A New York court has awarded Sarkis Izmirlian’s BML Properties Limited $1.6 billion against China Construction America (CCA) and affiliated companies, finding that China State Construction Engineering Corporation Bahamas (CSCECB) committed material breaches of the parties’ investors agreement by requesting $54 million from BMLP to pay subcontractors, but instead used it to purchase the Hilton hotel in Downtown Nassau.
The court found that the defendants used Sir Baltron Bethel, who was at the time senior policy advisor to then-Prime Minister Perry Christie, in an effort to secure the Bahamas government’s help in pushing Izmirlian out of the project.
Izmirlian, facing a liquidity crisis in June 2015, filed for Chapter 11 bankruptcy.
A ruling by Justice Andrew Borrok of the Supreme Court of the State of New York said the defendants committed multiple acts of fraud, and those breaches and acts of fraud caused the loss of BMLP’s entire $845 million investment.
China Construction America, Inc. now known as CCA Construction, Inc., CCA Construction, Inc., CSCEBAHAMAS, LTD., and CCA BAHAMAS LTD. are named as defendants.
The court found that CSCECB purposely delayed work on the project. For instance, CSCECB allowed hundreds of workers to return to China for Chinese New Year without ensuring adequate appropriate workers to meet the March 27, 2015 deadline for partial opening.
The October 18 ruling said BMLP proved “by clear and convincing evidence” that CCAB committed at least four instances of fraud.
The first was that the defendants committed to a March 27, 2015 partial opening date without having a plan in place.
“… BMLP proved that the defendants committed fraud beyond any doubt by giving a firm commitment to open the project on March 27, 2015 without having any plan in place by which it could meet that commitment and thereby made an empty, fraudulent promise which misrepresented its present ability to perform,” the ruling says.
The court found that CCAB knew it had insufficient manpower, management, and resources to achieve the March 27, 2015 partial opening date, knew the date was in jeopardy and hid this knowledge from BMLP.
“The stark contrast between CCAB’s reassurances given to BML and the acknowledgements in its internal communications that the work was not on track and that the TCO (temporary certificate of occupation) and March 27, 2015 deadlines were in danger permit the rational inference that CCAB’s misstatements were knowingly and intentionally false when made, designed to induce reliance, did cause reliance and damages.”
The trial revealed that BML did not have sufficient information to be on notice of problems in meeting the March 27th deadline, and it was incumbent on the CSCECB board member to warn BMLP if deadlines were in danger of not being met.”
Tiger Wu testified that when he became CSCECB board member, he was not aware that a Best Interests Obligation (to act in the best interest of BMLP) was in place.
The court said, “BML proved that by clear and convincing evidence that the defendants’ multiple acts of fraud and breaches of the Best Interests Obligation, caused the project to miss the date.”
The court said, “Mr. Izmirlian credibly testified that if he had known the project would not open on March 27, 2015, BML would have conserved its cash and would not have entered into the liquidity crisis that ultimately led to its liquidation and the loss of BML’s investment.
“In fact, and as discussed above, trial revealed that if the CSCECB board member and CCAB had not committed to the March 27, 2015 opening, BML would not have agreed to the release of $54 million.”
The court noted that at trial date, “the defendants argued that BML’s filing for Chapter 11 and Mr. Izmirlian’s refusal to make a $175 million guarantee requested by CEXIM (The Export-Import Bank of China) as a precondition to its lending more money to the project were intervening acts that cut this chain of causation. The argument failed.
“As discussed above, the liquidity crisis was caused entirely by the defendants. In addition, the credible evidence indicated that Mr. Izmirlian acted honorably and commercially reasonably and willing to work out a deal as long as the defendants committed to a substantial completion date (as they had fraudulently done in November 2014).
“This they refused to do and again only tried to shake down Mr. Izmirlian for more money before they would even discuss completion.
“Having done this, the failure of Mr. Izmirlian to sign an additional guaranty (beyond the $25 million letter of credit that he was additionally prepared to give) cannot be said to have been a missed opportunity to mitigate damages.”
The court found that after the deadline was missed, the defendants actively worked to push BMLP out of the project.
“The CSCECB board member and CCAB effectively halted work after the March 27, 2015, deadline was missed, and the evidence showed that the defendants refused to commit to a new, later opening date unless BMLP met its demands for payment, again purportedly so CCAB could pay its subcontractors, many of whom had stopped work,” the ruling says.
“But, as Mr. Wu admitted, had CCAB had an additional $54 million (i.e., had it not diverted this sum to buy a competing project), it could have paid these subcontractors and would not have felt the need to press BML for additional cash.
“In addition, and as discussed above (in breach of the Best Interests Obligation) Mr. Wu acknowledged in front of Bahamian government officials that he as the CSCECB board member had CCAB purposefully delay the work.”
The court said BMLP informed the CSCECB board member of BML’s liquidity problems.
“The CSCECB board member and CCAB, however, refused to work with Mr. Izmirlian on agreeing to a new date. As discussed above, the CSCECB board member and CCAB was aware that BML was spending millions of dollars in reliance on its (fraudulent) assurances.
“The defendants in fact preferred that BML be put into liquidation.”
Curry favorThe ruling says CCAB and CEXIM agreed that “complete liquidation is a fundamental solution to the project’s problems”.
Minutes showed “[t]he two parties agreed on the criteria for finding new strategic investors,” including priority to Chinese companies.
“The defendants actively worked to curry favor with the Bahamian government and behind the back of BML,” the ruling says.
“Through the end of 2014 to the beginning of 2016, the CSCECB board member had CCAB pay the consulting company (NOTARC) belonging to Leslie Bethel, son of Sir Baltron Bethel (a senior advisor to the Bahamian prime minister) approximately $2.3 million, purportedly for consulting services related to business opportunities in Panama.”
It adds, “The record evidence establishes, at the very least, that (i) the defendants relied on their business relationship with Leslie Bethel to gain access to Sir Baltron Bethel and by extension the Bahamian government, and (ii) Sir Baltron Bethel and the Bahamian government coordinated with the defendants during the 4-way negotiations between BMLP, the defendants, the Bahamian government, and CEXIM, which ensued after deadline failure.
“For example, while CCAB was in negotiations with the Bahamian government over a heads of agreement in relation to the Hilton development, Mr. [Daniel] Liu (senior vice president of both CCA, Inc., and CCAB and lead negotiator for the purchase of the Hilton) forwarded an email communication from Sir Baltron Bethel [to] his son, Leslie Bethel.
“Mr. Liu confirmed in his deposition testimony that he did so because he was ‘looking for help’ from Leslie Bethel, and wanted Leslie Bethel to speak with his father, Sir Baltron Bethel, about proposed edits made by Sir Baltron Bethel to the heads of agreement.
“Leslie Bethel reassured Mr. Liu that ‘Sir B is one of CCA’s biggest supporters’ and promised to provide further help with the defendants’ interactions with the Bahamian government. Mr. Liu reciprocated the sentiment, saying “I am sure about Sir Baltron and yourself as our best friend.”
The ruling adds, “Later on, after the March 27, 2015 deadline had been missed and in advance of a planned negotiation meeting with BML, Sir Baltron Bethel asked Mr. Liu for advice as to the ‘[m]anner in which you would wish negotiations to proceed’.
“Later, in a July 22, 2015 email (apparently inadvertently copying representatives of BMLP) Sir Baltron Bethel proposed ‘[o]ne way of making up the equity shortfall of Baha Mar would be for the bank to advance the idea of an additional equity partner with hotel and casino experience being brought in within say 90 days.
“He was careful to add that ‘[s]uch a suggestion should preferably come from [the] bank and not government to prevent Baha Mar taking the position government is trying to push lzmirlian out’.
“Mr. Liu, in an email to Messrs Wang, Wu, and Yuan, celebrated an article describing BML’s Chapter 11 filing, and recommended that the defendants ‘take advantage of the Bahamas government. If the government, the Export-Import Bank of China and CCA join forces, that can turn passive into active!’
(David Wang was a vice president of both CCA, Inc., and CCAB. Ning Yuan was Tiger Wu’s predecessor as the CSCECB board member).
“[Liu] added, ‘reclaiming the land and not recognizing the US Chapter 11 were fatal blows to Baha Mar’.
“This email chain also references apparently bilateral meetings between the defendants and the ‘prime minister’s senior advisor. This email chain is a clear endorsement of the strategy of pushing BMLP and BML out of the project, and contemplates having the Bahamian government’s assistance in doing so.”
After the U.S. bankruptcy case was dismissed in favor of a liquidation proceeding filed by the Bahamian government, BMLP offered to “match the price” of any other offer to buy the project’s assets out of liquidation, but did not receive a response.
The project was sold out of liquidation to Perfect Luck, Ltd., a subsidiary of CEXIM, and then subsequently bought by another Chinese entity, Chow Tai Fook.
“Thus, the failure to get the project back on track after the March 27, 2015 deadline was missed due to the defendants’ conduct,” the ruling says.
The court found that BMLP proved “by more than clear and convincing evidence” that the CSCECB board members and CCAB’s acts of fraud and the CSCECB board member’s multiple material breaches of the investors agreement were the direct and proximate cause of the loss of BMLP’s investment in BML.
“To wit, but for the defendants’ conduct, there would not have been a liquidity crises, a reasonable achievable date certain for opening would have been agreed upon with an appropriate plan in place to achieve that date, there would not have been massive misappropriation of funds, the defendants would have maintained adequate work force for the project and not slowed down the work or otherwise diverted critical project personnel and resources such that BML would not have lost its entire $845 million investment.”
The court said BML’s filing for Chapter 11 bankruptcy in June of 2015 was a foreseeable and natural consequence of the defendants’ actions.
The court found that BMLP was damaged in the amount of $845 million, plus pre-judgment interest running from May 2014.
The court also found that CCAB misappropriated project funds for the personal use of officers.
Last night, the Office of the Prime Minister released a statement saying Prime Minister Philip Davis directed Attorney General Ryan Pinder to conduct a review of the recent ruling issued by Supreme Court of the State of New York in the case of BML Properties Ltd. v. China Construction America, Inc.
“The prime minister has stated that the government will wait the advice of the Office of the Attorney General and Legal Affairs before making any further comments or decisions regarding the findings of the ruling.”
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Publish date : 2024-10-21 08:13:00
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