Mystic Mountain shake-up - Founding chairman to exit amid court battle for control
The Mystic Mountain Rainforest Adventures attraction in Ocho Rios, contending with more than a COVID-19 pandemic financial fall-out, is estimated to require US$2.6 million or $380 million in additional working capital over the next two years.
As the tour provider tries to woo Jamaicans and tourists back to its adrenaline-pumping rides, things are rocky in the boardroom with an ongoing court battle involving investors and directors.
After some 10 years at the helm of Mystic Mountain Limited, MML, the Jamaican company that owns and runs the adventure park, the venture’s co-founder and MML Chairman and CEO Michael Drakulich is on his way out of the top job.
Drakulich and other shareholders and directors have so far failed to secure a court injunction preventing majority shareholder Rainforest Adventures (Holdings) Limited, or RFA, a British Virgin Islands-registered company, from making board-level changes at MML, including adding more directors and appointing a new chairman and CEO.
Mystic Mountain was opened in 2008 with financing from the Development Bank of Jamaica, DBJ, and private investors, including RFA, Drakulich, John Dalton and former politician Horace Clarke, who passed away in 2010.
MML, which was formed in 2003, is now owned 100 per cent by Karibukai Limited, a St Lucia-registered investment vehicle created in 2015 to hold the MML shares. Drakulich, John Dalton and Norma Clarke – the widow of Horace Clarke – are minority shareholders in Karibukai, which is 54.87 per cent owned by RFA, making RFA the ultimate controlling partner in MML.
Court records show that the legal action was filed by Drakulich; with Dalton, Clarke and MML directors Max Patchen, a former managing director of the company, and Milverton Reynolds, the managing director of DBJ, added as co-claimants when the case was first heard in the Supreme Court on October 9 this year. They have been seeking, among other things, an injunction to restrain Karibukai, RFA and MML from changing the MML governance structure. The suit is supported by MML.
Drakulich and the other claimants contend that it was understood and agreed among the owners that the minority shareholders would have independence in the management and operation of MML and that Karibukai served only as the vehicle to manage the relationship between the shareholders.
The claimants argue in court filings, too, that “the increased and sudden involvement” of RFA President Josef Preschel in the affairs of MML has “the potential to cause significant damage to the claimants’ business reputation in light of Mr Preschel’s connection to convicted criminal Harald Joachim Von der Goltz”.
Von der Goltz, the founder and former chairman of RFA, was in September this year convicted in the Southern District Court of New York and sentenced to four years in prison on charges including wire fraud, tax fraud and money laundering, in a case related to the Panama Papers exposé. The Financial Gleaner has not ascertained the current business relationship between Von der Goltz and RFA.
Karibukai and RFA have argued that their power as shareholders give them the right to make the changes and further, that Drakulich and the other shareholders and directors did not object when Karibukai added six new directors last year, following MML’s decision to increase the number of directors from five to 11. Previously, RFA named three of the five directors to the MML board.
In a decision handed down on November 6, Supreme Court judge David Batts denied the injunction sought by the minority shareholders. Justice Batts ruled that there is no serious issue for trial and noted that the articles of MML make it clear that no one age 70 years or older is to be appointed to the company’s board of directors. Drakulich turns 71 on December 4.
Drakulich and his co-claimants were also denied a request for a stay of the RFA and Karibukai board actions, pending an appeal to the Court of Appeal. In November, judge of the Court of Appeal, Justice Nicole Simmons, heard arguments and on November 26 dismissed the claimants’ request for an injunction against the proposed action of RFA and Karibukai, pending the hearing of the substantive appeal against Justice Batts’ decision.
The minority shareholders and directors were also unsuccessful in legal action filed in the courts of St Lucia, where Karibukai is domiciled, seeking an injunction staying the intended board action of Karibukai and RFA.
Drakulich and the co-claimants are being represented by attorneys Georgia Gibson Henlin QC and Nicola Richards of the law firm Henlin Gibson Henlin, while RFA and Karibukai are being represented by Sandra Minott-Phillips QC, Simone Bowie Jones, Stephanie Ewbank and Shaniel May of Myers, Fletcher & Gordon. The lawyer for MML is Janet Morrison of Hart Muirhead Fatta.
Following its court wins, it is expected that RFA will now move quickly to convene an annual general meeting to effect the board changes.
“Those with minority interest have not prevailed. There is now no obstacle in the way of the first and second defendants (Karibukai and RFA) holding the meetings that they intend to hold,” Minott-Phillips told the Financial Gleaner when asked for comment.
“They don’t want to give a comment in relation to next steps, but they look forward to taking such steps as are in the best interest of Mystic Mountain Limited,” Bowie Jones said on behalf of her clients.
Gibson Henlin declined comment but referred the Financial Gleaner to the Mystic Mountain chairman and CEO.
“As you are aware, proceedings have been filed in the Supreme Court, and I have been advised to refrain from making any further comments at this time,” Drakulich said this week.
The embattled business executive is, however, striking an upbeat tone about the business.
“As CEO and chairman of Mystic Mountain, I am humbled by the outpouring of support that our Jamaican nationals and tourists alike have continued to bestow on our iconic attraction,” he said in a written response.
“COVID-19 has severely impacted our island, as it has done to the rest of the world, and many of us are grimly feeling its effects. Mystic Mountain has not been spared. Since reopening in July, the public response has been tremendous, and despite the current travel climate, I am encouraged by, and grateful to, the many Jamaicans who have reconnected with our famed attraction,” Drakulich added.