Baha Mar Fraud Claim Baseless

Judge Charles Ramos, sitting in the New York State Supreme Court, said Baha Mar had alleged that Harrah’s, and its Caesars Bahamas Investment Corporation subsidiary, had “misrepresented their intent” to proceed with the project and close their joint venture deal.

This allegation, the judge said, was premised on the claim that despite agreeing to the Supplemental Heads of Agreement that Baha Mar signed with the Bahamian government on January 31, 2008, Harrah’s concealed that its private equity owners, Apollo and Texas Pacific, had already decided not to proceed. This decision was allegedly made at a Harrah’s meeting three days earlier, on January 28, 2008.

However, Judge Ramos found: “Baha Mar’s fraud claim fails because it is unsupported by any evidence that Caesars Bahamas and Harrah’s knowingly intended to deceive Baha Mar with respect to unconditionally going forward with the project.

“There is simply no evidence that Caesars Bahamas and Harrah’s made a definitive decision on January 28, 2008, to abandon the project, while agreeing to the execution of the Supplemental Heads of Agreement just days later.”

Baha Mar had alleged the fraud was exposed by the affidavit deposition of Harrah’s chief executive, Gary Loveman, who had said that “a view was forming in the late part of January that proceeding with the project was probably not a good idea at that time”.

This issue was raised and discussed at the January 28, 2008, meeting, but Loveman had further testified that he could not recall anyone discussing the possibility of terminating the agreements with Baha Mar.

And a Caesars Bahamas representative, Marc Rowan, who was present at the meeting, testified that while it and Harrah’s “were not prepared to move forward at that point” with the Cable Beach redevelopment in its “current iteration”, “there had been no detailed plan decided” over whether to pull out or not.

Concerned

And Judge Ramos found: “Further, while Harrah’s was concerned about the ability to procure financing in a tightening credit market, Caesars Bahamas and Harrah’s communicated these concerns to Baha Mar, thereby undermining any contention that Caesars Bahamas and Harrah’s was intending to deceive it.

“For several weeks following the signing of the Supplemental Heads of Agreement, the parties openly worked to address Harrah’s financing concerns, and even participated in several conferences with banks to discuss financing options.”

The judge noted that John Forelle, Baha Mar’s attorney and vice-chair, had testified that “he began to develop concerns during the first week of February 2008 that Caesars Bahamas and Harrah’s would elect to abandon the project”.

And a February 7, 2008, e-mail exchange between Sarkis Izmirlian, Baha Mar’s chairman and chief executive, and its chief financial officer, a Mr Ludwig, discussed conference calls with Caesars Bahamas and Harrah’s representatives, and officials from Barclays and Scotiabank, and “the fears of the current market conditions”.

“Other evidence in the record demonstrates that Baha Mar was aware that Harrah’s had developed concerns about the prospects for procuring financing, and that it may even elect to abandon the project,” Judge Ramos ruled.

“One Baha Mar attorney even testified that, on or about February 18, 2008, he discussed the prospect for litigation with Harrah’s over the possibility of termination.”

Judge Ramos also dismissed Baha Mar’s claims for breach of fiduciary duty, promissory and equitable estoppel and negligent misrepresentation, as they were largely based on the same grounds as the fraud allegations.

And he found that the developer’s claims for specific performance were “untenable”, given that Baha Mar was in negotiations with China State Construction and the China Export-Import Bank “to develop a replacement project, in the same location and scope, as this project”.

Source: The Tribune