’s son) for years, and asked Leslie Bethel to intervene with his father when Bahamian politics did not go CCA’s way. The same month Sir Baltron Bethel asked CCA how it wanted negotiations to proceed, CCA paid Notarc nearly $100,000.”