Corporation of Hamilton Mayor Graeme Outerbridge and chief operating officer and secretary Ed Benevides approved the disbursement of the “full balance” of the Par-la-Ville Hotel and Residences Ltd’s multimillion dollar escrow account at the Bank of New York Mellon, according to a letter signed by both men on Corporation letterhead.

The New York bank was told to place the funds in the private bank account of Michael and Yasmin MacLean at Clarien Bank Limited in Bermuda, via intermediary bank Wells Fargo Bank in New York.

Documents and letters relating to the $18 million bridging loan made to Par-la-Ville Hotel and Residences Ltd and its disbursement have been seen by The Royal Gazette.

Mr MacLean has stated in an affidavit that he is the president of Par-la-Ville Hotel and Residences Ltd (St Regis Bermuda). That affidavit was filed for a legal action for $90 million in losses the plaintiffs are claiming was incurred by the voiding of the Hamilton Waterfront development agreement.

The money, which is believed to have totalled approximately $13.8 million of the $18 million loan, was deposited in the developer’s private bank account. Some $12.5 million of that money is now thought to be held by a United Arab Emirates entity called Argyle UAE Ltd.

According to Minister of Home Affairs Michael Fahy, the money had been traced to a Gibraltar company called Argyle Ltd.

He said two weeks ago: “It appears that a substantial sum of the bridging loan was at some point paid to a company registered in Gibraltar called Argyle Ltd as a fee to get access to a large line of credit to develop the financing for the hotel and residences development.

“Both the Corporation of Hamilton, me as steward and the mortgage holder are doing everything possible to obtain further details as to the whereabouts of the bridging loan money.”

The Royal Gazette reported on April 16 that documents show that Argyle Ltd had declared just £1,000 ($1,486) in assets in December 2013. Its website has been closed down.

Very little information about Argyle Ltd is easily available, although the company appears to remain active. It was started in December 2006 by a Robert McKellar, whose residence is stated to be Malaga area, Spain.

However, further investigation reveals a seemingly more active entity under the Argyle brand, Argyle UAE Ltd, whose address is listed as Dubai, United Arab Emirates, and whose website describes Robert McKeller as its chairman.

A telephone call to Argyle UAE was answered by an automatic paging service asking callers to select either Argyle UAE or Argyle Ltd.

Sources now confirm that the money went to the UAE entity.

The Argyle UAE website states that the company was formed in 2012.

It says: “We invest in fixed income and zero coupon investment grade products and receivables to generate income streams and profits for projects for our own account.

“We invest globally and have investment opportunities in London, Zurich, Gibraltar, Channel Islands and Singapore.

“We are particularly interested in clients with cash or near cash assets where we can match these to investments, the profits from which are applied to the client’s own projects to increase available equity, or to fund research and development projects where such funding is difficult to raise from traditional sources.”

The letter from the Mayor and Corporation Secretary supporting Par-la-Ville Hotel and Residences Ltd instructions to the US bank to make the disbursement to the MacLeans’ personal bank account in Bermuda has been seen by this newspaper. The day and month that the letter was written have been obscured and only the year, 2014, is legible. Sources put the month as October.

The lender of the funds was a company called Mexico Infrastructure Finance LLC. Documents show that the money was to be loaned for a 180-day period, and the Credit Agreement, dated July 9 and signed by the parties to the loan, states repayment was due on December 30 last year.

Par-la-Ville car park was put up by the Corporation of Hamilton as collateral for the $18 million loan, but after the failure to repay this, the approximately 79,000 square foot site of prime Hamilton real estate is now in the hands of KPMG receivers.

In that Credit Agreement, dated July 9, a condition of loan states the lender should receive “an appraisal addressed to Lender, issued by CBRE Inc, appraising the Land at $29,900,000 or more, as of a date no earlier than April 18, 2013”.

Documents also show that the borrowed funds were specifically for the purposes of paying expenses associated with securing a “permanent loan” along with fees and costs.

The need for the loan is spelled out in the Credit Agreement between Par-la-Ville Hotel and Residences Ltd and Mexico Infrastructure Finance, which states: “Borrower represents to Lender that its agreement with Starwood Hotels and Resorts Worldwide Inc and Sheraton Overseas Management Corporation (Starwood) to develop the project (the Starwood agreements) are not in good standing because Borrower failed to obtain the Permanent Loan at the time required by the Starwood Agreements.

“Borrower shall use commercially reasonable efforts to (a) bring the Starwood Agreement into good standing, subject to obtaining the Permanent Loan, or (b) enter into a similar development and operation agreement with a hotel company comparable to Starwood.”

The proposed project is also spelled out in the Credit Agreement. Under “Definitions”. It states: “‘Project’ means the Starwood branded St Regis Hotel and Residences, consisting of a 137-room hotel, 82 residences, retail space and three-level parking garage, planned to be constructed by Borrower on the Land.”

According to the Escrow Agreement (see below), Par-la-Ville Hotel and Residences was looking for about $334 million.

Although the bridging loan was specifically to enable Par-la-Ville Hotel and Residences to secure financing for the project, there was no information about who that lender was to be.

A letter from law firm Wakefield Quin, dated December 29, 2014, responding for Par-la-Ville Hotel and Residences to correspondence from the lenders’ lawyers, Shutts & Bowen LLP, stated: “PLV (Par-la-Ville Hotel and Residences) is not in a position to supply the Lender with a copy of the Permanent Loan Funding Agreement and that PLV is permitted to withhold same in accordance with section 3.3(c) of the Lender Escrow on the basis of it being subject to strict confidentiality owed to the Permanent Lender.

“Also, the formation of the Senior Escrow and the terms governing the transfer of the Escrow Property ... are recorded in and form part of the Permanent Loan Funding Agreement and is therefore subject to similar restrictions and exceptions on the basis of confidentiality.

“Although the specific provisions of the Permanent Loan Funding Agreement cannot be disclosed, PLV wishes to advise the Lender that (i) the Senior Escrow was established in accordance with the definitions set out in section 3.8 of the Lender Escrow and (ii) that the proceeds of the Loan were deposited in the Senior Escrow in accordance with section 3.4 of the Lender Escrow and (iii) that the escrow agent appointed pursuant to the Senior Escrow ... was duly approved by the Corporation of Hamilton.”

The Royal Gazette has not seen documents showing Corporation approval of a permanent lender or senior escrow. However, it is understood that the transfer of funds to Argyle UAE Ltd is directly connected to an agreement with Argyle Ltd, the Gibraltar entity, which was to provide the funding in the form of a one-time irrevocable payment in exchange for a one-year credit facility of $125 million.

The letter from Shutts & Bowen to Mr MacLean and Mr Outerbridge, dated December 15 last year, argues why they believed Par-la-Ville Hotel and Residences was in default.

It states that, among other things: “The Borrower’s failure to (a) use the proceeds of the Loan only for the purposes of obtaining the Permanent Loan or paying expenses related thereto ... (b) obtain and deliver, to the Lender, the certification and other documents specified by Section 3.3 of the Lender Escrow Agreement as a condition precedent to obtaining a distribution of the Escrow Property, (c) transfer the Escrow property into the Senior Escrow, as required by section 3.4 of the Escrow Agreement, and (d) comply with Section 10 of the Credit Agreement”, which lists the reasons that would constitute a default of the loan.

The letter ends with a sentence entirely written in capital letters, which states: “The Lender is attempting to collect the indebtedness evidenced by the loan documents and any information obtained by the lender or its representatives will be used for that purpose.

“Govern yourself accordingly”, it concludes.

Documents show that the Corporation voted to approve the loan and guarantee, but there are no documents that this newspaper has seen that showed the Corporation approved the removal of the funds from the Bank of New York Mellon escrow account and the deposit of that money into the MacLeans’ bank account.

Corporation Councillor Carlton Simmons said last week: “It is important for the public to know that based on the assurances given by our attorneys to the board, $15 million of the $18 million was never supposed to leave a joint account held by the Corporation of Hamilton and the developer.

“The legal conditions under which the money could have been released were never met.

“The Corporation of Hamilton’s lawyers and the Council were never consulted and therefore did not advise the release of millions of dollars to a third party.”

Mr Simmons said that if rules and guidelines had been followed then “this tragedy would have never occurred”.

“Someone has to be held responsible,” he added.

Home Affairs Minister Michael Fahy said last week: “This whole debate is the reason we stepped in.”

He explained: “I attended a meeting on January 22 with the entire Council of the Corporation of Hamilton, including the Mayor, and at that meeting, a number of concerns were brought to my attention in relation to the transaction, in respect to the guarantee and the loan.”

Sen Fahy said that he then took control of the Corporation on January 25, and that between March 2014 and the end of January this year “we had no running of the Corporation”.

• Section 3.3 of Lender Escrow Agreement states:

To obtain a distribution of the Escrow Property into the Senior Escrow, the parties shall, subject to section (d) below, comply with the following:

(a) PLV (Par-la-Ville Hotel and Residences Ltd) shall deliver to the Corporation (of Hamilton) (with copies to the Depositor (Mexico Infrastructure Finance) for information purposes only): (a) a certification, signed by an officer PLV, certifying that all conditions precedent have been satisfied for the funding of a loan of $224 million and an equity investment of $100 million or for such substantially similar financing structure from the Permanent Lender in substance reasonably acceptable to the Corporation (in any event in an amount no less than the aggregate of the principal, fees, costs and interest outstanding on the Loan plus the Corporation Expense Payment), to PLV (the “Permanent Loan”); and (ii) copies of the Permanent Loan Funding Agreement, the Senior Escrow Agreement and all ancillary documents, duly executed by the parties thereto, and in form and substance reasonably acceptable to the Corporation; and

(b) No sooner than three (3) Business Days after receipt by the Corporation (and receipt of copies for information purposes only by the Depositor of the items in subsection 3.3)(a) above, the Corporation and PLV shall provide joint written notice to the Escrow Agent (i) stating that the documents delivered pursuant to subsection 3.3 (a)(i) and (ii) above are approved by the Corporation (such approval not to be unreasonably withheld, delayed or conditioned), and (ii) authorising the disbursement to the Senior Escrow.

(c) PLV’s obligation to provide Depositor with copies of the Permanent Loan Funding Agreement in accordance with in subsection 3.3(a)(ii) above will apply insofar as PLV is permitted to release same without being in breach of any confidentiality owed to the Permanent Lender, provided that PLV hereby undertakes to apply its best endeavours to have the Depositor included in a permitted category in the Permanent Loan Funding Agreement as it relates to confidentiality or non-disclosure.

(d) Furthermore and notwithstanding anything to the contrary contained herein, a minimum of $500,000 (the Final Amount) shall at all times remain in the Escrow until the Escrow Agent receives written notice from the Interested Parties that the Loan is paid in full. The Final Amount will be segregated from the remainder of the Escrow Property and kept in a separate deposit account which shall be held by the Escrow Agent subject to the terms of this Agreement. The Interested parties will monitor the balance in the account to ensure that the Final Amount is always in the account.

• Another section, section 3.7, of the agreement states: “Notwithstanding the foregoing, the Escrow Property can be distributed in such manner as may be agreed upon in writing by all the Interested Parties.”

According to the agreement, the “Interested Parties” are Bank of New York Mellon, Mexico Infrastructure Finance, Par-la-Ville Hotel and Residences, and the Corporation of Hamilton.

• The agreement also states: “As used herein: (a) the “Permanent Lender” is the lender with respect to the Permanent Loan, which shall be designated by written notice from PLV to the parties hereto as part of the deliverables in accordance with subsection 3.3(a) and subject to subsection 3.3(c) above, (b) the Permanent Loan Funding Agreement is the agreement between the Permanent Lender and PLV which provides for the Permanent Loan to PLV; (c) the ‘Senior Escrow’ is an escrow to be established by PLV, the Permanent Lender, and Escrow Agent (or another escrow agent reasonably acceptable to the Corporation) for the purpose of paying expenses associated with the Permanent Loan; and (d) the Senior Escrow Agreement” is the agreement among PLV, the Permanent Lender and the Escrow Agent (or another escrow agent reasonably acceptable to the Corporation) governing the Senior Escrow.”

• It also states: “Secured Party Control. (a) While the Escrow Property remains in escrow, the Escrow Agent will permit withdrawals of the Escrow Property only as permitted by Section 3 above. PLV and the Depositor irrevocably authorise the Escrow Agent to disburse the Escrow Property in accordance with Section 3 above, and PLV and the Depositor further agree that they will not have access, now or any time hereafter, to any of the Escrow Property, except in accordance with section 3 above.