PETALING JAYA: Genting Group has been accused of dumping nearly a billion dollars of debt on a small island-resort and casino in the Bahamas, some 50 miles from South Florida.
Calling it “a massive and coordinated fraud”, the Capo family of Miami is suing Genting Americas Inc for at least RM2.6bil (US$600mil), based on a court filing sighted by StarBiz.
Incorporated in Delaware in the United States, Genting Americas currently controls the Genting Group’s entire operations and properties in Miami, New York and the Bahamas.
Genting Americas is an affiliate company of BB Entertainment Ltd, which in turn is a joint-venture that is 78% owned by BB Investment Holdings Ltd and 22% owned by RAV Bahamas Ltd.
BB Investment is 100% owned by Genting Malaysia Bhd
. RAV, on the other hand, is fully controlled by the Capo family.
BB Entertainment runs Resorts World Bimini in the Bahamas. It is a 10,000 sq ft casino, a 305-room hotel with surrounding restaurants, lounges and a jetty used to dock cruise ships.
RAV had on Oct 7 filed a lawsuit against Genting Americas before the US District Court Southern District of Florida, seeking damages in excess of US$600mil.
In a filing with Bursa Malaysia, Genting Malaysia has labelled the lawsuit as “baseless and totally without merit”.
“(Genting Malaysia) will vigorously defend against the complaint.”
In the court filing, RAV said it has transferred to BB Entertainment approximately 20 acres of land, which is where Resorts World Bimini now sits.
The first batch of four acres of land transferred in 2013 was valued at US$12mil, while another 16 acres transferred a year later was valued at US$25.5mil.
To date, RAV said that BB Entertainment has not distributed any profits from this venture because Genting Americas, which controls BB Entertainment’s finances, “has used BB Entertainment as its financial wasteland”.
“Through its stranglehold over BB Entertainment and its finances, Genting Americas has used BB Entertainment to conceal a medley of fraudulent activities.
“What is clear is that Genting Americas’ fraudulent accounting practices have drowned BB Entertainment in hundreds of millions of dollars in illegitimate debt.”
BB Entertainment’s audited financial reports for 2022 reflect total liabilities of US$885.18mil. RAV noted that 99.4% of BB Entertainment’s total liabilities in 2022 constituted monies owed to Genting Malaysia’s subsidiaries.
“Only a massive and coordinated fraud could dump nearly a billion dollars of debt on a small island resort, where RAV had already developed most of the significant infrastructure.
“Genting Americas buried the nearly billion-dollar liabilities in consolidated statements using vague categories of expenses to conceal the fraud from RAV.
“Genting Americas, at every turn, has deliberately kneecapped RAV’s efforts to obtain clarity into the financials, including denying RAV full access to BBE’s financial records, and denying its requests for an independent audit.
“This lawsuit seeks the damages that Genting Americas’ continuing fraud has caused, which include, but are certainly not limited to, rendering RAV’s contribution to BB Entertainment (the 20 acres of land) entirely worthless,” according to RAV.
RAV further alleges that only an outright fraud can explain how a small island-resort that averaged US$22mil in revenue per year for 10 years, can accumulate almost a billion dollars of debt in that same span.
“No commercially reasonable actor would incur US$89mil of costs and interest per year to operate a small hotel that generates US$22mil in revenue per year,” it added.
TA Research senior analyst Tan Kam Meng agrees that the accusations are baseless, on the basis that Genting Malaysia’s accounts are audited by PwC Malaysia.
“I will give the benefit of the doubt to Genting Malaysia at this juncture. If there is fraud, the auditors would not certify the accounts.
“Genting Malaysia also thinks that it has a strong case looking at its filing in Bursa Malaysia. Hence, I would not change my earnings projections at this moment,” he said.
With regards to the lawsuit amount of US$600mil, Tan said Genting Group had the financial muscle to settle the amount, should the charge materialise.
“They will probably be able to find a way to settle US$600mil,” he said. It is noteworthy that Genting Malaysia’s cash and cash equivalents stood at RM5.4bil as at the six months ended June 30, 2024.
The company also had RM30.9bil worth of assets as at June 30, 2024.
On the other hand, Genting Bhd’s cash and cash equivalents registered at RM25.6bil for the six months ended June 30, 2024, while its total assets were at RM109.9bil.
In the meantime, Tan said Genting Malaysia’s prospects remained strong on the back of an influx of foreign tourists in Malaysia.
Meanwhile, Rakuten Trade head of equity sales Vincent Lau said the court case is expected to drag on for some time which is typical of most such lawsuits.
“As such, there is no immediate impact on the share price of Genting Malaysia and Genting Bhd.
“Some investors may probably choose to sell their holdings and ask questions later, but overall it is not likely that there will be any major reaction in the share prices.
“This is just a part and parcel of doing business and business operations are still fundamentally sound,” he said.
