Fighting $1.6B Baha Mar Decision, China Construction Files for Bankruptcy
BML Properties was the original developer of the Baha Mar resort, located in Nassau, Bahamas, which opened in 2017.
Image courtesy of BML Properties
Following a New York State judge's ruling that China Construction America owes $1.6 billion to BML Properties—the original developer of the $3.5-billion Baha Mar project in the Bahamas—the contractor in December filed for bankruptcy protection in federal court in New Jersey.
There, the contractor—now known as CCA America—is asking the bankruptcy court to authorize CCA to join its co-defendants, CCA Bahamas Ltd. and CSCEC Bahamas, Ltd., in pursuing its appeal against the New York State court's ruling.
In a Dec. 22 statement, CCA America called that previous decision "wrongful" and "erroneous," arguing that "the only alleged basis for recovery against CCA was BMLP’s convoluted theory of veil-piercing liability, which the trial court erroneously accepted."
The term "veil-piercing" is used when judges find that corporate structures are being used to shield wrongful conduct.
Calling the New York ruling "fatally flawed," CCA Chairman and CEO Yan Wei said in the statement that "the record is clear that BML Properties’ losses were entirely the result of its own gross mismanagement and irresponsible actions, and that the lower court’s decision suffers from multiple, insurmountable errors of law."
Continuing, Wei remarked that "the lower court’s decision completely ignores the reality that CCA was not involved at all in the Baha Mar construction project.”
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As ENR previously reported, New York State Supreme Court Judge Andrew Borrok found that BML Properties' bankruptcy was partly brought about via a $54-million payment from the developer to contractor CCA Bahamas as the project was nearing completion. During that trial, the developer argued that the contractor had said the money was needed to help pay subcontractors as the mega-resort project was nearing completion and, critically, a scheduled opening date.
In his ruling, the New York judge sided with BML's contention that instead of using the $54 million to fund construction, CCA Bahamas "wanted it and used it to buy a competing hotel development down the road," the British Colonial Hilton in Nassau, Bahamas.
Borrok stated in his ruling that "the choice was but one of many made by the defendants demonstrating that these entities operated as one, such that piercing the corporate veil is appropriate."
On Jan. 14, BML Properties Ltd. filed winding-up petitions in the Supreme Court of the Bahamas seeking the "orderly liquidation of CCA Bahamas Ltd. and CSCEC (Bahamas) Ltd. following their failure to satisfy" the $1.6-billion judgment decided by the New York court.
In response to BML's filing of what it calls a "meritless winding-up petition," a spokesperson for CCA Bahamas commented that the contractor "will take all necessary steps to protect our employees and the Margaritaville Beach Resort and British Colonial Hotel from BMLP’s attempt to create chaos."
Referencing BML Properties' filing of winding-up petitions in The Supreme Court of the Bahamas, the CCA Bahamas spokesperson characterized the action as "nothing other than transparent grandstanding to distract from the prospect of defeat in our appeal in New York of the trial court’s flawed decision."
Construction of the resort halted in 2015, and in June of that year Baha Mar Ltd. filed for bankruptcy protection in U.S. bankruptcy court, an action that CCA Bahamas fought to dismiss at that time. Construction was later completed, with the Baha Mar resort opening in April 2017.
