The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Bahamian whistleblower and his 11,000 e-mail haul this week survived the latest bid by a former Nassau-based broker/dealer’s principal to have them struck out as trial evidence.

Judge Edwin Torres, in a May 14, 2024, ruling, found that Guy Gentile, former head of Swiss America Securities, had “failed to show bad faith” was involved when Philip Dorsett, his company’s former chief compliance officer, incorrectly stated during a 2023 deposition that a small group of these e-mails were inadvertently deleted .

The judge, sitting in the south Florida federal district court, criticised the Securities & Exchange Commission (SEC) for failing to supervise the process that led to the original “deletion” by Mr Dorsett but said this amounted to “negligence” rather than an action in “bad faith”.

Mr Gentile, whose Bay Street-based broker/dealer operated under the names SureTrader and Mintbroker International prior to being wound-up and placed into Supreme Court-supervised liquidation in March 2020, has spent much time and effort seeking to prevent Mr Dorsett and the e-mails from being used as evidence against him by the SEC.

The deleted e-mails, which lie at the heart of this pursuit, involve communications with Mr Gentile and SureTrader’s lawyers that are attorney/client privileged, meaning they cannot be used as evidence at trial or before a court. Among the e-mails involved in the dispute are those sent to, and received from, Philip Davis KC, who acted as the former broker/dealer’s Bahamian attorney prior to becoming Prime Minister.

Referring to Mr Gentile’s latest bid to bar Mr Dorsett and the evidence from appearing at trial, Judge Torres wrote: “The motion here focuses on a key witness for the SEC, Philip Dorsett, who was SureTrader’s chief compliance officer from 2011 through 2017. He claims to have witnessed key meetings at which Gentile and other SureTrader’s principals concocted a scheme to evade federal securities law.

“In the course of the litigation, Gentile has pursued much discovery related to Dorsett and his allegations. This included production of e-mails and documents the SEC had received, or was about to receive, from Dorsett and other former SureTrader employees.

“Dorsett, in particular, had amassed approximately 11,000 SureTrader work e-mails that were backed up to his personal gmail account during the time he was employed with SureTrader. Dorsett produced those materials to the SEC.” Gentile and his former broker/dealer are accused of violating US federal securities laws by directly soliciting American clients despite not being registered with the SEC.

Judge Torres recalled how the SEC asked Mr Dorsett to separate and segregate from the rest of the e-mails any correspondence that could be attorney/client privileged. “Specifically, these hits would involve Michael Miller, Philip Davis and Adam Ford (counsel of record in this case). Dorsett was instructed to produce the 11,000 emails minus the ‘hits’ to the SEC,” he wrote.

Mr Dorsett and the e-mails survived Mr Gentile’s bid to have them dismissed as evidence because the correspondence was “improperly obtained” by the SEC. But the Bahamian chief compliance officer, when deposed on February 27-28, 2023, stated that he had “deleted” all e-mails he deemed to be attorney/client privileged.

After checks by the SEC’s attorneys, it was discovered that Mr Dorsett had made a mistake in his testimony and that the relevant e-mails were still in his possession. “Dorsett set forth that he worked on a company lap-top while he worked for SureTrader but his work e-mails were backed up to a gmail account,” Judge Torres wrote.

“When he separated from SureTrader in August 2017, he was not instructed to remove or destroy SureTrader data or work from his personal laptop. So when the SEC requested that he voluntarily produce SureTrader e-mails backed up to his gmail account, he did so but for e-mails between SureTrader and its lawyers.

“To do so, Dorsett exported his gmail account to Outlook and created a data file. He then searched for e-mails with Michael Miller, Philip Davis and Adam Ford, and deleted those particular e-mails. He also searched for (and deleted) e-mails from Bettina Albury, who he recalled worked with Michael Miller, as well as the term ‘lawyer’,” the judge continued.

“After Dorsett produced the 11,000 e-mails to the SEC (minus the deleted e-mails relating to the attorney names), he kept the original Outlook Backup file on his computer. When the SEC contacted him, he then searched for the same attorney names in the Outlook Backup File, located them and forwarded those to the SEC.

“Mr Dorsett explained that, although he testified during his deposition that he had ‘deleted’ the e-mails with SureTrader’s attorneys after running the searches, the e-mails in fact were not deleted. He clarified that he ‘misspoke when [he] said they were deleted’ and said that the ‘more accurate explanation is that the e-mails with SureTrader’s attorneys were removed from the sub-folder so that they would not be sent to the SEC but the ‘e-mails with SureTrader’s attorneys remained in the Outlook Backup File’.”

This, though, did not prevent Mr Gentile from launching a second legal bid to have the e-mails struck out and prevent Mr Dorsett from testifying. Judge Torres, while finding that the chief compliance officer had a duty to preserve evidence, ruled that the former SureTrader chief “seems to just ignore the record showing” the disputed e-mails were made available to himself and his attorneys.

“Rather than disputing this factual point head on, Gentile cursorily insists that some e-mails seem to be missing from an 11,000 batch of documents,” the judge wrote, adding that he had failed to show that these documents were lost for good.

“Instead, Gentile falls back on highlighting what Dorsett originally testified in his deposition as to his ‘deleted’ e-mails. That evidence is certainly something that can be used as impeachment at trial if Gentile testifies. Indeed, the ability to cross-examine any witness as to missing information or ‘deleted’ e-mails is always available to undermine a witness’s credibility.

“Nothing stops Gentile from doing so here notwithstanding the supplemental showing the SEC has made that Dorsett cured this problem and clarified the record..... What the record does show is that Dorsett produced to the SEC, and the SEC produced to Gentile, a huge batch of e-mails that include many relevant e-mails for purposes of the case.”

Dismissing Mr Gentile’s strike-out attempt, Judge Torres added: “Gentile has failed to show that bad faith is evidenced in this record..... At best, Gentile has made a case that Dorsett’s original testimony revealed negligence on his part, but that showing is clearly not enough to evidence bad faith in his review and production of e-mails that he stored in his gmail account.

“To begin with, the company may have access to more e-mails than the one he backed up into his gmail account. But, in the second place, his storage and production of that account does not reveal any intentional or reckless conduct given that Gentile now has the benefit of those 11,000 e-mails and may make of them as he wishes. So the witness’s actions here undermine any showing of bad faith.”

The judge, though, offered some mild criticism of the SEC. “Gentile has instead only shown that the SEC erred in having the witness conduct the privilege review that led to the original ‘deletion’ of e-mails in Dorsett’s production,” he added.

“That process should have been supervised by counsel and not left to a witness to undertake on his own.... Leaving any privilege review to a witness alone is not advisable. But, again, that does not evidence bad faith on the SEC or its witness’s part. Negligence committed during the scope of good faith production does not warrant spoliation sanctions.”