Mining Money in Vancouver

One source of funds for the Los Angeles-based church is the notorious, self- regulated stock exchange in Vancouver, British Columbia, often called the scam capital of the world. The exchange's 2,300 penny-stock listings account for $4 billion in annual trading. Local journalists and insiders claim the vast majority range from total washouts to outright frauds.

Two Scientologists who operate there are Kenneth Gerbino and Michael Baybak, 20-year church veterans from Beverly Hills who are major donors to the cult. Gerbino, 45, is a money manager, marketmaker and publisher of a national financial newsletter. He has boasted in Scientology journals that he owes all his stock-picking success to L. Ron Hubbard. That's not saying much: Gerbino's newsletter picks since 1985 have cumulatively returned 24%, while the Dow Jones industrial average has more than doubled. Nevertheless Gerbino's short- term gains can be stupendous. A survey last October found Gerbino to be the only manager who made money in the third quarter of 1990, thanks to gold and other resource stocks. For the first quarter of 1991, Gerbino was dead last. Baybak, 49, who runs a public relations company staffed with Scientologists, apparently has no ethics problem with engineering a hostile takeover of a firm he is hired to promote.

Neither man agreed to be interviewed for this story, yet both threatened legal action through attorneys. "What these guys do is take over companies, hype the stock, sell their shares, and then there's nothing left," says John Campbell, a former securities lawyer who was a director of mining company Athena Gold until Baybak and Gerbino took it over.

The pattern has become familiar. The pair promoted a mining venture called Skylark Resources, whose stock traded at nearly $4 a share in 1987. The outfit soon crashed, and the stock is around 2 cents. NETI Technologies, a software $ company, was trumpeted in the press as "the next Xerox" and in 1984 rose to a market value of $120 million with Baybak's help. The company, which later collapsed, was delisted two months ago by the Vancouver exchange.

Baybak appeared in 1989 at the helm of Wall Street Ventures, a start-up that announced it owned 35 tons of rare Middle Eastern postage stamps -- worth $100 million -- and was buying the world's largest collection of southern Arabian stamps (worth $350 million). Steven C. Rockefeller Jr. of the oil family and former hockey star Denis Potvin joined the company in top posts, but both say they quit when they realized the stamps were virtually worthless. "The stamps were created by sand-dune nations to exploit collectors," says Michael Laurence, editor of Linn's Stamp News, America's largest stamp journal. After the stock topped $6, it began a steady descent, with Baybak unloading his shares along the way. Today it trades at 18 cents.