Perry Christie's Baha Mar Quagmire

by Larry Smith

"The doctrine of collective responsibility is the basis on which the system of ministerial government rests. All major matters of policy, and matters on which there may be doubt regarding the attitude of other members of Cabinet, and all subjects on which there is unresolved difference of opinion between ministries, should be put before Cabinet. No minister may, in the parliament or in public speeches, commit the government to any course of action save in accordance with the policy of Cabinet.” — Bahamas Manual of Cabinet Procedure

For months now, Foreign Minister Fred Mitchell has been unconstructively inserting himself into the Baha Mar imbroglio - by insulting, berating and threatening the project's developer, Sarkis Izmirlian. 

More recently, Labour Minister Shane Gibson has joined in this abuse - by asserting (no doubt correctly) that prospective investors needed to have their heads examined before coming to the Bahamas.

Only weeks ago Baha Mar was being hailed as the country’s economic salvation - the crowning achievement of Perry Christie’s leadership. But lately, cabinet ministers have been making the most intemperate statements on the project with complete impunity - as the prime minister’s tepid response amply demonstrates:

 "Some ministers have made loaded remarks, that they spoke to me about....but those remarks were personal and do not reflect the government. The government's view would be reflected by me in this particular matter." 

Taken at face value, not only is Perry Christie allowing members of his cabinet to speak out of turn on an issue of national importance. He is also, at the same time, asserting that only he can articulate government policy. But neither of these positions is provided for in our system of government.

Michael Scott, a lawyer who advises the Free National Movement, put it this way: "Under the constitutional practice of collective responsibility, when a minister speaks it is presumed that he speaks for the government and not in his personal capacity. If he is not authorized  - as neither Mitchell nor Gibson were, according to the prime minister - he is bound to resign or be sacked.”

But that’s only if we take what Christie said at face value. 

In reality, it is far more likely that what he said was just for show, because it is clear to most that the government has embarked on a campaign against Izmirlian in concert with Baha Mar’s Chinese contractor and creditor. As such, there can be little doubt that the cabinet has discussed strategies, and that offensives have been authorised on several fronts.

The only other plausible view is that Christie cannot control his own cabinet. So Mitchell feels able to pursue his own peculiar strategy to become leader of the PLP. That strategy includes presenting himself as a strongman with the ability to put rich, white foreigners in their place - regardless of the cost to the country.

After more than a dozen years of slog to get Baha Mar to the brink of completion, Izmirlian is now fighting for his life  - he stands to lose $800 million if this project ends up in someone else’s hands. And the Chinese, who financed most of the $3.5 billion development cost, are putting the squeeze on, with the full backup of the PLP government.

To protect his assets, Izmirtlian filed for a Chapter 11 reorganisation in the United States, where his Baha Mar holding company is domiciled. That court-supervised process allows a corporation to stay in business while it restructures and attempts to reduce its debt.

The Christie government has tried to block this move by seeking to liquidate Baha Mar through the Bahamian courts. Most observers believe this would lead to the unravelling of the entire project over a very long time, with lawyers and accountants picking over the remains until the bare bones could be sold at a deep discount to others.

Or, the Export-Import Bank of China, as the secured creditor, could step in under the Companies Act and either take control of the project or exercise its power of sale. According to Section 238 of the Companies Act, “a creditor who has security over the whole or part of the assets of a company is entitled to enforce his security without leave of the court and without reference to the liquidator.” 

 

In fact, this is the course of action that seems to be suggested by Baltron Bethel in his now infamous July 22 email advising his Chinese colleagues, that was mistakenly copied to Baha Mar President Tony Dunlap.

By some accounts, Izmirlian has reacted to all this by attempting to sway public opinion so that liquidating Baha Mar becomes a political liability for the government. And Mitchell and Gibson are trying to neutralize that threat by convincing the electorate that Izmirlian is a disrespectful, white foreigner who thinks he can do as he pleases in our proud Bahamaland. 

Of course, this picture is completely at odds with the PLP’s worshipful embrace of that other rich, white foreigner who thinks he can do as he pleases in our proud Bahamaland. You may recall that right after the 2012 general election, Lyford Cay resident Peter Nygard released a series of  videos, including one aptly titled Nygard Takes Bahamas Back.

The video featured senior PLP cabinet ministers Brave Davis, Shane Gibson, Jerome Fitzgerald, Ken Dorsett, Alfred Gray and Perry Gomez meeting the great man in his natural habitat and being congratulated on their election win. 

Meanwhile, Izmirlian has been kicked to the curb and Baha Mar - once considered the country's greatest asset - has become an albatross around Perry Christie’s neck. In fact, the very meaning of that particular metaphor is telling: it refers to something you have done or are connected with that keeps causing problems and stops you from being successful.

Former attorrney-general Carl Bethel has offered the best description we’ve heard so far of the pickle we find ourselves in today: "I've never seen so much vainglorious and brainless spouting of nonsense...and unseemly public name-calling...the government obviously got lost in the politics and didn't see the policy.”

But the big mystery here is, what exactly is the end game for the government?

According to an August 11 article on Baha Mar in the online magazine, Global Construction Review, “major projects often go wrong, but rarely do they sour so spectacularly and publicly... Sarkis Izmirlian isn’t behaving as if he is mad, but rather as one backed into a corner with plenty to lose.”

On the other hand, the prime minister has said that "completion of the Baha Mar resort is a matter of the utmost national importance,” while arguing that a liquidation under the supervision of the Bahamian courts puts the resort on the right track for completion.

But as Izmirlian noted on a radio talk show recently, "we found ourselves on June 29 with no opening date from our general contractor, costs mounting, the company in a liquidity crisis, and the only viable option was Chapter 11…Under the liquidation process you cannot do the things you can do under Chapter 11. The fastest way to open Baha Mar is and was Chapter 11."

Construction industry experts say that if the issue is simply a numbers game, it should be settled by quantity surveyors and arbitrators rather than by lawyers and litigation. As an example, Banco Ambrosiano’s Bahamian subsidiary went into liquidation in 1982, and the process is still ongoing.

 In his 2013 budget address Christie said Baha Mar would “usher in a new dimension in Bahamian and regional tourism and was expected to provide 8,000 permanent jobs and 430,000 stopover visitors.” It’s difficult to see that ever happening under current circumstances.

And it is worth recalling here the US diplomatic cables that were published by Wikileaks some time ago. In 2009 American diplomats were concerned that the Baha Mar investment would leave the Bahamian government "indebted to Chinese interests for years to come". They also reported the fears of Bahamian politicians that "China is using this investment solely to establish a relationship of patronage”.

With the recent acquisition of the landmark British Colonial property downtown, the launch of a multi-million redevelopment of the adjacent waterfront by the same Chinese company that defaulted in the opening of Baha Mar, and the raft of other Chinese investments and contracts in the country, we are left to wonder whether those predictions have now come to pass.

Perhaps the strangest thing of all is that Christie and the PLP have managed to get themselves into this massive political quagmire without any interference from the opposition FNM, who have had almost nothing controversial to say on the matter. Christie did it all by himself, and that will probably be his greatest legacy. 

Comments

[Colin Clark]

It's all too complicated for me. I'm just a Chartered Accountant.

[Leandra Esfakis]

What we have here is the multilateral patronage scheme:
The Chinese have a patronage relationship with the PLP who have a mutual patronage relationship with Nygard and the Numbers Boys. These two schemes, plus access to the Public Treasury, (read: increasing national debt) provide the oil and grease for the ultimate patronage relationship of the Politicians with the public. In colonial days the dependence of the masses on the masters was called the plantation system. But patronage relationship sounds more politically correct for the 21st Century as we move forward. Or backward.