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WEDNESDAY, MARCH 8, 2023
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Chief Justice exposes ‘fronting’ on Bay Street • ‘Illegality major part’ of deal involving Skandaliaris family • Cosmetics store tried to ‘circumvent’ Bahamians owning • VAT, Business Licence, Immigration, NIB laws breached
By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net THE CHIEF Justice has ruled that “illegality was a major part” of a Bay Street retail ‘fronting’ deal involving one of Nassau’s most prominent Greek-Bahamian families. Sir Ian Winder, in a March 3, 2023, verdict, found that ZRK Ltd, owned and controlled by the Skandaliaris family, had signed an agreement with two US investors that was designed to “circumvent” the National Investment Policy’s stipulation that retail businesses are reserved for Bahamian ownership only. The deal, which involved the operation of a Bay Street
SIR IAN WINDER beauty and cosmetics store under the Truffoire/Lionesse brand names, is “oft described in the Bahamian vernacular as a ‘fronting operation’”, he noted. And Sir Ian said the venture appeared to have violated
multiple Bahamian laws including those related to Immigration (work permits); the VAT and Business Licence Acts; payment of National Insurance Board (NIB) contributions; and exchange controls. The Chief Justice’s verdict thus shines a rare light on the long-known practice of Bahamians ‘fronting’ for foreign investors so that the latter can secretly operate businesses in sectors of this nation’s economy purportedly reserved for local ownership only, while hiding their control and earning most - if not all - the profits that are then sucked out of this jurisdiction. Tribune Business has over the years received multiple complaints and allegations of such
Bahamians to gain 49% stake in Royal Caribbean PI project By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net THE GOVERNMENT last night said it has approved Royal Caribbean’s $110m Paradise Island beach club project after negotiating greater Bahamian ownership and entrepreneurial participation in the development. Chester Cooper, deputy prime minister who also has responsibility for tourism, investments and aviation, said in a statement that the Davis administration believes it has resolved all “previous objections” to the cruise giant’s plans by ensuring more Bahamian involvement “at all phases” of its construction and operation. Stating that specific activities at the Royal Beach Club, including water sports, entertainment and food and beverage, will be reserved for local
• Gov’t: ‘Previous objections’ to $110m deal resolved • To convert leased Crown Land to ownership interest • Pledges ‘greater Bahamian participation’ in all phases businesses and entrepreneurs, he pledged that Bahamians will also be able to invest in the project and collectively take a 49 percent equity ownership stake. This would leave Royal Caribbean owning the majority interest.
As for the Crown Land being leased to the cruise giant, Mr Cooper said the Government planned to also convert this asset into an ownership stake in the development that would be held by the country’s sovereign wealth fund, now known as the National Investment Fund. It is unclear how much Crown Land will be leased to Royal Caribbean as the Government’s statement did not specify the quantity. Both the cruise line and the Government had been embroiled in a long-running battle, including in the Supreme Court, with Bahamian entrepreneur, Toby Smith, who has asserted he has a binding lease for at least two Crown Land acres that Royal Caribbean is seeking to use in its project. Mr Smith declined to comment when reached by Tribune Business last night, but the go-ahead for the cruise giant - likely formalised at
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Condo hotel tax now takes ‘effect’ By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net THE BAHAMIAN resort industry was yesterday said to have “got 90 percent of our asks” over the new condo hotel tax which has now come into effect some eight months after it was first unveiled. Robert Sands, the Bahamas Hotel and Tourism Association’s (BHTA) president, confirmed to
Tribune Business that the new tax - designed to ensure the Public Treasury gains its fair share of income from hotel condos and units included in hotel pools - is “in effect” after being introduced in last May’s 2022-2023 Budget. “I am aware that the Department of Inland Revenue is doing the rounds of various properties and getting information to come up with assessments,” he said. “They’re doing an
assessment of valuations, which I know that they are working on. I am aware that the regulations and guidelines have gone out, and that it has passed and become law.” One hotel industry source, speaking on condition of anonymity, told this newspaper that the sector had largely obtained the clarity and tax structure it had been seeking following several months of talks with the Government on
how the condo hotel tax would be applied and function in practice. “The industry is very satisfied with the guidelines and got 90 percent of our asks,” the source said. “They’re going to calculate it on the residential rate. Previously, if they didn’t meet the threshold they would have to pay the VAT and the real property tax. Now they have got to pay
practices, but those making the claims have either failed to provide supporting evidence or declined to place their assertions ‘on the record’. This has made it extremely difficult to investigate such arrangements, but Bay Street retailing - especially in the luxury goods and cosmetics area - is a sector where ‘fronting’ complaints have frequently surfaced. The case involving the Skandaliaris family only came to light as a result of the two foreign investors, Tal Nemzer and Zvi Yosifon, initiating Supreme Court legal proceedings against them in 2017 for alleged breach of the two sides’ management agreement and purported
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Bahamian liquidators fire FTX warning shot By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net FTX’s Bahamian liquidators yesterday warned their US counterparts that the failed crypto exchange’s $446m claim against another digital assets firm will not be resolved unless their interests are satisfied too. Brian Simms KC, the Lennox Paton senior partner, and PricewaterhouseCoopers (PwC) duo, Kevin Cambridge and Peter Greaves, argued that there will be no “global peace” in FTX’s battle with Voyager Digital unless the Bahamian liquidation estate’s potential claims are also satisfied. In legal filings with the Delaware Bankruptcy Court, the trio moved to “preserve their rights” to recover assets belonging to Bahamas-based FTX Digital Markets and its clients/creditors that may have been loaned or otherwise transferred to Voyager via Alameda Research, the speculative trading entity owned by
BRIAN SIMMS KC fallen FTX co-founder, Sam Bankman-Fried. They acted after John Ray, the FTX Trading chief responsible for the 134 entities in Chapter 11 bankruptcy protection in the US, sought the Delaware court’s permission to enter into an agreement with Voyager that sets out a road map or pathway for dealing with the two sides’ competing claims against each other. Included in these claims is FTX Trading’s bid to recover some $446m it alleges was “preferentially transferred” to Voyager by Alameda Research, with
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FINCO’s repossessed collateral jumps 30% By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net ROYAL Bank of Canada’s (RBC) BISX-listed mortgage arm narrowly beat prior year comparatives with $40m in profits for the year to end-October 2022 following recovery of more than $16m in credit loss provisions. Finance Corporation of The Bahamas (FINCO), unveiling its full-year financial statements, disclosed
a 2.2 percent year-overyear net income increase that was driven by the further “release” of credit losses on loans following the Bahamian economy’s continued recovery from COVID-19 and rebound in employment levels. Profits rose by less than $1m, increasing to $40.095m as opposed to $39.236m for 2021, but in common with other Bahamian commercial banks it was not driven by top-line interest income growth
or loan book expansion. Interest income fell by almost $1.8m yearover-year, dropping from $42.346m to $40.558m for the 12 months to endOctober 2022. With interest expense down due to lower deposit rates, FINCO’s net interest income fell by 3.2 percent to $34.788m compared to $35.93m the prior year - a fall of just over $1m. Total revenue was off 3.4 percent year-over-year, standing
at $36.465m as opposed to $37.755m. However, non-interest expenses such as staff and administrative costs fell by more than $700,000 yearover-year to $13.283m. And the “release” of credit losses on loans rose to $16.216m compared to $15.698m the year before. The improvement in these two lines items was largely responsible for driving FINCO’s modest bottom line improvement.
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