The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

US federal regulators are urging the southern New York courts to prevent a Bahamian broker/dealer and its principal from playing “a game of whack-a-mole” with their obligations to testify against other defendants.

Attorneys for the Securities & Exchange Commission (SEC), in an April 20, 2015, letter sent to the New York court, called on it to “at a minimum” set four pre-conditions before permitting US attorneys representing Warren Davis and Gibraltar Global Securities to withdraw from the case.

Apart from the Bahamian defendants producing documents sought by the SEC, the regulator’s attorneys demanded that the duo “consent” to default judgments being entered against them that cannot be contested.

The SEC also wants Mr Davis to provide e-mail and cell phone contact numbers, plus a personal or physical address where he can be served or contacted, and for him to provide discovery testimony in one of the cases where he and Gibraltar were named as defendants.

That case involves an alleged unregistered share offering for two companies, Pacific Blue and Tradeshow, which purportedly netted scheme participants other than Gibraltar and Mr Davis, some $11 million.

“There are nine remaining defendants,” SEC attorney Todd Brody told the southern New York court.

“Davis can provide relevant testimony with respect to Ben Kirk, Dylan Boyle and James Hinton, and Luis Carrillo Jr, who all had accounts at Gibraltar (and in some cases several accounts), and Ben Kirk used these accounts to trade his Tradeshow and Pacific Blue stock.

“In addition, Carrillo Huettel [a law firm] purportedly served as counsel to Gibraltar, and the SEC has questions about the representation since it impacts the knowledge that the firm and its lawyers had about the fraudulent scheme and the identity of the true beneficial owners of the Tradeshow and Pacific Blue stock.

“Since the SEC has already been ordered to pay Davis’s travel/accommodation costs, there is no financial prejudice to Davis to do so.”

Urging that Mr Davis’s US attorneys, DeFeis, O’Connell and Rose, not be allowed to withdraw before their Bahamian client testifies, Mr Brody added: “There will be substantial prejudice to the SEC if Davis is allowed to elude his responsibility to give a deposition by simply abandoning the case, as the SEC will have to start over and begin the process of obtaining his deposition for trial testimony as a third party via an Application for the Issuance of a Letter of Request for International Judicial Assistance Pursuant to the Hague Convention on the Taking of Evidence in Civil or Commercial Matters.

“Davis should not be allowed to force the SEC and the court to play a game of whack-a-mole where Davis attempts to evade his discovery obligations as a defendant, and then forces the discovery process to start over whilst being treated as a third party.”

Mr Brody also called for the withdrawal to be contingent on Mr Davis and Gibraltar either handing over documents relating to 24 persons allegedly involved in the Pacific Blue and Tradeshow affair, or a hard drive containing the information.

And he added: “As a fourth condition for the De Feis firm’s withdrawal, Davis and Gibraltar should be required to represent on the record that they consent to default judgments being entered against them, and that they waive the right to contest any disgorgement, penalties or injunctive relief that the court may order against them at a future date.”

Tribune Business revealed earlier this week 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 two cases it had brought against him and his former company.

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.