CMKM shareholders' lawyer wants third parties pursued
2005-09-12 11:01 ET - Street Wire
See Street Wire (U-CMKX) CMKM Diamonds Inc
by Lee M. Webb
CMKM Diamonds Inc., Saskatchewan native Urban Casavant's massively diluted pink sheet promotion currently involved in a U.S. Securities and Exchange Commission (SEC) administrative proceeding to revoke its stock registration, has received a request from Texas lawyer Bill Frizzell that the company pursue legal action against various third parties.
Mr. Frizzell, who now represents approximately 2,400 CMKM shareholders, names several individuals and levels some rather serious allegations in a Sept. 6 "shareholder derivative rights" demand letter to the company's attorney, Donald Stoecklein.
Among other things, Mr. Frizzell suggests that several of the named individuals engaged in possibly illegal transactions that resulted in the dumping of hundreds of billions of CMKM shares into the market.
Mr. Casavant, who authorized the issuance of almost 800 billion shares, many of them to himself, relatives and associates, is not among those fingered by Mr. Frizzell for legal action. However, the Texas lawyer notes that his letter "does not purport to be a complete and final list of actions that the shareholders deem to be warranted."
The lawyer
Mr. Frizzell, who also owns shares in Mr. Casavant's subpenny pink sheet promotion, offered his services to other CMKM shareholders earlier this year after the SEC launched its administrative proceeding against the company.
The lawyer had already been engaged by fellow Texan and CMKM shareholder John Martin last year, but decided to provide limited representation until a decision was rendered in the SEC proceeding to other shareholders for a modest non-refundable fee of $25 per person.
Approximately 5,500 shareholders signed up to become members of what was called the Owners Group, but according to Mr. Martin, who is closely associated with Mr. Frizzell, only 4,223 people actually anted up the fee.
Evidently at least some CMKM shareholders who did not honour the employment agreement simply could not afford to pay that $25 fee. The Owners Group website accepts PayPal payments for "membership for those shareholders who are less fortunate."
Mr. Frizzell is not a securities lawyer and, apart from CMKM, it is far from clear that he has much experience with stocks or the markets generally.
In any event, over the objections of the SEC, Mr. Frizzell was granted limited participation in the administrative proceeding on behalf of the Owners Group. During the May 10 evidentiary hearing, that limited participation was expanded to allow Mr. Frizzell to cross-examine witnesses.
Even before offering his legal services to other shareholders, Mr. Frizzell was clearly in the camp of the CMKM followers, many of whom signed on for his representation, who believe that the company has been savaged by naked short selling.
The notion that a stock with no market makers, trading at a few hundredths of a penny, with approximately 780 billion shares outstanding at one time and that has never appeared on the Regulation SHO threshold list has a significant naked short position is scoffed at by many CMKM critics, including seasoned investors familiar with pink sheet shenanigans. Mr. Frizzell and other CMKM followers think otherwise.
While the Owners Group members were hopeful that Mr. Frizzell would be able to offer some arguments regarding naked shorting during the administrative proceeding, Chief Administrative Law Judge Brenda P. Murray ruled that short selling was irrelevant to the issues to be decided and would not be considered.
Notwithstanding that ruling, following the evidentiary hearing Mr. Frizzell pursued the matter further.
Indeed, at least according to the rather slip-shod accounting offered by both Mr. Martin and Mr. Frizzell, it appears that a significant portion of the approximately $105,000 collected from shareholders was used in an effort to establish evidence of a significant short position in the stock.
Among other things, Mr. Frizzell asked shareholders to fax his law firm copies of their brokerage statements showing their CMKM holdings. The lawyer claims to have gathered up several hundred thousands of pages of documents, including statements from approximately 10,500 brokerage accounts.
Notwithstanding Judge Murray's earlier ruling regarding the irrelevance of short selling to the matter at hand, Mr. Frizzell attempted to introduce the subject of naked short selling in a posthearing brief and by way of a proposed exhibit.
The lawyer claimed that his documentation proved that there were approximately 134 billion more CMKM shares in circulation than the company had issued and, given that he had only tallied 10,500 of approximately 53,000 accounts holding CMKM shares, the number would undoubtedly increase significantly.
Mr. Frizzell's methodology and the exact nature of the calculations used in arriving at the purported proof of a significant short position are unclear and may well remain that way. Judge Murray ordered the section dealing with Mr. Frizzell's claims about naked short selling struck from his brief and the proposed exhibit was not allowed.
On July 12, Judge Murray issued her initial decision in the SEC proceeding against CMKM, determining that the company was an egregious and recurrent securities violator that was likely to continue to breach securities laws and ordering the revocation of CMKM's stock registration.
CMKM petitioned for a review of the initial decision and that petition was granted on Aug. 8.
The appeal process is still in progress, but under the terms of the $25 employment agreement Mr. Frizzell's initial representation of his CMKM shareholder clients came to an end when Judge Murray issued her decision.
Even before the initial decision was issued, Mr. Martin, who is reportedly on the hook for all attorney fees and costs not covered by contributions from other participating shareholders, was pitching the Owners Group members to ante up another $25 for a second phase of representation by Mr. Frizzell in several investigations related to CMKM.
According to the Owners Group website, 2,373 people have signed on for the second phase of representation, adding approximately $59,000 to the pot for Mr. Frizzell's services, if everyone paid the fee.
While Mr. Frizzell is still convinced that there is a large short position in the stock, he is now concerned with other transactions and "bad guys," as he frequently calls them.
Perhaps entirely coincidentally, the expansion of Mr. Frizzell's concerns became particularly evident after another CMKM shareholder obtained copies of the exhibits used in the SEC proceeding, including the company's master shareholders list showing the beneficiaries of the staggering stock issuances, and began posting the information on the Internet.
The evidence of the dumping of hundreds of billions of shares into the market, with much of the selling coming from Mr. Casavant, his relatives, acquaintances and people closely associated with the company, shook the beliefs of even some of CMKM's most faithful followers and completely destroyed some fantasies.
In the wake of the Internet disclosure of evidence from the SEC proceeding, Mr. Frizzell began rumbling about lawsuits.
In an Aug. 17 e-mail to members of the Owners Group, the Texas lawyer indicated that he was considering a bringing a lawsuit against certain unidentified parties.
"If I decide to bring any lawsuit, I will obtain permission from the shareholder that will be the named plaintiff or plaintiffs in the lawsuit," Mr. Frizzell wrote. "Any suit will not be brought on behalf of the CMKX Owners Group. There will be no individual shareholders named other than the individuals I select to bring any claims."
The lawyer went on to explain that a lawsuit on behalf of the entire Owners Group might bog the proceeding down in a two-year deposition and discovery process, resulting in a waste of time and money.
"This will not be a suit against the company nor Urban Casavant at this point in the proceedings," Mr. Frizzell remarked, perhaps in an attempt to assuage the concerns of the many CMKM shareholders who steadfastly believe that Mr. Casavant has their best interests at heart and is armed with some master plan to ensure they are all handsomely rewarded for their loyalty.
By Aug. 30, Mr. Frizzell was floating a revised plan. Remarking that the stock price was burdened by the huge amount of shares dumped into the market, Mr. Frizzell said the dilution "was wrong and illegal," but shareholders could not immediately take direct legal action in the matter.
"Under recent state and federal legislation, the legal system does not give you as a shareholder an easy route through the courts to go after those who have profited illegally from their deeds," Mr. Frizzell advised the Owners Group. "Your rights are 'derivative' of the company's rights to go after the bad guys.
"The legal term describing your rights is a 'shareholder derivative rights' cause of action.
"As a shareholder, you must first make a demand on the company to assert any claims the company has against the bad guys.
"If the company chooses not to assert their rights against the bad guys, for whatever reason, then you can proceed."
Mr. Frizzell went on to say that he would be issuing a demand letter to Mr. Stoecklein "demanding that action be taken against certain individuals that have been parties to the dilution of this company."
"I will name specifically certain individuals and request that action of specific types be taken against them," the lawyer wrote. "There will be a stated time for the company to take action. When that time passes, and no action occurs, you will have the right as shareholders to assert your rights in your own lawsuit."
Apparently the sabre-rattling about lawsuits and demands upon the company caused some dissension among members of the Owners Group. Within a few days, Mr. Martin chimed in with a few thoughts.
"I must confess that Bill and I have had a difficult time continuing to work on this case with the lack of support from some shareholders," Mr. Martin remarked. "There are those, who are armchair quarterbacks who think they have all the answers. (You all seem to have no trust in anyone.)
"There are those of you who are so caught up in UC (Urban Casavant), that you can't see what has happened (I know, because I was there); and then there are those who see blood so red, that you are willing to file a suit at any cost for revenge."
After acknowledging "the truly supportive group of hundreds of shareholders," sketching Mr. Frizzell's dedicated efforts with little financing and touching on some of the distressing "calls almost daily from those who fear they have lost everything," Mr. Martin offered his summary of the CMKM saga.
"Several years ago, some seriously evil people took advantage of Urban Cassavant (sic)," Mr. Martin wrote. "Evidently, UC bought a dirty shell when he formed CMKI (predecessor to CMKM).
"That means there was very fine print, which would cause him many problems in the future: Problems that forced him to pay extortionists along the way, i.e. a dilution agreement and toxic financing.
"We feel, and hopefully will not be proved wrong, that UC is not the mastermind who diluted this stock. We believe it was done to keep up with the agreements in the contract."
Mr. Martin went on to claim that he and Mr. Frizzell were "in the process of investigating the extortionists."
"We think they deserve to pay for what they have done," Mr. Martin continued. "They are present in dozens of other companies, and are doing the same thing to them. Their day is almost over!!
"We believe that once they are out of the way, UC will then be able to do the right thing and do whatever he must to give his shareholders their due."
A few days after Mr. Martin penned his missive, Mr. Frizzell issued his Sept. 6 demand letter to Mr. Stoecklein.
While certainly provocative in its own right, Mr. Frizzell's demand letter does not identify or contain any references to the mysterious dark forces of so-called extortionists and "seriously evil people" mentioned in Mr. Martin's rant.
The letter
"In several of our conversations you have reminded me that you are the attorney for CMKM Diamonds Inc. and that your representation does not necessarily involve representation of any particular officer or director individually," Mr. Frizzell wrote. "I am writing this letter to you as the attorney for CMKM Diamonds Inc."
The Texas lawyer went on to ask Mr. Stoecklein to bring the letter to the attention of CMKM's board of directors, comprised of Robert Maheu and Mr. Casavant, for action by the company.
"In 2004 over 600 billion shares of CMKM Diamonds Inc. common stock was issued by the company," Mr. Frizzell noted. "The issuance of these shares caused significant dilution of the shareholders stock. The stock has not yet recovered from the effects of this dilution.
"Many of the company shareholders have been involved in the investigation of the transactions that led to the issuances of stock last year in such large quantities.
"On behalf of the above mentioned shareholders I suggest that certain third parties have committed acts that give rise to legal liability to the company."
With that, Mr. Frizzell set about identifying several parties and levelling allegations of misconduct.
It should be emphasized that Mr. Frizzell's allegations and pointed suggestions of illegal activity are not proven.
Moreover, while some of the allegations apparently turn on information made available to Mr. Frizzell during the discovery process in the SEC administrative proceeding, it is clear that some of the Texas lawyer's claims are based on information and interpretations offered by unidentified CMKM shareholders whose qualifications are entirely unknown.
Further, some of the information presented in Mr. Frizzell's letter and elsewhere is flatly wrong.
The $2-billion man
Mr. Frizzell first identifies John Michael Edwards, claiming that a "review of one complaint filed with the SEC shows that Mr. Edwards was instrumental in obtaining some early financing of the company's activities."
"Mr. Edwards has been identified as an individual that opened in excess of 36 trust accounts at Nev West Securities since his involvement with the company," Mr. Frizzell claims.
"Certificates have been issued to an additional 20 companies that have addresses in Langley, B.C., which are purportedly owned or controlled by John Edwards," the lawyer continues. "All addresses have been traced to mail drops as opposed to physical addresses in both Las Vegas and Langley, B.C."
While exhibits from the SEC evidentiary hearing show that shares were issued to approximately 20 entities using mailboxes at two Langley malls, those exhibits do not indicate that Mr. Edwards controlled the Langley companies, nor was any testimony to that effect given at the hearing.
According to Mr. Frizzell, CMKM began issuing shares to Mr. Edwards's trusts as early as 2002.
"It is clear through the company's master shareholder list that these trust accounts were the vehicle for dumping hundreds of billions of shares onto the market," Mr. Frizzell alleges. "Many of these shares were restricted shares and should never have been dumped on the market."
Given that Mr. Frizzell does not identify the trust accounts allegedly operated by Mr. Edwards, his claim that the accounts were used to dump hundreds of billions of shares cannot be checked. It is clear from the master shareholder list, however, that hundreds of billions of shares were unloaded, with Mr. Casavant and members of his family accounting for a significant portion of the dumping.
"This dumping occurred at a time when the company was conveying good news about the company's progress to the innocent but unknowing public," Mr. Frizzel continues.
It is not at all clear whether Mr. Frizzell recognizes that his allegations convey a scenario with more than a passing resemblance to a classic "pump-and-dump" operation, which is very rarely orchestrated without the assistance of company insiders.
The Texas lawyer then serves up a snippet that may well raise significant concerns about the quality of his information.
"Recently it was learned that Mr. Edwards had amassed $2-billion worth of Crown Financial stock," Mr. Frizzell claims. "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."
While Crown may indeed have been active in executing transactions involving shares of CMKM, just where Mr. Frizzell came up with the notion that Mr. Edwards had amassed $2-billion worth of Crown stock is something of a mystery.
Crown shuttered its trading activities and market making entirely in February of this year and its stock sporadically changes hands on the pink sheets for less than five cents per share.
According to SEC filings, in March and April of this year Mr. Edwards purchased a total of 6,758 preferred shares of Crown priced at $148 per share through two entities that he controls for a total cost of just over $1-million, a far cry from the $2-billion worth of stock that Mr. Frizzell claims was amassed.
Mr. Edwards's 6,758 preferred Crown shares are convertible into a total of 6,758,000 common shares. If the shares were in fact converted, then at Crown's recent closing price of four cents per share, Mr. Edwards's disclosed holdings would carry a value of $270,320.
The source of Mr. Frizzell's information or the exact nature of the fuzzy math used to parlay Mr. Edwards's Crown shares into purported holdings valued at a whopping $2-billion may well remain something of a mystery.
After serving up his dubious Crown claims, Mr. Frizzell moves on to an arguably more disturbing matter involving the hundreds of billions of CMKM shares allegedly dumped through Mr. Edwards's trust accounts.
"There is evidence that portions of the funds from the sale of these securities were returned to the company and/or some of the company insiders via wire transfers and other deposits," Mr. Frizzell claims.
Perhaps unknown to Mr. Frizzell, with the addition of that allegation, the scenario now bears more than a passing resemblance to a classic pump-and-dump operation orchestrated by company insiders while unloading shares through nominee accounts ostensibly controlled by a frontman.
During the SEC hearing, there was some testimony regarding wire transfers and other deposits to company accounts for which the bookkeeper had not yet received supporting documentation. Moreover, on July 28 an auditor fired by CMKM notified the SEC of possible illegal acts, noting among other things that the volume of wire transfers and cashiers cheques rendered the banking records inadequate to obtain evidentiary matter necessary for an audit opinion.
However, neither the hearing testimony nor the July 28 letter written by fired auditor Brad Beckstead offer any claims regarding kickbacks to the company or insiders from the sale of shares.
Apparently Mr. Frizzell's allegations are, at least in part, based upon non-public information obtained from the SEC's investigation file on CMKM.
"It is my opinion that certain portions of the documents I have received from the SEC investigation are confidential and I am not free to disclose certain documents, including banking records which I have in my possession, to my clients," the lawyer continues. "I am obligated however to direct you to the records which you received as well for purposes of this 'shareholder derivative rights' letter."
Mr. Frizzell wants CMKM to pursue Mr. Edwards for his alleged breach of insider trading rules and any other securities violation known to Mr. Stoecklein.
"Specifically, the company should seek disgorgement of any short swing profits made by Mr. Edwards based on his trading activities," Mr. Frizzell advises. "The company should seek cancellation of each and every CMKX share that is now outstanding and currently being held by Mr. Edwards or any of his companies or trusts."
According to the Texas lawyer, some unidentified CMKM shareholders contacted the principals of at least two of the trusts and those unidentified principals disclaimed any knowledge of the transactions involving the sale of billions of shares on the alleged instructions of Mr. Edwards.
"If, in fact, these trusts were used as vehicles to sell stock in violation of securities law, your shareholders would request that the company seek reimbursement for all sales and any consequent gains from the trusts that were used in this manner," Mr. Frizzell continues.
The Texas lawyer goes on to offer some comments about Mr. Edwards being "in attendance at several meetings in which the progress of an audit was being discussed" and suggesting that he inexplicably had the company's stock book in his possession in January.
According to Mr. Frizzell, "it seems clear there is cause for investigation on behalf of the company as to the propriety of such acts."
"I would also direct your attention to a wire transfer dated July 28, 2004, from a PA Holdings Inc. account," Mr. Frizzell adds without further explanation.
"The shareholders are aware of Mr. Edwards's refusal to testify by deposition at the administrative hearing," Mr. Frizzell remarks in wrapping up his discussion of Mr. Edwards. "If Mr. Edwards should continue the assertion of his Fifth Amendment rights in any action brought by the company, the company should seek rulings from the court which would assist them in obtaining a favorable outcome of any action."
Mr. Frizzell makes no mention of the fact that Mr. Casavant, CMKM's only officer, asserted his Fifth Amendment privilege and refused to answer any questions at the evidentiary hearing.
Bad-mouthing brokerage
Mr. Frizzell turns to a discussion of Nev West Securities, which allegedly operated several accounts controlled by Mr. Edwards.Again, the Texas lawyer seems to rely heavily on non-public information obtained from the SEC for his claims regarding the brokerage firm.
"It has been proven by the records you and I have received from the SEC that Nev West Securities has allowed John Edwards to open at least 36 trust accounts to trade securities," Mr. Frizzell begins. "The company issued stock certificates to Mr. Edwards's companies and trusts totaling hundreds of billions of shares in 2003, 2004 and 2005.
"Once the sale of these massive amounts of CMKX stock were concluded, checks were issued and funds were wired from Nev West to various accounts at the direction of John Edwards.
"The company should investigate these activities to determine the complicity of Nev West in the massive dilution and improper trading activities in its company stock.
"I have been told there has been a full NASD (National Association of Securities Dealers) investigation and we request that the company seek full discovery of any such investigation."
Mr. Frizzell moves on to a discussion of a matter close to the hearts of many of CMKM's devoted followers, naked short selling.
"I have requested from you the DTCC (Depository Trust and Clearing Corp.) records regarding the trading in CMKX stock and would renew that request at this time on behalf of the company shareholders," Mr. Frizzell writes.
"You are aware that significant naked shorting of CMKX stock has occurred and the company is hereby requested to assist in the investigation to determine those that may be responsible for the illegal shorting and fails to deliver that are present in this stock," the Texas lawyer continues. "It is believed that Nev West facilitated the naked shorting of CMKX stock."
Mr. Frizzell offers no support for his professed belief that the Nevada brokerage firm was involved in the purported naked shorting of CMKM.
Adding insult to the alleged misconduct, Mr. Frizzell suggests that a Nev West representative bad-mouthed CMKM after unloading some of its shares.
"There is a group of CMKX shareholders that contacted Nev West earlier this year after learning there was a large amount of stock available for sale," Mr. Frizzell says. "This group of shareholders contacted Nev West directly and purchased a large block of CMKX stock.
"Immediately upon the purchase of a large block of stock, the Nev West agent began to run the stock down to the purchasers, alienating several shareholders.
"It is clear that Nev West has been a facilitator in the dilution of CMKX stock."
The auditor
Mr. Frizzell also wants CMKM to take legal action against its former auditor, Neil Levine, and his accounting firm, Bagell, Josephs & Company.
"Testimony by Mr. Levine at the administrative hearing confirms that Neil Levine was brought in to perform the audit by John Michael Edwards," Mr. Frizzell claims.
In fact, the testimony at the May 10 evidentiary hearing indicates that Mr. Levine received a referral from Mr. Edwards and was hired by CMKM after he and a senior partner from Bagell, Josephs met with Mr. Casavant and others associated with the company.
"Mr. Levine admitted to his prior association with Mr. Edwards because of other work he had performed for Mr. Edwards," Mr. Frizzell writes.
"The company received an unwelcome surprise on the day before the important administrative hearing was to begin," the Texas lawyer continues. "Mr. Levine stated that he was too busy with other companies and was terminating his relationship with CMKM Diamonds Inc."
In fact, in both his testimony and in a termination letter, Mr. Levine said CMKM had not produced the documents necessary to perform an audit, despite several requests, so he quit.
Among other things, he also testified that Mr. Casavant asserting his Fifth Amendment privilege during the proceeding was problematic and neither he nor his firm wanted to be associated with a company like CMKM.
"We acknowledge that the company was having difficulty in gathering information needed by Mr. Levine, but his abrupt termination at such a critical time most likely constituted professional negligence," Mr. Frizzell suggests.
"Mr. Levine's relationship with the person most involved in diluting the company renders his stated reason for abandoning the company suspicious at best," the lawyer continues, apparently a reference to Mr. Edwards, not Mr. Casavant.
At the very least, Mr. Frizzell wants CMKM to seek the return of "any unaccounted for pre-paid fees" from Mr. Levine.
"The evidence of Mr. Edwards's massive sell off of CMKX stock should be reason to bring legal action against Mr. Levine on behalf of the company," the Texas lawyer claims, serving up a rather peculiar reason for suing someone.
The bungling accountant
Moving on, Mr. Frizzell wants the company to take legal action against its former chief financial officer, David Desormeau, who was hired in December of 2002 amid touting that he was going to institute a real-time financial reporting and inventory control system.
"The shareholders request that the company file suit against Mr. Desormeau for professional negligence," Mr. Frizzell writes. "Since the company's hiring, Mr. Desormeau has not instituted the system which was touted on his hiring.
"There has never been a financial report filed with the SEC since Mr. Desormeau's hiring.
"It is clear from the written communications between Mr. Desormeau and Neil Levine that Mr. Desormeau did not have adequate records of the company.
"It now appears that Mr. Desormeau's failed accounting system is at least one of the reasons the company has been unable to file it required financials."
Mr. Frizzell's concerns extend beyond Mr. Desormeau's bungled bookkeeping.
"Of even greater concern than the inadequate bookkeeping is Mr. Desormeau's trading activities and payments for his services," Mr. Frizzell says, going on to note that Mr. Desormeau was allegedly paid $1.5-million in shares.
"My investigation shows that 63 billion shares were issued to Business Works (a company owned by Mr. Desormeau) at a time when the company was promoting its stock through press releases about its diamond finds," Mr. Frizzell goes on.
"I have reviewed bank records which show cash payments from Mr. Casavant to David Desormeau for $49,500 from June 10, 2004, to Aug. 18, 2004," the lawyer writes, adding that he only reviewed "a few select bank statements of various company accounts."
According to Mr. Frizzell, Mr. Desormeau's Business Works is also the registered agent for several Nevada companies that received billions of CMKM shares.
Indeed, records available through the Nevada Secretary of State do show Mr. Desormeau and Business Works as the resident agent for a number of companies, some either revoked or in default, that received billions of CMKM shares.
"Specifically, the company should seek disgorgement of any short swing profits made by Mr. Desormeau based on his trading activities," Mr. Frizzell advises. "The company should seek cancellation of each and every CMKX share that is now outstanding and currently being held by Mr. Desormeau or any of his companies."
The consultant
Mr. Frizzell also suggests that the company should pursue claims against James Kinney.
"James Kinney was identified as being a consultant to CMKM Diamonds Inc. in an S8 filing by the company on April 15, 2003," Mr. Frizzell writes. "Mr. Kinney was paid 530,000,000 shares valued at $265,000 for a 6 month consulting contract for his expertise in zinc claims."
In fact, the consultant mentioned in the S-8 filing is identified as James Kenny, though sometimes names are not properly recorded in filings and he may be the same person. In any event, Mr. Kinney did serve as one of the company's investor relations representatives for a time, among other things.
According to Mr. Frizzell, Mr. Kinney and companies under his control, such as Part Time Management Inc., received almost 100 billion shares of CMKM in less than 10 months from late 2003 to 2004.
Mr. Frizzell wants CMKM to seek disgorgement of any short swing profits made by Mr. Kinney and to cancel any shares he may still control.
The clerk
The Texas lawyer wants legal action taken against Ginger Gutierrez, too. Ms. Gutierrez held clerical positions with the company and served a stint as CMKM's investor relations representative along with Mr. Kinney.
"Her signature appears on many checks written from CMKXtreme account," Mr. Frizzell writes, a reference to a private company controlled by Mr. Casavant. "There are also checks written out to Silver State Bank for cashier's checks which were ultimately endorsed by Ginger Gutierrez."
According to Mr. Frizzell, from August of 2003 through October of 2004, Ms. Gutierrez unloaded 23 billion shares of CMKM.
Mr. Frizzell suggests that Ms. Gutierrez should be made to cough up any short swing profits made through her trading and that any shares she still holds should be cancelled.
The lawyer
Rounding out his list of targets, Mr. Frizzell rather more gingerly suggests that one of the company's former lawyers, Brian Dvorak, may also deserve some legal attention.
"The shareholders have been presented with evidence that numerous opinion letters were written by Brian Dvorak which resulted in free trading shares of CMKX stock," the Texas lawyer writes.
"The evidence suggests Mr. Dvorak incorrectly issued opinions which resulted in legends being removed or authorized free trading of shares when in fact, such shares should have been restricted and subject to certain holding periods," Mr. Frizzell opines.
"The shareholders request that you take legal action against Brian Dvorak for any occurrences of legal malpractice which have caused company stock to be freely traded in the market, when such should not have occurred," the Owners Group lawyer writes.
Shine the light
Coming to the end of his letter, Mr. Frizzell remarks that Mr. Stoecklein is the one person who has unfettered access to the company's records and the one most able to obtain any missing records.
"You have seen two auditors bail out after being paid substantial sums of money," Mr. Frizzell observes. "One auditor has notified the SEC of serious improprieties found during the attempted audit of CMKM Diamonds Inc.
"If your work has uncovered any acts that may warrant legal action on behalf of the company, the shareholders request that you take any and all action that you deem necessary on behalf of the company.
"This obviously puts you in an awkward position, and for that I apologize."
Indeed, given that Mr. Frizzell has dumped a demand upon CMKM's lawyer to pursue claims that may be extremely costly for the cash-strapped company to advance, even if it turns out that those claims do have some legal merit, and may well draw countersuits if they are filed, "awkward" may be an understated characterization of Mr. Stoecklein's position.
"Maybe the bright lights of litigation will help illuminate some of the reasons this company stock has been diluted and shorted," Mr. Frizzell says.
"This list does not purport to be a complete and final list of actions that the shareholders deem to be warranted," the Texas lawyer adds, holding out the prospect of even more allegations.
Mr. Frizzell wants a response from Mr. Stoecklein within 30 days.
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; Feb. 11, 14, 18, 22 and 23; March 1, 3, 4, 7, 14, 15, 16 and 21; June 6, 8, 9, 10, 13, 14, 15, 16, 17, 20, 21, 22, 29 and 30; July 1, 4, 6, 12 and 13; Aug. 2, 5 and 9; and Sept. 7, 2005.)
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Reader Comments - Comments are open and unmoderated, although libelous remarks may be deleted. Opinions expressed do not necessarily reflect the views of Stockwatch.
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What is amazing, Lee, is that Frizzy totally avoids the issue of exactly how all those shares got issued to the front organizations. He also turns a blind eye to the nearly 40 billion shares sold through several Bahamas and Virgin Islands anonymous corporations.
The name I haven't figured out yet is the grantor of many of the Edwards trusts, one Ian McIntyre. As is his wont, Frizzy posted only partial information on the trusts.
I don't think Frizzy has access to non-public information, BTW. He simply has a complete copy of the SEC exhibits from the hearing, many of which were not obtained by the shareholder who got the stock transaction records, and many of which were not used in hearing presentation by the SEC. Once Pope Urban took the fifth banking records, etc. that would have been used by the SEC in examining Urban V or in deposing Edwards who also took the fifth became moot, but were still part of the record.
Posted by Thomas Malone @ 2005-09-12 10:11
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Holy smokes I have had it with this company!
scam or not, they plead the fifth and let investors die!
Posted by Johnny Walker Green @ 2005-09-12 10:39
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All roads lead to Urban Casavant. Too stupid to orchestrate but smart enough to take advantage.
Posted by Urban Is the One @ 2005-09-12 10:58
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let that be a lesson to all, never buy stock in a co. where you need exponential notation to figure out the share cost i.e. 10^6 shares @ 10^-4 dollars = 10^2 dollars your cost. aiiy yiii yiii.
Posted by jimmy the accountant @ 2005-09-12 13:47
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Wow Lee....you didn't have to do much work (DD) with this article. Just let Mr. Frizzell and his people post their work/findings and you can copy and paste and when something breaks (either way) you can sit back and say "I told you so".
Posted by Dave @ 2005-09-12 14:11
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We've heard about shorting, scammers, and now extortionists. Next 'Theory' will be little green aliens?
At what point do people quit wasting money trying to get their $50 back, and just let the gov't put Urbie in jail? Talk about a money pit! Suckers, sheesh! I guess the old saying about a fool and his money just keeps on going!
Any money all those 'law suits' attain, will probably just go to legal fees anyway, for ummm, some 'Owners Group' Laywer perhaps?
Vicious circle. Too bad Urban didn't own property in New Orleans. Then, the next excuse would be that all the financial records washed out to sea!
Good luck people. Buy a 'real' (non-pink) company next time!
Try the DOW, or TSX! (you'll sleep better at night, and be able to eat more than KD tomorrow!)
Posted by NextTheory @ 2005-09-12 16:14
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TAKE IT GOOD BAD OR UGLY...IF YOUR IN YOU WIN.. IF YOU DOUT GO POUT...BUT DONT GET OUT....THE SHARE HOLDERS OF CMKX WILL WIN THIS WAR..GOD IS ON OUR SIDE.
Posted by BUYALLYOUCAN @ 2005-09-13 10:48
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Yep, God is on the side of those who tell the truth. At this stage Frizzel is shaping up to be more of a gentleman than I expexted. If you read between the lines he knows EXACTLY who is behind the massive dillution, but he can't bite the hand that feeds him: if he angers the shareholders they will not give him more $25 fees in order that he can contune his work. At this stage I believe he can only hint at what is to come.
goLEEgo!! BOO YAH!! Keep exposing those Vulgar Touts.
Posted by goLEEgo @ 2005-09-13 17:10
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After reading that it looks to us this Lee is involved on something fishy here..
Posted by Alex @ 2005-09-14 08:57
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According to all the CMKX starry eyed naifs, they were going to sue Lee Webb and Stockwatch, because they were to blame for the downfall (and the destroyer of dreams) of CMKX's twit brigade?
What is amazing, is that anyone would admit to having bought shares in this obvious fraud????? Urbie has a nice 4M dollar home, paid for by the suckers of the world. Who would publicly admit to having bought shares in this obvious fraud.
Wake me up when the March Urbie off to jail in leg irons, I expect him to get at least 10 years in Jail. Shouldn't be long
Posted by Yaba Urba Doo @ 2005-09-14 10:08
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life is agamble everyday patience is the virtue of life i invested 1000.00cdn its not life savings maybe people should not always think about getting rich but be willing to lose what they have invested.when u go to a casino u shouldnt think about how much your gonna win you should think about how much you can afford to lose
Posted by fedducci @ 2005-09-14 12:02
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From RB re McIntyre connection:
By: drt2054 14 Sep 2005, 05:32 PM EDT Msg. 1118684 of 1118686 Jump to msg. # The CONNECTIONS among Ian McIntyre and U Casavant and Gregory Austin, has arrived!! All 3 were Directors of a Canadian Mining Co. called J-Pacific Gold. The relationships extend back to 1997. Name Latest Report Filed Adam, Darcy George 01/23/2003 Austin, Gregory G. 02/17/2000 Berg, Norman Walter 04/10/1999 Boronowski, Alex 05/10/1999 Braun, Ralph Werner 01/21/2003 Cameron, Driffield McCara 01/21/2003 Casavant, Urban 08/10/1997 Case, Stanley Grant 02/10/1999 Farries, Melvin Roy 08/10/1990 Ferris, Nicholas T. 03/15/2003 Gibbeson, Thomas Martin 08/10/1991 Greig, John Angus 03/10/1994 Kameda, Manabu 06/03/2003 Matsufuji, Tamisuke 03/11/2003 McClenahan, David Sean 06/10/1999 McIntyre, Ian 04/10/1995 Mesrobian, John Haig 03/26/2003 Nicholas, Stephen Anson 11/10/1998 Pedersen, Cheri 05/23/2003 Pettersson, Ragnar 12/09/1999 Ross, Kristian Munro 11/01/2000 Savage, Alan Clyde Hayes 11/10/1994 Shaddrick, David Roy 06/09/2003 Shuto, Kazuo 01/21/2003 Somerville, Richard David 03/10/2000
Posted by Thomas Malone @ 2005-09-14 14:39
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From RB re McIntyre connection:
By: drt2054 14 Sep 2005, 05:32 PM EDT Msg. 1118684 of 1118686 Jump to msg. # The CONNECTIONS among Ian McIntyre and U Casavant and Gregory Austin, has arrived!! All 3 were Directors of a Canadian Mining Co. called J-Pacific Gold. The relationships extend back to 1997. Name Latest Report Filed Adam, Darcy George 01/23/2003 Austin, Gregory G. 02/17/2000 Berg, Norman Walter 04/10/1999 Boronowski, Alex 05/10/1999 Braun, Ralph Werner 01/21/2003 Cameron, Driffield McCara 01/21/2003 Casavant, Urban 08/10/1997 Case, Stanley Grant 02/10/1999 Farries, Melvin Roy 08/10/1990 Ferris, Nicholas T. 03/15/2003 Gibbeson, Thomas Martin 08/10/1991 Greig, John Angus 03/10/1994 Kameda, Manabu 06/03/2003 Matsufuji, Tamisuke 03/11/2003 McClenahan, David Sean 06/10/1999 McIntyre, Ian 04/10/1995 Mesrobian, John Haig 03/26/2003 Nicholas, Stephen Anson 11/10/1998 Pedersen, Cheri 05/23/2003 Pettersson, Ragnar 12/09/1999 Ross, Kristian Munro 11/01/2000 Savage, Alan Clyde Hayes 11/10/1994 Shaddrick, David Roy 06/09/2003 Shuto, Kazuo 01/21/2003 Somerville, Richard David 03/10/2000
Posted by Thomas Malone @ 2005-09-14 14:41
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He is right on.
Posted by matrix @ 2005-09-14 17:59
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He is right on.
Posted by matrix @ 2005-09-14 17:59
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jeez, i never owned a million of anything before
Posted by jimmy the accountant @ 2005-09-15 18: |
