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Monday, 04/07/2008 8:08:25 PM

Monday, April 07, 2008 8:08:25 PM

SEC Charges 14 In $64 Million Penny Stock Scheme
SEC Files Charges Against CMKM Diamonds

WESTMINSTER, Colo. - The Securities and Exchange Commission on Monday filed charges against CMKM Diamonds Inc., accusing the tiny mining company of violating federal securities laws by fraudulently issuing "hundreds of billions of shares,"

In a complaint filed in U.S. District Court for the District of Nevada, the SEC alleged that the company, CEO Urban Casavant and several others "conspired to illegally issue and sell unregistered stock" and "lined their pockets with more than $64 million from 40,000 nationwide."

The complaint alleges that Casavant generated investors' interest in the company through false press releases, Internet chat boards and funny-car race events in events across the country, without disclosing that he ran this purported gold and diamond company from his house in Las Vegas.

The SEC complaint charges CMKM, a broker dealer and transfer agent involved and 11 individuals including Casavant.

The commission identifies in its complaint John Edwards as the mastermind of the scheme. The SEC alleges that Edwards and others sold their unregistered stock into the public markets. The SEC alleges that Edwards profited by about $26.4 million from sales through a single brokerage firm and that Casavant received about $31.5 million.

The complaint alleges that CMKM improperly issued up to 622 billion shares of purportedly unregistered stock between January 2003 and May 2005. The SEC claims that these stock issuances were based in large part on "inadequate, suspect and inconsistent" written authorization and opinion letters prepared by company lawyer Brian Dvorak.

CMKM transfer agent 1st Global Stock Transfer LLC and owner Helen Bagley are also charged with issuing stack of stock certificates without restrictive legends based on these faulty documents.

The SEC is seeking permanent injunctions against the defendants and disgorgement of profits. The Commission is also seeking penny stock bars against each named individual defendants and an order prohibiting Casavant from acting as an officer or director of any public company.

The SEC revoked the registration of CMKM in October 2005 after the company failed to file annual and quarterly financial reports since 2002.

http://www.forbes.com/feeds/ap/2008/04/07/ap4863449.html

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