Lawsuit seeks $2.25 billion
Sarkis Izmirlian, the billionaire who used nearly $1 billion of his family’s money to develop the $4.2 billion Baha Mar Resort in the Bahamas before being forced out of the project by the Bahamian government, has filed a $2.5 billion lawsuit in Manhattan against China Construction America (CCA), the Chinese state-owned construction contractor that Izmirlian ultimately refused to pay because of repeated construction delays.
The conflict can be traced to deadlines missed by the contractor, a subsidiary of state-owned China State Construction Engineering Corporation. The original grand opening of the six-hotel Baha Mar resort, Izmirlian’s vision to revive Nassau’s Cable Beach resort area, was slated for the winter high season of 2014-15. It was postponed to the end of that season, March 27, 2015—which passed with only around 90 percent of the resort complete.
Izmirlian’s company, then known as Baha Mar Ltd., ceased paying the contractor, which promptly suspended construction. The project sat idle for two years.
Baha Mar attempted filing for Chapter 11 bankruptcy in the U.S. before the Bahamian government rejected the attempt and took control of the project, forcing the original owner out. The main financier, the Export-Import Bank of China, ultimately resold the project to Hong Kong-based conglomerate Chow Tai Fook Enterprises, which opened the 1,000-acre property’s casino and first hotels last April.
Izmirlian’s lawsuit, filed under his company’s current name BML Properties, alleges that CCA delayed completion of Baha Mar as part of a massive fraud scheme that involved sham billings for hundreds of millions of dollars. The lawsuit is seeking more than $2.25 billion in compensation.
The lawsuit alleges intentional understaffing and other fraudulent activities. “The scheme was based on CCA’s efforts to falsely create the appearance that it was working toward an on-time and on-budget opening in December 2014,” the lawsuit states, “while knowingly and fraudulently concealing its real intent not to construct the (Baha Mar) project on time and on budget, and in the process extort more money than it earned and was due.
“Starting in 2012, as significant ‘out of the ground’ construction began and the first floors above the foundations were being constructed, CCA knew that it would be unable to build the project on time, on budget and in accordance with the plans and specs because, among other things, it did not have and would not commit to the project the qualified workforce or sufficiently senior managers needed to meet its representations and obligations.
“CCA carried out its scheme by a series of knowingly and intentionally false representations, acts of extortion, material failures to disclose, fraudulent acts of concealment, outright sabotage, and lies to the government of the Bahamas and the project lender.”
The lawsuit claims CCA crafted a plan as early as 2012 to delay opening of Baha Mar, “until it could negotiate its way out of the disputes it knew would arise and concerning which it believed it had material exposure… As the project moved into late 2014 and early 2015, CCA as well undertook to sabotage forward progress of the work, intentionally damage and disable life-safety, security and electrical supply systems to try to compel BML Properties and Baha Mar Ltd. to accede to its demands on sham payment applications and on fraudulent ‘commercial claims,’ stage labor walk-offs when it was already critically delayed in delivering the project, intentionally slow down work at the project (a fact admitted by CCA’s executive at a meeting with the then prime minister of The Bahamas in April 2015), and divert equipment and executive and labor effort to its newly purchased competing project just a few miles from the front door of Baha Mar.
“Indeed, just 11 days before Baha Mar Ltd was forced to file for bankruptcy protection due to CCA’s fraud and malicious conduct, CCA and the then government of The Bahamas signed an agreement (undisclosed until early 2017), based on what later articles deemed collusion between CCA and the government, that ratified CCA’s movement of heavy equipment and Chinese laborers from the project and to CCA’s newly acquired competing Hilton project while CCA was still under contract to finish Baha Mar.”
The complaint alleges that CCA’s plan was to use Baha Mar as a training facility for other projects in an expansion across the Caribbean and Central and South America.
“Moreover, there is evidence that a $54 million advance paid in November 2014 to CCA Bahamas was actually diverted by CCA to its own coffers to fund the purchase of the neighboring Hilton Hotel in Nassau, Bahamas,” the complaint alleges.
“Manifesting its complete disregard for the rule of law and its requirements under its contracts, CCA also bought gifts, the reimbursement for which it hid from BML Properties and Baha Mar Ltd. in CCA’s expenses as part of its ‘payment applications’ sent to the bank on the project. CCA even resorted to stealing documents from the project to accomplish its illicit goals and cover-up its previous reprehensible conduct.”
CCA Bahamas responded in a statement that pointed to the ultimate successful completion of the project. “CCA Bahamas is proud of the world-class Baha Mar resort it constructed and, by any objective measure, the resort is expected to have a substantial beneficial impact on the economy of The Bahamas and its citizens,” the statement said. “The lawsuit filed by Mr. Izmirlian is a vindictive and baseless attempt to redeem his own failures to properly manage his companies and their investment in the Baha Mar resort project.
“Mr. Izmirlian’s scattershot allegations are totally false and constitute a gross abuse of the American judicial system. CCA Bahamas will vigorously defend these unfounded claims.”
