Post by str8biodiesel on Sept 6, 2012 0:32:17 GMT -5
Berkley-Heller race revives pain of CMKM Diamonds scandal
Posted: Sep. 5, 2012 | 2:02 a.m.
Updated: Sep. 5, 2012 | 8:27 a.m.
CHARLOTTE, N.C. -- Write it off as election-year politics if it suits you.
That's the easiest thing to do: Consider the resurrection of the CMKM Diamonds scandal nothing more than white noise.
Shelley Berkley's U.S. Senate campaign has tried to link former Nevada Secretary of State Dean Heller to the stock debacle, which blew up while he was in office back in 2005.
Now-U.S. Sen. Heller has laughed off such talk as the desperate jabs of a candidate crippled by her own House ethics investigation. And most of the press has simply moved on to other jaw-dropping allegations in a year with no shortage of whoppers .
But perhaps others haven't fielded the calls I've received over the years from dozens of the thousands of investors who were jive-talked and jilted in the CMKM Diamonds hustle. They lost very real money: more than $200 million by reliable estimates.
CMKM (traded as CMKX) was a Nevada-registered business that sold a glittering pipe dream - Canadian diamond mines! - to people nationwide out of dozens of glorified boiler rooms. Its pitchmen oversold billions of shares as the company, under casino high-roller Urban Casavant's design, was being exposed as a fraud. Insiders shorted the stock and raked off a big score.
What infuriated investors then, and torments some to this day, is how slow regulatory authorities from Nevada and the federal government appeared to move to stop Casavant and his crew. (Casavant is under indictment on fraud charges but has gone underground. Others associated with the scandal have been hit with criminal convictions and civil penalties.)
The hard-driving Heller, a weekend auto racer a decade ago, assures skeptics he didn't know Casavant. The fact Heller in 2005 found himself behind the wheel of a racing vehicle linked to the diamond company has been waved away as harmless coincidence.
Mugged investors see things very differently. Mike Robinson's view is representative of some of those I've received. He spares no one.
"You have been given the facts regarding CMKX which show that the authorities, including Dean Heller, FINRA, and the SEC were fully aware of the fraud which was occurring and let that fraud continue unabated for years costing CMKX shareholders 250 million dollars and valuable land claims," Robinson wrote , adding his belief that federal authorities used "false data" in calculating investor losses.
The Nevada secretary of state's office has long been in over its head when it comes to licensing securities. Although current Secretary of State Ross Miller has won friends with federal law enforcement by aggressively pursuing a working relationship, that hasn't been the rule.
The SEC and the Justice Department might have moved too slowly to save investors money, but investigators established a rock-solid pattern of fraudulent activity by the faux diamond company.
For the record, CMKM Diamonds is now under new management with headquarters in Lincoln, Ala. Its president, Steve Kirkpatrick, assures skeptics the company has no link to the previous bad actors.
After a recent interview, he memorialized our conversation with a letter. It reads in part: "There is very little doubt that CMKX stock was sold 'naked short' prior to the delisting of the stock in 2005." But the statute of limitations has expired, and pursuing the litigation would cost "millions of dollars and years of legal work with no guaranty of success."
Kirkpatrick: "One of the main sources of anger and anxiety among our shareholders stems from the apparent lack of oversight by the SEC, DOJ, and Nevada authorities at a time when it was obvious that fraudulent activities were ongoing within both CMKM and the brokerages. Shareholders feel that this activity could have been halted by these government agencies before it literally broke CMKM and caused its revocation."
Time hasn't healed those wounds, but the Berkley-Heller Senate campaign has reopened them.
John L. Smith's column appears Sunday, Tuesday, Wednesday and Friday. E-mail him at Smith@reviewjournal.com or call (702) 383-0295. He also blogs at lvrj.com/blogs/Smith
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