- ContributedA balloon is let off in celebration of the official opening of Ciboney Ocho Rios on May 17, 1991. Among those in the foreground: Peter Rousseau, left, then Prime Minister Michael Manley, second right, then Minister of Tourism, Frank Pringle, third right, then Ciboney Chairman Dr. Paul Chen Young, right.
Barbara Gayle, Staff Reporter
THE CONTENTIOUS legal battle between the Financial Sector Adjustment Company (FINSAC)-controlled Ciboney Group hotel operations and the Group's former bosses, Ivor Alexander and Peter Rousseau, could soon be settled out of court.
Attorneys said last week talks were close to being finalised for an out-of-court settlement in the multi-million lawsuit brought by FINSAC controlled Ciboney Group Ltd. against seven defendants including a little known provident society Neuson Ltd., Ivor Alexander, Peter Rousseau, two former directors of Ciboney, and two Caymanian companies. The deal would also see counter claims made by Mr. Rousseau and Alexander settled as well.
The FINSAC case was placed on the Court of Appeal's cause list last week but was not set for hearing this week.
Attorney John Vassell, from the law firm Dunn Cox Orrett and Ashenheim who is representing the FINSAC owned plaintiffs, confirmed that a settlement was pending.
When the Ciboney Group collapsed due to a huge pile of debts in September 1997 many thought that was the end of a long and contentious business tale. Government agency, FINSAC had effectively gained control of the hotel group through its ownership of the Crown Eagle Insurance Company, thus sealing the fate of the much fought-over company.
Decline
Ciboney's fall from grace was relatively swift since listing on the Jamaica Stock Exchange (JSE). After-tax profits of $84 million fell consistently since 1993. Late in 1997 its shares were suspended from the Jamaica Stock Exchange at 40 cents, a dramatic decline from a 1993 high of $7.50.
The slide appears to coincide with the general malaise in the economy and another of its now infamous legal wrangles. Four years ago Ciboney Group directors and driving forces Peter Rousseau and Ivor Alexander fought and won a bitter battle against then Crown Eagle boss Dr. Paul Chen-Young, but the Group's fortunes languished ever since.
Even after FINSAC took over as a major shareholder and creditor, it had to pay US$250,000 to buy out Mr. Rousseau and Mr. Alexander's controversial management contract, which controlled the running and marketing of the Ciboney Group hotels.
In June this year Finance Minister, Dr. Omar Davies, said Ciboney Ocho Rios hotel had been offered under lease to Gordon "Butch" Stewart's Sandals Resorts International (SRI).
According to the Minister, an agreement in principle was reached for the lease to take effect from September 1, for a three-year term, subject to the drafting of a formal agreement. Sandals is to pay US$180,000 every month for leasing the property but can buy it outright for the option price of US$17.5 million after Ciboney's legal issues have been resolved. The option price will be maintained for the period of the lease in which time, "Government expects that the legal obstacles to a sale will be removed," Dr. Davies said at the time.
The dispute that is close to being settled was initially described as the 'mother of all disputes' over who had the right to assets of the publicly quoted company.
At the heart of the latest legal battle is debts owed to a little known Jamaican provident society, Neuson.
The society claims that the hotel group owes it hundreds of millions of dollars and wants to foreclose on property controlled by Ciboney, which was pledged as collateral.
Ciboney Group and associated companies, backed by FINSAC, are resisting the bulk of the $435.8 million claim, made by Neuson in February 1998. Instead, Ciboney argues that Neuson, is 'beneficially owned or controlled by Messrs Alexander and Rousseau' and possibly another former Ciboney Group board director Ambassador Francisco Soler.
The FINSAC-backed Ciboney, along with Ciboney Hotels Ltd. and Luxury Resorts International Ltd. had filed the suit last year in the Supreme Court. It claimed that investigations showed that between December 31, 1995 and November 1996, Mr. Alexander and Mr. Rousseau on behalf of Luxury Resort International, then a subsidiary of the Ciboney Group Ltd, borrowed monies amounting to US$1,780,388 with interest at 20 per cent and $71,082,376 with interest at 50 per cent compounded from Baanq, a Caymanian company. The loans were unsecured.
FINSAC's Ciboney is contending that Baanq, formerly Luxury Resorts, was in fact owned by Mr. Alexander and Mr. Rousseau. The plaintiffs are also accusing Mr. Alexander and Mr. Rousseau of failing to disclose their respective interests in Baanq to the Board of directors of the plaintiff companies.
In addition they accuse the defendants of failing to seek or obtain the prior authorisation of the plaintiff's board for the loans. They also complained that the rates of interest were higher than most of the other "borrowings" of the plaintiffs.
It is the plaintiff's contention that the accounts of Ciboney Group Ltd. and Luxury Resort International showed other purported loans from Baanq in the sum of US$2.7 million, inclusive of interest.
Those funds were never disbursed to the plaintiffs. In the suit filed, the plaintiffs are asking the court to make an order for account of monies purportedly loaned and expended by Baanq.
Repayment
The plaintiffs are also seeking an order for repayment of the sums found to be due to the plaintiff. The plaintiffs are contending that Neuson is a Caymanian Company which was owned and operated by Mr. Rousseau.
But Mr. Alexander fired back in his defence. He is contending that the plaintiffs' accounts and financial statements which reflected borrowings from Baanq were audited and thereafter approved by the Plaintiffs' board of directors.
Mr. Alexander stated that the plaintiffs financial statement and accounts were audited annually by the plaintiffs' independent auditors, KMPG Peat Marwick, and thereafter approved by the plaintiffs' shareholders in annual general meeting.
The plaintiff's financial statements for the financial year ending May 31, 1996 confirmed that loans had been made by Baanq to the plaintiffs in the total sum of $159,175,010, Mr. Alexander contends.
It was disclosed that the loans were a mix of local and foreign currency loans repayable on different dates during 1997 to 1998 at rates ranging from 50 per cent per annum and secured by a charge on specific assets.
Mr. Alexander claims further that the plaintiffs are stopped and precluded from alleging that the loans from Baanq were unauthorised or in any way improper. He also denied that he and Rousseau exercised day-to-day executive control over the operations, business and activities of the Ciboney Group Ltd.
During December 31, 1995 to November 1996, Luxury Resort International borrowed from Baanq to finance the development of its projects in particular the acquisition of the Seawind Hotel, which loans were evidenced by promissory notes and reflected in the accounts of the plaintiffs.
Mr. Alexander also denied that he or Mr. Rousseau controlled Baanq or were beneficial owners. He said their interest in Baanq, which was formerly named Luxury Resort Marketing Ltd. was as nominee shareholders and he (Mr. Alexander) was co-attorney and such matters were discussed to the board of directors of the plaintiff companies.
Mr. Alexander denied that he or Rousseau failed to seek or obtain prior authorisation from the plaintiffs' board of directors for the borrowings from Baanq. He said further that they had been expressly delegated and empowered by the plaintiffs' board to negotiate loans. Mr. Alexander said such authority was confirmed by a resolution of the plaintiff's board dated November 16, 1990 and further affirmed by resolution passed on January 20, 1992 and signed by Dr. Paul Chen Young the then chairman of Ciboney Group Ltd. and its subsidiaries on February 23, 1993.
After the suit was filed Mr. Alexander requested further and better particulars from the plaintiffs but his summons was dismissed by Justice Marva McIntosh.
Mr. Alexander appealed the judge's ruling but on June 2 this year, attorney Allan S. Wood, of the law firm Livingston Alexander and Levy, who is representing Mr. Alexander, informed the Registrar of the Court of Appeal that "there is a settlement pending in this matter and in the circumstances, the parties to the appeal are jointly requesting that the appeal for week June 5, 2000 be removed from the list."
The other defendants to the suit are Francisco Soler, John Ross and Resort Management Associated Ltd.
Mr. Soler is a national of El Salvador and a businessman and chairman of International Bank of Miami in which the plaintiffs did business. Mr. Ross is an attorney and a director of Ciboney Group Ltd. Mr. Ross was appointed executive vice-president and general counsel of Ciboney in 1994.
