By NEIL HARTNELL
Tribune Business Editor
Baha Mar’s original developer last night argued that the two Nassau hotels owned by the project’s contractor should be pledged as security for its New York appeal against his $1.642bn damages verdict.
Sarkis Izmirlian, arguing that it was “speculative” for China Construction America (CCA) to assert that enforcing his award would harm its two Nassau hotels and their employees, said downtown Nassau’s British Colonial and Margaritaville Beach Resort – the latter part of The Pointe complex – were sufficiently valuable to at least cover part of his damages.
Calling on the New York State Supreme Court’s appeals division to dismiss the bid by CCA to obtain an injunction preventing him from collecting on his comprehensive legal win, Baha Mar’s original developer asserted that he and his BML Properties vehicle would be the ones to suffer “significant and irreparable harm” if the Chinese state-owned contractor succeeds.
“CCA has not established its entitlement to any discretionary stay of enforcement. If the court is nonetheless inclined to grant some stay, it should exercise its discretion to impose conditions on that stay,” Mr Izmirlian argued in legal filings. “At a minimum, the court should condition any stay on CCA posting a meaningful form and amount of security – even if not a bond – and submitting proof to this court of the amount it can pay.
“That way, BML Properties is at least somewhat protected when the judgment is affirmed on appeal. As explained above, this court and others frequently make stays conditional on posting some security, even if in a lesser amount than the total judgment.
“CCA undoubtedly has assets that can be used to secure satisfaction of the judgment, at least in part, such as its two hotels in The Bahamas, even though it has chosen to withhold documentary evidence of its assets and liabilities in support of its motion. The court has discretion to order CCA to impose appropriate conditions, such as executing a deed of conveyance to its real property to be held by the court pending appeal.”
And Mr Izmirlian later reiterated: “At a minimum, CCA should be required to secure the judgment to the fullest extent possible, such as through a smaller cash bond and alternative forms of security including, for example, its two hotels in The Bahamas. And CCA should be held to its promise of perfecting its appeal promptly by December 30, 2024.
“At this point, however, CCA has yet to come clean about its financial condition, which would only be further obscured by a stay that would both pause post-judgment discovery and provide a window of opportunity for CCA to dissipate its assets. Because CCA has neither offered to extend these protections nor provided a record on which the court can fashion them itself, the court should deny the motion.”
CCA had previously argued that it may be forced to liquidate its two Bahamian resort assets, the British Colonial and Margaritaville Beach Resort, if Mr Izmirlian was able to enforce his award in the face of its own inability to obtain the $1.96bn surety bond required to prosecute its appeal. However, Baha Mar’s original developer argued that it had supplied no evidence to prove this would be the outcome.
“CCA also claims that bankruptcy or insolvency would harm ‘non-parties’ like the employees of CCA Bahamas’ hotels or affiliates of CCA in ‘ongoing construction projects’, but cites nothing to support that assertion—not even a conclusory affirmation,” Mr Izmirlian argued in legal filings yesterday.
“That speculative harm, based on a tenuous chain of causation from enforcing the judgment to insolvency, to liquidation, to jobs and construction projects being terminated, is insufficient to justify a stay.” Mr Izmirlian argued that granting CCA the relief it is seeking, and making the temporary stay permanent until the appeal court’s final verdict, would harm him by giving the contractor time to dissipate and conceal assets.
“BML Properties will suffer significant and irreparable harm if CCA is granted an unsecured stay of enforcement pending appeal. CCA does not seriously argue otherwise. CCA claims that an unbonded stay of enforcement ‘would merely maintain the status quo’. Wrong,” Baha Mar’s original developer asserted.
“BML Properties ‘is entitled to have [its] victory secured’ during the stay by CCA posting a bond, so that when the stay lifts, ‘a ready fund with which to satisfy the judgment shall be available’. But CCA refuses to post a bond or any other form of security, asking this court to impose a completely unsecured, discretionary stay.
“Such a stay would defeat the very purpose of the bond requirement and destroy any protection BML Properties may have during CCA’s meritless appeal. First, the trial court’s findings establish a strong likelihood that there will be further dissipation and diversion of CCA’s assets,” Mr Izmirlian continued.
“CCA committed numerous acts of fraud, diversion and misuse of assets, financial transfers and commingling between unrelated entities, and lied repeatedly while doing it. During a stay of enforcement, CCA would likely transfer its remaining assets to other non-defendant entities and outside the ordinary course of business, just like it did during the project. That would substantially harm BML Properties.
“CCA claims it ‘would not and could not dispose of or transfer their assets while this appeal is pending’, but tellingly does not explain this or cite any supporting authority. To the contrary, a stay would prevent BML Properties from serving restraining notices to prevent dissipation; from serving subpoenas to identify dissipation; and from commencing turnover proceedings to recover dissipated assets.”
The Chinese state-owned contractor had previously moved rapidly to secure this relief because it was unable to obtain the near-$2bn bond required by New York State Supreme Court rules to gain an “automatic stay” of any judgment it issues. Branding the sum awarded against it as “breathtaking”, CCA alleged that the damages handed to Mr Izmirlian are “several times’ the combined value” of itself and its affiliates.
Their most valuable assets were described as “two hotels in Nassau, Bahamas” which, although not specifically named in CCA’s November 1, 2024, legal filings are clearly downtown’s British Colonial property as well as the Margaritaville Beach Resort that sits at the heart of the adjacent Pointe complex. However, as “illiquid” real estate assets, neither could be pledged as collateral to secure the required bond.
The Chinese contractor warned that, unless it obtained a stay, any bid by Mr Izmirlian to enforce the fraud and breach of contract damages awarded to him over his ousting from Baha Mar would drive it into insolvency and, subsequently, either bankruptcy in the US or “liquidation proceedings” in The Bahamas – the latter of which would inevitably hurt the two resorts.
A surety bond broker, used by CCA as an expert witness, besides asserting that there is “no ability” to use the resorts as collateral for the security demanded by the New York court also argued that financiers will shy away from Bahamas-based assets due to perceived challenges with enforcing agreements and potentially having to deal with this nation’s court system.
However, Mr Izmirlian blasted back: “CCA now asks this court to do something unprecedented: To grant CCA a completely unsecured stay of enforcement of the $845m-plus interest judgment pending appeal, because CCA purportedly cannot currently obtain a bond.
“In other words, CCA says to this court: ‘Trust us. We can’t pay the judgment now, but don’t require us to make any showing that we will do so later’. But CCA deserves no benefit of the doubt. The trial court’s findings make clear that CCA cannot be trusted to tell the truth or to act properly regarding financial matters.
“CCA cites no case where a court has granted a stay under such circumstances without requiring any security, let alone a case involving a judgment of this size, in which the defendants have been found liable for repeated acts of fraud and diversion of funds. The court should exercise its discretion to deny CCA’s extraordinary request.”
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Publish date : 2024-11-13 11:00:00
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