A must read for all serious starnet investor.
A bit long but very important info.
Looks like we will have another dive on Monday.
Starnet CEO heads to court; hiring continues; sweet deals in Antigua
Friday Aug 27 1999
by Brent Mudry
CEO SEEKS TO BLOCK ACCESS TO SENSITIVE RECORDS
In the first legal challenge to the Starnet Communications International police raid,
Starnet chief executive Mark Dohlen has launched a court action seeking to assert
solicitor-client privilege over certain documents and records seized during
searches of Starnet's corporate headquarters and his personal residence a week
ago. In a motion filed Thursday in the Supreme Court of British Columbia,
prominent Vancouver criminal defence lawyer Ian Donaldson seeks to block
police access to sensitive records seized by members of the RCMP and the
Co-ordinated Law Enforcement Unit on Aug. 20.
Certain disputed files have been sealed in court pending resolution of the privilege
claim. An initial court hearing has been scheduled for Tuesday morning on the
search warrant challenge.
HIRING SPREE SEEKS PORN-PEDDLER, OTHERS
In an unrelated Starnet matter, the Vancouver-based Internet gambling and
pornography company appears eager to mount a new hiring spree, recruiting staff
in numerous positions, including its porn division, which it hopes to quickly sell off.
In a large ad on Thursday in The Georgia Straight, a Vancouver weekly
entertainment newspaper, Starnet is soliciting a marketing representative for its
entertainment division, amongst numerous other posted jobs. "Do you have the
ability to 'think outside the curve'?," Starnet asks in its porn-peddler posting. The
company states that this position requires strategic thinking and implementation,
directly relating to Redlight.com and Adultv.com.
Queasy web-surfers may want to take a pass on these sites, at least Redlight.com,
which offers a much harder-core home page than Starnet's main porn sites,
Sizzler.com and Chisel.com. Redlight.com's home page offers an extremely
explicit mix of "teaser" shots, including a graphic live-sex video clip. While Starnet
wants to dump its porn business, its latest ad seeks a marketer to maintain
continual market research of new forms of advertising and demographics, with
"overall participation in the team effort." The Thursday recruitment ad came three
days after Starnet's Monday disclosure that it hopes to quickly auction off its adult
entertainment division assets, with documentation to be complete in 30 days.
This Redlight.com site happens to be the same Starnet site targeted by the police
in their proposed single criminal count of adult pornography. While no charges
have yet been laid against Starnet or any directors or employees, the "information
to obtain," a court-filed document supporting the search warrant, notes eight
proposed counts, including one of possession, for the purpose of publication,
distribution or circulation, computerized pictures depicting obscene acts. The
police note that "Fetish," one of Redlight.com's seven sections, shows 84 images
of nude bondage, women with clamps on body parts, women with horse bridles
and bits in their mouths, and women hanging by their arms from straps or belts.
The latest Starnet recruitment ad also suggests it is "business as usual" at Starnet,
despite the week-ago raid by more than 100 officers from the RCMP, CLEU, the
Ontario Provincial Police, the United States Customs Service and the U.S.
Internal Revenue Service. The Georgia Straight ad seeks a WorldBroadcasts.com
manager, an Internet marketing manager, HTML programmers, graphic designers,
an investor relations administrative assistant, an adminstrative assistant of
production and sports odds analysts. Starnet seeks "open-minded, innovative
people who enjoy working in a dynamic, fun, team atmosphere and are able to
work creatively under pressure."
MUTUAL SUPPORT IN ANTIGUA
While Mr. Dohlen may be worried enough about sensitive seized records to hire a
top criminal defence lawyer, the Antiguan government steadfastly stands behind
the Starnet chief executive. "Starnet has proven itself to be a sound corporation
and chief executive Mark Dohlen has demonstrated integrity in all aspects of the
corporation's dealings with this government," stated Gyneth McAllister, Director
of Offshore Gaming for the Government of Antigua and Barbuda, in a press
release on Thursday. (The Antiguan government was issuing this endorsement at
about the same time that Mr. Dohlen's lawyer was filing the search warrant
challenge in court.)
The search warrant documents reveal a very high level of contact and apparent
co-operation between Starnet and Antiguan government officials, including
Starnet's demands for secret special terms. In curbside garbage pickups from the
residence of Starnet president Paul Giles on Feb. 26 and April 13, the RCMP
retrieved a series of letters documenting Starnet's dealings with the Antiguan
government. In a Dec. 9, 1998, letter to the Chairman of the Antigua & Barbuda
Free Trade & Processing Zone, Starnet offshore operations vice-president Terry
Bowering noted that Starnet's World Gaming Services Inc. was the only Internet
casino licensed under the free trade zone and proposed special terms.
The letter asserted that all Starnet licensees were separate corporate entities,
licensed in various jurisdictions throughout the Caribbean. With a March 1
Antigua licence renewal deadline approaching, Mr. Bowering told the free trade
zone chairman that Starnet wanted to consolidate all the existing and future
licensees under one jurisdiction, along with World Gaming. Starnet proposed a
licensing fee schedule, offering $100,000 per year for the World Gaming master
licence, and a five-year schedule based on the number of additional licences that
Starnet would bring to Antigua.
The Starnet proposal apparently was met with some resistance from the Antigua
free trade zone body, so the company went direct to the prime minister. Court
documents note that a Starnet letter, dated Jan. 28 and addressed to the
Honourable Lester Bryant Bird, the Prime Minister of Antigua, stated that the
licensing matter had become critical to the immediate future of Starnet and its
licensees in Antigua and Barbuda, and that unless Starnet's proposal was
accepted, it would be forced to relocate to St. Kitts. A Jan. 30 Starnet letter, also
addressed to Prime Minister Bird, stated that Starnet was prepared to bring 10
licensees to Antigua at $120,000 (U.S.) each in the first year and $100,000
(U.S.) per year afterwards.
A third letter found in the trash was dated Feb. 2 and addressed to Ascot
Michael, the Chief of Staff in the Prime Minister's Office, with a handwritten
notation that this letter had not been sent. This trashed draft stated that the
$120,000 (U.S.) proposal was rejected. This letter also stated that Starnet would
immediately begin plans to move its operations to St. Kitts, and Mr. Bowering
planned to visit the rival Caribbean island to arrange for the transfer of the existing
licences and make application for 14 new licences.
In this Feb. 2 draft letter, Mr. Bowering stated that since he was unable to
convince the Chief of Staff and certain other officials of the immediate and
long-term benefits to Antigua of having Starnet establish a base of operations
there, the company needed to move elsewhere. The RCMP note this letter also
included a cryptic and blunt monetary remark. "I wish your party all the best in the
upcoming election campaign," stated this letter. Written in the margin, with an
arrow to this quote, was a cryptic remark. "They desperately need cash for this,"
stated the note, with the word "cash" underlined.
The direct lobbying to the Prime Minister's Office apparently helped. In a Feb. 8
memo to Mr. Dohlen, copied to Mr. Giles and fellow Starnet official Jack Carley,
Mr. Bowering stated that he had obtained terms of an agreement with the Antigua
free trade zone for 15 Internet gaming licences at $50,000 (U.S.) each, with an
additional $250,000 (U.S.) due within 90 days. Additional licences would cost
$100,000 (U.S.), with a $100,000 (U.S.) annual renewal fee.
In this memo, Mr. Bowering advised his Starnet colleagues that the proposal
agreed to by Prime Minister Bird included the cancellation of the contract with the
Commissioner of the Free Trade Zone, as "he has been a hindrance to business
here." The proposal included a non-disclosure agreement to keep competitors and
the Antiguan Free Trade Zone members from learning of Starnet's favourable
terms.
Court documents note Mr. Bowering stated that Prime Minister Bird "should be
aware" that if he allowed one of the free trade zone board members to inform
Starnet's competitors of the details, Starnet could potentially void the agreement.
Under this hardball sweetheart proposal, Starnet also demanded a waiver of the
three-to-one employee ratio for nationals to non-nationals, which is the current
requirement for all licensees under the free trade zone.
Mr. Bowering suggested that the per-licence cost should not be divulged to any
party other than Starnet's principals, and definitely not to any licensee, as Starnet
did not want anyone approaching the Antiguan government directly.
"If this happens, not only will we lose our opportunity to take back terms from
them and realize a handsome net profit, but the officials here will be outraged. I
promised them that this will not happen. As far as they are concerned, for
individual operators outside of this agreement, the regular licence fee in Antigua
stands. On the other hand, the free trade zone does not need to know at what
cost we pass these licences on to our software licensees either," stated Mr.
Bowering in this internal Starnet memo. |
