By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Sarkis Izmirlian’s bid to have an independent examiner investigate the business affairs of Baha Mar’s main contractor has been approved by the New Jersey federal bankruptcy court.

Judge Christine Gravelle, in a March 5, 2025, order rejected CCA Construction Inc’s arguments against such a move although she set several terms and conditions relating to the timing of the examiner’s appointment.

This, she ordered, will happen either by June 1, 2025, or earlier if the New York State Supreme Courts appeals division prior to that date upholds Mr Izmirlian’s $1.642bn fraud and breach of contract damages award against CCA Construction Inc and its two Bahamas-domiciled affiliates, CCA (Bahamas) and CSCEC (Bahamas).

All three entities are subsidiaries of China Construction America (CCA), which in turn is owned by China State Construction and Engineering Corporation (CSCEC). All are owned by the Chinese government, and Judge Gravelle also enabled Mr Izmirlian and his BML Properties vehicle to petition for the examiner to be appointed at an earlier date.

The only involvement that CCA and its parent will have in the process is “to determine the scope and budget for the examiner’s investigation”. Mr Izmirlian had urged that an independent examiner be appointed to probe CCA Construction’s pre-Chapter 11 bankruptcy protection dealings with other CCA affiliates for alleged “fraud, dishonesty, incompetence, misconduct, mismanagement” or other irregularities.

He and his BML Properties vehicle, in filings with the New Jersey federal bankruptcy court, argued that the examiner’s appointment was justified because CCA Construction Inc has shown “clear bias” against themselves even though the damages awarded against the Chinese state-owned contractor makes Mr Izmirlian its largest creditor by far.

With no official creditors committee likely to be appointed, and China Construction Inc purportedly “stonewalling” Mr Izmirlian’s information requests following its December 22, 2024, filing for Chapter 11 bankruptcy protection, Baha Mar’s original developer argued that appointing an independent examiner would be the best way to protect all creditors given the contractor’s “history of serious - and already proven - fraud claims”.

“Based on CCA’s clear bias against BML Properties - its largest creditor by orders of magnitude - it is apparent that CCA is not acting as a true fiduciary for its estate,” Mr Izmirlian argued. “Exacerbating the situation, no official creditors’ committee will be formed by the Office of the United States Trustee for this district, and CCA has stonewalled BML Properties’ requests for information.....

“CCA’s insistence that all future requests for information go through formal discovery, rather than freely disclosing the information requested by the estate’s largest creditor, bespeaks the level of obstruction that CCA (likely acting at the behest of CSCEC) will impose on these proceedings. Rather than efficiently providing information, CCA insists on making BML Properties’ efforts to obtain information as complicated and costly as possible.

“For these reasons, BML Properties seeks the appointment of an independent examiner to investigate.. the dealings between CCA and its nominal affiliates to identify instances of fraud, dishonesty, incompetence, misconduct, mismanagement or irregularity in the management of CCA’s affairs in the lead up to, and throughout, this Chapter 11 case.”

And Baha Mar’s original developer further argued: “An examiner will serve at least three important functions. One, allowing an independent investigation into claims that CCA’s estate may possess that could significantly enhance creditor recoveries, including potential avoidance actions, alter ego claims and breach of fiduciary duty claims.

“Two, protecting the interests of creditors and the public at large, and three, providing stakeholders, the US trustee and the court with much needed transparency that the debtor has resisted in this Chapter 11 case. Because CCA’s fixed, liquidated and unsecured debts well exceed $5m, the appointment of an examiner is mandatory under binding third circuit precedent.

“Moreover, an examiner is in the best interests of CCA’s creditors given the history of serious - and already proven - allegations of fraud. An examiner should thus be appointed, and BML Properties respectfully requests that it be granted broad investigatory powers.”

CCA, though, hit back by accusing Mr 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.

The Chinese state-owned contractor had 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.

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.