oldie: CMKM hearing well attended & heavily lawyer Aug 31, 2008 11:59:57 GMT -5
Post by sandi66 on Aug 31, 2008 11:59:57 GMT -5
CMKM hearing well attended and heavily lawyered
2005-06-08 20:50 ET - Street Wire
Also Street Wire (U-*SEC) U.S. Securities and Exchange Commission
by Lee M. Webb
CMKM Diamonds Inc.'s May 10 hearing before the U.S. Securities and Exchange Commission (SEC) in Los Angeles, Calif., was a well-attended and heavily lawyered event. While administrative proceedings rarely draw much of a crowd, approximately 50 CMKM shareholders filled the seats in the small courtroom not taken by a bevy of lawyers.
As previously reported by Stockwatch, the SEC issued an order instituting proceedings against CMKM on March 16 seeking the suspension or revocation of the company's stock for allegedly failing to file periodic reports as required.
Represented by Donald J. Stoecklein, CMKM filed its response to the order on April 11, setting out nine affirmative defences. Among other things, the company claimed that the SEC lacked authority to conduct the proceedings; the proposed sanctions were "punitive remedies against individual and indispensable parties who have not had an opportunity for appearance"; and that a proceeding to revoke or suspend CMKM's securities was premature.
Perhaps to the surprise of some of the company's devoted followers, according to a recent brief filed by the SEC, all nine of the company's affirmative defences were "rightly rejected" by Administrative Law Judge Brenda P. Murray during a prehearing conference on April 13.
In any event, the hearing took place on May 10 and the reportedly defenceless CMKM evidently wowed some of the supportive spectators, though several of the more popular reviews and assessments of the proceedings that quickly made their way to Internet chat sites frequented by the company's cult-like followers are rather difficult to square with the hearing transcript.
Beginning with this introductory piece Stockwatch will review the hearing transcript, providing some background on the participants and fleshing out the context.
Lawyers and clients
Lawyers Leslie Hakala and Gregory Glynn appeared on behalf of the SEC. Ms. Hakala took the lead in the hearing, delivering the opening statement and conducting both the direct examination of the six witnesses called by the U.S. regulator and the cross-examination of the three witnesses called by CMKM.
Mr. Stoecklein of the Stoecklein Law Group appeared as counsel for CMKM. According to the hearing transcript, Anthony DeMint also entered an appearance on behalf of the company. Mr. DeMint is the managing director of the Securities Law Institute, a company closely affiliated with Mr. Stoecklein's law firm.
CMKM is headed by Saskatchewan native Urban Casavant, who now lives in Las Vegas, Nev. Mr. Casavant is reportedly the company's only officer.
As readers of Stockwatch may know, CMKM is a massively diluted pink sheets company with more than 703.5 billion shares outstanding that now trades on the grey market for less than one-100th of a penny. (All amounts are in U.S. dollars.)
Over the past year, CMKM has tallied some staggering daily trading volumes, with billions of shares regularly changing hands, including a whopping 39.6 billion shares reportedly traded on Dec. 9, 2004. Indeed, on many days CMKM's volume has exceeded the total shares traded on every exchange in the world.
According to the company's promotional material, CMKM has an interest in several mining claims in Saskatchewan, including properties in the Fort a la Corne area. Given the lack of regulatory filings, however, the exact nature and extent of CMKM's interest in the Saskatchewan properties is a mystery.
The Saskatchewan Financial Services Commission issued a cease trade order against CMKM last October that is still in effect.
The company reportedly also has some type of interest in a small gold mining operation in Ecuador, though the details of that interest are difficult to decipher, too.
In fact, there is very little in the way of publicly available information regarding the company's operations and absolutely no information available about its actual financial condition.
The SEC issued a 10-day suspension against CMKM on March 3 and then followed up with an order instituting proceedings against the company just as the suspension was set to expire on March 16.
Mr. Stoecklein, CMKM's latest attorney, was hired in early February. A review of SEC filings indicates that Mr. Stoecklein has been associated in some capacity with dozens of reporting companies.
As previously reported by Stockwatch, Mr. Stoecklein has submitted a number of comments to the SEC regarding several matters related to securities regulations. He reportedly also has had some direct personal experience with the U.S. regulator's enforcement division.
According to an SEC filing by CEC Industries Corp., now known as Advantage Capital Development Corp., for which he served as a director, Mr. Stoecklein entered into a settlement with the U.S. regulator and, while neither admitting nor denying the allegations, agreed to the entrance of a cease and desist order.
Coincidentally, CMKM's recently appointed co-chairman Robert Maheu was also identified as a director of CEC in that filing.
Mr. DeMint has also been involved with many reporting issuers, including dozens of "blank check" companies, many of which also feature connections to Mr. Stoecklein. Several of Mr. DeMint's companies sport rather interesting names such as Nothing Corp., Tell A Tale Inc. and Too Late Financial Corp.
Asset Equity Group Inc., International Brands Inc. and Mega Micro Technologies Group Inc., which all have ties to Mr. DeMint, had their registrations revoked by the SEC on Jan. 19.
Among Mr. DeMint's many corporate associations, he serves as the president and chief executive officer of privately owned DaVinci-Franklin Capital.
Coincidentally, Mr. Maheu serves as chairman of the board of directors of DaVinci-Franklin.
Lawyer Bill Frizzell of Tyler, Tex., appeared on behalf of a number of CMKM shareholders known as the Owners Group. According to a recent tally, Mr. Frizzell now represents approximately 5,200 shareholders.
Mr. Frizzell, who also holds CMKM shares and is evidently convinced that there is a massive naked short position in the company's shares, was first hired by a group of shareholders led by John Martin of Lindale, Tex., last year.
In the wake of the SEC action, Mr. Frizzell, with the support of Mr. Martin, invited other shareholders to join the group by signing a limited consultation and representation agreement and paying $25.
On April 6, Mr. Frizzell filed a motion requesting leave for third-party participation on a limited basis in the proceeding. Over the objections of the SEC and another CMKM shareholder, Janet Douglas, Judge Murray granted the motion.
Mr. Frizzell's involvement has made the proceeding far more transparent than usual. Somewhat selectively, Mr. Frizzell has made a number of documents relating to the proceeding available on the Owners Group website (http://www.cmkxownersgroup.com).
Several of the witnesses called by the SEC were also represented by counsel.
Neil Levine of Bagell, Josephs & Company, who served a short stint as CMKM's auditor, was represented by lawyer David Frydman.
While Mr. Levine's firm services a number of companies that trade on the pink sheets, he evidently had some concerns about CMKM. In any event, notwithstanding the fact that he was an SEC witness, CMKM was reportedly stuck with picking up his legal costs.
SEC witness Helen Bagley, the owner of 1st Global Stock Transfer, CMKM's transfer agent, was represented by Melanie Porter of DePalma Law Offices.
Ms. Bagley's firm was briefly dismissed by CMKM on June 29, 2004, when the company proudly announced that it had engaged Pacific Stock Transfer. That proud and confident engagement came to an end a few days later when Pacific Stock Transfer disclosed to many CMKM shareholders that the company had a whopping 400 billion shares outstanding.
CMKM quickly re-engaged Ms. Bagley's firm and, with the gag firmly in place, the number of outstanding shares climbed to a staggering 778 billion shares with nary a peep to shareholders from either the company or the transfer agent.
Rendal Williams, another SEC witness, was represented by two lawyers, Edward Gartenberg and Hailey Hibler of Thelen, Reid & Priest LLP.
As Stockwatch readers may know, Mr. Williams is the chief executive officer of U.S. Canadian Minerals Inc., a company with a number of ties to CMKM.
While trading on the OTC Bulletin Board last year, U.S. Canadian Minerals soared to a surprising $18.75 per share, whereupon the company declared a 3-for-1 forward split. Just as the stock split became effective, the SEC suspended trading in the company's shares on Oct. 28, 2004.
Following the suspension, U.S. Canadian Minerals was bounced down to the pink sheets where it has recently been changing hands at 40 cents per share in light trading.
U.S. Canadian Minerals is under investigation by the SEC. The company is also a delinquent filer.
Mr. Casavant was also called as an SEC witness and he, too, had a pair of lawyers. New York lawyer Gerald Griffin of Carter, Ledyard & Millburn LLP registered an appearance for Mr. Casavant, as did David Chesnoff of the Las Vegas firm Goodman & Chesnoff.
Before turning his hand to prospecting and stock promotion, Mr. Casavant spent some time as a prison guard in Prince Albert, Sask.
Mr. Casavant's previous corporate experience includes a stint as the president of Petro Plus Inc., a Canadian mining promotion that has since changed its name a number of times.
Mr. Casavant took the helm at Petro Plus in November of 1995 when the stock price was languishing at about 15 cents. Under Mr. Casavant's guidance, and amid much nattering about "visible gold" in drill samples from one of the company's properties, the share price climbed above $1 within a matter of months.
Petro Plus's stock price subsequently collapsed as quickly as it had risen and Mr. Casavant abruptly and rather intriguingly parted company with Petro Plus on Oct. 25, 1996, without even receiving a fond farewell.
While CMKM's share price never reached the lofty levels of Petro Plus, it appears that Mr. Casavant may have personally fared much better with his latest promotion, at least to this point.
Mr. Casavant now makes his home in Las Vegas, where he lives in a $3.5-million house purchased last year that features five bedrooms, three full bathrooms and three partial bathrooms, and a four-car garage spread over 9,500-square feet.
As disclosed in CMKM's answer to the SEC proceeding, during the investigation of U.S. Canadian Minerals, with which he has a number of connections, Mr. Casavant asserted his Fifth Amendment privilege and declined to answer any questions.
Apparently Mr. Casavant's two lawyers were on hand to ensure that his Fifth Amendment privilege was maintained and respected during the CMKM hearing.
Several of the witnesses did not have independent legal representation at the hearing.
SEC witness Christopher Wall, an information technology specialist for the U.S. regulator testified only briefly and, perhaps understandably, did not have a lawyer.
The SEC also called Suzanne Herring, a witness who was going to be called by CMKM, also without legal representation.
Ms. Herring is an accountant and the president of Opus Pointe, which she described as a consulting company that is a division of the Securities Law Institute headed by Mr. DeMint.
CMKM only called three witnesses, none of whom had independent legal representation.
John Edgar Dhonau was the first witness called by CMKM. As previously reported by Stockwatch, Mr. Dhonau owns Nevada Minerals and has ties to both CMKM and U.S. Canadian Minerals.
Mr. Dhonau is the largest shareholder of U.S. Canadian Minerals and he briefly owned at least 75 billion CMKM shares through Nevada Minerals. CMKM repurchased those shares late last year.
Nevada Minerals has an interest in mining claims in Saskatchewan and has been involved in a joint venture there with CMKM and U.S. Canadian Minerals.
His company is also involved a small gold mining project in Ecuador with CMKM. The ore from that project is reportedly processed at a facility owned by U.S. Canadian Minerals.
CMKM's second witness, greatly anticipated by the company's supporters, was Mr. Maheu.
The 87-year old Mr. Maheu is a fabled ex-FBI agent and former private gumshoe who spent about a decade working for Howard Hughes before he was fired in 1970.
Mr. Maheu, who owns no shares of CMKM, joined Mr. Casavant as a member of the two-person board of directors and co-chairman on Jan. 31.
He is the latest champion embraced by CMKM's cult-like followers and heralded by many of them as just the man to lead the company to its rightful place as a fantastically profitable mining conglomerate, shaking up the markets, the regulators, the offshore hedge funds and wiping out the nasty short sellers along the way.
Mr. Maheu's goals for CMKM are somewhat more modest.
Kristen Buck rounded out CMKM's list of witnesses. Ms. Buck graduated from law school in May of 2004 and currently works at Mr. DeMint's Securities Law Institute.
Ms. Buck has reportedly been assigned the task of beginning the process of putting together CMKM's reporting obligations.
The young lawyer faced some tough sledding during cross-examination by Ms. Hakala.
Stockwatch will continue its review of the hearing in a following article.
CMKM's share price continues to languish below one-100th of a penny with a mere 442.3 million shares changing hands on June 8.
The saga continues.
Comments regarding this article may be sent to firstname.lastname@example.org.
(More information regarding CMKM Diamonds and associated companies can be found in Stockwatch articles dated Oct. 21, 2003; June 22; Sept. 16 and 24; Oct. 1, 15 and 20, 2004; and Feb. 11, 14, 18, 22 and 23; and March 1, 3, 4, 7, 14, 15, 16 and 21; and June 6, 2005.)