By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Baha Mar’s contractor is accusing Sarkis Izmirlian of seeking to “circumvent” the Bahamian courts by using its US Chapter 11 protection as a “springboard” to pursue the winding-up of its two Nassau hotels.

China Construction Inc, the contractor’s US arm which is presently in bankruptcy protection in New Jersey, hit back at the Baha Mar developer’s bid to appoint an “independent examiner”, who would be charged with investigating dealings between itself and its Bahamian affiliates, as an effort to “hijack the Chapter 11 process for its own benefit”.

The Chinese state-owned contractor, in particular, asserted in its February 6, 2025, legal filings that Mr Izmirlian would seek to use the examiner’s findings to support his bid to wind-up both CCA (Bahamas) and CSCEC (Bahamas) before the Supreme Court in Nassau. The former serves as the immediate parent for both CCA’s Bahamian resort interests, the British Colonial and Margaritaville Beach Resort. 

Mr Izmirlian is aiming to persuade the New Jersey bankruptcy court to appoint such an examiner to probe alleged “fraud, dishonesty, incompetence, misconduct, mismanagement” or other irregularities involving CCA Inc’s dealings with its Bahamian and other affiliates prior to its Chapter 11 filing during the Christmas and New Year holiday period.

However, CCA Inc, in urging the court to reject this move, claimed such an appointment would be premature and a waste of valuable time, assets and resources that would deplete the company’s estate to the advantage of other creditors.

And it repeated claims that it was incorrectly held liable for the $1.642bn fraud and breach of contract damages awarded to Mr Izmirlian and his BML Properties vehicle, instead pinning all the blame on CCA (Bahamas), which it branded “a remote affiliate”. CCA Inc argued that the New York court had wrongly “pierced the corporate veil” by using New York, as opposed to Bahamian, law for this test.

“The examiner motion filed by BML Properties is a transparent attempt to rewrite the facts and circumstances leading up to and following CCA’s Chapter 11 filing, all in support of BML Properties’ ongoing prosecution of claims against CCA’s litigation co-defendants in New York and The Bahamas,” CCA Inc and its attorneys alleged.

“This court should resist BML Properties’ invitation to use CCA’s good-faith Chapter 11 filing as a springboard to pursue its non-bankruptcy enforcement efforts against non-debtors, circumventing the jurisdiction of the Bahamian court in which BML Properties has already brought an enforcement action..”

That “enforcement action” is the winding-up petition filed against CCA (Bahamas) and CSCEC (Bahamas), the other two entities which - besides CCA Inc - have been held liable for the multi-billion dollar damages awarded to Mr Izmirlian.

CCA Inc’s latest filings, though, make crystal clear that filing for Chapter 11 bankruptcy protection was always the plan if Baha Mar’s original developer won his New York case so as to prevent him from being able to enforce his judgment against its assets. CCA (Bahamas) and CSCEC (Bahamas), being domiciled in this nature, do not have access to the equivalent protection.

“BML Properties wants to rush directly to an investigation that would benefit its own ongoing litigation against CCA’s non-debtor affiliates. Ironically, the examiner motion is a thinly-veiled attempt by BML Properties to use estate resources and hijack the Chapter 11 process for its own benefit – the very kind of behaviour of which BML Properties has baselessly accused CCA...,” the Chinese state-owned contractor added. 

“The court should decline to authorise BML Properties efforts to weaponise [Chapter 11] into an estate-funded ‘fishing expedition’. BML Properties should not be permitted to leverage CCA’s legitimate need for bankruptcy protection as a means to pursue scorched-earth discovery tactics in pursuit of enforcing BML Properties’ judgment against non-debtors at the expense of CCA’s estate.”

The winding-up petitions were filed in the Bahamian Supreme Court against CCA (Bahamas) and CSCEC (Bahamas) on the basis that they are insolvent. Tribune Business previously reported that both sides have been negotiating a so-called “protective order” governing how confidential documents and other evidence - disclosed as part of the Chapter 11 bankruptcy protection process involving CCA Inc - will be treated.

However, they are at odds over the issue of whether any evidence disclosed in the Chapter 11 proceedings could then be used by Mr Izmirlian and BML Properties to aid other legal actions against CCA including the Bahamian winding-up proceedings involving its Nassau two resorts. Not surprisingly, Baha Mar’s original developer wants the ability to do this, while the Chinese state-owned contractor is adamantly opposed.

CCA Inc, meanwhile, said the New York State Supreme Court’s verdict only held CCA (Bahamas) - and not itself - liable for perpetrating any fraud on Mr Izmirlian over the Baha Mar project’s 2015 collapse and failure to complete. And it used its latest legal filings to place as much distance between itself and its Bahamian affiliates as possible.

“CCA Bahamas is CCA’s distant corporate affiliate – not a parent, subsidiary or sibling corporation to CCA,” CCA Inc argued. “CCA was held liable in the trial decision, not based on any conduct of its own, but only on an erroneously applied veil-piercing theory, which CCA and its co-defendants have appealed and believe will be reversed.

“As the defendants’ appeal explains, piercing CCA (Bahamas) corporate veil to reach its remote affiliate, CCA, was plain error.” This, it argued, stemmed from the fact that the New York court failed to apply Bahamian law, which it claims should have been used to determine the “veil piercing” because CCA (Bahamas) is a Bahamian company.

“If Bahamian law had been correctly applied, BML Properties would have lost its suit against CCA,” CCA Inc argued. “In the Bahamas, veil-piercing is allowed only if a plaintiff shows that the defendant created a shell entity to ‘deliberately evade... an existing legal obligation’ that the defendant already owed to the plaintiff. That fact pattern did not apply in the Baha Mar litigation, and BML Properties never argued it did.

“To the contrary, CCA was never party to any contract with BML Properties, and any liability CSCEC (Bahamas) or CCA (Bahamas) incurred to BML Properties only arose at the time of the alleged breaches or fraud in 2014-2015, years after those companies were incorporated in 2009. For these straightforward reasons, the [appeal court] is likely to reverse the trial court’s erroneous decision to pierce the corporate veil.”

The New York State Supreme Court, though, found that all three entities were part of a common enterprise with senior executives switching and inter-changing between them at will when it suited their purpose. CCA Inc, meanwhile, argued in its February 6, 2025, filing that it has provided sterling co-operation to Mr Izmirlian.

“To date, CCA has reviewed more than 20,000 documents, resulting in 14 separate productions totaling over 18,000 pages of discovery. In response to BML Properties’ ever-increasing demands, CCA’s legal and financial teams have been working around the clock to identify and produce responsive documents, ensuring that no unnecessary delays occur,” the contractor asserted.

“The scope and complexity of these productions... underscore the extraordinary diligence with which CCA has approached the process. Despite the significant volume of material requiring review, translation and processing, CCA has continued to make rolling productions without delay, fully complying with its discovery obligations.”