Troubling financial matters seem to be plaguing the operator of the Caneel Bay Resort at Virgin Islands National Park/Carolyn Sugg via Flickr

Editor's note: This updates with response from National Park Service to the current situation with the Caneel Bay Resort.

More than two years after Laurance S. Rockefeller’s beloved resort at Virgin Islands National Park was heavily damaged by back-to-back hurricanes, the once-idyllic retreat’s operators are “grossly underinsured” and being sued over an unpaid $217,416 construction bill.

Since hurricanes Irma and Maria battered the national park and the Caneel Bay Resort in September 2017, the company that runs the resort has failed to convince Congress to extend its lease to run the resort by 60 years. CBI Acquisitions also has failed, so far at least, to get the Interior Department to pay it $70 million to simply walk away from the operation now in shambles. The rationale behind the request is unclear, since the government, under Rockefeller's wishes, stands to inherit the property in a little less than four years.

Questions also have arisen about CBI's environmental stewardship and whether the Park Service will inherit a toxic clean-up problem as well. In its $70 million offer to walk away, CBI demands to be indemnified against any environmental responsibility (see attached Engle Letter).

Today the resort remains largely beaten into the ground on the northwestern shore of St. John in the U.S. Virgin Islands, its operations almost entirely shuttered by the hurricanes, and CBI seemingly far short of the $100+ million its officers maintain is needed to rebuild the exclusive resort where nightly rates started at $600.

The state of affairs appears to be a quandary not only for CBI, which took over management of the resort in 2004, but also for the National Park Service, which had been expected to take over the tony resort in late 2023 but now faces the prospect of receiving a splintered, weather damaged, and possibly environmentally contaminated property.

National Park Service staff said Wednesday that negotiations have been ongoing with CBI to resolve the resort's future.

"The recovery of the Caneel Bay resort is important to the Department of the Interior and to the residents of the island of St. John," Park Service spokesperson Stephanie Loeb said in an email. "Negotiations between CBI Acquisitions and DOI remain ongoing. We are hopeful that all parties will come to an agreement on a path forward soon."

Rockefeller's Vision

Rockefeller envisioned better for the resort and its embracing national park. A philanthropist and conservation giant whose support of the national parks movement spanned the country from Acadia National Park in Maine to Redwoods National and State Parks in California, Rockefeller had fallen in love with St. John during a cruise in the Caribbean.

In 1956, he purchased 5,000 acres and gave it to the federal government for the park's creation, but held back about 170 acres on the grounds of the historic Caneel Bay Plantation to create a luxury resort. 

Twenty-seven years later, on September 13, 1983, on a sultry day in New York City, he signed the 170 acres over to the Interior Department for just $1, but crafted a "Retained Use Estate" to allow his resort to operate through September 2023. In that RUE document (see attachment VIIS-RUE), he made clear his intent that the facilities eventually would become property of the national park.

It is Grantor’s expectation and intention that at some future time, to be determined by Grantor pursuant to the provisions set forth herein, the Retained Use Estate will be terminated and extinguished in order to carry out the longstanding objective of Grantor that the Premises ultimately be an integral part of the Virgin Islands National Park under the jurisdiction of the Secretary for the use and enjoyment by visitors to the Park of the outstanding scenic and other features of national significance located both within the Premises and in other areas of the Park.

But CBI for most of the past decade has tried to erase that 2023 end date. While the Park Service purportedly has made attempts since 2010 to work out a more traditional concessions-type deal for the property as directed by Congress, Gary Engle, CBI’s principal, has maintained those talks have not been substantive.

Hurricanes Irma and Maria upended whatever talks had occurred – neither CBI nor the National Park Service has been willing to discuss the negotiations, and a Freedom of Information Act request filed by the Traveler early in 2018 remains largely unfulfilled.

Unpaid Bills

CBI portrayed itself as an economic force, not just on St. John, but in the Virgin Islands. It claimed that it generated $65 million a year in direct annual spending for the island, and "more than $160 million in annual economic activity, and causing additional job creation in related industries." Leading up to the 2017 hurricanes, the resort employed 400, the company claimed.

But not only did the hurricanes heavily damage the resort, but they also exposed CBI to a $217,416 lawsuit (see attachment VIIS-Bluewater Lawsuit) brought by Bluewater Construction, of St. Thomas, stemming from 18 hotel rooms it built in the months leading up to the September 2017 storms but has yet to be paid for.

Too, CBI was told early this year that the resort was “grossly underinsured.” (see attachment VIIS-Underinsured)

It’s a convoluted tangle. Caneel Bay’s spokesman did not answer his phone Tuesday, and lawyers for Bluewater Construction and the insurance company did not return phone calls.

Court documents, however, show that CBI was underinsured by just about half of what it valued the resort at.

CBI was successful in its $32 million claim for damages from Hurricane Irma, which struck on September 6, 2017. But when the company filed a similar $32 million claim for damage from Hurricane Maria, which struck less than two weeks later, Lloyds of London denied the claim on the grounds that the first claim covered the loss from both storms.

“There is no additional damage caused by Hurricane Maria that was not considered in the scope of damages from Hurricane Irma,” the claims management company noted in a September 2018 letter to Engle. In other words, the coverage for Irma would cover impacts from Maria, the claims firm concluded.

While that denial sent the parties down the road towards arbitration, they failed to agree on an umpire for the matter. In a March 14 filing in U.S. District Court in the Virgin Islands seeking appointment of an umpire, attorneys for the insurers noted, “CBIA chose to obtain property and business interruption coverage under the Policies for a total limit of $32 million per occurrence, despite its own determination that the total insurable value was $65,413,068. … Thus, the Caneel Pay Properties were grossly underinsured.”          

Just a month later, however, the insurers without explanation asked the court to dismiss the matter; it's not publicly known whether the insurers came around to CBI's thinking and paid the claim, or whether CBI gave up.

Seven weeks later, CBI made its $70 million request to Interior Secretary Bernhardt. However, the proposal is not valid under the terms of the RUE, Loeb said Wednesday.

Concerning CBI's proposal to walk away from the resort in return for $70 million and indemnification against environmental damage, she said the offer was invalid.

"In a recent letter from (the Interior Department) to CBIA, dated Oct. 10, 2019, DOI outlines several options for Mr. Engle’s consideration, including options if EHI/CBIA wishes to conclude or continue the operation of the Caneel Bay Resort," she said. "The specific terms proposed by CBIA, including payment of $70 million, do not constitute a valid offer to terminate the Retained Use Estate. DOI is currently awaiting a response."

As for the unpaid construction bill, which the Park Service was unaware of, Bluewater is seeking a jury trial seeking compensatory damages, attorneys’ fees, and possibly punitive damages.

The News of St. John was first to report on the court filings.

What shape the resort is in come September 2023 when it’s scheduled to be turned over to the Park Service remains to be seen, and not simply in terms of buildings. There’s also the possibility that the land it sets on is contaminated.

Environmental Questions

When Rockefeller structured the RUE that allowed the Caneel Bay Resort to be operated for private profit, a provision he had inserted required the operator to use and maintain the grounds in a way that is "consistent with the preservation of such outstanding scenic and other features of national significance, and preserve the Premises to the extent feasible in their natural condition for the public benefit, enjoyment, and inspiration..."

But according to initial documents Traveler obtained through its FOIA request, a 2014 environmental assessment of the Caneel Bay Resort property raised questions of contamination from SVOCs -- semivolatile organic compounds -- often related to pesticides, and arsenic.

"In addition, there are concerns for leachability of SVOCs, arsenic and mercury to groundwater," the report noted.

The surveys also found concentrations of total petroleum hydrocarbons and diesel range organics above acceptable levels set by the Virgin Islands Department of Planning and Natural Resources.

While the assessment called for more extensive testing to determine the extent of these contaminants -- both across the ground surface and to determine depth of contamination -- records Traveler obtained said CBI had refused to allow a contractor for the Park Service to access the grounds to perform further testing.

Since then, Park Service personnel have declined to discuss the status of the environmental condition of the property, and Traveler’s FOIA remains pending.

How soon a lodge will return to Caneel Bay remains to be seen. When Engle proposed his offer to Secretary Bernhardt, he claimed that if he couldn't move forward with his $100 million vision, it would not be until 2028 at the earliest that a resort rose on the grounds, "and possibly not until 2030."

That time period, he said, was based on the Park Service having to go through a competitive bidding process for a new concessionaire, building a facility, and negotiating various contracts and permitting processes.