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Baha Mar casino-resort developer Sarkis Izmirlian has been awarded $1.6bn in restitution after a US court found Chinese contractor China Construction America (CCA) defrauded the entrepreneur and sabotaged the project’s opening.
New York State Supreme Court Justice Andrew Borrok ordered CCA to pay $845m plus pre-judgment interest dating from May 2014, totalling $1.6bn, according to the ruling on Friday (October 18).
The 11-day bench trial in August followed Justice Borrok’s order in June 2023 that the case should proceed, amid evidence that the subsidiary of state-owned construction colossus China State Construction Engineering Corp conspired to expel Izmirlian’s company Baha Mar Ltd, a subsidiary of BML Properties, from the project in 2015.
BML Properties “more than met its burden in proving” that a “hopelessly conflicted” board member of subsidiary CCA Bahamas, executive vice president Tiger Wu, breached the project’s investors agreement six times and committed fraud on at least four occasions, Borrok ruled, while dismissing all counterclaims.
Borrok ruled that CCA testimony was “often inconsistent with their own internal communications or otherwise confirmed their many instances of breach and fraud”.
He wrote that CCA breached the investors agreement given that Wu, as board member and the company’s most senior official on site, was unaware of his duty to act in the best interests of BML Properties, and that he was conflicted in his additional roles as construction manager and Baha Mar’s general contractor.
The judge ruled that Wu provided false testimony in claiming he told his BML partners that his company was working on a new CCA project in Panama, a project to which Baha Mar construction resources were being diverted.
Wu was also cited for his fraudulent role in the “clandestine acquisition” of a nearby Hilton project using $54m demanded from BML, a development that BML Properties discovered only “on or about the closing of the Hilton acquisition”, according to the ruling.
CCA’s demand for the exact amount required for the secret Hilton purchase was made during a series of meetings between CCA, state-owned financier Export-Import Bank of China (CEXIM) and Izmirlian in Beijing in November 2014, a meeting the court described as an “absolute sham and shakedown” of the entrepreneur.
The meeting was “designed to induce BML to release $54m of disputed change order money” from its CEXIM credit facility “for use to purchase the Hilton (rather than to pay subcontractors or to otherwise advance the Project) and that [CCA Bahamas] had no plan to achieve substantial completion by March 27, 2015 when it promised to do so”, the judge wrote.
Borrok also found that CCA Bahamas had defrauded BML Properties by committing to the opening date without a plan in place, by misappropriating funds for personal use, manipulating workers and sending them home for Chinese New Year with deadlines looming, and misleading BML into thinking the completion date would be met while informing the parent company in China that it was in danger.
These “assurances by Mr. Wu and his subordinates were false and designed to induce reliance by [BML Properties] … and cause a liquidity crisis in pushing [BML] out of its $845m investment".
“This is exactly what happened.”
That sum consisted of $830m in cash and assets and a subsequent $15m invested by BML Properties after Baha Mar missed its completion date.
Subsequently, the judge wrote, CCA “actively worked to curry favour with the Bahamian government and behind the back of BML”, spending millions of dollars on a consultant whose father was a then-advisor to the Bahamian government.
That advisor, Sir Baltron Bethel, suggested in an email inadvertently copied to BML that CEXIM propose a new gaming company be brought in within 90 days “to prevent Baha Mar from taking the position Gov is trying to push Izmirlian out”.
Justice Borrok found that when the Bahamian government took control of the case from US bankruptcy court in a liquidation proceeding, CEXIM ignored BLM’s offer to match any offer for Baha Mar’s assets, instead selling the property to Hong Kong-based Chow Tai Fook, which opened the property in April 2017.
Izmirlian’s comprehensive court victory throws the spotlight back on the Bahamian government, whose handling of the delayed opening and support for expelling Izmirlian from the project generated years of media controversy amid accusations of high-level corruption and geopolitical intrigue.
“I first conceived of Baha Mar more than 20 years ago, only to see it ripped out of my hands at the brink of opening by CCA,” Izmirlian said in a statement.
“The decision once and for all sheds light on the true events of Baha Mar and how the actions of CCA, and the then-Bahamian government, ousted Sarkis Izmirlian and the Baha Mar management team to the detriment of The Bahamas,” he said.
CCA said in a statement that it will appeal. The Bahamian government said it would review the ruling before commenting.
