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Peter Nygard turned ‘Nygard Cay’ into a bacchanal, Mayan-themed private luxury resort where peacocks roam and guests used to attend ‘pamper parties’ where they received spa treatments and luxuriated in a giant sauna.

Canadian fashion mogul Peter Nygard and U.S. hedge fund billionaire Louis Bacon have levelled some outrageous accusations at one another in their multiyear dispute over their adjoining Bahamas beachfront estates. But the flamboyant, 74-year-old Mr. Nygard has decided he's had enough, and wants to make peace.

Mr. Nygard has alleged in U.S. court documents that Mr. Bacon "terrorized, intimidated, and corrupted" locals and government officials and "made it his mission to destroy Mr. Nygard's reputation" while costing him a fortune. Mr. Bacon has sued Mr. Nygard for defamation in the United States, accusing him of operating "a malicious smear campaign … that is extraordinary in its content, scope and intensity," including "falsely accus[ing] Mr. Bacon of repugnant and outlandish crimes and activities, including murder, drug trafficking and membership in the Ku Klux Klan."

Now, however, Mr. Nygard is offering his neighbour an apparent olive branch.

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In a letter running Monday in two Bahamian newspapers to Mr. Bacon, a local environmental group and the government, Mr. Nygard calls for an end of the "bickering, fighting and suing." He proposes negotiating a "global resolution" to outstanding litigation and environmental issues related to Mr. Nygard's property and instead financially helping the nation's less fortunate citizens. "I am personally committed to immersing myself in the settlement process," Mr. Nygard writes.

The dispute dates back more than a decade. Finnish-born Mr. Nygard, a rags-to-riches story whose Winnipeg-based Nygard International has annual sales exceeding $500-million (U.S.), became a permanent resident of the Bahamas in 1986, two years after buying an estate on the western tip of New Providence Island once owned by Canadian tycoon E.P. Taylor. He turned "Nygard Cay" into a bacchanal, Mayan-themed private luxury resort where peacocks roam and guests used to attend "pamper parties" where they received spa treatments, luxuriated in a giant sauna and danced under a glass ceiling in a 32,000-square-foot grand hall.

Mr. Bacon, CEO of New York-based Moore Capital Management, purchased his adjoining property in 1993 and found Mr. Nygard to be a noisy neighbour. He built flagstone walls along a road passing through his property to Nygard Cay, which limited Mr. Nygard's guests' ability to park, and created run-off problems; puddles formed on the road after storms, which irritated Mr. Nygard. Mr. Bacon installed speakers that blasted sound back at Mr. Nygard's property, which Mr. Nygard claimed in a filing with the U.S. District Court in New York was part of a continuous harassment effort to "interfere[e] with his property rights and liberties." Mr. Nygard alleges an individual working for Mr. Bacon was involved in a 2009 fire that caused extensive damage to Mr. Nygard's spread.

Mr. Bacon claimed in a recent filing with the U.S. court that Mr. Nygard "fixated his attention" on him, "apparently believing that [Mr. Bacon] was somehow behind the government's action." He added Mr. Nygard's "crusade against Mr. Bacon has become an irrational obsession" that fuelled a "smear campaign" using the Internet, falsified news reports and staged protest marches.

Mr. Bacon is also a backer of "Save the Bays," a local environmental group that alleges Mr. Nygard has caused damage to the local marine area by building sea walls and dredging to expand his beach. The group filed an injunction that prevented the government  government from approving permits allowing Nygard to repair and rebuild his fire-damaged property.

Both have accused the other of meddling in state affairs to further their interests and Mr. Bacon claims to have found a whistle-blower with video recordings of Mr. Nygard that support his case. A judge in New York scaled back Mr. Bacon's defamation action last summer, then threw out Mr. Nygard's counterclaim.

In his letter, Mr. Nygard warns the various actions "could last for years to come because – if we are all being honest with ourselves – in addition to the legal issues that we all feel strong about, this is at least partially fuelled by pride and a clash of egos."

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A settlement, Mr. Nygard's lawyer Aaron Marks said, "would allow Mr. Nygard more time to focus on continuing to grow his business and to enjoy the property … in the community that he loves." A spokesman for Mr. Bacon declined comment.

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