CMKM tout decries SEC administrative proceeding
2005-03-21 16:59 ET - Street Wire
by Lee M. Webb
CMKM Diamonds Inc. booster Hal Engel, a former securities violator better known as Internet tout Willy Wizard, suggests that the company's cult-like followers are not being well served by a U.S. Securities & Exchange Commission (SEC) administrative proceeding against the subpenny pink sheet promotion.
On March 16, just as a 10-day trading suspension was set to expire, the U.S. regulator announced its administrative proceeding against CMKM for failing to file required periodic reports. According to the SEC, CMKM has not filed an annual report since May 9, 2002, or quarterly reports since Nov. 18, 2002.
Some time within the next four months, an administrative law judge will decide whether an order should be issued suspending CMKM for up to one year or revoking the company's registration entirely.
As previously reported by Stockwatch, CMKM issued more than 100 news releases, many of them short on details and long on puffery, while ducking its reporting obligations.
During the same time, the pink sheet promotion headed by Saskatchewan native Urban Casavant issued hundreds of billions of shares without so much as a peep to shareholders. Indeed, CMKM gagged its transfer agent, ensuring that investors could not learn about the massive dilution.
With investors left in the dark, CMKM ran its record setting outstanding total up to more than 779 billion shares before repurchasing 75 billion shares from Nevada Minerals Inc. in a private transaction last December. The company still has a staggering 703.5 billion shares outstanding.
While operating in non-reporting obscurity, the pink sheet promotion managed to attract a remarkably large, gullible following and a motley assortment of Internet touts. Some of the touts are as misinformed as the most gullible of CMKM's starry-eyed followers.
Willy Wizard
Mr. Engel, a car salesman and stock tout who is still making instalment payments on an SEC fine levied in connection with previous touting activity, was one of the earliest CMKM Internet cheerleaders.
The stock tout has registered thousands of posts on stock message boards, profiled CMKM on his website, WillyWizard.com, issued scads of imaginative e-mails about the company and now holds forth almost daily about the pink sheet promotion on PalTalk, an Internet site that offers text and audio messaging in virtual rooms.
Mr. Engel began acquiring a position in CMKM last year based on outrageous rumours circulated by other touts including Jose Davila and U.S. air force officer Major Sterling Collins.
Alas, the wild tales of massive finds of diamonds, platinum, gold, silver and pretty much every other known mineral of any value bore no relation to reality.
Nonetheless, Mr. Engel claims that he increased his already sizeable holdings when CMKM hired the highly and imaginatively touted securities lawyer D. Roger Glenn of Edwards & Angell last June. CMKM bade farewell to Mr. Glenn in February.
By the time the dust had settled on Mr. Engel's buying, he was "all in," having sunk all of his cash into the subpenny pink sheet promotion. According to the stock tout, he had amassed approximately 980 million shares of CMKM at a cost of almost $200,000. (All amounts are in U.S. dollars.)
Mr. Engel's position briefly increased by a relatively insignificant three million shares last fall when he was one of many recipients of shares distributed by rumour-mongering tout Mr. Davila.
Perhaps sensitive to the appearance that gift might leave with regulators, Mr. Engel reports that he returned the certificates for three million shares of CMKM and three million shares of a related private company, Casavant International Mining Inc., to the transfer agent for cancellation.
Meanwhile, the stock tout, who claims credit for having brought thousands of investors to CMKM, has had to reduce his position a bit in order to meet some expenses including his SEC fine instalments. Mr. Engel reportedly now holds approximately 920 million shares of the pink sheet promotion.
With approximately $185,000 still tied up in CMKM, not to mention the "responsibility" he claims for his followers, Mr. Engel has not been overjoyed with recent developments.
Like many of the company's starry-eyed followers, however, the stock tout evidently thinks that the SEC is to blame for the current predicament, not CMKM.
Mr. Engel served up some of his thoughts on the matter in a March 18 news release.
Wizardly musings
"After a 10 day suspension by the SEC CMKM Diamonds resumed trading Thursday with a bang up volume of 8,368,848,699 shares exchanging hands," Mr. Engel led off in a clumsily revised news release incorporating some corrections to a release issued about three hours earlier.
"Buyers outweighed sellers all day but the share price remained unchanged," the stock tout declared.
Evidently Mr. Engel, who has been touting OTC Bulletin Board and pink sheet stocks for years, is a bit confused about CMKM's trading status.
Following the 10-day SEC suspension, CMKM was relegated to what is known as the "grey market" where quotes are not even published and brokers are effectively limited to executing matched trades.
Moreover, most of the more than 8.3 billion shares reportedly exchanged on March 17 went off at one-100th of a penny.
"For many months market makers have kept CMKX locked at .0001 by .0002 even with multi billion shares trading daily," the tout continued.
Again Mr. Engel seems confused. Even prior to the 10-day suspension, CMKM was only quoted unsolicited on the pink sheets, colloquially known as a "one-legged pink."
For stocks that are quoted unsolicited on the mighty pinks, a broker can only publish a quote solely on behalf of a customer and representing that customer's unsolicited expression of interest. In other words, market makers did not have the price locked at all.
"There seems like no escape for investors looking for a share price increase," Mr. Engel remarks, closing out the first paragraph of his March 18 news release.
"Now CMKM Diamonds faces another challenge by the S.E.C.," the tout continues, going on to sketch the administrative proceeding initiated by the U.S. regulator on March 16.
"Many shareholders are appalled that the SEC has waited until the company is finally attempting to bring back a fully reporting status," Mr. Engel goes on.
As previously reported by Stockwatch, CMKM has always had full reporting obligations. In other words, it is not a matter of bringing back "a fully reporting status," it is a matter of the company meeting its obligations under that reporting status, something that it has not done.
"The SEC states they are trying to protect investors but many shareholders dont (sic) see it that way," Mr. Engel states.
"CMKM Diamonds reported, via IR (investor relations) for USCA (closely related U.S. Canadian Minerals Inc., currently under investigation by the SEC) last summer, they had 41,000 plus shareholders and numbers are rumored to be upwards of 60,000 plus at this time," the tout continues.
"To threaten to revoke the registration of a company that is attempting to bring order back to their filings, many shareholders believe is not protection but a threat to investors (sic) investment," Mr. Engel reports.
Indeed, as noted on the SEC website, the primary mission of the U.S. regulator "is to protect investors and maintain the integrity of the securities markets."
That, of course, is a general mandate that does not necessarily entail protecting the specific interests of antsy shareholders of a massively diluted pink sheet promotion that has ducked its reporting obligations for more than two years to the possible detriment of other gullible members of the investing public and the integrity of the markets.
Mr. Engel devotes a paragraph to the recent addition of Robert Maheu to CMKM's board of directors and the company's most recent declaration of its go-forward plans.
"Does CMKM Diamonds look like a company that needs their shareholders protected?" Mr. Engel asks rhetorically.
Some help in formulating an answer to that question may well be found in Mr. Engel's subsequent comments pointing to the cult-like nature of the company's starry-eyed Internet following and the source of many of their wild fantasies.
"Shareholders are an organized group of believers partaking in many message boards and live chat rooms from Yahoo to Paltalk," Mr. Engel observes. "These rooms contain as small as 15 shareholders to as large as 600 plus shareholders.
"These shareholders are united and believe in their chairman Urban Casavants (sic) dream.
"They share the dream trusting their Chairman to make the right decisions entrusting millions of dollars to his dream."
Interestingly, as part of its mission to protect investors and maintain the integrity of the markets, the SEC cautions investors about Internet pump and dump schemes and, among other things, warns of the perils of relying upon information obtained from tout sheets and Internet chat sites.
Mr. Engel wrapped up his March 18 news release with a message and pledge of allegiance to Mr. Casavant, the company's only officer, and Mr. Maheu, CMKM's only other director.
"We stand behind you with trust and that our investment dollars are safe," Mr. Engel declares. "You both have our allegiance of trust. We wait patiently for your next move to accomplish building a successful company."
PalTalk palaver
Mr. Engel's mangled missive was the subject of some discussion on PalTalk on March 18, but it gave way to much more animated palaver later in the day and throughout the weekend.
Indeed, the company's excitable cult-like followers were in a tizzy over the latest fantasy advanced by Mr. Engel's foul-mouthed PalTalk sidekick, an optometrist from Missouri who uses the Internet alias "ooggie."
Most of the vulgar visionary's gobbledegook hardly bears repeating, but his latest fantasy, in a nutshell, is that CMKM has received a $500-billion settlement that will soon be distributed to its shareholders.
At the root of his latest nonsense is the widely held and completely unsubstantiated belief that CMKM has been the target of a massive shorting campaign in which the Depository Trust and Clearing Corp. has been a conspirator.
According to the vulgar tout's imaginings, the Depository Trust has cut a cheque to CMKM for as much as $500-billion to resolve the matter that would otherwise expose the corruption of the entire securities industry and bring the markets crashing down, wreaking havoc on the world's economy.
That, apparently, all makes sense to many of the company's cult-like followers. Indeed, with some variations, that nonsense was soon splattered over a number of Internet stock chat sites.
For some critical observers of the pink sheet play, that rubbish reinforced the answer they had already formulated to Mr. Engel's rhetorical question about whether CMKM's shareholders need protection. For some, the short answer is that many of the company's cult-like followers are far beyond any protection or help, for that matter, that a securities regulator can provide.
With more than 10.6 billion shares changing hands, almost all of them at one tick above zero, CMKM closed at one-100th of a penny on March 21.
The saga continues.
Comments regarding this article may be sent to lwebb@stockwatch.com.
(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 and 16, 2005.)
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