Glen H. Waldman (Melanie Bell)
A Miami jury ordered Marriott International Inc. and two affiliates to pay $21 million to a construction company that sued the hotel conglomerate for alleged fraud in a failed $1 billion dollar project in the Bahamas.
Jurors awarded American Bridge Bahamas Ltd. $17 million in compensatory damages plus $4 million in punitive damages on May 13 after a three-week trial in Miami-Dade Circuit Court.
American Bridge sued to recover payment for contracted construction work done from 2007 to 2009 on a 300-slip marina at a proposed Ritz-Carlton resort in Rose Island, Bahamas. Gencom Asset Management Co., Ritz-Carlton and its parent, Marriott, formed a joint venture to build the $1 billion development with a luxury resort, homes and marina on an island three miles off Nassau, Bahamas.
American Bridge said Marriott led it to believe the hotel group had $30 million to fund an 18-month marina construction project even though emails between executives showed Marriott knew within 30 days that the funding was not in place.
“Marriott was so arrogant about this whole thing. They lied up front about how much money they had. They lied while the project was going on. It was all BS,” said American Bridge attorney Glen Waldman, managing partner of Heller Waldman in Miami. “Ultimately the jury didn’t buy anything they were selling and smacked them around pretty good.”
Gencom principal Karin Alibhai executed a term sheet with American Bridge in March 2006 defining the terms of a joint venture. Gencom issued a series of news releases identifying itself as the project’s developer and later managed major portions of the development from a Miami office even though the company was not registered to do business in Florida, Waldman and colleague Eleanor Barnett said in an amended complaint.
“At all material times throughout the contract negotiations, work on the project and later refinancing efforts, American Bridge and other third parties were led to believe that the Ritz-Carlton on Rose Island was a joint venture between Ritz-Carlton, Marriott and Gencom,” the complaint said.
In July 2007, Gencom and an affiliate, RC Rose Island Hotel Co. Ltd., or RCRI, issued a letter of intent to American Bridge identifying Gencom, Ritz-Carlton and Lehman Brothers Holdings Inc. among the joint venture partners controlling the project. That September, American Bridge won a $32.5 million marina contract.
RCRI was nothing more than the alter ego of Ritz-Carlton and Marriott for the project, and their creation of RCRI was a sham done to fraudulently mislead creditors including American Bridge into believing RCRI would pay its bills, the complaint said.
American Bridge was under the impression the developers secured $80 million in financing and set aside the marina money. It said it later learned nearly half the money was gone by the time the marina deal was signed, spent on commitments to other companies including Marriott and Gencom affiliates.
The marina deal started to crumble within a year, and the hoteliers later blamed the stalled project on Lehman Brothers’ collapse in September 2008, American Bridge’s attorneys said. The construction firm said the money stopped in July 2008.
“All American Bridge Bahamas did was do their job, and they got screwed,” Waldman said.
The firm filed suit in the Bahamas against Ritz-Carlton and Marriott and won a $7.59 million judgment plus 12 percent interest in 2011.
‘Point of No Return’
As early as November 2007, emails between Gencom executives show the developers labored under the cost of the project.
“In essence, we will burn through the remaining $32.5 million loan availability in early June 2008 when total cash expenditures exceed $120 million,” Gencom Group manager director Nicholas Ward wrote colleagues in an email dated Nov. 19, 2007, and presented in court.
By the following May, he was telling them they’d “reached a point of no return as to the pace of work for American Bridge on Rose Island.”
“With the implementation of the slow-burn strategy at the end of March, you will recall we are going to instruct AB by April 30 to shut down all onsite works by May 31,” Ward wrote May 5.
An Aug. 11, 2008, message read: “Guys, we are in a pinch. Out of monies as you know and AB is on the scent.”
A series of emails on Sept. 24, 2008, showed several Marriott executives discussing the need to find financing for the project but expressing skepticism that they could.
The developers’ attorneys declined comment. Arnstein & Lehr represented Gencom, and DLA Piper represented Marriott and Ritz-Carlton.
The Miami jury found the developers fraudulently and negligently misled American Bridge about the project’s funding and fraudulently induced the construction firm to enter the contract. The jurors assessed punitive damages of $2 million against Gencom and $2 million against Marriott.
“The bigger implications are for all these corporations that try to hide behind these shell companies,” Waldman said. “Unless you do the right thing, you’re going to get spanked.”