Samuel Goldman & Associates Helps SkyComm Investors Secure $19.9 Million Jury Verdict in Houston Securities Fraud Case

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Jury Delivers Emphatic Verdict after Lengthy Legal Battle; Determines that Securities Offerings involving Houston Satellite Telecommunications Company were Fraudulent

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We are grateful to the jury for their verdict, which helps rectify a wrong that had been perpetrated on the investors.

A Texas State Court jury handed down a $19.9 million verdict against Canadian stock promoter Robert Kubbernus based upon findings of fraud and violations of the Texas Securities Act. The verdict included actual and punitive damages, and after pre-judgment interest and attorney’s fees and expenses are added, the total judgment could exceed $25 million. The case, JoAnn Schermerhorn, et al. v. CenturyLink, Inc. and Robert Kubbernus, et al., was tried before Judge Michael Landrum of the Harris County District Court in Cause No. 2010-09675.

New York City-based Samuel Goldman & Associates was retained by more than 60 investors and shareholders in SkyComm Technologies Corp., to pursue their claims against Kubbernus and CenturyLink, the company that turned control of SkyComm over to him in 2006. SG&A worked with local trial counsel, Eric Fryar and Christina Richardson, of Houston’s Fryar Law Firm, and Harold Obstfeld, a New York securities litigator, in securing the verdict after five and a half years of litigation and a three week trial.

According to court documents, in the two and a half years after CenturyLink contracted to sell control of SkyComm Technologies Corp. to affiliates of Kubbernus, including Toronto-based, Balaton Group, Inc., Kubbernus raised approximately $17 million from investors from all over the world. The funds were to be used to finance the acquisition and operations of SkyComm, as well as to take the company public.

The trial record shows that Kubbernus initially raised $7 million in ClearSky Investments, L.P., an entity he created for the stated purpose of acquiring the controlling interest in SkyComm. Investors in ClearSky were informed in the ClearSky offering documents that the agreements with CenturyLink would be assigned to ClearSky and that the controlling share interest in SkyComm would be transferred to ClearSky at the closing with CenturyLink. However, at the closing which was held on November 2, 2006, CenturyLink transferred control of SkyComm to Balaton, and not to ClearSky. Over the ensuing two years, Kubbernus sent the ClearSky investors correspondence and a financial statement that showed that ClearSky had acquired control of SkyComm. At the same time, in other documents, he stated that Balaton or “Balaton Group, et al.” had acquired control.

Court documents show that after the closing, Kubbernus raised another $10 million from investors, but never disclosed to these investors that Balaton had acquired control of SkyComm using the ClearSky investors’ money, and that the ClearSky investors had received nothing.

According to court records, Kubbernus then made an unsuccessful effort to take the company public on the Toronto Stock Exchange and to raise even more money in the IPO. When Kubbernus’ IPO plans did not work out, he filed SkyComm’s operating subsidiary, SkyPort Global Communications, Inc., in Chapter 11 (In re SkyPort Global Communications, Inc., Case No. 08-36737, United States Bankruptcy Court, Southern District of Texas, Houston Division). He submitted a plan of reorganization to the bankruptcy court that provided that all of SkyComm’s shareholders, including the investors he had sold interests in the company to, would lose their shares and Balaton (and others he designated) would wind up with 100% of the share ownership in SkyComm. When Adrien Pouliot, a Montreal businessman and the lead investor in ClearSky, sought to challenge Kubbernus’ plan in the Bankruptcy Court, Kubbernus testified that ClearSky had no interest in SkyComm. Based on this, the bankruptcy court refused to allow Pouliot to submit his plan and the court approved Kubbernus’.

The transcript of the bankruptcy court proceedings shows that the bankruptcy court ruled that its decision did not foreclose the ClearSky investors from pursuing their claims against Kubbernus in another court. Similarly, the ruling did not affect claims by other investors for fraud and securities fraud. However, the bankruptcy court’s Chapter 11 Plan confirmation did wipe out all “derivative claims” which the SkyComm shareholders and investors could have brought against CenturyLink and Kubbernus. These are claims where the harm was technically suffered by the company, and only indirectly by the shareholders as a result of the fact that they were shareholders. Derivative claims typically include claims of breach of fiduciary duties to the company, mismanagement and looting. The bankruptcy court ruled that the plan confirmation did not prevent the bringing of derivative claims by the ClearSky investors.

Plaintiffs commenced their action in the Harris County State Court (Cause No. 2010-09675) after the Chapter 11 Plan had been confirmed. They alleged claims that included fraud and securities fraud claims against Kubbernus and aiding and abetting the Kubbernus frauds against CenturyLink. In the end, the jury found Kubbernus liable, but determined that there was insufficient evidence that CenturyLink was aware of Kubbernus’ fraudulent activities, to hold it liable.

The verdict, handed down by the State Court jury on July 23, 2015, awarded $7 million in damages to the ClearSky investors, $5.9 million to the subsequent investors and $7 million in punitive damages. Sam Goldman of SG&A stated: “We, our clients and our co-counsel are grateful to the jury for their verdict, which helps rectify a wrong that had been perpetrated on the investors in the SkyComm-related securities offered by Kubbernus. We are also grateful for the message they sent with their award of punitive damages, that frauds such as the one perpetrated by Kubbernus will not be tolerated.”

Court documents show that SkyPort had been founded in the late 1990's by Bill McCrary and Chuck Stack, two Houston-based businessmen who had gotten an early start in the satellite communications business by, among other things, setting up remote satellite feeds all over the world for news broadcasters and selling and installing satellite antennas. They conceived the idea of setting up an ultra-secure satellite telecommunications facility at Ellington Air Force Base adjacent to NASA headquarters and they brought in noted NASA space communications pioneers, including John Llewellyn and George Metcalf. Llewellyn is widely credited with figuring out how to bring the crippled Apollo 13 spacecraft back to earth in 1970.

The record indicates that CenturyLink provided the financing for the development of the teleport and it took voting control of SkyComm and SkyPort. The teleport began operations in 2004. When in 2005, CenturyLink decided to divest itself of its control position, it contracted to sell its interest to Balaton and Watershed. .

SG&A had provided corporate representation to SkyComm in its early years in the late 1990s, well before the events that were the subject of the lawsuit took place.

According to the trial record, after he took control of SkyPort, Kubbernus changed its name to Trustcomm. Then, faced with this lawsuit, he sold this company and bought a similar company, with operations in Germany and Switzerland. Kubbernus is believed to now reside in Switzerland.

Trustcomm, under new ownership, continues to operate the teleport in Houston.

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Herbert Shaw
@SGALaw
since: 02/2010
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