• NY court seeks Bahamas help on $2.25bn dispute

• Wants Cross & Mosko ‘compelled’ on CCA papers

• Local engineering firm, two banks also targeted

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The British Colonial Hilton’s sale is among the multiple targets of a US court’s request for Bahamian judicial assistance relating to Sarkis Izmirlian’s $2.25bn legal battle with Baha Mar’s main contractor.

Legal documents obtained by Tribune Business reveal that the New York State Supreme Court, which will ultimately determine the outcome of the fight between China Construction America (CCA) and Baha Mar’s original developer, is requesting help in obtaining potential evidence thought to be held by multiple Bahamas-based banks and companies.

The assistance requests, made on behalf of both CCA and Mr Izmirlian’s BML Properties vehicle, ask the Attorney General’s Office to apply to the Bahamian Supreme Court for orders compelling a realtor; engineering company; Scotiabank (Bahamas); Citibank (Bahamas); and the vehicle that engineered Baha Mar’s ultimate sale to produce documents that could bolster both sides’ legal claims.

One requests that Cross & Mosko Real Estate and Development Company, whose principals are Jimmy Mosko and Kevin Cross, produce multiple documents and communications relating to the British Colonial Hilton’s October 2014 sale to CCA which they brokered.

Mr Izmirlian and BML Properties believe these may provide evidence to support their claim that the Chinese state-owned contractor used a disputed $54m payment intended to “accelerate” its construction work at Baha Mar to instead fund its acquisition of the downtown Nassau resort.

“Plaintiff seeks to obtain documents from Cross & Mosko, who brokered the sale in October 2014 of the British Colonial Hilton to defendants,” the New York court’s legal assistance request states. 

“These documents have a direct connection to the subject matter of the New York litigation because plaintiff alleges that in order to purchase and develop the British Colonial Hilton, defendants used funds they had pledged to the Baha Mar project and diverted both tangible and intangible resources to the Hilton venture, defrauding plaintiff and exacerbating the delays already plaguing Baha Mar.”

The legal assistance request, made under The Bahamas’ Evidence (Proceedings in other jurisdictions) Act 2000 and filed by the New York court on April 5, 2021, asks that Cross & Mosko be “compelled” to produce all documents related to the sale plus communications on the deal with CCA; Aubaine Capital (the seller); and the then-Christie administration.

Other documents sought include communications potentially detailing CCA and its affiliates moving “workers, managers or tangible resources” from Baha Mar to the British Colonial Hilton as the contractor ramped up to develop the $200m Pointe project and associated Margaritaville-branded resort.

Communications from CCA executives, including David Wang, Daniel Liu and Tiger Wu, relating to CCA’s “intention to work or actually work” at the Bay Street resort property are also targeted by the Cross & Mosko legal assistance request, which is targeted at a three-year period covering 2013-2015.

Meanwhile, the New York court has also moved on behalf of Mr Izmirlian and his legal team to obtain the production of documents thought to be held by Graphite Engineering, whose principal is Sonia Brown, and which acted as the “engineer of record” for the Baha Mar project’s construction.

Setting out the original developer’s case, the court documents state: “Plaintiff contends that defendants - who invested in and served as construction manager of the Baha Mar project - concealed their intent and knowledge that they would not construct the complex on time and on budget, in violation of New York’s common-law prohibition on fraud and defendants’ contractual obligations.

“Much of the parties’ dispute hinges on whether and to what extent defendants’ work, including its alleged failure to timely obtain the requisite permits and approvals from the Government of the Bahamas, resulted in the delays to the Project.

“Graphite was the engineer of record for the project and worked with the various design and construction teams, as well as the Government of The Bahamas, to keep the project compliant with local code requirements,” the New York court added. 

“Graphite also oversaw the mechanical, electrical, plumbing and fire protection installation. Graphite is therefore likely to possess documents and evidence concerning defendants’ alleged failure to adequately address defects in the project.”

Among the documents and papers being sought are communications over “stop work orders” issued by the Ministry of Works in relation to construction activities at Baha Mar in the lead-up to Mr Izmirlian’s ultimately unsuccessful Chapter 11 bankruptcy protection filing in mid-2015.

Graphite Engineering’s dealings with CCA over efforts to get electrical power for the project; the fire alarm testing results; alleged “fireproofing defects” and “CCA’s failure to build the fire life-safety system in conformance with Government of The Bahamas regulations and approved plans” are also the focus of the legal assistance request.

There is no suggestion that any of the Bahamian companies involved, or their principals and executives, have done anything wrong in relation to either the British Colonial Hilton’s sale or the Baha Mar project.

However, Mr Izmirlian’s evidence production efforts, made as part of the New York court’s legal “discovery” process that is supposed to conclude by mid-September 2021, does not halt there. For his third and final target is Perfect Luck Assets, the vehicle created and owned by Baha Mar’s then-$2.45bn lender, the China Export-Import Bank, to facilitate the project’s sale to a new owner.

“The documents plaintiff is seeking from Perfect Luck are central to this matter,” the New York court alleged. “Defendants’ alleged fraud and delay resulted in the Government of the Bahamas initiating liquidation proceedings, and the Export-Import Bank of China, which had partially financed the project, initiating receivership proceedings, seizing plaintiff’s interest in Baha Mar, and selling Baha Mar’s assets to Perfect Luck, a Chinese entity owned by Export-Import Bank of China.

“Perfect Luck thereafter re-engaged defendants as construction manager, awarded them lucrative work packages, and attempted to amend the contracts that had originally governed the parties’ relationship. Perfect Luck’s documents are therefore material to defendants’ intentional and knowing conduct to remove plaintiff from the project and attempt to strip plaintiff of its rights to the benefit of defendants.”

Communications between Perfect Luck and Baha Mar’s provisional liquidators; receiver-managers; and its China Export-Import Bank owner are the targets here, along with details on the revisions made to the construction contract with CCA after Mr Izmirlian was removed as the project’s developer.

However, the legal assistance requests are not limited to Mr Izmirlian. For the New York court is requesting assistance from the Attorney General’s Office and Bahamian Supreme Court on CCA’s behalf in a bid to obtain information on transactions and money flows involving multiple Baha Mar accounts at Citibank (Bahamas) and Scotiabank (Bahamas) when Mr Izmirlian was in charge.

CCA is seeking these details to bolster its counter-claim that Mr Izmirlian’s alleged mismanagement of the Baha Mar project wiped out its $150m preference share investment in the original development, even though it was subsequently selected for the $700m contract to complete the Cable Beach-based venture.

“BML Properties asserts fifteen causes of action based on breach of contract, breach of the implied covenant of good faith and fair dealing, and fraud relating to the timeliness of completion of the project,” the New York court said of Mr Izmirlian’s stance.

“CCA Bahamas asserts counterclaims based on breach of the amended and restated investors agreement and breach of the implied covenant of good faith and fair dealing, seeking damages based on the loss of its investment.

“CCA Bahamas alleges that BML Properties, as the day-to-day manager of Baha Mar, mismanaged the project’s finances and the release of design information resulting in delays and cash flow issues on the project.”