China-Backed Real Estate Developer Ordered to Pay $1.6 Billion in Casino Fraud Case
China Construction America Inc. (CCA), a subsidiary of China State Construction Engineering, has been ordered by a US court to pay $1.6 billion in damages after being found guilty of committing multiple fraudulent actions in the construction of the Baha Mar resort in the Bahamas. The decision is tied to a case initiated by BML Properties, a company controlled by the original developer of Baha Mar, Sarkis Izmirlian.
The Baha Mar casino resort in the Bahamas. (Source: Conde Nast Traveler)
LISTEN TO THIS ARTICLE:The Baha Mar resort, which opened in April 2017, is the largest casino resort in the Caribbean. With a layout featuring 1,800 hotel rooms, a casino, retail spaces, a convention center, a spa and a golf course designed by Jack Nicklaus, it was initially envisioned as a landmark project for the region. However, the development faced multiple setbacks during construction, resulting in missed deadlines and escalating costs.
The project's troubled timeline can be traced back to a 2008 deal, when Izmirlian sought funding from China's Export-Import Bank in the wake of the global financial crisis. According to a Bloomberg report, the court found that CCA was responsible for causing the significant delays and contributing to the project's financial downfall, leading to the developer's bankruptcy.
The initial financing agreement, totaling $2.45 billion, came with stipulations from China's Exim Bank. The bank required that CCA be appointed as the general contractor for Baha Mar, giving the Chinese state-owned firm significant control over the project. The agreement also allowed CCA to bring in up to 8,000 Chinese workers, benefiting China's economy.
BML Properties contributed an additional $845 million, while CCA itself invested $150 million in the project. Despite these extensive financial inputs, construction delays and workmanship issues began to surface as the project progressed.
Baha Mar was initially scheduled to open in December 2014, but after missing this deadline and several others in 2015, BML Properties filed for bankruptcy in June 2015. Izmirlian accused CCA of deliberately delivering poor-quality work, which he claimed was part of a scheme to undermine the project and ultimately allow Chinese interests to take control.
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Working Off Two Scripts
By the time of the bankruptcy filing, the resort was reportedly 97% complete, but progress had stalled due to unresolved construction issues. Further controversy erupted when reports emerged that CCA employees had removed sensitive documents and computers from the project's offices. Some of the recovered documents suggested acknowledgment of substandard work.
Efforts by Izmirlian to retain control of the resort and replace CCA with a new contractor were unsuccessful. The Bahamian government, which considered the resort a vital project for the country's economy, decided to intervene.
The government placed the property into receivership and halted construction for over a year while negotiating with CCA and searching for a buyer. The stalled project raised concerns about its potential economic impact, as the government had high hopes for the resort's contribution to the Bahamian tourism sector.
In 2017, Hong Kong-based Chow Tai Fook Enterprises, a conglomerate with strong connections to China, acquired Baha Mar. The Cheng family, which controls Chow Tai Fook, has long-standing ties to Beijing and a significant presence in the global casino industry. It holds stakes in various companies, including Australia's Star Entertainment Group and the new Queen's Wharf project, as well as in Vietnam. Additionally, the family has connections to Macau's SJM Holdings through its investment in STDM.
The recent court ruling in favor of BML Properties determined that CCA had committed fraudulent actions with the intent to cause BML's collapse, ultimately ensuring the resort's control passed to Chinese interests. The $1.6 billion awarded to BML includes the developer's original $845 million investment and interest accrued since 2014.
CCA has expressed its intent to appeal the decision.
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