Ritz $6.2M duty debt still unpaid

| 11/06/2015 | 118 Comments
Cayman News Service

Ritz-Carlton, Grand Cayman

(CNS): Government has still not collected on debt of more than six million dollars owed to the public purse from duty concessions given to the developer of the Ritz-Carlton, Grand Cayman. The financial secretary said that legal questions remain about who now owes the cash because the concessions were given to companies owned by the developer, which have either been sold or folded, and not to Michael Ryan, the man behind the 5-star hotel project.

Since the Ritz was sold and Ryan and his creditors settled their various legal arguments out of court in 2014, the government’s debt, which was unsecured, has remained unpaid. Answering questions on behalf of the Ministry of Financial Services and Economic Development, Financial Secretary Kenneth Jefferson said that government had had no luck in recouping any of the $6.2 million debt, which has been outstanding since the summer of 2009.

During his time as the principal owner of a number of companies involved in the development and construction of the Seven Mile Beach hotel, Ryan was given a duty waiver on material used in the project, which was to be paid back to government once the exclusive resort opened its doors and began trading. Although Ryan began making payments on the original debt to government coffers of over $10 million, the repayments all stopped shortly after the UDP  administration took office in 2009, when Ryan had asked for a new payment plan because of alleged financial difficulties at the resort in the face of the world economic slump.

However, the payments never resumed and when Ryan hit even more financial difficulties and the hotel was seized by the creditors of Ryan’s complex web of companies, the debt to government was lost in the legal wrangling.

Jefferson told Finance Committee that, despite past attempts to collect the debt, government was not successful and collection efforts had essentially ceased, as he pointed to the legal difficulties faced by government because the concessions were not given to Ryan personally but the various companies created by him which no longer exist.

The financial secretary also admitted that government was having a hard time with debt collection in general and it was carrying long-held significant debts in addition to the outstanding $6.2 million. He said that some $15 million was owed to the public purse as a result of unpaid loans given to people for medical emergencies. Jefferson explained that a policy decision had been taken by government in 2010 directing the Treasury not to pursue bad debt from individuals through the courts. He also stated that advice had been given by the auditor general that the CIG needed to write off the bad debt to regularize the accounts but continue to pursue collection of the cash and the promissory notes that were held by government against the debts, usually linked to people’s homes.

East End member Arden McLean asked Jefferson how it was that government was going after the poor, who faced losing their homes because of medical expenses, when it was not pursuing the developer of the Ritz, which had been sold and someone had made many millions of dollars.

“It says volumes about us that Michael Ryan can drive around in … his big time car and has homes and we don’t put a lien (on his properties),” McLean remarked. He said he appreciated that the money people borrowed from government had to be paid back but it was not right that government had ceased pursuing the outstanding Ritz duty debt when it was pursuing those who could least afford it and who had taken loans because of genuine emergency medical needs.

Jefferson acknowledged the issue and said that they would take another look at the situation but he revealed an all-round failure of debt collection.

Pointing to the scaled down debt collection unit because of the policy, he said debtors were pursued through correspondence. Some of the individual medical debts were substantial, with people owing sums amounting to over a half million, but he said efforts to chase the cash have “not been fruitful”.

“Efforts are ongoing and I appreciate that this is publicly broadcast and my comments may frustrate the process,” the financial secretary stated, as he candidly revealed the state of affairs regarding the bad debt.

He also noted that while government did take promissory notes on some loans at times, the urgent need for the funds for medical emergencies prevented government from securing the loans.

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Category: Government Finance, Politics

Comments (118)

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  1. Annonymous says:

    $600 million was spent to build the Ritz Carlton which was sold for $180 million. Where did the money go? Was there really no money to pay for the duty? It sounds like one big slush fund. Bear in mind that most of the slush fund came from a Christian charity. Class act Cayman.

  2. Anonymous says:

    Reading through the comments it seems there was at least a high likelihood that corruption was involved here, and everyone knows it. The details might not be public, but we all know which politicians profited and were at least conflicted. What annoys me is that nobody is going to do anything about it. The MLAs who drone on about stamping out corruption pretend they don’t know about it. The ACC is, as usual, completely silent. There must be documents, written agreements, emails, transaction records etc that would throw some light on it but no-one is looking at them.

    There are dozens of examples of this sort of thing, where it’s generally considered that a specific politician received a payoff, or lied, or was conflicted and everyone knows but no-one does anything, ever. It shows that every person in authority here who speaks out against corruption is full of hot air at best.

    Whether there is actual corruption in this case or others is not the point. There is clearly the possibility- even the appearance- of corruption and an assumption by the public that that’s just the way things are done around here. Surely someone should look into these things and either arrest the person involved or clear their name. Until they do that the Cayman Islands is going to appear riddled with corruption, rightly or wrongly.

    • Anonymous says:

      …add to the list the $800,000.plus paid for a certain politician’s relative’s land in West Bay, now worth about $70,000 …and the game goes on.

      • Anonymous says:

        Could the Police please explain the lack of any overt action on these issues? It all looks pretty bad. Just how corrupt are we?

        • Anonymous says:

          police have tried, but the politicians pass the laws and as long as they profit from them being able to legally gamble away tax payers money or pave voters private driveways with our money, they will not change them. especially when the people get more outraged by people highlighting the corruption than by the corruption itself. This is even incentivised when so many get free fuel with the gasboy cards, which is still going on.

  3. Anonymous says:

    Thanks again Mac! You gave the concessions to Ryan, your real estate company got the commission on the condo sales and your government stopped collecting on the debt the day you got re-elected in 2009. Those who criticize the current PPM-led government conveniently forget that the previous PPM government made Ryan start paying the debt back.

  4. Anonymous says:

    There should be a public inquiry called into the failure to collect debts and duties after the 2009 election and the connections between politicians involved in that decision and their and their family’s financial associations with the entities that owed the money and individuals associated with them.

    • Anonymous says:

      A country whose politicians really wanted to make it clear it had zero tolerance to corruption would have held such an inquiry some time ago.

      • Anonymous says:

        But the place is riddled with corruption and the politicians are protesting too much and doing nothing about it.

        • Anonymous says:

          when you get called a traitor in the LA and then get death threats for highlighting this, it just shows how deep the corruption goes.
          A great example is the calling Winston cheap for not giving people money for their vote and this had been going on for over a decade.
          Something is badly wrong in Cayman

    • Anonymous says:

      Yet the finance committee spends two hours querying the COP over $300. Its a total joke. Wake up people and smell the manure in your yard

  5. George Nowak says:

    Just another day in paradise

    • Song Bank says:

      Remember the good old days when Barefoot used to write songs about this stuff?

      Where oh where is all de money gone, all de money gone, all de money gone………

  6. Anonymous says:

    Which MLAs did this deal? I think it was Mac, but I could be mistaken. If it was him, he made about the same sum in commissions through his real estate company, if memory serves me right (I think Marchant ran a story calling him the Six Million Dollar Man)… perhaps Mac’ll do the decent thing and repay the debt himself lol

  7. Anonymous says:

    The great thing about ignorant types thinking that the operators of the Ritz somehow owe $6m for the debt of another company is that they stay away from the Ritz. This, like the West Bay Road lovers staying away from Camana Bay does make the place a lot better when it comes to spending leisure time.

    • Anonymous says:

      the current owners are not the people that should be punished (nor should their employees) by a boycott…the people who should be brought to task are the administration that did not register/secure the claim, and allowed a default on the payments for years until the bankruptcy.

    • Anonymous says:

      Good,just keep on keeping away.

    • Anonymous says:

      Actually when you take over a company there has to be negotiations about who becomes responsible for the debts of that company. So yes.

      • Anonymous says:

        Not in this case. It was the secured creditors who took over the company and the debt owed to them took precedence over all other debts.

  8. Sharkey says:

    This whole story sound like what Mr Legge said, and again the politicians may think that they are smart politicians , but very stupid _××××××___ business people. Again I wish that people would Google the word TREASON and TREASONOUS , and not use the premier definition of the word . It offends me.

  9. No corruption involved in this project, right?

    A US charity lost $220 m. Congratulations to everyone who allowed this to happen (including the dubious old-codgers running the charity) and to everyone who did nothing about holding anyone accountable.

    It was almost like such conduct was considered to be acceptable in Cayman. But, of course, that can’t possibly be true in light of the recent outpouring of outrage at such a suggestion.

    I wonder why Alden ‘zero tolerance of wrongdoing’ McLaughlin hasn’t done anything about this. Could it be because, like most politicians, he’s full of the brown stuff?

    And what was the name of that news service that exposed this conduct at the very beginning (before the charity invested/loaned into the project, no less) and then almost got sued into bankruptcy at the Grand Court of the Cayman Islands while locals sat idly by and went about their business?

    Step forward OffshoreAlert (the bestest and bravest investigators in the entire kingdom, indeedy-doody, not to mention handsomest).

    • Anonymous says:

      It was a mental fundamentalist “charity”.

    • Anonymous says:

      Mr. Marchant we cannot dictate who invests in private companies or projects besides from an AML perspective. My opinion is that this whole project was mismanaged and perhaps stripped by the promoter and his various consulting/management companies…but it could not be proven or it would have been. No-one wants this kind of unsuccessful at best and perhaps nefarious activity to occur in their country…however as long as there are suckers out there willing to invest with apparent disregard to the histories of the promoters these things will continue to happen in every country. Although there is some concern over conflict of certain government officials our government did not provide any guarantees to investors. I personally am not concerned about the amount owed the government but am concerned with the reason the debt was not registered/secured and no payments on the amount were made after a new administration came into office. And for God’s sake why has there not been an investigation into this when we recently charged a government official with an offense a child could have defended. Note I did not use the c-word and hope this will not be considered a treacherous post.

      • Cayman’s best-known politician received an over-ride commission on the sale of all condos sold for the project (not that there’s anything wrong with that, as Seinfeld would say). So this person was compensated even if this person had no role whatsoever in the sale.

        Nothing suspicious about that, right?

    • Anonymous says:

      @David Marchant……..most definitely the handsomest!!

  10. Anonymous says:

    The problem with this development from day one is that the idea of having a ‘Ritz-Carlton’ on SMB blinded everyone to the realties of what they were agreeing to. If anyone had bothered to do any due diligence a number of warning flags would have been raised long before any of this was signed.

    This was posted online 13 years ago – http://www.upi.com/Business_News/2002/06/11/Funny-Business-Putting-on-the-Ritz/91441023813652/

    Having committed the islands to the project CIG then failed to follow up and missed (again probably blinded by the carefully staged high-profile events being held at the resort) some very clear warning signs that all was not well financially at R-C. Back in mid-2007 it was already pretty obvious that the resort was struggling but by that time we were too far down the financial road on this to turn back.

    I just hope that lessons have been learnt and CIG will be a bit more careful about who they hand out concessions to in future. As for the $6.2 million? You can write that off to experience because unless there was fraud involved at any stage it’s now completely unrecoverable.

    • Sharkey says:

      This is simple to fix if they owe Government this kind of money, why is government hesitant to put a lean on this property ? That is $6.2 million ?

      • Anonymous says:

        Sharkey, to start off with it’s a lien and we can only do that if the actual property owners owe us the money. In this case CIG failed at any time to nail the debt down to any specific individual or individuals. It wasn’t even even attached to the property itself rather than a limited liability company, which as we have seen can disappear into bankruptcy overnight. It is (as has already been pointed out) completely unsecured, which means exactly that – there’s nothing they can grab onto.

        The fault here is 100% with CIG and the MLAs who were involved in this when the waiver was granted. The developer must have damn near wet himself laughing when he saw what a mess they’d made of it.

        The only hope (and it’s a pretty slim one) at this stage is that somewhere along the line RCIPS could establish fraud and then you might be looking at asset seizure to recover the money. Don’t hold your breath on that.

        • Anonymous says:

          Actually, I think the failure to pursue collection of the debt when it ceased to be paid shortly after the 2009 elections is what we should be looking at and not just who gave the concession.

  11. Civil Serpents says:

    Pffffft. What’s a little $6,000,000 here and there, when you’ve got over $600,000,000 to blow through each year. Plus, it ain’t my money and my benefits are non-performance based, so who cares if it goes uncollected? We got lots more coming in. This carnival ain’t never gonna stop…….

  12. Anonymous says:

    The forever honerable legend lives on.

  13. Thor says:

    So let’s see if I get this right $6 million owed to the caymanian people and they don’t want to hire caymanians?

    • Anonymous says:

      No get it right. A company owed $6m. That company went bust and has no assets. Another company is running the Ritz now and it owes nothing. It is like the previous owner of your home running up a credit card bill that is unpaid and you being asked to pay it when you moved in.

      • Anonymous says:

        A nice logical way of putting it

      • What was the name of the company that owed the debt and were there any guarantors for the obligation, corporate or individuals? Did this company “go bust” or did it enter receivership? Was this court supervised?

        • Anonymous says:

          We don’t respond to those that hide from the laws of the jurisdiction.

        • Anonymous says:

          Govt. is not sure which company it is, and really doesn’t matter in any event since there was no guarantor. Receivers were appointed because it defaulted on its loan obligations because it was insolvent. It doesn’t matter whether it was court-supervised because the unsecured debt to government would be inferior to the secured debt of the secured creditor who appointed the Receivers.

          • Fred the Piemaker says:

            The debt to government would be a preferential claim rather than unsecured. Wouldn’t cover the charged property but would be first claim on the unsecured assets. Of course if you don’t even bother filing a claim…..

            • Anonymous says:

              It is preferential to unsecured debts, yes, but the companies were insolvent and could not fully repay even the secured debt so it does not matter.

      • Thor says:

        Yeah but the irony of the whole thing was the concessions were given the politician sold it on the premise that caymanians would be employed and there would be other spin offs. Who got the jobs and the spin offs?

    • Anonymous says:

      Wow! You need to move on with the hire the Caymanians who don’t show up to work.

  14. Anonymous says:

    Have you all forgotten?!!! It was the Holly JUJU that allowed the property transfer to take place!!!! She was the then Premier. She should have to answer, instead of slipping through the cracks undetected again and again and again!!!!!!

    • Anonymous says:

      There was no legal basis to stop the transfer since the debt to government had nothing to do with the transferee. Government ran the serious risk of being hammered with damages plus being ordered to register the transfer. At least she had the good sense to recognise that.

  15. J. E. Hoover says:

    Not collect on a six million debt? Somebody made some big bucks on the Ritz-Carlton deal and our government doesn’t seem very eager to get what was promised. Hard to believe. No effort to collect on any of the medical and/or other debts? Also unbelievable. Multiple medical debts of over half a million? Could it be possible there is some form of corruption going on here? I did read where there was some hanky panky going on in the medical care insurance business, which I see as corruption. Perhaps one day we will have leaders who are willing to clean up Cayman’s problems………. or maybe not.

  16. Anonymous says:

    Is Michael Ryan Caymanian?

    • Anonymous says:

      He was one of the status grants in 2003

      • Anonymous says:

        Why? How long has he been her by then. Isn’t that about the same time he arrived here?

      • Anonymous says:

        So the answer is “yes”.

        • Anonymous says:

          Can anyone explain why? Did he have Cayman connections? Is he one of the Brac Ryan’s?

          • Anonymous says:

            No he’s a Canadian flimflam man. By now everyone knows there was no legitimate reason for many of the status grants…it was done under the guise of giving long term residents right of residency…fair enough….every politician and many connected to the old boys club were allowed to submit lists. However there was no requirement for the recipients to have been in cayman for any established length of time. As you will recall they did the grants in 2 tranches….the recipients of the first tranche were so obviously not long-term residents that they did a second to try and purify the process….there are rumours of status’ being sold and at least one incarcerated criminal receiving it (who I believe was later shot in a home robbery). Another rumour was that due to the nature of the recipients the chosen folks who were allowed to provide lists didn’t wish to be associated….as there were no recorded sponsors this actually facilitated an expat employee of GIS putting his/her own name directly into the system.

            • Anonymous says:

              So you mean that it was quite possibly an act of corruption? Have the police investigated? What is the back story?

            • Anonymous says:

              Status is easily revoked. I can think of a few status holders who over the years have been kicked off these islands after they upset the wrong people. Admittedly, there weren’t too many of them but there were enough to prove it can be done.

              • Anonymous says:

                The cabinet grants (before the 2003 Gold Rush about 3 or 4 every 5 years) cannot be revoked we have been told.

                • Anonymous says:

                  And you believe what you are told?

                  • Anonymous says:

                    @6:50 Unless the person I think we are talking about has somehow relinquished his Canadian citizenship and obtained a Cayman Islands passport he’s still only a temporary resident here.

            • Anonymous says:

              There must have been a formal police investigation. It sounds like it stinks to high heaven! What did they find?

              • Anonymous says:

                Yeah it was a dark moment in our history….but the particular grant in question was actually made by the Governor of the time. They are supposed to be used for exceptional circumstances…we seemed to have had almost three thousand exceptional circumstances in 2003.

  17. Anonymous says:

    And on top of everything else, the Ritz was to hire Caymanians…yea right, they hold the highest work permits at Immigration.

  18. Anonymous says:

    Government should have obtained his personal guarantee for the debt before they gave him the concession, then they could have pursued him anywhere. More slackness from our civil servants.

    • Fred the Piemaker says:

      Lets see – what do these have in common – duty concessions, changing planning regulations to allow additional floors on the Ritz, not collecting the reduced duties and fees that were agreed, paying substantial consultancy fees to a real estate advisors, and ownership of an apartment at the Ritz….a common thread there somewhere, no?

    • Anonymous says:

      How can the cIvil servants do their jobs when corruption is so endemic at the top.

  19. Anonymous says:

    Really Arden…are you so totally ignorant that you don’t know the difference between personal debt and company debt. CIG made a boo boo by not securing a debt owed by a Company. They cannot make that right by going after Ryan (unfortunately). If MLAs do not have that basic understanding then best shut up – Mark Twain had that one right!!!

    • Anonymous says:

      CNS should know the difference too. Although that wouldn’t help their anti Michael Ryan agenda.

      • Not valid criticism. What company owed the debt? Did any corporations or individuals guarantee it? I’m aware of RCGC companies going into receivership but not liquidation? Was anything court-supervised? Where’s the transparency? After all, this is owed ultimately to the good people of Cayman.

  20. Anonymous says:

    A policy decision not to pursue individuals… Should that not be read as a policy decision not to pursue voters? …and that is appropriate, legal or legitimate how? It is great to now know I do not have to pay my bills either. Yipee -. Who do I vote for? 2010 – was that Big Mac again? Who was running the HSA then? This is in out best interests?

    FCO? RCIP? Anti Corruption Commission? WTF?

  21. Anonymous says:

    Shouldn’t the Ritz debt have been passed to the new owners?

    And surely the Gov’t would have made millions through stamp duty on the sale?

    • Diogenes says:

      The debt does not attach to the property, so answer to the first question is no. And the secured creditor gets the entire value of the property because it was way less than the secured debt. The bigger question is why, the Ritz having started to pay duty after its concession period ran out, stopped immediately after the change of government.

      As for the second question, I seem to recall that they did pay duty on the sale – there was some attempt by government to get more stamp duty claiming that the “true” value of the property was higher than the price paid, but that came to nothing given the property had been auctioned.

      • Anonymous says:

        Nothing to see here. Move along.

      • Anonymous says:

        Did not the creditors purchase the Ritz property for millions less the the assessed value, then refuse to pay duty on the difference? When I managed to but my home cheaply, the titles office came out and reassessed the place and we paid the raised amount. There were many millions of dollars openly moved around at that time and Mac and his posse allowed it.

        • Pogo says:

          Any assessment is an estimate of value. When you auction a property, you have a real test of value – its what anyone will pay for it, provided the auction is fair. This was a court supervised process. Reality is the property was worth what the free market was prepared to pay for it, not what some government bureaucrat chewing his pencil thought it might be worth (particularly when government would then take a percentage of that number!) .

      • Anonymous says:

        Correct. The Government ordered two separate valuations and found to their chagrin that both estimates were even lower than the auction price.

  22. Anonymous says:

    Forget about it. You made an unsecured loan and the borrowers went bust. This is useless political humbug.

  23. Anonymous says:

    Don’t issue driving licenses or any other kind of licenses to people who owe Government money and the outstanding amounts will come in quickly. But Government is too much of a pathetic soft touch and they don’t do the sorts of things that, for example CUC and Water Authority do, namely cut you off. But guess what-it works. No money, no light or water, so people eventually pay. Something must be done to demonstrate to debtors that because it comes from “government” it’s free.

    • Anonymous says:

      But since the company that owed the $6 is not going to be applying for anything because it is bust, what difference would your policy make to the issues in this story?

      • Anonymous says:

        No difference, 7:20, but it damn well would to the many millions of dollars more than the Ritz debt that drivers and obsessive smart phone gazers owe the Government for health services (especially) and other debts. Remember that Ozzie, prior to his “driftwood” phase pointed out that most of the massive HSA debt is owed by people owing $1000 or less?

    • Same old says:

      Does that include any of the government employees that were connected to the 1.5 billion that is still missing from government funds?

  24. Anonymous says:

    Which bit of the basic concept of a limited liability company do these people not understand?

  25. Anonymous says:

    re-read legges editorial!…..then see who is treasonous

    • Barehanded says:

      Where oh where is all de money gone???

    • Anonymous says:

      Good point. Could the Premier please explain to the people how this is all appropriate?

      • Anonymous says:

        He won’t and David Legge is not allowed to, so you will have to ask someone else. Baines?

        • Anonymous says:

          The Commissioner apologizes. He is unavailable to comment or investigate allegations of serious crime because he and the entire elected Government are embroiled in an all consuming investigation over whether or not, with the benefit of hindsight, a frightened citizen was appropriately given $300 worth of police protection.

          In the circumstances we kindly request that persons refrain from any attempts at corrupting public officials, lying to regulatory authorities, purchasing Cayman status, helping yourselves to gasoline and other theft, and shooting each other. He would also be grateful if no-one take any steps to award the World Cup to the United States of America in return for any enticement, in particular so as to avoid the beautiful game being excessively referred to as soccer.

          Your kind cooperation is appreciated. The Commissioner and his offices look forward to serving and protecting the many good and law abiding people of the Cayman Islands as soon as our leaders stop behaving like we are descending into a third world quagmire of petty rivalry and point scoring with no possible benefit other than to cause minor and entirely unnecessary embarrassment to otherwise good individuals.

          Thank you.

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