The Hypnotic files part 2: The first round – How Minister Duncan’s Hypnotic set its claws in the Seaman’s Club Brothel

POSTED: 03/14/13 12:25 PM

When Richbenzwan N.V. signed a 10-year management contract with Hypnotic Hotel and entertainment back in 2009 for the management of the Seaman’s Club brothel in Sucker Garden it soon found itself in one conflict after the other. Two court cases later Hypnotic is sitting pretty and Richbenzwan has been pushed with its back against the wall – and the fingerprints of Justice Minister Roland Duncan are all over these events.

Today reconstructed the history of this ugly dispute based on court documents this newspaper obtained. The Richardson family – owners of Richbenzwan – declined to be interviewed for these stories citing personal safety and security concerns but they gave permission to use the court documents.

 

Trouble in the land of easy virtue

St. Maarten / By Hilbert Haar – That the relationships between competitors in the profitable prostitution market were not exactly harmonious appeared a couple of months after the signing of the management contract between Richbenzwan NV and Hypnotic Hotel and Entertainment NV on June 29, 2009. In October 2009, Richbenzwan was forced to file a lawsuit to settle a dispute with the Island Territory of St. Maarten. The Seaman’s Club’s original location was the building that now houses El Capitan in Sucker Garden. On November 21, 2008, the Rental Board Committee gave landlord Tochie Meyers permission to terminate the lease agreement with Richbenzwan per July 1, 2009.

While the rental Board committee advised Richbenzwan to appeal the ruling, the company decided to avoid further conflict. Attempts to buy the building behind the current El Capitan location stranded – then known as the Blueberry Hotel and Hypnotic. But during the negotiations, business partners Roland Duncan and James Carti became more interested in operating the Seaman’s Club than in selling their building.

Per July 1, 2009 the Seaman’s Club set up shop in the building behind El Capitan and it is still there today.

When Richbenzwan went to Economic Affairs to change its address to the Hypnotic building, a civil servant at the department called Duncan and told him to withdraw his request for a permit for the same address.

A ruling from the Court in First Instance dated October 16, 2009, establishes that this building was previously used as a hotel and entertainment center under a name that is by now all too familiar: Hypnotic Hotel and Entertainment NV. It is noteworthy that Hypnotic’s business life must have been extremely short; the company was incorporated at the Chamber of Commerce on February 6, 2009 and the Seaman’s Club moved into its building in July of the same year. Soon after business partners Roland Duncan and James Martin Carti entered into negotiations with Richbenzwan about a management contract.

When the Seaman’s Club changed address it asked the Island Territory to adjust its permits on September 23. Only sixteen days later, on October 9 the police and the voluntary corps St. Maarten paid the establishment a visit to control its permits.

According to a police report that is part of the court ruling, officers waited for about an hour for the permit holder to come to the club to explain the discrepancy between the permit and the address. When nobody showed up, the officers closed the club and it remained closed until the date of the court ruling one week later.

Richbenzwan contested the police action saying that the rules for the establishment of companies state that only the Executive Council closes down companies that operate without a permit. But at best, the company argued, the permit is imperfect (because it does not have the correct address) and the closure is unlawful “because it lacks a legal basis. The action violates the principles of carefulness, proportionality, equality and the ban on arbitrariness.”

Judge René van Veen however ruled that the Seaman’s Club was operating without valid permits because it did not have the correct address. However, the judge also found that according to the Island Ordinance for the establishment of companies closure has to be based on a decision by the Executive Council – and such a decision did not exist. The police did not have the authority to close down the business either. The court ruled that there was no legal basis to justify the closure and ordered the immediate reopening of the Seaman’s Club.

And so the island’s oldest brothel stayed in business.

At the time Richbenzwan was happy to hand over the reins through a management contract to Hypnotic Hotel and Entertainment. The agreement went into effect per November 1, 2010. While the court document states that Richbenzwan entered into this agreement with James Martin Carti, this newspaper has seen the contract; it also carries the signature of Justice Minister Roland Duncan.
For clarity’s sake: at the time of the signing, Duncan was Minister of Constitutional Affairs in the government of the Netherlands Antilles.:

The condition parties agreed upon seemed simple. Hypnotic would pay $18,000 at the signing of the agreement on July 29, 2009, and another $18,000 as a security and good faith deposit on or before October 31, 2010. Furthermore, parties agreed on a monthly management fee payable to Richbenzwan of $18,000 by the fifth of each month for the first five years, and $20,000 for the month for the second five years..

There was one escape clause in the contract and that would become the source of a lot of trouble. A court ruling in summary proceedings dated July 27, 2012 contains the text of this clause: “In case government is delinquent for more than 3 months for whatever reason, not being a default on the side of Grantee (Hypnotic – ed.),due to tardiness in applying for the permits or any administrative mistake on the side of grantee for which grantee is accountable, to process and grant Grantor (Richbenzwan – ed,) work and residency licenses for entertainment girls and that causes the sex-club business to at any given moment have only ten or less entertainment persons, Grantee will be obliged to pay Grantor a guaranteed income of $5,000 until government grants the requisite permits.”

Simply put: if Hypnotic through no fault of its own would at any moment not be able to employ tenor more girls at the Seaman’s Club, the management fee would automatically and dramatically drop from $18,000 to $5,000 per month. The only valid reason for having fewer girls would be government bureaucracy frustrating the issuing of work permits.

In June and July of last year Hypnotic called on this clause, saving itself $26,000 in management fees in the process.

The court ruling of July 27 establishes that the troubles about the execution of the management contract began almost immediately. “The defendant immediately fails to pay the fee for the month of November 2010.”

It also appears that Hypnotic never paid the levies for the permits of the Seaman’s Club even though Hypnotic was contractually obliged to pay this on behalf of Richbenzwan. At the time of the ruling, Hypnotic was 11,656 guilders behind with its payments.

Moreover, Richbenzwan pleaded with the court, there is no proof that the government of St. Maarten defaulted for more than three months in issuing work and residence permits for “entertainment girls,” nor did Hypnotic present evidence that during more than three months fewer than ten girls were working in the club. “It is clear that the defendant had made insufficient efforts to contract more girls in a timely manner,” Richbenzwan claimed.

Hypnotic fielded a remarkable defense: it claimed that work permits had been denied “because due to changed government policy no more work permits are granted to persons younger than 25 years.”  Furthermore, the company had been unable to get work permits for women who were older than 25.

The court shot these arguments to pieces. First it noted that Hypnotic called on legislation (the Execution decree Labor Foreigners) dating back to the beginning of 2009. Then it ruled that Hypnotic should have provided information about the work permits it requested for the Seaman’s Club in terms of numbers, dates of application and decisions. It should also have provided the same information about the number of girls in contracted and for which period. Lastly, the court ruled, Hypnotic should have made clear to the plaintiff which efforts it made to contract more entertainment girls.

In spite of these considerations the court rejected Richbenzwan’s demand of payment for the months of June and July 2012 because there was still a possibility for Hypnotic to provide the demanded proof in a regular court procedure. For the same reason, the court rejected the demand to sentence Hypnotic to regular payment of the monthly management fee.

But the court did sentence Hypnotic to provide written information to substantiate its defense arguments within a fortnight after the ruling on the forfeiture of a penalty of $700 for each day it failed to comply with a maximum of $70,000.

Hypnotic did not contest the claim that it had failed to pay fees for the club’s permits to the Receiver and indicated that it was willing to make these payments upon receipt of an invoice from Richbenzwan.

This way, the first round in the dispute went to Richbenzwan. But the fight was far from over, as we will establish in part 3 of this series.

Tomorrow: The Hypnotic files part 3.

 

 

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