DOES IT MATTER RRUFF? ACCORDING TO BUD BURRELL THE WALLSTREET IS GOING TO CRASH AND ALL BECAUSE OF THE TRILLIONS OF SHARES NAKED SHORTED IN CMKX ALONE AND THAT IS IF WALLSTREET HAS TO BUY ALL THOSE SHARES AT A PENNY ACCORDING TO BUD "THE GENERALIST".
Bud Burrell"s Interview on C h r i s t i a n F i n a n c i a l R a d i o N e t w o r k (CFRN)
CMKX 100 Billion OS
cfrn.net
GUESS BUD DID NOT READ STOCK WATCHES STORY
11/11/05 - [CMKM] Street Wire: CMKM massive short story debunked, fantasy continues
CMKM massive short story debunked, fantasy continues
2005-11-11 20:52 ET - Street Wire
See Street Wire (U-CMKX) CMKM Diamonds Inc
by Lee M. Webb
CMKM Diamonds Inc.'s liquidating "task force" is actively perpetuating the notion of a massive NAKED short position in the recently revoked pink sheet promotion headed by Saskatchewan native Urban Casavant. That tale plays well among CMKM's cult-like followers, but trading data debunks the story.
CMKM's vaunted task force consists of the company's former trophy co-chairman, 87-year-old Robert Maheu, its legal counsel, Donald Stoecklein and Texas lawyer Bill Frizzell, who represents approximately 2,500 shareholders.
As disclosed in an Oct. 24 filing with the U.S. Securities and Exchange Commission (SEC), the task force will oversee a liquidating distribution of CMKM's assets as Mr. Casavant winds up the company. CMKM has tens of thousands of shareholders and a staggering 703.5 billion shares outstanding.
According to the Oct. 24 SEC filing, CMKM's assets consist of 50 million shares of Vancouver-based Entourage Mining Ltd., a financially challenged OTC Bulletin Board company flagged with a going concern warning. The Entourage shares are reportedly being swapped for CMKM's Saskatchewan mining interests.
Interestingly, Mr. Casavant's business associate Emerson Koch of Tuxford, Sask., is rather magnanimously contributing 30 million of the 50 million Entourage shares slated for distribution to CMKM shareholders.
The 50 million Entourage shares have not yet been issued and the Vancouver company has not even announced that the deals involving CMKM have been consummated. Nonetheless, the task force is already pressing ahead with the dubious liquidation plan.
Setting aside the matter of the 50 million Entourage shares that have not yet been issued, the plan to wind up CMKM with a liquidating distribution of assets raises a number of other issues.
For example, it is far from clear that CMKM, a Nevada-incorporated company with thousands of shareholders, can be wound up without the majority consent of its shareholders. CMKM has not bothered seeking shareholder approval.
Moreover, it is far from clear whether a liquidating distribution of assets can be conducted in the absence of financial records. CMKM has neither an auditor nor auditable financial records.
Given that CMKM's last auditor, Brad Beckstead, was fired after he raised concerns with the company and the SEC over possible illegal acts by Mr. Casavant and company insiders, the lack of financial records is no small matter.
Among other things, Mr. Beckstead reported that he had discovered information indicating that CMKM made improper loans to its officers and directors. According to the fired auditor, those loans may represent recoverable assets.
In a rather more specific disclosure regarding possible illegal acts and recoverable assets, Mr. Beckstead reported that it appeared that Mr. Casavant had improperly "caused CMKM to advance $4-million to CMKXtreme Inc.," a company that he owned. (All amounts are in U.S. dollars.)
Quite apart from those rather significant matters, the task force's proposed liquidating distribution scheme raises additional legal and practical issues.
According to the task force, only shareholders who produce copies of physical CMKM share certificates will participate in the liquidating distribution of Entourage shares.
Some observers question whether CMKM's task force can legally restrict the liquidating distribution of assets to shareholders who produce share certificates, thereby excluding investors who, for one reason or another, leave their shares in street name.
According to a March 4 news release, an unknown number of shareholders held more than 407 billion shares of CMKM in street name. While that number may have fluctuated somewhat before the SEC finally yanked CMKM's stock registration at the end of October, a staggering number of shares are undoubtedly still held in that form by many shareholders.
Under the task force's scheme, the shareholders who want to participate in the liquidating distribution will have to foot the bill to obtain certificates. The cost varies among brokerage firms, but could range from approximately $50 to several hundred dollars.
It is perhaps telling that some of the company's shareholders claim that they will find it difficult to ante up the cash to obtain the share certificates. Some others suggest that converting their holdings of a few million shares into certificate form may not be worth the cost.
Questions have also been raised with respect to whether a news release and claims published on a website slapped together on Nov. 4 constitute adequate notice of the plan to wind up the company and distribute its assets.
Notwithstanding the many questions, it appears that the majority of CMKM's cult-like followers endorse the task force's scheme.
That endorsement turns not so much on the possible value of the liquidating distribution of restricted Entourage shares, but on the widely held belief that the scheme will reveal a massive NAKED short position in CMKM.
The CMKM liquidating task force is aggressively promoting that belief on its website.
Incredible information
While the task force is still working out the mechanics of its liquidating distribution scheme, the notion of a massive NAKED short position in CMKM is getting full play on its website.
According to the task force, one of the principal reasons for demanding a "certificate pull" is to determine the actual number of CMKM shares held by all shareholders.
"If the total number of CMKX shares exceeds CMKX's outstanding share count, this may be due to the existence of NAKED Short Shares in the Market," the task force states, identifying the company by its former trading symbol.
Tossing off rallying remarks like "helping to right a monumental wrong that permeates our entire market system" and "an opportunity to participate in a history-making event," the task force urges CMKM shareholders to obtain their share certificates and await further instructions.
"Credible information indicates the number of NAKED short shares is potentially as high as 2 trillion shares," the task force claims.
Stockwatch has asked for the exact nature and source of this purportedly "credible information," but has not received a reply.
A review of CMKM's trading data, however, debunks the task force's incredible "credible information."
While CMKM has recorded phenomenal trading volumes, including a staggering 40 billion shares notched in a single trading session last December, the claim of a potential NAKED short position of two trillion shares in a company with more than 703.5 billion shares outstanding does not stand up to scrutiny.
To put it rather simply, from the time Mr. Casavant took control of CMKM's predecessor in November of 2002 until the SEC revoked the company's stock registration on Oct. 28 of this year, approximately 1.77 trillion shares have changed hands.
That figure includes approximately 112 billion CMKM shares that were unloaded on an ex-clearing basis and not reported to the tape by Jeffries & Company Inc. in 2004 on behalf of two unidentified customers. Those trades settled without incident.
While "only" may be an odd word to use in the context of such staggering numbers, it should be clear to all but the most obtuse that it is impossible to have a NAKED short position of two trillion shares when only approximately 1.77 trillion shares have been traded.
The impossible notion of a possible NAKED short position of two trillion shares is also debunked by information regarding delivery failures that was recently provided to task force member Mr. Frizzell by the SEC.
It is not clear whether Mr. Frizzell, who has long been a champion of the NAKED short fantasy, understands the significance of that information.
Texas champion
As previously reported by Stockwatch, Mr. Frizzell, who also sank money into CMKM, was hired by fellow Texan and CMKM shareholder John Martin last year to represent him in matters relating to his investment in the pink sheet promotion.
Mr. Frizzell is not a securities lawyer and, in fact, is still a relative novice when it comes to stocks and the securities industry.
When the SEC launched its administrative proceeding against CMKM in March of this year, Mr. Frizzell offered to represent other shareholders at a cost of $25 per person. Approximately 5,000 shareholders known as the Owners Group took the Texas lawyer up on his offer.
Mr. Frizzell was granted limited third party participation in the administrative proceeding on behalf of the Owners Group and managed to slip at least an oblique reference to a massive short position into his impromptu opening statement in a May 10 evidentiary hearing, notwithstanding a prehearing ruling that short selling was irrelevant to the matters at hand.
"The SEC counsel has said there are 700 billion shares that have been issued by this company," Mr. Frizzell said. "I'm going to suggest to the court that there are trillions of these shares that are in shareholders' hands."
It is not clear whether Mr. Frizzell's suggestion turned on the same purportedly "credible information" now touted by the task force of which he is a member or, for that matter, whether the Texas lawyer is the source of that patently inaccurate information.
In any event, Mr. Frizzell subsequently tapped the shareholders for another $25 per person for a second phase of representation, but only about 2,500 people reportedly signed on for that agreement.
Under the terms of the representation agreements, Mr. Martin would be on the hook for any costs not covered by the contributions anted up by the Owners Group.
Mr. Frizzell, who reportedly wrapped up his other legal business to concentrate on the Owners Group as his only client, has provided only a very rough accounting of his expenses, so it unclear whether Mr. Martin has had to shell out any cash at all.
Mr. Martin, another ardent proponent of the massive NAKED short position, has reportedly been working assiduously on behalf of the Owners Group, logging nearly as many hours as Mr. Frizzell.
Stockwatch has twice asked Mr. Frizzell whether Mr. Martin is being compensated for his efforts and, if so, to identify the source of that compensation. The Texas lawyer has not yet offered a response.
In any event, by Mr. Frizzell's very rough accounting, it is clear that a significant portion of the money he collected from the Owners Group was spent in an effort to establish proof of a short position in CMKM.
As part of that effort earlier this year, the Texas lawyer asked CMKM shareholders to fax copies of their brokerage statements to him. Reportedly, more than 10,000 account statements flooded in.
Again disregarding the prehearing ruling excluding any evidence of short selling, Mr. Frizzell attempted to submit the information gleaned from the brokerage statement accounts as evidence of a NAKED short position.
That submission was not accepted and a rather lengthy section of Mr. Frizzell's posthearing brief dealing with claims of a NAKED short position was ordered struck from the brief.
Notwithstanding that setback, in a number of e-mail updates to the Owners Group, Mr. Frizzell continued to indicate that he had established proof of a massive NAKED short position in CMKM.
It may be worth at least passing mention to note that while Mr. Frizzell persistently tried to pass off information culled from CMKM shareholders' brokerage statements as "proof" of a NAKED short position, the task force of which he is now a member is adamant that brokerage statements will not be accepted proof of ownership.
In any event, the Texas lawyer's calculations and purported proof have never been offered up for public scrutiny.
Moreover, according to SEC lawyer Leslie Hakala, Mr. Frizzell has not even bothered to provide the enforcement division with his purported evidence.
"Mr. Frizzell has been specifically invited to provide the Division with any evidence of violations that he has, including his alleged evidence of NAKED short selling," Ms. Hakala wrote in an Oct. 27 e-mail to Janice Shell. "He has opted not to provide the Division with any such materials."
Ms. Shell, who has quite a nose for sniffing out stinky stocks, probably needs no introduction to CMKM's cult-like Internet followers. Indeed most of them evidently consider the art historian, who delights in exposing overblown penny stock promotions and outright scams, an evil pariah whose very name is anathema to true believers in the revoked pink sheet promotion.
In any case, while Mr. Frizzell reportedly did not take up the SEC's invitation to provide his alleged evidence of NAKED short selling, the U.S. regulator recently provided the Texas lawyer with information that clearly refutes his claim of a massive short position and, even more so, the task force's so-called credible information of a potential NAKED short position of two trillion shares.
The information provided to Mr. Frizzell after a request under the U.S. Freedom of Information Act is a report of delivery failures relating to CMKM trading during April of this year.
Whether the Texas lawyer, who has only recently encountered terms such as "convertible debenture," "fail to deliver," "Cede & Co." and so on, actually understands the data is an open question.
Indeed, since Nov. 3, Stockwatch has twice asked Mr. Frizzell to comment on the implications of the April fails-to-deliver data for his claim of a massive NAKED short position in CMKM. The Texas lawyer has not yet offered a response.
However, Mr. Frizzell did provide the data and his fun-with-numbers calculations in an e-mail to members of the Owners Group.
"It appears that approximately 800 Million shares of CMKX stock were reported to the DTCC (Depository Trust and Clearing Corp.) as delivery failures in the month of April of 2005," Mr. Frizzell advised the Owners Group members.
At best, that indicates that Mr. Frizzell has some proficiency in adding and rounding, but it does not indicate that he has a clue about the significance of the delivery failure data provided by the SEC.
Setting aside the observation that not all delivery failures necessarily represent NAKED short sales, simply adding up running totals of the delivery failures for a month to arrive at approximately 800 million shares while disregarding any intervening settlements of those transient failures does not really provide any meaningful information.
What is meaningful and certainly significant with respect to any claim about NAKED shorting is that the delivery failures topped out at approximately 186 million shares on April 22, a trifling amount for a company with 703.5 billion shares outstanding. Further, even that insignificant number of fails was settled by April 26.
Moreover, the delivery failures only amounted to approximately 3.07 million shares worth a picayune $300 at the end of April.
Once again, it should be clear to all but the most obtuse that claims of a short position of several hundred billion shares, let alone two trillion shares, do not bear scrutiny.
Indeed, several of Mr. Frizzell's claims, which frequently bear more than a passing resemblance to the wild imaginings of CMKM's cult-like Internet followers, do not stand up to scrutiny.
For example, in their quest to extend the culpability for CMKM's woes, some of the company's faithful followers suggested that Mr. Casavant had innocently fallen in with a bad lot early on and had fallen prey to sharp operators. Among the names bandied about in connection with that quest was John Edwards of Las Vegas.
Interestingly, during the May 10 evidentiary hearing in the administrative proceeding against CMKM, Mr. Frizzell hammered away at Neil Levine, then the company's auditor, who was called as an SEC witness. Mr. Frizzell rather pointedly suggested that Mr. Levine had turned on the company at the bidding of Mr. Edwards.
While Mr. Frizzell did not make much headway on the subject of Mr. Edwards during the hearing, the search was soon on to uncover more information about the Las Vegas businessman. Indeed, Mr. Frizzell invited CMKM shareholders to forward any pertinent information about Mr. Edwards to his office.
Among the nuggets uncovered about Mr. Edwards was the fact that he had acquired a stake in Crown Financial Holdings Inc., a former market maker that shuttered its operations in February.
In the hands of some of CMKM's imaginative, if mathematically challenged, followers, that nugget turned into a fantasy gold mine.
By some fuzzy calculations, Mr. Edwards's rather ill-fated $1-million investment in Crown Financial, now worth approximately $20,000, was transformed into a $2-billion stake in the beleaguered company.
Perhaps Mr. Frizzell uses the same fuzzy math.
On Sept. 6, the Texas lawyer sent a letter to CMKM's attorney Mr. Stoecklein, with whom Mr. Frizzell is now honoured to serve as a member of the task force, demanding that the company pursue third party claims against a number of individuals including Mr. Edwards.
"Recently it was learned that Mr. Edwards had amassed $2-billion worth of Crown Financial stock," Mr. Frizzell claimed in his Sept. 6 demand letter. "Crown Financial was one of the most active market makers of CMKX stock when hundreds of billions of shares of stock were suddenly dumped on the market."
Stockwatch has twice asked Mr. Frizzell to provide the basis for his claim that Mr. Edwards amassed $2-billion worth of Crown Financial stock. The Texas lawyer has not yet replied.
Another example of at least some convergence between the wild fantasies of many of CMKM's Internet followers and Mr. Frizzell's apparent beliefs concerns the mistaken notion that the company's Saskatchewan mining interests included valuable oil and gas rights.
That notion has received considerable play on some chat sites frequented by CMKM's cult-like followers.
Among the most outlandish fantasies that have been advanced is that, during a trip to China, Mr. Casavant inked a deal with the Chinese government regarding the purported Saskatchewan oil and gas rights.
Hal Engel, a stock tout and former securities violator who has been beating the drum for CMKM for more than year, has also been keen on the value of the company's purported oil and gas prospects. According to Mr. Engel, those rights could carry a value of $500-billion or more.
While Mr. Frizzell has not specifically endorsed any of those outrageous fantasies, he clearly shared the belief that CMKM held significant oil and gas rights.
Indeed, in an e-mail message to members of the Owners Group, Mr. Frizzell advised that he had told CMKM's lawyer Mr. Stoecklein that he had acquaintances in the oil business who might be interested in the company's oil and gas rights.
Moreover, in a chat session on an Internet site called PalTalk in early September, Mr. Frizzell claimed that CMKM's mineral rights included oil and gas rights that could hold significant value.
Stockwatch has twice asked Mr. Frizzell to offer comments regarding the foundation for that claim. The Texas lawyer has not yet offered a response.
In any event, perhaps unknown to Mr. Frizzell and CMKM's cult-like followers, the ballyhooed Saskatchewan mineral rights to which CMKM held some claim are defined under the Mineral Disposition Regulations of 1986 and specifically exclude oil and gas.
Not to put too fine a point on it, CMKM's mineral claims, which are apparently in the process of being shunted off to Entourage, did not include any oil and gas rights.
It remains to be seen whether Mr. Frizzell, who is undoubtedly busy with his dual role of representing approximately 2,500 CMKM shareholders and helping the task force work out the wrinkles in the liquidating distribution scheme, will respond to Stockwatch's requests for comments on these matters and other issues raised in a dozen questions to the Texas lawyer.
Among the unanswered questions that Stockwatch put to Mr. Frizzell is whether he is being compensated as a member of the task force overseeing CMKM's liquidating distribution and, if so, the amount and source of that compensation.
Mr. Frizzell may also be busy in his capacity as a director and legal counsel for a recent venture headed by his associate, client and Owners Group founder Mr. Martin, which is coincidentally named The Owners Group Inc.
The motivation and philosophy reportedly underpinning that new venture, "owned by shareholders and dedicated to honesty, integrity and transparency," is served up on the company's website.
"Over the past year or so we have been appalled to learn the extent of just how much fraud and manipulation is costing real Americans investing in small public companies," the website explains. "Then, we had an idea of how to help combat the bad guys and try to make a difference.
"The idea is to form a company that finds other company's (sic) trying to run a legitimate business that is free of fraud, intentional manipulation, massive dilution, etc., then tell everyone about those companies.
"From this rose The Owners Group Inc. whose goal is to provide information on small companies managed with Honesty, Integrity and Transparency (HIT) so our member's risk of losing money through dishonest practices is reduced."
Evidently The Owners Group, which boasts another CMKM shareholder, Kevin West, as vice-president, is reportedly in the process of completing a private offering and has plans to become a fully reporting public company.
People can sign on to receive news and e-mail updates regarding The Owners Group's picks, currently consisting of two OTC-BB companies that have reportedly passed muster with the venture's "initial due diligence check."
In a boilerplate disclaimer similar to what can be found on other stock touting sites, The Owners Group discloses that it has received one million restricted shares from American Resources Corp. and two million restricted shares from its other pick, Diamond I Inc.
Meanwhile, Mr. Frizzell and the other two members of the CMKM liquidating task force are making some progress with respect to the "cert pull" fax campaign.
A downloadable fax cover sheet and instructions are now available on the task force website and two fax lines are being set up.
The saga continues.
Comments regarding this article may be sent to lwebb@stockwatch.com |
