The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

US federal regulators have moved quickly to prevent attorneys for a former Bahamian broker/dealer and its principal ceasing to represent them in two New York court cases, alleging they are “gaming the system” to evade producing critical evidence.

The Securities & Exchange Commission (SEC), in documents filed with the southern New York district court, alleged that Warren Davis and Gibraltar Global Securities were using “one more tactic pulled from a dilatory bag of tricks” after failing to comply with a judge’s order.

Objecting to efforts by the duo’s US attorneys, DeFeis, O’Connell and Rose, to withdraw from representing them, the SEC alleged that Mr Davis and Gibraltar had not “produced a single page” of the Bahamas-documents that they had been ordered to turn over by April 15.

Alleging that this was “a flagrant violation” of Judge James Francis’s order, the US capital markets regulator argued that Mr Davis’s decision to stop defending himself and Gibraltar was “no excuse” for this.

Pointing out that the Bahamian duo’s attorneys sought court permission to withdraw just one day before the document production deadline, the SEC alleged: “Rather than first fulfilling their court ordered discovery, defense counsel filed their motion - with no advance discussion or notice to SEC counsel - on the evening before the due date for defendants’ production of documents.

“This court’s Order to produce documents was clear and unambiguous. Yet, on April 15, the due date for the production, defendants did not produce any of the ordered documents. Not a single page. The failure to produce was in flagrant violation of this court’s Order.”

Arguing that Mr Davis’s decision to cease his defence did not make the document production “moot”, the SEC continued: “This latest manoevere of a last-minute motion to withdraw as cover for defendants’ refusal to comply with the court’s Order is but one more tactic pulled from a bag of dilatory tricks.

“Once again, defendants and their counsel are gaming the system to avoid producing relevant information. These are the same documents speciously claimed to be immune from production under Bahamian law.”

The SEC alleged that there was no ‘fade away’ available to Mr Davis and Gibraltar, and it urged the New York court to warn the Bahamian duo that they would face sanctions and a default judgment against them if the documents it is seeking are not produced by this Friday.

Tribune Business revealed yesterday how Mr Davis and Gibraltar had conceded defeat in their two legal battles with the SEC, and were now exposed to summary judgments they cannot pay.

Mr Davis was said to have “exhausted his resources and ability to defend himself”, and had “significant outstanding arrears” in legal fees owed to his US attorneys that he was unable to pay.

The SEC was also alleged to have rejected his attempts to settle the case.

The US federal regulator, though, is not letting Mr Davis and Gibraltar creep away from the field of battle easily.

Apart from claiming that their departures would “significantly disrupt discovery and compliance” in the two actions, the SEC alleged: “For some tactical reason, defendants prefer to merely state a present intent to not defend themselves.”

It added that neither Mr Davis nor Gibraltar could “simply walk away from their obligations” to provide depositions and testimony in the two cases before the southern New York district court.

The SEC reiterated its demand that Gibraltar and Mr Davis should face sanctions and summary judgments if they failed to confirm by Friday whether they will attend deposition hearings set to take place no later than May 13, 2015.

As for the Bahamian defendants’ inability to pay their legal fees, the SEC alleged: “The De Feis firm has not provided the court with the current arrearages and the duration of same, nor have defendants submitted affidavits accounting for their current assets and demonstrating an inability to pay current and future bills.

“Without such information, the court has no reasonable basis to believe Davis and Gibraltar will be unable to pay their legal bills.”

It added: “There has been no affidavit submitted which provides an accounting for the millions of dollars made by Gibraltar and Davis from the very conduct upon which this case is based. Further, the attempt to dismiss Gibraltar as defunct has been demonstrated to be inaccurate. It is still a broker-dealer registered in the Bahamas.

“The De Feis firm has been representing Gibraltar since before the [enforcement action] notice was received and, it must be assumed, based on the presently stated complaints about cost, that it has been paid for that representation….. It is likely that the bulk of their effort and expense have been related to the dilatory and plainly frivolous claims under Bahamian law.”

The battle with the SEC has not been totally-one sided. Mr Davis and Gibraltar have been successful in getting the southern New York court to throw out the most serious charge against them - that of knowingly participating in, and facilitating, a securities fraud.

That related to just one case, in which the SEC is claiming the Bahamian duo participated in an unregistered share offering for two companies, Pacific Blue and Tradeshow, which netted $11 million.

In the second lawsuit, the SEC is alleging Mr Davis and Gibraltar were involved in another “illegal unregistered [share] offering and sale” for Magnum d’Or, a small, thinly-traded company.

Some 10 million shares were allegedly sold by Gibraltar on behalf of US customers, netting proceeds of more than $11.384 million.

The Bahamian duo were also alleged to have operated as an unlicensed broker by using their website to solicit US clients, facilitating the sale of $100 million worth of securities.