The construction company hired to lead the failed Caroline Bay luxury hotel project has been accused of transferring funds meant for local subcontractors out of Bermuda, in breach of an agreement.

A written complaint was made to the Bermuda Police Service by the owner of a local construction firm on April 1, in which he alleged that dck Bermuda was given more than half a million dollars which was "expressly reserved for payment to the subcontractors“ but that it had instead paid the money to its parent company, Pittsburgh-based dck worldwide.

The money – from the public purse – was provided to dck Bermuda by Ernst & Young Bermuda, the liquidator appointed by the Supreme Court in March 2020 to take control of the various companies behind Caroline Bay after the developers failed to pay their mounting debts.

The construction company boss, whom The Royal Gazette has decided not to name, told police that his firm was still owed more than $73,000 for clean up work it was hired by dck to do on the site between last November and January this year and that other subcontractors were also still owed money.

In his complaint, seen by The Royal Gazette, he told police that ”small Bermudian contractors“ had been ”left to suffer“ by dck’s actions and the matter should be investigated.

But a detective told the man that though he was an “aggrieved party” he could not file the complaint, as that had to be done by the joint provisional liquidator.

Detective Sergeant Paul Ridley wrote: “Funds in lieu of contracted works are owed to you, although it is the JPL who should make the complaint of dishonesty to police.

“In the event that the JPL submits the formal complaint, [the local construction company] would also be asked to participate in the investigation, albeit as a witness.”

The construction company owner replied that he was “deeply saddened and disappointed” by the response.

Mr Ridley responded on April 5 that he had forwarded the e-mail to a senior prosecutor for independent review and would advise when a response was received.

A police spokesman told The Royal Gazette: “The BPS is working with [the construction company owner] to resolve the matter he has raised.

“However, we have found that we are somewhat hamstrung by legislation that governs when companies go into liquidation, as is the case in this matter.

“The appointed liquidators are responsible for collecting any unpaid monies and reimbursing the contractors who are owed money, such as on this project.”

He added: “The liquidators would be the legal complainant in the circumstances set out by [the construction company owner].

“The BPS has not – to date – received any complaint from the liquidators, Ernst & Young.

“We have asked [the construction company owner] to come in and meet with one of our detectives to provide any evidence that he may possess and we will discuss with the liquidators accordingly.”

The joint provisional liquidator filed a civil lawsuit against dck Bermuda in mid-February, although it was not possible to obtain a copy of the claim from the Supreme Court this week owing to the shelter-in-place restrictions.

The legal case has George’s Bay Limited, the company in provisional liquidation which held the hotel assets, marina and residences at Caroline Bay, listed as a plaintiff, along with roofing specialist company J W Gray & Co Ltd.

J W Gray & Co is not the company that has made the police complaint.

The Royal Gazette understands that red flags were raised when a spreadsheet of dck’s assets shared with the liquidator last month showed only $13,000 – even though the firm had been given more than $550,000 to pay subcontractors.

The local construction company owner alleged to police last week that a principal at Ernst & Young Bermuda had contacted him after he filed his police complaint and “attempted to dissuade me from making a criminal complaint on the basis that to do so may jeopardise my company’s ability to get paid”.

Questions were sent to Ernst & Young and dck via their lawyers for this article.

Richard Horseman, at Wakefield Quin, representing dck, said he could not comment.

Mark Diel, at Marshall Diel & Myers, representing Ernst & Young Bermuda, said: “The JPLs are of the view that, as the matter is subject to court action, we are unable to comment at this time.”

Caroline Bay, on the former Naval Annex in Southampton, was initially planned as a $2 billion luxury resort, featuring hotels, residential units and a marina.

But it was beset with financial problems and the plans were gradually scaled back.

In 2016, the former One Bermuda Alliance government signed a guarantee of $165 million on the project.

Work on the hotel stopped in March 2018 after costs overtook financing.

In September 2019, after the developers defaulted on loan payments for the project, the Government stepped in and acquired the interests of the loans, raising the country’s debt ceiling by $250 million in the process.

Last July [2020], Curtis Dickinson, the Minister of Finance, told the House of Assembly the Government was committed to buying the claims of the contractors and subcontractors who were left unpaid by the developers.

He said: “We worked with the main contractor, dck Bermuda, to understand the extent that they and so many Bermudian subcontractors had been left unpaid by the developers.

“We did not have a legal obligation to do so. It was of national economic importance for them to be paid immediately while we took the necessary time to evaluate a way forward and a way to get the money back for the people of Bermuda.”

The minister said the Government bought dck’s claims for $11 million and “immediately began paying subcontractors”.

The more than $73,000 allegedly owed to the local construction company is for “backfilling” work done more recently on site. The company boss declined to comment for this article.

A Ministry of Finance spokeswoman said: “The Bermuda Government, as the largest and only secured creditor of George’s Bay Ltd – in liquidation – has provided funding to the joint provisional liquidators to maintain and secure the buildings on the construction site.

“All contracts associated with the project are arranged by the JPLs while the companies remain in provisional liquidation.

“By virtue of their role, the JPLs operate independently and are responsible to the Bermuda courts to whom they make regular reports.

“We are aware of contractual disputes regarding payments to subcontractors and have been informed of the resolution plans for payment put in place by the JPLs, which has our full support. ”

The spokeswoman added: “As the matters in dispute are still under investigation by the JPLs, it would not be appropriate for us to comment further at this time.

“To be clear, these disputes do not relate to the claims the Government purchased in December 2019 prior to the appointment of the JPLs."

Developer Brian Duperreault told The Royal Gazette in May last year that George’s Bay Limited did not have an obligation to pay subcontractors.

He said: “The contractor is dck, so dck had an obligation to the subcontractors. I don't know if they paid.

"We had a contract with dck, and that's between us and dck. I'm not saying anything more.“

NOTE: This article has been edited to include a response from the Ministry of Finance confirming that the funds were provided to the liquidators by the Government.

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