A New York State Supreme Court judge has ordered the subsidiary of a major Chinese contractor to pay the developer of the Baha Mar resort in the Bahamas damages of $1.6bn for fraudulently delaying the opening of the resort, which the subsidiary was building, thereby causing the developer’s financial collapse.
Following an 11-day, non-jury trial, Justice Andrew Borrok ruled on 18 October that developer BML Properties “more than met its burden in proving” its claim that China Construction America (CCA), a subsidiary of China State Construction Engineering Corporation (CSCEC), breached the Best Interests Obligation of the Investors Agreement at least six times and committed fraud at least four times to cause BML Properties to lose its entire $845m investment in Baha Mar.
On top of that, CCA was ordered to pay interest accruing from the date of the first breach, which the judge identified as 1 May 2014, leading to the $1.6bn figure.
Among the instances of fraud the judge cited was an urgent request for $54m which the defendant said was needed to complete work on the resort by the agreed opening date of 27 March 2015.
But instead of using the money to accelerate work on Baha Mar, the defendant used it to purchase a competing resort project nearby, which Judge Borrok described in his ruling as “an absolute sham and shakedown”.
Among the breaches of the Best Interests Obligation, the judge cited the defendant’s decision to let hundreds of workers return for Chinese New Year before the scheduled resort opening without arranging for replacements, while assuring BML Properties that the project was on track.
“I first conceived of Baha Mar more than 20 years ago, only to see it ripped out of my hands at the brink of opening by CCA,” said BML Properties chair and chief executive Sarkis Izmirlian in a statement following the decision.
The developer went bankrupt in 2015 and filed its lawsuit on 26 December 2017.
“We are grateful to have finally had our day in the US judicial system and thank Justice Borrok for his fair and thoughtful approach to the case,” Izmirlian said, adding: “And we intend to proceed with the enforcement of the judgment in an equally thoughtful and prudent manner.”
CCA told Engineering News-Record that it intends to appeal.
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