Baha Mar in Nassau, Bahamas
Swiss developer Sarkis Izmirlian has been awarded more than $1.6B in a lawsuit against China Construction America, a subsidiary of China State Construction Engineering Corp.
In the decision, filed in New York Supreme Court Friday, Judge Andrew Borrok ruled that CCA breached its contract with Izmirlian’s BML Properties and committed four instances of fraud related to the construction of the Baha Mar resort in Nassau, the largest project outside of China in the history of China State Construction Engineering Corp., or CSCEC, the world’s largest contractor.
“The court’s decision is deeply flawed under well-settled principles of New York law, and we intend to appeal,” CCA said in a statement to Eyewitness News in the Bahamas.
BML and CCA partnered on the $3.4B hotel, casino and resort project, which broke ground in 2011. BML invested $845M in the project and received a nearly $2.5B credit facility from the state-owned Export-Import Bank of China, known as CEXIM. CCA also invested $150M of its own equity in the resort.
The project eventually had to file for bankruptcy after the resort failed to open due to construction delays.
“BML’s filing for Chapter 11 bankruptcy in June of 2015 was a foreseeable and natural consequence of the Defendants’ actions,” Borrok wrote in his decision, which followed an 11-day bench trial in August.
Under BML’s plan, CCA was contracted to build the 1,000-acre project to include 2,250 hotel rooms, a 100K SF casino and an 18-hole golf course, The Wall Street Journal reported in 2011.
“[CCA] were extremely aggressive about wanting to be in the project,” Don Robinson, then-president of Baha Mar, told the WSJ. “It will help China State Construction prove to the world that they can build a very complex project outside China.”
The construction firm told BML that the project would be largely completed by March 27, 2015, allowing for a partial opening.
But BML claimed that CCA lacked the manpower necessary, and there was no plan in place to meet that deadline. Throughout the process, CCA, which brought in thousands of workers from China, would also divert personnel to other projects, further delaying construction. CCA also misappropriated funds for its own benefit, the court ruled.
In one instance, CCA requested that the developer give $54M to pay subcontractors, but the construction company instead used that money to buy a competing project, the British Colonial Hilton in Nassau, Borrok wrote.
In other instances, officers and employees spent project funds on various personal items, like scarves, golf equipment and cigars.
“The decision ignores indisputable evidence that BML Properties overborrowed, overspent, and overextended itself and then drove the project into a wrongful, secret bankruptcy — without first seeking the contractually required consent of minority investor CSCEC Bahamas — to eliminate its obligations at the expense of other stakeholders, including not only CSCEC Bahamas and construction manager CCA Bahamas, which made tireless efforts to complete the Baha Mar project on time and within budget,” CCA’s statement says.
During the project’s construction, CCA used its role in the project to become friendly with members of the Bahamian government, giving it assistance in the competing Hilton resort, the judge ruled.
In a statement to Eyewitness News, the office of the prime minister of the Bahamas said it was reviewing Borrok’s decision and declined to comment further.
After the construction deadline was missed, the construction firm was documented as telling CEXIM that it preferred liquidation of the project. Baha Mar was eventually sold out of liquidation to Perfect Luck Ltd., a subsidiary of CEXIM, and then subsequently bought by another Chinese entity, Chow Tai Fook, according to the decision.
At one point during the trial, a board member of the CSCEC acknowledged that he was unaware of the contractual obligation to act in the best interests of BML during the project.
The decision marks a possible end of the longstanding battle between the parties. Izmirlian’s firm first filed its complaint against CCA in 2017. Borrok ruled that CCA must pay $845M to cover the cost of Izmirlian’s investment, plus prejudgment interest that has accumulated since 2014, amounting to roughly $1.6B.
“We are grateful to have finally had our day in the US judicial system and thank Justice Borrok for his fair and thoughtful approach to the case,” Izmirlian said in a statement. “We intend to proceed with the enforcement of the judgment in an equally thoughtful and prudent manner.”
Neither CCA nor CSCEC responded to Bisnow’s requests for comment.
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Publish date : 2024-10-21 11:54:00
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