I wonder what the full story is. As told it would paint a pretty bad picture of Exim and Chinese construction labor. Presumably its out there to try to discourage people from dealing with Exim (a cautionary tale of the form "This happened to this guy, don't let it happen to you.") but I doubt that tactic will really work unless the story gets a lot more traction.
And this is the part I don't understand (and conversely why I think there is more to the story); If you are in a contract with a 'no fire' clause, then you only get there by adding 'final approval' clause. That is to say you have final approval on the work performed and if it isn't up to your standard the contractor will re-do it at their expense until it is to your standard. Your only method of putting pressure on the contractor is to deny approval, thus increasing costs which cuts into profits. The people who were enriching themselves on those profits won't want to give them up to re-work costs, and will put pressure on the workers and their supervisors to avoid failing approvals.
So if you don't bother to inspect, and you sign off on work that later fails, you are at fault. While it may be considered rude and unprofessional, there are a lot of people who feel that getting away with extra money while following the letter (if not the spirit) of the agreement as a great pastime. Manufacturing and construction is an area where such people can really turn a small short cut into a big payout for themselves. You have to realize that going in, and they won't be mad at you for calling them on it when its allowed and they will be very pleased when you miss out your opportunity (they consider that a 'win'). You will meet these people during your career, treat them appropriately.
I doubt that Izmirlian knew how to protect himself when working with a construction company - the problem here is that he failed to protect himself from the obvious conflict of interest, where the company providing him money pushed him into choosing a contractor with strong ties to them.
Now that I think about it, this is just like your VC pushing you to spend money on, and join your technical stack at the hip with a service provided by another startup... Funded by that same VC.
But I'm sure that all the problems were caused by the fact that he was dealing with state-owned enterprises. These kinds of shenanigans never happen between private parties, and this is not at all a hit piece.
From reading the article, it seems he would have already filed bankruptcy before the Chinese construction company stepped in, and decided to take the free money and hoping it'll salvage his sunk investment.
The construction company pulled their strings with EXIM to get him the loan, and probably didn't want to get screwed, so they put in that clause.
In the end, this guy didn't lose much extra (the 900 mil is already sunk), and EXIM basically gave 2.45B to the construction firm minus materials and any project management expenses.
This is all too typical in China, everybody wins, except the tax payers.
> Then the 2008 financial crisis hit, and would-be partners balked. When China State Construction Engineering Corp., the world’s second-largest contractor, approached Izmirlian about stepping in, he said yes. The company directed him to Export-Import Bank of China, or Exim, which promotes trade and investment under the direction of Beijing.
> Seeing a way into U.S. markets, China State Construction promptly invested $150 million. Exim kicked in $2.45 billion in construction loans -- with the proviso that Izmirlian could never fire the Chinese builder, no matter what, and that workers from China would do the job.
It seems his business partners ditched in 2008 and he agreed to a bad contract to salvage the project via an Exim loan.
> In May 2014, Izmirlian appealed to an independent mediation service based in Washington, D.C., but the troubles multiplied. Pipes burst when inspectors tested the fire sprinklers and faulty balcony railings had to be reinforced, people with knowledge of the construction said. When Izmirlian complained, China delayed its money, one said.
Exim then used its control of the purse strings to put the screws to him whenever there was a problem.
> Christie says he’s still optimistic the resort can open. In December, Exim said a number of potential investors had expressed interest. These include Guo Guangchang, chairman of a non-state Chinese conglomerate called Fosun Group, people familiar with the situation say. Fosun already owns stakes in Club Mediterranee SA and Cirque Du Soleil Group.
Yeah. :/ He should have abandoned ship the moment he needed an Exim loan.
> Yeah. :/ He should have abandoned ship the moment
> he needed an Exim loan.
Exactly, and that is where I'm hung up in this story. Since he's apparently had some experience here and he didn't abandon the project, I would have expected that the contract language would protect him from the situation he is currently in. That it didn't makes me wonder why he agreed to it in the first place. Reminds me of the joke about looking around the poker table to spot the sucker, if you can't spot the sucker then YOU are the sucker.
If you can't fire them, how can you possibly hold them accountable?
From the article:
>“Baha Mar Ltd.’s decision to file for bankruptcy is the direct result of its failure to secure adequate financing and its mismanagement,” the Chinese company told the court.
Which is ironic, because it essentially translates to "By agreeing to use a construction company that couldn't be fired, what did you expect? That's just plain mismanagement right there!"
And this is the part I don't understand (and conversely why I think there is more to the story); If you are in a contract with a 'no fire' clause, then you only get there by adding 'final approval' clause. That is to say you have final approval on the work performed and if it isn't up to your standard the contractor will re-do it at their expense until it is to your standard. Your only method of putting pressure on the contractor is to deny approval, thus increasing costs which cuts into profits. The people who were enriching themselves on those profits won't want to give them up to re-work costs, and will put pressure on the workers and their supervisors to avoid failing approvals.
So if you don't bother to inspect, and you sign off on work that later fails, you are at fault. While it may be considered rude and unprofessional, there are a lot of people who feel that getting away with extra money while following the letter (if not the spirit) of the agreement as a great pastime. Manufacturing and construction is an area where such people can really turn a small short cut into a big payout for themselves. You have to realize that going in, and they won't be mad at you for calling them on it when its allowed and they will be very pleased when you miss out your opportunity (they consider that a 'win'). You will meet these people during your career, treat them appropriately.