NASSAU, BAHAMAS — A bundle of documents filed in a New York State Supreme Court in the ongoing legal battle between Baha Mar’s original developer Sarkis Izmirlian and China Construction America, are shedding even more light on the series of developments that ultimately led to the developer being ousted and the resort property sold some six years ago.
The documents filed late last week include various email correspondences, meeting minutes, and legal filings from both sides in the contentious $2.25 billion fraud and breach of contract claim against the Chinese State-owned firm.
The Baha Mar founder and his BML properties vehicle in court filings contend that he lost a multi-million equity investment in the project as a result of a conspiracy by Baha Mar’s main lender and the contractor to oust him.
Izmirlian has asserted, among other claims that the resort’s main contractor had misrepresented that sufficient laborers and managers would remain working on the project to complete the project on time for the March 27, 2015 deadline, when in fact hundreds of Chinese workers left the project from December 2014. Izmirlian also contends that CCA failed to disclose conflicts of interest and payments and efforts to influence Bahamian government officials, their families, and associates, including payments to and efforts through Notarc Management Group.
Further Izmirlian claims that the contractor intentionally engaged in work slowdowns or stoppages which prevented the project from opening to any paying guests on March 27, 2015 and contributed to BML’s liquidity crisis.
CCA Construction has denied that either it or CSCEC (Bahamas), Ltd. ever started, stopped, or slowed work on the project. On June 29, 2015, following the commencement of the Chapter 11 reorganization proceedings in Delaware, work on the project stopped until September 2016.
CCA has accused Izmirlian and his BML Properties vehicle of failing to preserve and produce detailed accounting records, including the majority of the soft cost- related invoices and expense supporting documents, despite having the opportunity to preserve such documents.
CSCEC (Bahamas), Ltd according to legal filings claims to have identified at least 635 soft cost transactions amounting to millions of dollars between January 24, 2011 and January 27, 2015 which it says it has been unable to verify as legitimate project-related expenses.
Due to concerns over Baha Mar Ltd.’s soft cost expenditures, the Export-Import Bank of China retained the accounting firm Ernst & Young to conduct a soft cost audit between August 25, 2014 and February 13, 2015.
According to CCA, E&Y sampled 350 invoices from a pool of 16,316 items, which revealed 10 transactions that appeared “excessive or not within the BML reimbursement policy”.
It contends that these improper transactions, in part, caused Baha Mar, Ltd. to exceed the 70/30 debt-to-equity ratio governing the credit facility from the Export-Import Bank of China, and required the injection of additional capital from BML Properties, Ltd.
