NASSAU, BAHAMAS — The Appellate Division of the New York Supreme Court has upheld a $1.6 billion judgment in favor of Baha Mar’s original developer, Sarkis Izmirlian, dismissing an appeal by China Construction America (CCA).
Justice Andrew Borrok of the New York Supreme Court previously found that CCA — the U.S. subsidiary of China State Construction Engineering Corporation — defrauded Izmirlian’s company, BML Properties Ltd., and breached its investment agreement, resulting in the loss of BML’s $845 million investment. The court concluded that CCA’s actions directly caused Baha Mar’s collapse and bankruptcy in June 2015. The court found four instances of fraud and six breaches of contract, awarding BML $1.6 billion in damages.
CCA appealed, but the Appellate Division has ruled that the trial court’s decision, reached after a nonjury trial, should not be overturned unless its conclusions were clearly unsupported by the evidence. “Under this deferential standard, we find no basis to disturb the trial court’s award,” the court stated.
The appellate panel cited a prior ruling that CSCEC Bahamas, a related entity, had a fiduciary duty to act in Baha Mar’s best interests. It noted that the trial court had correctly interpreted the “best interest” clause of the investor agreement to require Tiger Wu, CSCEC Bahamas’ appointed board member, to act in the project’s best interest at all times, regardless of his role. Wu’s actions — including diverting funds from subcontractors, withdrawing resources, and authorizing delays — breached the agreement and directly contributed to the project’s failure, it noted.
The court rejected CCA’s argument that the trial court had applied the wrong legal standard for fraud. It pointed to internal communications presented at trial which showed that although CCA publicly claimed the resort would open on March 27, 2015, it privately acknowledged that the timeline was unachievable. “The evidence established that defendants misrepresented their ability to perform, which is sufficient to support a finding of fraud,” the ruling stated.
As for the damages, the appellate court affirmed the award of BML’s full investment, noting that the loss constituted direct damages, not consequential ones, since CCA’s breaches directly led to the project’s failure and BML’s financial collapse. While the investment was made in 2011 and the fraud occurred in 2014 and 2015, the court agreed with BML’s position that it relied on false assurances from CCA, which led to critical financial decisions.
Ultimately, the appellate court found no merit in the remainder of the defendants’ arguments and upheld the trial court’s decision in its entirety.
A spokesperson from the defendants noted: “We are disappointed in the appellate court’s decision, which is incorrect on multiple points of New York law. It also ignores BML Properties’ own mismanagement of the Baha Mar project, which led to the losses suffered by CCA Bahamas, CSCEC Bahamas, the Bahamian government, subcontractors and workers. This is not the last word on this matter, and we intend to pursue an appeal of this decision to the New York Court of Appeals.”
