So after a lot of testing, it seems like it is somehow related to the latest 
updates for Ubuntu 14.04.1.

The reason I say so:
My first setup I installed Ubuntu 14.04.1 server from DVD and then installed 
Gitorious. It did go through without any problems.
I realized I wanted to make a few changes to the install so I started from 
scratch, new install but this time before installing Gitorious I did a apt-get 
update & upgrade.
This time the Gitorious install failed during install of the gems.
I restarted this setup a few times (clean ubuntu install, upgrade, gitorious) 
and failed every time @ the gems. 
Lastly out of desperation I tried again, clean Ubuntu and the Gitorious install 
went through fine (no updating of Ubuntu).

I am not sure why this would be an issue, hopefully this feedback will help. 

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