Ritz law suit a threat to CI

| 08/03/2012

RitzCarltonGrandCaymanParent.jpg(CNS): The opposition leader has warned that the impact of the legal action against the owners of the Ritz Carlton, Grand Cayman could pose a threat to the Cayman Islands reputation and tourism industry. Alden McLaughlin has said that for all of the issues surrounding the development of the internationally branded resort, and those since, it has been a boost to the islands tourism industry and its closure would be detrimental to business and Cayman’s standing. While the PPM leader said the outstanding $6 million duty was also of significant concern to government, as it was very unlikely the public purse would now recoup that debt, the hotel closure could be even worse.

McLaughlin was the first person to query the stalled duty payments publicly when he raised the issue during question time in the Legislative Assembly in September 2010. The premier admitted that the developer, Michael Ryan, the owner of a number of companies linked to the hotel, had ceased making payments on a debt to the public purse of some $10 milllion, despite there being more than $6 milllion still owing.

Government officials have recently confirmed that it is several months since they last had any contact with the developer regarding the negotiations for a new payment plan.

Given the current circumstances after a creditor filed legal action in the Grand Court last month in an effort to take control of the Ritz, McLaughlin said the chances of the Cayman Islands Government now recovering the outstanding duty were not good.

“The government’s claim would be pretty low on the totem pole as it is an unsecured debt,” the opposition leader said, if the hotel was to be taken over by creditors. But given the circumstances, government was now unlikely to be agitating as they should be for the money, he added.

Notwithstanding the significance of that amount, McLaughlin pointed to the risk of the hotel closing, which he said could have a much greater impact on Cayman as a whole than the missing duty. The opposition leader said the closure would impact the islands’ image as a high end tourist destination as well as directly affect tourism related businesses. Even ifgovernment can’t recoup the debt to the public purse, McLaughlin said, it must do all it can to keep the hotel open.

The opposition leader noted that the duty should have been recovered by now as under the previous administration the developer was obligated to pay back the waiver from the Ritz before the PPM administration agreed to new concessions for a proposed new development at Dragon Bay. He said the government, of which he was a part, had made it clear that new concessions could only be granted on the basis that the previous duty waivers, which became due after the hotel opened, would be repaid.

Ryan’s companies stopped paying the quarterly instalments immediately after the UDP government was returned to office and has made no payments since March 2009.

Independent member for North Side Ezzard Miller said he wanted to know what had changed after the May 2009 election that allowed the developer to stop making the payments, especially now that it was clear the $6 million of public money was in danger of never being repaid. He said the finance ministry should be taking steps to protect the government’s claim in case the results of the pending legal action do not go in Ryan’s favour.

“We need to establish if the Cayman government could be a legitimate creditor,” Miller added.

In 2010 the premier said that there was little risk that the money would not be returned when he told the Legislative Assembly that the Ritz developer was seeking a new payment plan but, Miller pointed out, 18 months later there was now a very demonstrable risk that the money would not be returned.

In addition, as the developer had not made any effort to pay government any money for almost three years, Miller said he believed there did not appear to be “any real intent on his part to pay it back either”, never mind the risk that Ryan’s legal dispute now raised about his ability to pay going forward.

See related stories:

Rritz-duty-still-not-paid

Ritz-carlton-faces-takeover

See details of legal action here
 

Category: Local News

Comments (35)

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  1. Just Commentin' says:

    Woah! Hold on a minute. Something about this deal stinks to high heaven. How can this be "an unsecured debt"?? In every case I am aware of regarding duty concessions that involve actual or potential repayment of duty involving real property, until the duy is settled a restriction is registered against the property prohibiting dealings with the property without the express permission of the Financial Secretary. In other words there is what amounts to a lien placed on the land that remains until the matter of outstanding duty or attached conditions are satisfied. You can not get better security than a restriction on the land. I should assume that the same applies in the Ritz case; unless of course the concession was structured by morons who did not care about protecting government's interest.

     

    I find it apalling that just because you're a Big Player you can just walk away from a $6-million debt. In my businesses Customs goes over my import invoices and customs forms with a fine-tooth comb and I do not collect my goods until every penny of duty due is paid. I once got extra stamp duty assessed because I got a good deal on a property, but the duty assessors thought it was too low and charged me full duty on the market value of the property. I know people cheat the system by putting a low amount on the land transfer but mine was a legitimate price.  

     

    What kind of an expample does this Ritz free pass set? The small businessman who is honest about import invoices and land transfers and who pays his dues gets no break. When we travel and return home with goods purchased abroad we have to declare of every penny of duty and there are dire warning signs posted telling of severe penalties for wrongly declaring. So we declare and pay up and are still met with overzealous customs officials who go over our receipts and goods with a microscope as if we were smuggling diamonds.

     

    The little man pays every penny up front, but if you are a foreign big bux investor you get a free $6-million pass. Absolutely astoundingly apalling!

     

    If government does not do their utmost to collect this debt, I cannot blame people for trying to cheat the system in the future and try to get away with all they can get away with. Scalawags and deadbeats are apparently welcomed here. I am almost sorry for not being a scalawag and a deadbeat; at least I would have more money saved and I would be in excellent company.

     

  2. Anonymous says:

    If it weren't for the kajillion people that would be displaced from work I'd say demolish it, turn the property into a public beach/park and never ever let another developer touch it.  the value of the beach front land should cover the 6 million owed plus it would be nice to give some of SMB back to the people of this nation.  Just sayin…

    • Anonymous says:

      Don't hold your breath. Mac is busy giving away beach front views not taing them back.

      • Anonymous says:

        You just come here or wha? beach views were given away before Mac  joined the political arena. Or maybe you fool fool!!!

  3. Anonymous says:

    I wonder what the latest shareholder dividends were?  Anybody know?  My guess is that the $6M owed to the CIG is going into the very deep pockets of the sharholders?

  4. EYE ON THE ISLAND says:

    Why do top political leaders take us to be so stupid?

  5. Anonymous says:

    Please can the government PUBLICLY ask Mr. Ryan for a personal guarantee for the $6m debts to show his long term commitment to Cayman?  You see my children's education might depend on that money being paid and I would hate for it all to be lost in liquidation and a flight away from Mr. Ryan's new "homeland".

  6. EYE ON THE ISLAND says:

    Why is Alden falling short on vision and leadership? He is missing the bus on many things. If he is worth his salt, he would be demanding that Ryan pay the CI government the $6 million. No bailout for Ryan and no siding with Mac. Concerned people please let him know.

  7. Anonymous says:

    What hurts Cayman is taking a private sector matter beyond regular reporting, and transforming it into a political spectacle, while fanning the fire to make sure it keeps burning on the world stage.

    There is absolutely no gain for Cayman in taking that approach, there is only a perceived political gain for the members promoting and enhancing the financial problems this company may be facing.

     

     

  8. Anonymous says:

    Whatever you do don't touch a road !!! If I were Dart I'd build a series of 5 story condos Beachfront on that 2500ft that they do already own with the hotel purchase and turn the the dilapidated hotel into a private club. In fact, make the whole yacht property private because, I've never seen a more unappreciative population. Meanwhile, Ryan owes 6 million to the Cayman purse and may lose the Dragon Bay development. Show me another Cayman Investor willing to forgor an ROI for twenty years? Where's Ugland's or any of the local gazillionaires dollars in Public Parks, Caymanian jobs and Caymanian infrastructure investment??

  9. Anonymous says:

    The individuals that are demanding their money from Ryan have no interest is closing the Ritz.  They are wanting to take control of the the property in order to recoup the  monies owed them  The Ritz will remain in business it is foolish to think otherwise.
    I see both sides setting up things up to bail Ryan out at the peoples expense.  This would be a travesty.

  10. Anonymous says:

    The biggest threat to these islands is our "Premier" package!

  11. Anonymous says:

    Alden – What the he!! – get with the programme or step down. The response to Mac's opposition to one man one vote is not "well you know the man has a point", and the response to the – shall we call it coincidence -of the duty payments on the Ritz project stopping as soon as Mac is back in power is not, "well it could be worse'. There are very serious and very obvious problems that you need to show leadership on or you should step aside and let someone else lead this country back to law, order and prosperity. 

  12. Anonymous says:

    Too big to fail… I call BS

  13. Anonymous says:

    This story just highlights how out of touch Alden McLaughlin is with reality. thanks CNS.

    • Anonymous says:

      Every company is calling in receivables, why would Government not do the same? The Ritz is touted as having the highest occupancy rates year round, and its not ppl with only 200 dollars in their pockets that can stay there, more like ppl with 200,000 or two million in their pockets. I said that to make the point that the rooms are not renting for discounts, but are going full price, and most likely the most expensive rates in the Cayman Islands.

       

      So, if the hotel and Ryan are getting high occupancy at their requested rates, what is the problem with the duty payment being made? Is it the high salaries being paid to Ryan and the other current directors or owners of the companies that is causing there not to be enough money at the end of the day to pay CI Govt?

       

      My name is more important to me than money, I would pay my debts before paying myself a salary.

      • Anonymous says:

        Step 1. Local reasl estate company purchases land from Holiday Inn.

        Step 2. Sell land to Ritz

        Step 3. Give major concessions to developer of Ritz

        Step 4. Get nice condo at Ritz (or two).

        Step 5. PPM gets into power. Payments on said concessions commence.

        Step 6. UDP back in power. Payments stop.

        Step 7. Condo sold

        Step 8. Ritz into administration, everyone lines up except Govt to collect outstanding bils.

        Hmmmm, see any correlation?

  14. Anonymous says:

    It's cool. Look how nice the old Hyatt on the land side looks.

    I smell a "Bailout"! soon come.

  15. Anonymous says:

    Stop confusing the Developer with The Ritz-Carlton. They are NOT the same. Just because one has a lawsuit filed by a lender does not mean the other is either going to close down or that the business model is not working. The Ritz is not managing the Developer, it is managing a property that happens to be owned by that Developer. Get your facts straight.

    • Anonymous says:

      The biggest red flag of all is that Cayman's "leadership" is too dumb to comprehend what is actually going on and who the parties are.  If it were not so sad it would be funny.

      • Anonymous says:

        " the PPM leader said the outstanding $6 million duty was also of significant concern to government, as it was very unlikely the public purse would now recoup that debt, the hotel closure could be even worse"

        Most sensible thing ALDEN has said in a long time. Maybe he is maturing.

        • Anonymous says:

          Forcing the developer to pay the money that is owed will have no effect on the hotel operations!

  16. Anonymous says:

    What about DIVI/  Why just Ritz Carlton which is an expensive chain whom I'm sure is not going to let it fall by the wayside?

    Alden you're showing weakness.  You should never say you need someone.  That gives them the control. Cayman Islands is being controlled by others.  Time to stop this crap and take back your country.

    • Anonymous says:

      I'm so glad you mentioned Divi. We are part time residents on the Brac and have a property here. We "found" the Brac 21 years ago when we stayed at Divi Tiara. For the next 5 years we holidayed at Tiara once or twice every year until we bought a property. We have watched its demise with huge sadness, mainly for all the loyal Brackers who worked there, and not for "good" wages!!!!. We walked the beach there 2 days ago, it's an absolute travesty that this Government doesn't get its A** in gear and compulsorily purchase this beautiful piece of property back from Divi for the benefit of Brackers AND tourists. The beach is overgrown, covered in litter, the old swimming pool is a "HEALTH HAZARD"!!!!, AND THE WHOLE SITE SHOULD BE DEMOLISHED!!!!. Come onn McKeeva show the Brac you are serious about sorting this disgraceful mess out, as you said you would a couple of years ago.

  17. Anonymous says:

    The Bush govt has no plans whatsoever to amend the Companies Law to fall into step with the rest of the developed world and allow the public to identify individuals behind ownership/directorship of certain companies. The type of companies that are used to own appartments in the Ritz.

    The Developer stopped paying Govt the $6m debt repayments immediately the Bush government was elected, and no efforts since to seek repayment seem to have even been made.

    Come on Cayman, its staring you in the face!

     

     

    • Funny Ha Ha says:

      Ironic isn't it when Cayman suffers from its abusive corporate secrecy just like the developing world has had to suffer fordecades?

  18. Anonymous says:

    The Ritz has been of great net-benefit to the Cayman Islands, in spite of all the alleged irregularities. Keeping everything going through the recession must have been a daunting challenge. Anyone in business should acknowledge that.

  19. Anonymous says:

    Mr. M, Why did you not say this about the Westin, Marriot (Holiday Inn) and the current Marriot. The old owner of these trhee properties just handed the keys over to the banks and no one said a word? This guy was worst than Mr. Ryan, once he made his money he let the properties go to hell then just left them and now has left the island with millions doing nothing for these islands, in fact i recall him kicking Caymanians off the beach stating it was his property and Caymanians were not allowed.

    Mr. M, go speak to the owner of the old Hyatt, i thought he was going to be fined $25,000 per day if he did nothing with the property. He has done nothing with it, How much does that guy owe the Cayman Islands now?

  20. Anonymous says:

    So if a politician's net worth goes up a huge amount for "fixin tings" and one or more developers gets even richer for having "tings fixed", what do you call that?

    I know that it can't be corruption because politicians don't see any need to have either tough anti-corruption laws or an adequately funded and staffed anti-corruption agency.  

  21. EYE ON THE ISLAND says:

    The law is the law. Don't let these chicken sh_ _ politicians tell you that our country will suffer if Ryan's hotel falls. The chain has many buyers standing by that will snap it up at the drop of a hat. DO NOT BE FOOLED. This property is solid as gold and the only one that will lose is it's present owner. They can't move this hotel smart fella. It will change hands very smoothly. Alden stop playing games with the people and fight to collect our 6 million.

  22. Chris says:

    Mr. Opposition, when faced with a threat it is up to you and the government to propose a solution.

    Let us stop and take stock…..why is it that so many businesses are failing in Cayman all of a sudden?

    The same model of capitalism that appeared to work for Cayman in the past seems to no longer yield the desired results.

    May i humbly suggest that the huge fee increases instilled by government along with the astronomical insurance rates and insane energy costs and mandatory pensions in a labour intensive business make it almost impossible for businesses to be profitable in Cayman any more. These expenses need to be reduced.

    Another solution is to dialogue with other hotel brands interested in establishing a presence in Cayman and have a seamless transition to a new owner who may have a business model that is more efficient than what the Ritz is operating under right now.

    The worst case scenario is for the CI Government to consider some kind of "bail out" for this entity….after all they already owe us $6million so if the business is liquidated lets hope CI Govt is first in line as creditor…..after all the hotel is still on crown land.

  23. Anonymous says:

    R-C will never let one of their branded resorts close down, this is all nonsense.

    The real problem with R-C Cayman is that it was bankrolled by an out of control Royal Bank of Scotland (RBS) at a time when responsible lenders would have turned the development down.

    The true victims here are the UK tax payers who bailed RBS out.

     

     

    • Anonymous says:

      But who are the villains? The victims are easy to identify, the CI people among them, the villains would be those that gave Ryan special treatment, first to have the law changed over building height, then to overlook his duty payment. Whoever did those things should be identified, anyone out there got any ideas who it may be?