Ryan accused of funds misuse

(CNS):The developer of the Ritz Carlton, Cayman is facing further legal trouble as a result of another writ filed in the Grand Court this week relating to companies he is alleged to have owned that are now in the hands of creditors. Michael Ryan has been accused of misappropriating funds from companies that were closely involved with the construction of the islands first five star resort. The companies, now controlled by RC Cayman Holdings LLC, which has also taken over the Ritz-Carlton, have sued Ryan and a number of other companies he is believed to own for undisclosed sums that the writ says belong to the plaintiffs. Ryan described the situation as a misunderstanding and said no demands were made on him before the writ was filed.

The companies which were said to have belonged to Ryan -- Cesar Hotelco (Cayman) Ltd, Cesar Properties Ltd, Condoco Grand Cayman Resort Ltd, and Condoco Properties Ltd -- now managed by the creditor, which holds a US$250 million loan taken out by Ryan, are suing him and several other companies he is alleged to still own -- Orion Developers Ltd, Deckhouses Construction Company Ltd, IRR Limited, Endless Service Management Ltd, and BlueTip Watersports Ltd – as being the recipients of the money that the creditor says Ryan moved from one place to another without the authority.

However, Michael Ryan told CNS that Orion has been the developer, manager and agent for the companies in receivership for many years and the lending group is aware of how Orion operated the business and the receipt and expenditure of funds on its behalf.

“Any misunderstandings about that could have been resolved without the need for legal action," he told CNS on Thursday.

“I believe that by taking these actions the lender's true goal is to try to embarrass me personally and ruin my reputation both here and abroad. I look forward to the proceedings being resolved in my favour once the allegations are actually made and I have the opportunity to demonstrate the true position. I regret that the minority shareholders and lenders have chosen to take this course, which can only damage to the project's value and reputation as well as harming the image of the Cayman Islands and the values for everyone who has property or investments here,” Ryan added.

The writ, filed on 10 April in Cayman’s Grand Court, alleges that Ryan received and/or misappropriated money and property belonging to the plaintiffs and illegally transferred them to the defendants, all of which, the creditors say, Ryan has some form of direct or indirect benefit.

This amounted to a breach of his fiduciary duties, the plaintiffs claim, but no actual values have been revealed. The plaintiffs, who are essentially the companies Ryan used to control but which are now in the hands of his creditors, are seeking an order from the court to force him to return whatever has allegedly been misappropriated.

This latest legal claim comes on the heels of RC Cayman’s writ suing Ryan for the outstanding loan of US$234 million used to develop the Ritz Carlton, Grand Cayman, for which Ryan was the guarantor, according to the creditors.

RC Cayman had bought the loan from Column Financial last year, which had bought the loan in 2007 from the original lenders, The Royal Bank of Scotland.

Ryan told CNS that as part of his desire to see the Ritz-Carlton’s value and reputation preserved he had been reluctant to comment on the lender's decision to appoint receivers. 

“That is their prerogative under the security documents, and although it is a standard provision, in this case it was unwarranted: the stated reasons for invoking the remedy were incorrect, and it impacts negatively on the Residence owners and guests at The Ritz-Carlton as well as the Cayman Islands generally,” he said, adding that, in the face of difficult economic times, he had tried to reach an amicable solution with the lenders.

“Despite those efforts, in March -- without any warning whatsoever -- receivers were appointed and my involvement with the hotel and project I had built was summarily terminated,” Ryan stated, adding that it had come as a complete surprise.

He also claims that at first he had assisted the receivers but that he is now owed money as a result of his efforts to support the project, “totalling many millions of dollars”, by the companies now in receivership.

He accuses the creditors that now manage those companies of launching the recent legal action against him without warning. 

“I have not received any demand letters or prior notice of the claims that were filed, and the most recent claims have not even been served on me," Ryan said in an email. “I do not know what the alleged complaints are because the documents are so vague: I am going to try to expedite the claims so that they can be defeated as soon as possible and so that the amounts due to be paid to me and the other companies and individuals involved can be collected.”

Ryan said that he believed the litigation was designed to attack him personally to taint his reputation as the documents show no details about the alleged misappropriation of funds and added that he believed it was a tactical move.

See writ filed in Grand Court below.