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News Article

October 20, 2014
Public money and red flags

A personal bank account was opened in the name of the Public Hospitals Authority (PHA), which PHA management said was "used to help needy employees".
External auditors, Grant Thornton, raised the alarm on this personal bank account, saying that such accounts "increase fraud risk as personal transactions can be performed using the name of the authority".
This audit, dated March 12, 2013, is separate from a widely reported forensic accounting report completed by UHY Bain and Associates.
The Grant Thornton report says, "We received a confirmation from the Royal Bank of Canada in respect of account number [X] with a balance of $175 as at June 30, 2012.
"We noted that this amount had not been recorded in the general ledger. We were informed by the financial controller that this account was opened under the name of the Authority but is actually a personal account. Hence, it should not be in the Authority's books."
After speaking to the implication of this personal bank account in the name of the Public Hospitals Authority, Grant Thornton recommended "that personal and business banking be kept separately to provide the Authority with credibility, to maintain accurate records, to provide a clearer audit trail, and to reduce the risk of fraud arising from transactions".
The audit includes a response from PHA's management to the personal bank account that was opened in the name of the Authority.
"We note that, the PHA executives opened a bank account from donations by its members. The bank used PHA as part of the account which was opened as the Bristo. The account was to be used to help needy employees. We will close out the account in May 2013 to avoid any conflict," the management said.
The audit does not provide details on transactions that were made using that personal account that was in the name of the Public Hospitals Authority.
But it seems to us the public interest would be well served by such information being provided, given that the PHA is a public agency.
We have several questions: Why open a personal account in the Authority's name? Who opened the account? Who are the signatories? When was the account opened? What was it used for in specific terms? Who are these "needy" employees who were helped? How did employees qualified for assistance from this fund?
The auditor also observed that the Authority did not prepare bank reconciliation statements in a timely manner from January 2012 to June 2012. This was unrelated to the personal bank account.
In response, management acknowledged the need to prepare bank statements in a timely manner and committed to doing so monthly. Management also explained that the delays were due to a transition of officers. It said the officer who previously prepared the reconciliation had been transferred.

Inventory
As we mentioned, the Grant Thornton audit is the second PHA report to be made public in recent weeks.
The forensic accounting report completed by UHY Bain and Associations raised concerns that have been widely debated on a national level since The Nassau Guardian's story on October 6.
Our original story noted that at the end of 2013, there was a $10 million difference in pharmaceutical inventory between the physical count and what is reflected in the Princess Margaret Hospital's (PMH) computer system.
Naturally, this revelation created alarm in some circles.
We have since heard from Free National Movement Leader Dr. Hubert Minnis that the unaccounted for $10 million in pharmaceuticals was due to "clerical errors", which he said the accountants should have caught.
Minnis is a former minister of health.
The UHY Bain and Associates report covers the period July 1, 2006 through June 30, 2013.
It is noteworthy that while Minnis had a response to the forensic accountant's finding on inventory for 2013, he had no response to alleged abuses reported for the time when he served as minister.
The forensic accountant's report points to multiple cases where effective controls were allegedly not carried out during the time Minnis was minister responsible.
It is curious that he chose to respond to a finding during the 2013 period while ignoring findings in relation to alleged abuses within the PHA between 2007 and 2012.
Minister of Health Dr. Perry Gomez has so far remained silent in the face of our reporting on the UHY Bain and Associates audit.
While Minnis was able to provide an explanation relative to the inventory, Gomez said he needed to take the report to cabinet first before commenting.
With the spotlight focused on the PHA, The Tribune reported on Friday that it had documents that showed PHA Finance Director Daniel Knowles said he found it "difficult to believe" that internal auditors, who originally raised the alarm on the unaccounted for inventory, did not recognize the errors given that the Authority's total yearly inventory had never exceeded $4 million.
According to The Tribune, Knowles addressed a letter to PHA Managing Director Herbert Brown on the matter last week.
The Tribune also reported that management at the Public Hospitals Authority claimed that the forensic audit conducted on pharmaceutical drugs and medical supplies did not follow best practices or industry standards and exposed the agency to civil litigations.
We wonder whether the management of PHA will also conclude that the Grant Thornton report did not follow best practices.
This would however be a very difficult position to take given that management acknowledged Grant Thornton's findings and pledged to address the concerns raised, including concerns relating to inventory that could not be reconciled.
Grant Thornton said in its audit that it noted "numerous differences in the quantity of inventory items between physical count and the inventory report".
The report said, "We noted that the inventory valuation reports generated from the inventory system have not been properly reviewed by the respective financial controllers, who sent these reports to the finance director to reflect the values in the general ledger."
Grant Thornton said the implication of this is that it would result in incorrect inventory values being shown in the financial statements.
It recommended that the "inventory valuation reports be properly reviewed by the financial controllers to ensure that the physically verified quantities are shown at year end".
"Further, any differences arising during the physical verification should be investigated properly by a responsible officer. Further, they should be made accountable for major differences," the report said.
The PHA's management acknowledged Grant Thornton's recommendation.
The management said in its response, "The Director of Finance has instructed the financial controllers to do monthly reviews of the inventory reports and assign an officer to perform monthly test counts.
"This will provide better and more accurate physical counts and general ledger reconciliation at year end."

Critical Care Block
Grant Thornton also found "improper accounting" in relation to the Princess Margaret Hospital's Critical Care Block.
The audit revealed that there was a mobilization advance of $5.2 million paid by the Authority on November 29, 2011 that was fully recorded as a construction cost when this should have been shown as an advance in the receivable.
Only $2.1 million should be reflected in the construction in progress and this was corrected during the audit, the report said.
"We noted that the Authority failed to account for retention claimed from the contractors' bills throughout the year. As a result, construction in progress and the retention payable have been understated by $2,126,635.17."
Speaking to implication of this, Grant Thornton said, "The lack of proper accounting on major construction costs and related liabilities will result in understatement of assets and liabilities of the Authority. As a result, in-house financial information presented to the Board could potentially be unreliable."
The auditor said the Finance Department has to review the construction agreements and contractors bills to ensure that the construction cost, mobilization advance and retention are properly accounted for in the general ledger.
"As these construction costs are material in financial terms, proper accounting is vital in order to reduce potential liabilities under the construction contract," the report said.
PHA's management acknowledged and agreed with Grant Thornton's observations.
Management said, "The full mobilization was accounted for as construction cost, also the retention. I have instructed the finance officer in charge of the asset management to reconcile the construction in progress monthly to avoid this from happening again.
"The director of finance will review at year end."

Technology
The UHY Bain and Associates Audit which we initially reported on said the computer system that controls the inventory process is inadequate, lacks proper design and its use is ineffective.
The auditor said "key personnel" were not trained to use the system, and so this allows "for possible fraud and corruption by employees and officers of the PHA".
The report revealed that some of the locations falling under the control of the PHA do not have any computers and use manual systems to record the receipt and distribution of pharmaceutical drugs instead.
Due to use of outdated technology and insecure operating systems, there are "challenging reconciliations, lack of sufficient audit trails, non-input of necessary data, and storage of information on personal computers".
"These actions enable possible fraud, enable theft of PHA assets, and encourage corruption."
The Grant Thornton audit which we report on for the first time today raised concerns regarding access to the Authority's computer system.
It noted that some staff who had been terminated or who resigned continued to have access to the application system of the Authority "as necessary restrictions have not been made to the system since their departure".
The audit then lists the name of former staff who continued to have access to the system, including Dr. Perry Gomez, the now minister of health.
National Review makes no comment on whether it is appropriate for the minister of health to have this kind of access.
The audit warned that, "untimely revocation of access to the IT system by resigned or terminated employees increases the risk of unauthorized access to critical systems of the Authority".
It recommended that a system be in place where timely notification of resignations and terminations of staff are sent to the IT Department for revocation of the system access.
PHA's management acknowledged this recommendation and committed to implementing it.
"We will have human resources liaise with IT to terminate all employees who leave the PHA on a timely basis," management said in its response.

Alarm
The latest audit being made public underscores a multitude of concerns and sets off more alarm bells relating to the PHA.
We should all pay attention as the PHA over the past 14 years has handled significant sums of public money.
The forensic accounting report noted that the PHA spent $1.8 billion over the last 14 years, with $334 million going for pharmaceutical drugs and medical supplies.
National Review looks forward to the conclusions of the cabinet and the PHA's board, headed by Frank Smith, as they relate to the findings in the various audits into the affairs of the Public Hospitals Authority.
We also hope that those conclusions are made public.
It is a shame that in so many cases the public is only able to learn of matters in the public interest through leaks.

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News Article
Rt. Hon. Hubert A. Ingraham Resolution on Baha Mar Project
November 19, 2010
Rt. Hon. Hubert A. Ingraham Resolution on Baha Mar Project

I have been disappointed but not surprised by the failure of Members Opposite to recognize that my Government has made considerable and measurable progress in making lemonade from the lemons which they left on the table when they were put out of office in 2007.

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News Article

March 26, 2014
Locals promised 'great benefits' from Abaco port project

In addition to the hiring of as many "able-bodied" local people as are available, a boost in economic activity over the course of its two-year construction period, an expansion in local and international trade, and the sourcing of materials and equipment locally have been touted as spin-off benefits of the construction of a new $39 million port in North Abaco.
A Bahamian/Chinese labor split of 70 percent and 30 percent respectively has been promised in regards to employment opportunities at the port, which is set to be constructed in the Coopers Town area, along with more than $3 million in subcontracted work going to Bahamian contractors.
These were some of the assurances of Deputy Prime Minister and Minister of Public Works Philip Brave Davis, who was in North Abaco on Monday evening to address a town hall meeting about the North Abaco Port project, which is set to break ground in the next six weeks.
The China Harbour Engineering Company (CHEC) is the lead contractor on the project, which is being funded by a loan from the Export-Import Bank of China, the same Chinese state-owned financial institution which has provided the multibillion-dollar Baha Mar loan.
Davis addressed what onen attendee estimated to be between 200 and 250 local residents, along with Felix Chang, principal, CHEC (Bahamas) Ltd.; Colvin London, senior business manager for CHEC, and Daryl Vaz, a Jamaican MP who came to speak about Jamaica's experience working with CHEC.
Davis said: "This is going to be of great benefit to the Abaco economy and the Bahamian economy in general. You'll have modern infrastructure and a transshipment facility that will facilitate national and international trade. It will generate new business revenues from all of the things that will be built up around it. It will engage Bahamian service providers and suppliers. We expect that with the port, trade between China and The Bahamas will improve."
Davis said that he met with CHEC as recently as the morning of the town hall meeting to discuss issues related to maximizing the local benefit from the project in the areas of labor, materials and equipment. Noting a comment made by Felix Chang indicating that $3 million of the $39 million in investment would go to local businesses, Davis said that this would in fact be increased.
"I heard that is going up. I am advised that $3 million is an error. We'll correct that," said Davis.
The deputy prime minister said he was advised that an inventory of the skills of all people available to work in the community is being drawn up and they will get "the first choice to start working" when the project begins.
"The materials, steel, cement and whatever else is required, they will source it locally. The only thing that is required is that we have competitive prices. I can't force them to buy steel or anything else if you are going to sell it for more than they will import it. I don't mean two cents more, yes they wil take into account that you have to import it, so it may be a bit more expensive, but it can't be too much more expensive.
"The only equipment that will be imported will be those that are more technically advanced to ensure they are on budget and on time. I have that assurance from them," said Davis.
Chang said that CHEC foresees "huge benefits" for local people from the project, and will implement training programs to help prepare locals to work on it. He claimed that to date, $300,000 has been spent locally, spread among 70 companies.
CHEC falls under the China Communications Construction Company (CCCC) Group, which forms part of a Fortune 500 company listed on the Shanghai Stock Exchange, and is the 11th largest construction company in the world. CHEC is one of the largest marine contractors worldwide.
Emphasizing the company's belief in corporate social responsibility, Colvin London explained that the company hopes to be involved in The Bahamas for a long time.
The company has not been without controversy in Jamaica, which may help to explain why it decided to bring Jamaican MP Daryl Vaz to essentially vouch for it at the town hall meeting.
In 2012, CHEC came into the spotlight when Greg Christie, Jamaica's contractor general at the time, criticized the government's decision to engage with the firm on the basis that it had been disbarred from receiving any financing from the World Bank due to concerns over alleged corruption.
Since that time, the company has been heavily involved in infrastructural works in Jamaica and elsewhere in the Caribbean. It is presently building a major highway between Kingston and Ocho Rios, and is in discussion with the Jamaican government about the controversial proposed construction of a transshipment port and industrial park in the Goat Islands, an environmentally-protected area.
A source with knowledge of the company's involvement in Jamaica told Guardian Business an assessment of its reputation in Jamaica "depends like always on who you speak to".
"For the environmentalists in Jamaica they are officially public enemy number one in light of the plans for the Goat Islands. The logistics hub is a disaster for the protected areas. For those in the construction industry, they've basically taken out a large swath of the infrastructure projects because they can't be beaten on price. It's difficult to read between the lines as to what's xenophobic and legitimate criticism, but they've had far from an easy ride."

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News Article
First piling marks core project start for Baha Mar
July 01, 2011
First piling marks core project start for Baha Mar

Baha Mar, the largest single-phase resort development in the history of the Caribbean, celebrated another milestone with the driving of its first of 5,700 pilings yesterday -- marking the beginning of construction for Baha Mar's core project.

A recent ceremony which highlighted the milestone included the embedding of a gold commemorative Baha Mar coin as a symbol of good luck for the $3.4 billion resort, gaming and entertainment complex slated to open in late 2014.  Officials from both the Ministry of Public Works and executives from Baha Mar were in attendance for the occasion.

"With the start of construction of our core project, Baha Mar continues on its planned timeline to deliver the largest resort development presently under construction in North America.  Today's ceremony is yet another milestone in the development of a project that is vital to the economy of The Bahamas, and which will go a long way to helping address the current economic challenges facing the country," said Don Robinson, president of Baha Mar.  "The realization of Baha Mar is due in large part to the confidence and strong support given by the Bahamian people and the Bahamian government."

The placement of the first piling of the core project is another significant accomplishment in the construction phase of Baha Mar.  In February Baha Mar held its ground-breaking ceremony, and in the intervening four months significant work has been done on both a new commercial village and substantial road works surrounding the resort, both of which are slated for completion by November.  In addition, Baha Mar has so far provided employment for almost 900 Bahamians, and has awarded over $90 million in contracts to Bahamian firms.

Representing an unprecedented alliance of powerhouses in the hospitality, financial and construction industries, Baha Mar is an example of a collection of diverse international partnerships.  In addition to securing a number of internationally-recognized brands as hotel partners, Baha Mar has appointed China State Construction and Engineering Corporation as its general contractor, and has also secured project financing from the Export Import Bank of China.

The ceremony was attended by Baha Mar executives, including, Don Robinson, president; Tom Dunlap, executive vice president of construction and development; Rick English, senior vice president sales and marketing, and Robert (Sandy) Sands, senior vice president of external affairs and government relations.  Also in attendance from the Ministry of Public Works were Craig Delancy, building control officer; and
Edwin Yuklow, senior structural engineer; and from China Construction America (The Bahamas) Tiger Wu, executive vice president.
For additional information, visit www.bahamar.com.

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News Article

April 30, 2014
Bimini resort 'working expeditiously as approvals allow'

Resorts World Bimini has stated that it is working "as expeditiously on our development as approvals will allow", after attorneys and environmentalists accused it of forging ahead with the construction of a controversial ferry terminal despite a top judge's warning.
Concerns were raised about construction activity in Bimini after a 450-foot 1,200-ton cutter-section dredger arrived in the area in recent weeks, considered among the most powerful machines of its kind.
In an emailed statement to Guardian Business, Michelle Malcolm, director of public affairs for Resorts World Bimini, confirmed that the dredger, named the Niccolo Machiavelli, was in Bimini to dredge a channel that will allow the Bimini SuperFast ferry to dock at the planned cruise pier.
With the arrival of the mega-dredger, Fred Smith, QC, attorney and one of the directors of the environmental organization Save the Bays, has accused Resorts World Bimini of "racing ahead to get work done" on the ferry terminal before a decision is reached in a judicial review action presently underway, which seeks to examine the approval process supporting the resort's plans for the pier.
Smith and others have also suggested that the dredger is set to wreak destruction on reef sites in Bimini as it proceeds with the pier construction, notwithstanding the fact that Court of Appeal Justice Abdulai Conteh told lawyers for the government and Resorts World Bimini last month that construction should not be allowed to progress while the project is being challenged in the courts.
In light of these concerns, on April 25, Smith wrote to the Office of the Attorney General urging the government not to do anything to jeopardize the Bimini judicial review proceedings.
"We would be grateful if you could urgently revert with confirmation that your respective clients will maintain the status quo (by which we mean, not carry out or allow the carrying out of any further changes to the development site including construction or pre-construction operations)," the letter said.
In a letter to Resorts World Bimini, sent on the same day, Smith asked the company to confirm whether the government had granted any permits, licenses or approvals in respect to the development.
Smith said there has been no response to either letter to date.
Yesterday, Smith again wrote, this time to attorney for Resorts World Bimini, John Wilson, asking whether any application for dredging permits for Resorts World Bimini is currently pending consideration by the relevant authorities.
He noted that his clients, the Bimini Blue Coalition, who are challenging the construction of the pier, would wish for an opportunity to make objections in accordance with section eight of the Conservation and Protection of the Physical Landscape of the Bahamas Act.
Smith went on to tell Wilson in the letter that if he did not have a response to this question by the close of business yesterday, he would "assume that the dredging is commencing without permits in breach of your undertaking to the Court of Appeal (and the Supreme Court)".
In a response to Smith's claims that Resorts World Bimini appears to be moving ahead with construction activity relating to the pier in contravention of undertakings made to the court, Malcolm told Guardian Business: "Resorts World Bimini has followed the prescribed regulatory process and adhered to all applicable laws relating to our development. We have secured the necessary approvals from the appropriate government agencies and complied with all judicial orders. We will continue to work as expeditiously on our development as the approvals allow."
Resorts World Bimini intends to construct a 1,000-foot pier which would enable it to dock the Bimini SuperFast ferry that brings passengers between Miami and Bimini, rather than having to bring passengers on to the island from the ferry by tender, which takes more time.
The pier has raised fears among environmentalists, Bimini locals and dive companies, in part given that it is intended to be placed in an area populated by a multitude of popular dive and fishing sites off Bimini. The Bimini Blue Coalition is due back in court in June to challenge a Supreme Court decision to require the group to put up $650,000 in costs if it is to move ahead with its judicial review of the project.

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News Article

June 01, 2011
Construction sector must 'get its house in order'

More than 50 percent of the thousands of construction workers in the country will be ill-prepared to capitalize on billions of dollars in opportunities if the Contractors Bill is not soon finalized.
President of the Bahamian Contractors Association (BCA) Stephen Wrinkle asserts it's never been more important for the country to ensure this bill - proposed to license and regulate the industry - gets passed.  His comments come as Baha Mar revs up construction and Atlantis gears up to go ahead with a multi-million project.
"Clearly we're not prepared to accommodate Baha Mar and Atlantis with the labor we currently have without additional training," he told Guardian Business on Monday.  "Both are extremely prestigious for the industry and the country and it [speaks] to the [need for the] passage of the Contractors Bill and a training program, otherwise (we will) be faced with huge imports of skilled labor.
"We certainly need to get our own house in order to accommodate these giant projects."
Wrinkle said the Ministry of Works is presently finalizing the draft of the bill in order to submit it to Cabinet, after input by the BCA, insurance representatives and the Attorney General's Office.
As far as he sees it, there should be no further impediments to passing the bill.  However, there has been one delay after the other in recent years as construction workers, in the meantime, grapple with myriad issues.
Wrinkle argues it is even more important for contractors in The Bahamas to be up to international standards with regards to licensing and surety obligations ahead of the economic turnaround projected.  The bill proposes to do just that, as well as ensure that Bahamian contractors are considered first for projects.
The introduction of the bill coincides with one of the biggest economic slumps the nation has ever suffered through, stemming from a U.S. housing and credit crisis that has zapped consumer confidence and dried up prospects for commercial developments.
To date, a number of these projects have been delayed or canceled altogether, with restart dates only now being offered.
Just Monday, Prime Minister Hubert Ingraham confirmed that the shelved Hurricane Hole project was now back on track at mega-resort Atlantis.
"Kerzner International expects to commence the development of its new timeshare resort and expansion of the Hurricane Hole marina this year," read Ingraham's speech on the Budget debate 2011/2012.
Wrinkle yesterday welcomed the news, saying it would speak to employment opportunities for construction workers.
"The BCA will continue to lobby on behalf of contractors for better positions," he said.
A $225,000 program signed into effect two months ago is expected to make the local construction industry more competitive internationally over the next 18 months.  Called the "Strengthening of the Bahamas Contractors Association", the project is funded with a $150,000 grant from the Inter-American Development Bank (IDB) and $75,000 from the BCA.

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News Article

March 08, 2013
How would VAT impact the construction sector

Dear Editor,
In February of this year, the prime minister of the Commonwealth of The Bahamas addressed Parliament, and the Bahamian public for that matter, as he introduced the conversation regarding the possible change in our current tax structure. He introduced the discussion of value added tax or VAT.

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News Article

October 03, 2012
Millions to be gained in construction

The Bahamas could be missing out on millions of dollars in profits from the construction industry by not exporting local talent throughout the region, according to an industry executive.

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News Article

January 24, 2012
Construction industry honours top players

THE BAHAMIAN Contractors' Association (BCA) honoured several top industry players during its second annual Christmas and Awards Luncheon, held on December 15, 2011.

Awards were given to contractors in four major BCA membership categories, which include Building Contractor of the Year levels one through three, and General Contractor of the Year.

Building Contractor of the Year Level One, which recognises contractors certified to build single-storey structures up to 5,000 square feet, went to BJ's Cabinetry and Construction.

The Building Contractor of the Year Level Two, which recognises contractors certified to build two-storey structures of up to 10,000 square feet, was awarded to D.H. Buil ...

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News Article

August 19, 2014
Baha Mar general counsel out

Baha Mar's top lawyer is leaving the company with immediate effect and being replaced by a former top global gaming executive, as the mega-resort approaches its completion deadline.

General Counsel and Senior Vice President Uri Clinton will be relocating with his family back to Las Vegas, Nevada. He is being replaced by Whitney Thier, former executive vice president of legal and government affairs, CG Technologies, L.P. and former general counsel of Fontainebleau Resorts.

Thier will assume the position of general counsel and executive vice president for Baha Mar, thereby also taking on a key role in the company's executive committee in addition to leading the company's legal team.

Joining Baha Mar in 2011, Clinton has overseen Baha Mar's development from a legal perspective, leading the resort through the establishment of hundreds of major legal deals and choppy legal waters. This included navigating the dispute with one of Baha Mar's hotel brand partners, Morgans Hotel Group. The dispute concerned a non-disturbance agreement sought by Morgans from the resort; it culminated earlier this year with Morgans pulling out of its contract with Baha Mar. Morgans was later replaced with SLS Hotels.

In an interview with Guardian Business yesterday, Clinton said it is simply "time to come home".

"I wanted to get home to my family. Honestly, it was my choice and it was a timing thing; (it was) what was right for my family."

Clinton said the resort development had reached a transitional point.

"We got through a lot of critical stuff from the construction side so now they are preparing for operations and so it was a breaking point. Sometimes if you don't put your family first, you never will," he said.

Thier's position at CG Technologies, formerly Cantor Gaming, saw her involved with delivering technological solutions to the worldwide gaming industry, making her seemingly well-suited to guide Baha Mar in its uptake of the more-advanced gaming methods that the proposed Gaming Bill would legalize in The Bahamas. Baha Mar and Atlantis have led the push for the passage of that bill, with Clinton himself vocal on the benefits it would bring to the tourism industry and government revenue collections by enhancing the competitiveness of the gaming in industry in The Bahamas.

The work of CG Technologies has included operating race and sports books and mobile gaming at eight Las Vegas resorts, as well as offering turnkey wagering systems to Baha Mar's major competitor, Atlantis, Paradise Island.

A release from Baha Mar announcing the shift in leadership yesterday highlighted Thier's "extensive experience" in regulatory law, management agreements, gaming technologies, intellectual property, capital financing structures, human resources and resort operations in the United States and internationally.

Thier holds a Juris Doctor degree from Tulane Law School and a Bachelor of Arts degree from Dartmouth College. She will be relocating with her family to Nassau.

Baha Mar recently announced that it will move its "grand opening" to spring 2015, and will offer a "preview opening" in December 2014 only, with invited guests offered the chance to view and stay at the resort.

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