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Securities and Exchange Commission - Street Wire
SEC target Gannon, ex-hubby Gilley in separate cases
Securities and Exchange Commission *SEC
Wed 24 Apr 2002 Street Wire
See Securities and Exchange Commission (U:*SEC) Street Wire
by Brent Mudry
Fugitive former porn star Kathryn Gannon is gearing up for a climax to her
two-year extradition fight, with her two-day extradition hearing finally
set for June 17. Ms. Gannon, who is still tempting and teasing the feds
with settlement talks, made a brief appearance Wednesday before Associate
Chief Justice Patrick Dohm of the Supreme Court of British Columbia. The
diminutive retired starlet has been a familiar face in Judge Dohm's
courtroom, but not his chambers, in recent years.
Ms. Gannon, 33, formerly known as Marilyn Star, has been entertaining
officials with the United States Department of Justice and the U.S.
Securities and Exchange Commission, preparing to submit to at least some of
the demands of American lawmen and satisfy their desires for justice.
While Canadian prosecutor William Loo hopes Ms. Gannon keeps her date in
court, defence lawyer Nikos Harris suggests the extradition hearing may
never happen. "We expect it to be resolved by then," he told Stockwatch.
Mr. Harris is assisting Ms. Gannon's lead lawyer, Dick Peck, who has his
hands full with the upcoming blockbuster Air India terrorist trial.
Lawmen hope to handcuff Ms. Gannon and make her a star guest of an American
jail, claiming she made $88,000 (U.S.) in illegal profits buying shares of
regional banks in five pending mergers, based on insider information passed
on by one of her lovers, James McDermott. Mr. McDermott, 50, was first
forced to resign as chief executive of Wall Street brokerage Keefe Bruyette
& Woods, then suffer such cruelties as being called the "stud stock picker"
in his New York criminal trial. Ms. Gannon's loose lips on takeover tips
helped another insider-trading lover, New Jersey businessman Anthony
Pomponio, 47, make $170,000 (U.S.) in illegal profits. While Mr. McDermott
was jailed for five months and Mr. Pomponio received a 21-month sentence,
Ms. Gannon has yet to serve a day behind bars.
Meanwhile, while Ms. Gannon made her appearance on the fifth floor of the
Vancouver Law Courts, an intriguing lawsuit drifted in downstairs in the
main-floor registry, revealing new details of the business dealings of the
fugitive former porn star's latest stock-stud ex-lover, Howe Street penny
stock promoter Michael Gilley.
(Mr. McDermott was released on Valentine's Day last year, a year after Ms.
Gannon's whirlwind romance and short-lived marriage on Valentine's Day,
2000, to Mr. Gilley, who dumped his wife and kids for the youthful porn
queen. The Gannon-Gilley wedding at the Hotel Vancouver came six weeks
after Ms. Gannon's novel millennium project flopped. The porn star hoped to
end her adult movie career and ring in the New Year by having sex with
2,000 men, but the ambitious pay-for-view retirement special never got off
the ground.)
In the new suit, two secretive companies in the offshore enclave of the
Grand Cayman Islands allege that Mr. Gilley's key business partner in
e-Auction Global Trading, a U.S. penny stock promotion, was none other than
fugitive executive and long-time close associate Daryl Buerge. (e-Auction
later changed names to Aucxis Corp.) Their private company, oddly enough,
was Millennium Advisors Inc., but there is no indication or suggestion that
this outfit had anything to do with Ms. Gannon's fizzled millennium sex
marathon.
(On May 25, 2000, the day after Ms. Gannon was arrested by the RCMP
Commercial Crime Section in the lobby of her Vancouver waterfront condo
residence, Stockwatch revealed her beau, Mr. Gilley, played key roles in
two OTC Bulletin Board promotions: e-Auction and Superwire.com.)
The plaintiffs in the suit, filed Tuesday by Vancouver-area lawyer Alastair
Rees-Thomas, are Parody Group Ltd. and Seabreeze Services Ltd. The named
defendants include Aucxis, formerly known as e-Auction Global Trading, Mr.
Buerge, Mr. Gilley, Toronto associate Roger Bradley Barrette and Millennium
Advisors. The allegations in the suit have not yet been proven in court and
no statements of defence have yet been filed.
"At times material to this action the defendants Barrette, Gilley and
Buerge held themselves out as officers and/or directors of the defendant
Millennium and that it was an incorporated entity," states the suit. Mr.
Rees-Thomas notes that if Millennium proves to be an unincorporated entity,
his offshore clients allege that Mr. Barrette, Mr. Gilley and Mr. Buerge
are partners and are jointly and severally liable for the debts,
obligations and liabilities of the partnership.
In the suit, Parody Group and Seabreeze Services seek the repayment of
$700,000 (U.S.) loaned to e-Auction on Aug. 12, 1999. The two Grand Cayman
companies claim they each advanced $350,000 (U.S.) through Millennium
acting as their agent. "As security for the loan, the defendant Millennium,
as the plaintiff's agent, was granted an first charge over the defendant's
interest in a transaction known as the Schelfout Transaction," states
lawyer Mr. Rees-Thomas in the suit. (This Schelfout deal soon became the
flagship promotion of Mr. Gilley's e-Auction.)
According to regulatory filings, on Aug. 13, 1999, the day after Parody and
Seabreeze made their $700,000 (U.S.) loan through Millennium, Millennium
loaned e-Auction $1-million (U.S.). In consideration of this loan,
Millennium received a whopping two million shares, plus 197,219 shares as a
financing and interest fee, issued in January, 2000. e-Auction shares fell
from $5.68 (U.S.) on the day of the loan to $2 (U.S.) by the end of August,
and traded in the $2 (U.S.) range in January, 2000. By March, 2000, the
shares peaked at $6.75 (U.S.), giving Millennium's 2.19 million shares a
paper value of more than $14.8-million (U.S.). The stock now trades at four
U.S. cents.
According to the suit, Parody and Seabreeze have unsuccessfully made a
demand for repayment of the loan. In response to the repayment demand,
e-Auction allegedly provided a form of release signed by Mr. Gilley as
representative of Millennium and by Mr. Barrette as the "authorized
representative" of the "undisclosed lender." The suit claims Mr. Gilley,
Millennium and Mr. Barrette were not authorized by the Grand Caymans
companies to execute any release of their indebtedness.
"The release purports to discharge the obligations of the defendant
e-Auction under the loan and security agreements set out above by agreeing
to a payment of $1,000,000 to the defendant Millennium or the set-off of
$1,000,000 against monies owed by the defendant Millennium to an entity
referred to in the release as 'QFG,'" states the suit. (Stockwatch noted
last September that e-Auction is a typical Vancouver OTC deal, featuring an
offshore post-box account, in this case David Ballantine's QFG Holding Ltd.
of Tortola in the British Virgin Islands, as a major shareholder.)
The lawsuit notes that Mr. Buerge is joined as a "director" of Millennium
and/or as a partner of Mr. Gilley and Mr. Barrette. "The defendant Buerge
was the controlling and directing mind of the defendant Millennium and
conspired with the defendants Gilley and Barrette to release the defendant
e-Auction from its obligations all to the harm, detriment and loss of the
plaintiffs," states lawyer Mr. Rees-Thomas. His offshore clients, Parody
Group and Seabreeze Services, seek repayment of their $700,000 (U.S.) loan
plus interest at 10 per cent dating back to Sept. 11, 1999.
The emergence of Mr. Buerge and Mr. Gilley together in Millennium may not
be a total surprise. Mr. Gilley is best known as former chief financial
officer of Cam-Net Communications Network, whose then-chairman Mr. Buerge
is a fugitive from the FBI in a broker-bribery scheme in 1996. Mr. Gilley,
a chartered accountant, served as chief financial officer for Cam-Net, a
company founded by scandal-plagued promoters Robert Moore, Elford Scott,
Byron Williams and Montague Simons, throughout its troubled years from 1991
to 1997, when the company filed for creditor protection.
Unlike most of Cam-Net's other key players, Mr. Gilley has never been
charged with any wrongdoing. Since leaving scandal-ridden Cam-Net in 1997,
Mr. Gilley headed compliance at Howe Street brokerage Georgia Pacific
Securities, before helping launch e-Auction and Superwire. (There is no
suggestion that while heading Georgia Pacific's compliance and keeping the
crooks at bay from the brokerage, Mr. Gilley had any dealings with the
fugitive Mr. Buerge.)
Mr. Buerge had the supreme misfortune of being snared in one of the largest
FBI sting operations ever conducted on Wall Street. On Oct. 10, 1996, in a
co-ordinated action with FBI, the SEC and that National Association of
Securities Dealers, prosecutors with the Southern District of New York
named Mr. Buerge and 44 other promoters, executives, brokers and former
brokers in a series of criminal complaints alleging securities fraud.
Mr. Buerge and his co-accused, Edward Padnos of Highland Park, Ill.,
allegedly bribed FBI agents posing as Wall Street brokers. In wired
conversations from January to March, 1996, the pair allegedly greased the
brokers, posing as "Nick Vito" and "Jeff Morrison" of Thorton Capital, to
get their clients to invest in Cam-Net.
The fine folks at Cam-Net expressed no end of shock at this distressing
event.
"Effectively immediately, Daryl H.C. Buerge has resigned as an employee and
director of the company and its subsidiaries," stated a Cam-Net official in
an Oct. 15, 1996, press release. "The company was shocked when it learned
of the allegations made against Mr. Buerge. The company would like to
reassure all of the shareholders and employees that all actions alleged
against Mr. Buerge in no way reflects (sic) the practices of the company."
This press release was signed by none other than Mr. Gilley.
Mr. Buerge has been on the lam ever since, presumably safely holed up in
Vancouver, but Mr. Padnos pled guilty less than a year after the bust, in
August, 1997. In federal court, Mr. Padnos admitted that in March, 1996, he
agreed with a co-conspirator, presumably Mr. Buerge, to arrange a secret
offshore cash payment to an undercover agent equal to 20 per cent of the
value of any Cam-Net shares bought. Mr. Buerge, of course, remains presumed
innocent at this point.
While Mr. Buerge has understandably kept a rather low profile on Howe
Street in recent years, his status as an FBI fugitive has hardly crimped
his high-society social calendar. After honing his skills in penny stock
rackets, he is now quite the ace with a tennis racquet. Last spring, Mr.
Buerge, or at least someone using his name, emerged as the winner of the
men's evening league at the tony Vancouver Lawn Tennis & Badminton Club,
duly honoured in the club's newsletter. If the RCMP ever decide to arrest
Mr. Buerge on behalf of the FBI, it might be worth popping in to the
exclusive 104-year-old society sports club, which sports a $9,000 entrance
fee and annual dues of a modest $1,800.
(c) Copyright 2002 Canjex Publishing Ltd. stockwatch.com |
