fp Turks and Caicos

Updated Friday, 04 February 2011 18:27

Dr. Cem Kinay and others are being sued in U.S. courts for at least $50 million allegedly taken in a “massive fraud” in the development and sale of properties on Dellis Cay.

Construction began on Dellis Cay in June 2008 and lasted for just over a year. The project was put into receivership in October by lender Trinidad and Tobago Unit Trust Corp., which is accused of aiding and abetting Kinay and partner Oguz Serim in committing fraud on purchasers.

“I categorically deny all their allegations,” Kinay told the fp in an Feb. 2 e-mail. “I, my family, my businesses were never involved in bribery, nor fraud.”

As he has said before, Kinay said he is a victim of Turks and Caicos Islands politics and will fight all claims against him. He also says he is still trying to save the project.

"Recently, a Turks and Caicos Islands Court has ruled in favour of Trinidad and Tobago Unit Trust Corporation in the sum of full loans made to Dellis Cay and maintained an injunction on all my worldwide assets" Kinay said. "With this court order, my ability to defend myself and my businesses, without any access to funding  is greatly reduced, if not impossible."

The TTUTC said the TCI Supreme Court this week froze approximately $85 million in assets held by Kinay and Serim globally and to maintain the assets to satisfy TTUTC claims.

"The UTC filed a lawsuit over a year ago against Kinay and Serim to protect the interests of UTC and its unit holders," the bank said in a statement to the fp. "The Supreme Court also dismissed all claims Kinay and Serim had brought against the UTC. The UTC will continue to take all actions necessary to protect the interests of its unit holders in this matter."

The main defendants in the lawsuit are Kinay, described in the complaint as “an Austrian and U.S. national with a history of questionable business practices and associations,” and Serim, a citizen of Austria and resident of Turkey.

Kinay and Serim are accused of using clients’ money as a “personal piggybank,” paying off pre-existing debts and spending it on things such as “an $8 million Miami Beach home, bribes to government officials, unrelated real estate ventures, payments to related entities without consideration and globe-trotting on private planes.”

In 2005 Kinay and Serim bought 209 acres of Dellis Cay from then owner, Donatella Zingone, who kept four lots on the island. In early 2009, the U.K. and TCI government granted a 200-year license to the adjacent seabed, the lawsuit says.

Dellis Cay was aggressively marketed in New York, and news stories featuring Kinay and the project appeared in the New York Times and New York Daily News.

The suit claims that Kinay and Serim were assisted by their lender, TTUTC, in “a calculated scheme to extract millions” from buyers, knowing all along that they lacked funds to complete the project and that it would fail.

Kinay and TTUTC are accused of hiding from purchasers the fact that the project’s $62 million loan required a $47 million lump sum payment after two years at an interest rate of 15 percent. That loan gave Kinay more time to bilk purchasers and essentially sold the island to TTUTC, the suit claims.

Mandarin Oriental Hotel Group International Ltd., which was enlisted to manage the Dellis Cay hotel, is also named as a defendant, accused of letting Kinay use its name and logo even when it knew the project was failing.

Mandarin received 1.5 percent of villa and residence sales, plus a 2.5 percent bonus for any sale price exceeding $1,000 per square foot, according to the lawsuit.

Both TTUTC and Mandarin are accused of providing supportive letters for Kinay to use to comfort purchasers when both knew the project was doomed. They are being sued for damages for aiding and abetting fraud, aiding and abetting breach of fiduciary duty, and commercial bad faith.

Both TTUTC and Mandarin denied the allegations Feb. 4.

"We believe the U.S. lawsuit is without merit," TTUTC said in a statement to the fp. "Furthermore, we do not believe that the U.S. courts have jurisdiction in this matter."

Danielle DeVoe, vice president of communications for the Mandarin Oriental Hotel Group in the Americas, told the fp that Mandarin denied the lawsuit's claims.

"The group has always made it clear that it has no investment or ownership in any part of the project," DeVoe said. "The claims made by the complainants against Mandarin Oriental are wholly without foundation, and the group is wrongfully joined in the proceedings, and will of course fully defend the claims."

The plantiffs also accuse Kinay and Serim of using SUU, a hotel chain with locations in Turkey and Costa Rica, to launder assets to get around an order in the TCI Supreme Court freezing their assets.

Named as defendants are Kinay, Serim, TTUTC, Mandarin, O Property Collection USA Inc.; O Property Collection GmbH; O Property Collection TCI Ltd.; Turks Development LP; Turks General Partners Ltd.; Turks (BVI) Holdings Ltd.; Turks Ltd.; Dellis Construction Ltd.; The SUU Hotels; Avatar Real Estate Services LLC; William Tacon; Stephen Katz; Kinay’s wife, Marjorie Kinay; Kinay’s brother, Cenk Kinay; Mer Insaat; and Halis Sumer.

The plaintiffs are represented by Todd Soloway of Pryor Cashman LLP in New York.

Click here to read the complaint