
The Ghosts of Baha Mar: How a $3.5B Paradise Went Bust - pavornyoh
http://www.bloomberg.com/news/articles/2016-01-04/the-ghosts-of-baha-mar-how-a-3-5-billion-paradise-went-bust
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ChuckMcM
I wonder what the full story is. As told it would paint a pretty bad picture
of Exim and Chinese construction labor. Presumably its out there to try to
discourage people from dealing with Exim (a cautionary tale of the form "This
happened to this guy, don't let it happen to you.") but I doubt that tactic
will really work unless the story gets a lot more traction.

And this is the part I don't understand (and conversely why I think there is
more to the story); If you are in a contract with a 'no fire' clause, then you
only get there by adding 'final approval' clause. That is to say you have
final approval on the work performed and if it isn't up to your standard the
contractor will re-do it at their expense until it is to your standard. Your
only method of putting pressure on the contractor is to deny approval, thus
increasing costs which cuts into profits. The people who were enriching
themselves on those profits won't want to give them up to re-work costs, and
will put pressure on the workers and their supervisors to avoid failing
approvals.

So if you don't bother to inspect, and you sign off on work that later fails,
you are at fault. While it may be considered rude and unprofessional, there
are a lot of people who feel that getting away with extra money while
following the letter (if not the spirit) of the agreement as a great pastime.
Manufacturing and construction is an area where such people can really turn a
small short cut into a big payout for themselves. You have to realize that
going in, and they won't be mad at you for calling them on it when its allowed
and they will be very pleased when you miss out your opportunity (they
consider that a 'win'). You will meet these people during your career, treat
them appropriately.

~~~
fweespeech
> Then the 2008 financial crisis hit, and would-be partners balked. When China
> State Construction Engineering Corp., the world’s second-largest contractor,
> approached Izmirlian about stepping in, he said yes. The company directed
> him to Export-Import Bank of China, or Exim, which promotes trade and
> investment under the direction of Beijing.

> Seeing a way into U.S. markets, China State Construction promptly invested
> $150 million. Exim kicked in $2.45 billion in construction loans -- with the
> proviso that Izmirlian could never fire the Chinese builder, no matter what,
> and that workers from China would do the job.

It seems his business partners ditched in 2008 and he agreed to a bad contract
to salvage the project via an Exim loan.

> In May 2014, Izmirlian appealed to an independent mediation service based in
> Washington, D.C., but the troubles multiplied. Pipes burst when inspectors
> tested the fire sprinklers and faulty balcony railings had to be reinforced,
> people with knowledge of the construction said. When Izmirlian complained,
> China delayed its money, one said.

Exim then used its control of the purse strings to put the screws to him
whenever there was a problem.

> Christie says he’s still optimistic the resort can open. In December, Exim
> said a number of potential investors had expressed interest. These include
> Guo Guangchang, chairman of a non-state Chinese conglomerate called Fosun
> Group, people familiar with the situation say. Fosun already owns stakes in
> Club Mediterranee SA and Cirque Du Soleil Group.

Yeah. :/ He should have abandoned ship the moment he needed an Exim loan.

~~~
ChuckMcM

       > Yeah. :/ He should have abandoned ship the moment 
       > he needed an Exim loan. 
    

Exactly, and that is where I'm hung up in this story. Since he's apparently
had some experience here and he _didn 't_ abandon the project, I would have
expected that the contract language would protect him from the situation he is
currently in. That it didn't makes me wonder why he agreed to it in the first
place. Reminds me of the joke about looking around the poker table to spot the
sucker, if you can't spot the sucker then YOU are the sucker.

~~~
foobarian
I don't really see what good a contract would do. It's probably worthless in a
Chinese court where it would matter.

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saumil13
Both Izmirlian and the Bahamian govt were naiive with Chinese business
culture. Contracts have zero value.

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wehadfun
Seems pretty stupid to agree that the construction company could not be
replaced.

~~~
mfoy_
If you can't fire them, how can you possibly hold them accountable?

From the article: >“Baha Mar Ltd.’s decision to file for bankruptcy is the
direct result of its failure to secure adequate financing and its
mismanagement,” the Chinese company told the court.

Which is ironic, because it essentially translates to "By agreeing to use a
construction company that couldn't be fired, what did you expect? That's just
plain mismanagement right there!"

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kevin_thibedeau
Seems a little dumb not to build half of the resort first and develop a
revenue stream while preparing for the second phase.

