A New York court has dismissed an appeal by China Construction America, Inc (CCA) against a Supreme Court ruling in October requiring it to pay US$1.6 billion to the original owner of Bahamas casino resort Baha Mar for committing “many acts of fraud” in assuming control of the property.
According to information acquired by Inside Asian Gaming, the New York Appellate Division, First Department on Tuesday backed the Supreme Court’s ruling in favor of Sarkis Izmirlian’s BML Properties Ltd, which found that CCA was responsible for BML losing its entire investment by committing “multiple acts of fraud and breaches”.
Baha Mar has since 2017 been operated by Hong Kong jewelry giant Chow Tai Fook Enterprises, which also holds interests in Australia’s Star Entertainment Group and Vietnam’s Hoiana. Chow Tai Fook also has links to Macau concessionaire SJM via chairman Henry Cheng’s 10% stake in STDM.
The US$1.6 billion figure includes BML Properties’ US$845 million investment plus interest dating back to May 2014. BML said the judgment now stands at more than US$1.7 billion following this latest decision.
“We are grateful that the Appellate Court upheld Justice Borrok’s judgment, once again confirming that CCA’s multiple acts of fraud and breaches caused the Baha Mar project to miss its opening, resulting in the subsequent loss of our entire investment,” said Izmirlian.
“We are continuing in our efforts to aggressively enforce our rights against CCA, its parent China State Construction Engineering Corporation (CSCEC), their affiliates and all those who orchestrated the fraud, and look forward to collecting on their debt. We hope that they will come to their senses and enter into a rapid settlement to minimize the disruptions to their operations that have been caused by their actions.”
In response, a statement from a spokesperson for the defendants said, “We are disappointed in the appellate court’s decision, which is incorrect on multiple points of New York law. It also ignores BML Properties’ own mismanagement of the Baha Mar project, which led to the losses suffered by CCA Bahamas, CSCEC Bahamas, the Bahamian government, subcontractors and workers. This is not the last word on this matter, and we intend to pursue an appeal of this decision to the New York Court of Appeals.”
The case stems from Izmirlian’s decision to seek funding for Baha Mar – first envisioned two decades ago – via China during the midst of the global financial crisis in 2008. He found success to the tune of US$2.45 billion through China’s Exim Bank, however the bank also stipulated that CCA must be general contractor and with the right to import up to 8,000 Chinese construction workers, providing in the process a significant boost to China’s domestic economy. On top of Exim Bank’s contribution, CCA chipped in US$150 million and BML Properties US$845 million.
The resort had initially been slated to open in December 2014, but after missing the opening and a series of later dates throughout 2015, BML filed for bankruptcy in June 2015 while blaming CCA for allegedly deliberate poor craftmanship. Baha Mar was said to be 97% complete at that point.
While Izmirlian had hoped to retain control and bring in a different contractor, the Bahamian government – which saw Baha Mar as a key national project – had other ideas and the property was instead handed over to a liquidator. Construction ultimately halted for more than a year before the government announced it had reached a deal with CCA to resume construction while it looked for a buyer.
Chow Tai Fook, whose controlling Cheng family has long held close ties with Beijing, was ultimately revealed to be that buyer at an undisclosed price although rumors circulating at the time suggested the acquisition came at a massive discount.
Michael Zhu, then Vice President of industry consultancy The Innovation Group, told IAG at the time that taking control of Baha Mar was “a win-win for Chow Tai Fook and the Chinese government … diversification is part of their strategy, geographically and business-wise.”
This US$1.6 billion decision against CCA saw the judge find the contractor had “committed fraud beyond any doubt” by forcing the collapse of the project in order to enrich itself and ultimately ensure Chinese interests claimed control.
According to BML, the Appellate Court confirmed that evidence in record showed that CCA Construction exercised complete domination of CCA Bahamas and CSCEC Bahamas, and that the domination was used to breach the investor agreement, defraud plaintiff and cause the collapse of Baha Mar, resulting in plaintiff’s injury.
