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It’s no cakewalk getting to the root of securities fraud.
Testimony of Peter Scannell ...
…. Somehow I was going to find a way to deliver these document to the NASD who licensed me, the SEC who should have been discovering these abuses, or maybe the New York Attorney General Elliot Spitzer who was building quite a reputation for someone who is willing taking a stand - refusing to let the Broker/dealers and Mutual Fund Companies bully and take advantage of the trust the investor has put in them.
I was deeply concerned that this issue may be pervasive throughout the Mutual Fund Industry, Putnam being one of the largest Mutual Fund Companies in the world; if they are willing to accept and maybe even promote this behavior by not assessing any short term transfer fees (STTFs) then there had to be many others as all my research suggested. The day ended. I left the building discreetly with the documents that should blow any regulator away. Every thing that I witnesses could be corroborated by many, the internal documents were the smoking gun, and the account numbers were the needle in the haystack. It was so simple, so very clear, I made sure that my presentation to a regulator would be dream come true if truly cared about their neighbor, The American Investor. I drove home looking constantly in my rear view mirror. I remember laughing out loud at how paranoid I was - actually I was shaking I was so scared. I wondered what did I get myself into - soon I would find out.
Sunday, February 2, 2003, I left my home for a meeting I attend regularly after having dinner with my wife and mother in-law and her house guest from Chile. I stopped at a Dunkin Donuts and got a cup of coffee before arriving at the church. I sat in my car for a few minutes finishing my coffee and listen to the end of the game. The night was cold, with blowing sleet and snow. Suddenly, without warning my car door was opened and I was being grabbed by my jacket and dragged out of the door, I still had my seat belt on and struggled to face my attacker.
As I looked up I could see a large burley man with a full beard, New York Yankee’s cap and grey sweatshirt that had “Boilermakers Local 5” emblazoned across the chest area in large bold letters. This was happening in split seconds when I felt something smashing down on my head while he was strangely talking very loud but furious. He said “ I better shut the f___ up” and repeated this and some reference to my working at Putnam a number of times while smashing my head and my left hand , which instinctively I was using to shield my head, repeatedly with what the police told me latter was a brick. The next thing I remember was a policeman reaching into my car to shut the engine off and then an EMT was trying to ask me questions. Blood was splattered against the inside of my driver’s door and there was a big gash in the door’s upholstery. I was shaking uncontrollably and I was incredibly cold and wet …
http://govt-aff.senate.gov/_files/012704scannell.pdf
Trading Practices and Abuses that Harm Investors ...
http://govt-aff.senate.gov/_files/012704scannell.pdf
Peter Scannell's testimony in the Mutual Fund scandal exposes the nature of the beast and the criminals involved in securities fraud.
There's a lot of Urbie's pale yellow claims showing on this map ...
http://www.geocities.com/outerspacea/
Shore has come up with a few pleasant surprises from its multimillion dollar bulk sample, and the diamond size distribution of Star appears to be at the top of the list, as Mr. Read said that the abundance of large stones was beyond expectations ….
2004-09-17 12:36 ET - Street Wire
by Will Purcell
Ken MacNeill's Shore Gold Inc. produced its best batch of diamonds to date from a large bulk sample of its Star kimberlite in the Fort a la Corne area. The program was designed to collect 3,000 carats from 25,000 tonnes of rock, and it seems that the company will achieve that target with room to spare. That is no great surprise to Shore's vice-president of exploration, George Read, who said earlier this year that the sample could produce as much as 5,000 carats if everything went Shore's way. Nevertheless, the sample has produced a few unexpected results, which have been highlighted in the latest batches.
Better grades
The latest five lots of kimberlite came from the 235-metre level, and once again, it was the rock from the southeastern drive that produced the most promotable grades. Three batches from this region were processed, and 187.84 carats of diamonds were recovered from 724.5 tonnes of rock, for a grade of 0.26 carat per tonne. So far, about 3,068 tonnes of kimberlite from the southeast drive at the 235-metre level has accounted for 663.24 carats, good enough for a grade of nearly 0.22 carat per tonne.
Although speculators were ogling the better grades and large diamonds in the latest result, there also was some good news in the diamond recoveries from the northern drive that may have been overlooked. Two of the lots came from this region, and Shore recovered 78.52 carats from 474.37 tonnes of kimberlite, indicating a grade of just less than 0.17 carat per tonne.
That is particularly promising, as two earlier lots from that area had produced a grade of less than 0.10 carat per tonne, and other parts of the early Joli Fou phase of kimberlite also had grades that were significantly lower than what had been found along the southeastern drive. The improved results in the northern area would appear to confirm that higher-grade zones exist in other parts of the pipe.
The latest tallies have upped the average grade for the other parts of the early Joli Fou phase to nearly 0.12 carat per tonne, based on 535 carats from 4,500 tonnes of kimberlite. In all, Shore has processed 7,570 tonnes of early Joli Fou kimberlite, recovering nearly 1,200 carats, indicating a grade of nearly 0.16 carat per tonne.
As a result, it was no surprise that Mr. Read was suitably pleased with the results, although he added that the grades were what they had been expecting. Mr. Read stated that the company's microdiamond recoveries had indicated that they would find the better grades that have now made their appearance.
Larger diamonds
Still, Shore has come up with a few pleasant surprises from its multimillion dollar bulk sample, and the diamond size distribution of Star appears to be at the top of the list, as Mr. Read said that the abundance of large stones was beyond expectations.
The latest samples produced several larger diamonds, much to the delight of Shore and its shareholders. The largest diamond weighed 14.6 carats and a second diamond weighed 10.14 carats, while at least two others exceeded six carats in weight. The three largest diamonds had all come from the southeastern drive, an area that appears to have a promotable combination of grade and stone size distribution going for it.
There were 41 diamonds larger than one carat in the latest haul, and that parcel of larger stones likely weighed in excess of 100 carats. That would account for approximately 40 per cent of the total weight of the diamonds, which is a hefty jump over the earlier tallies that had already been quite impressive. So far, one-carat diamonds appear to account for a bit more than one-third of the weight of the diamond haul from the early Joli Fou phase.
That is comparable with what came from a 9,400-tonne test of the Jericho pipe, which Tahera Diamond Corp. hopes to mine, and it is significantly better than what Winspear Resources Ltd. produced in 1999 from a 6,000-tonne test of its Snap Lake dike, which De Beers Canada Corp. now plans to mine. About one-quarter of the weight of the diamonds recovered during the Snap Lake test was contained in stones weighing at least one carat.
Shore will not have a firm picture of the value of its Star diamonds until the entire parcel is shipped off for appraisals toward the end of this year, but the healthy diamond size distribution should augur well for a promotable result. Earlier, Mr. Read had expressed his opinion that the diamond value would top $100 (U.S.) per carat, but the latest numbers have given him cause for more optimism. Mr. Read now says that he believes a value of $125 (U.S.) per carat would be conservative, although he continues to caution that such values are purely speculative.
The Star diamonds appear to have other qualities going for them. About two-thirds of the one-carat diamonds in the latest batch of stones were classified as white, and Mr. Read said that the largest diamonds were single crystals. Earlier, the company had recovered a 19.71-carat stone, but the diamond was described as an aggregate crystal, which was not a particularly inspiring description.
Such stones could be in a distinct minority in the Star sample. Mr. Read indicated that there were 16 diamonds in the latest haul that were larger than two carats, and all of the stones were single crystals. Half of them were octahedral diamonds, while the remaining stones were generally fragments of larger stones.
That could result in some valuable gems being present in the Shore sample. Mr. Read said that there apparently were "some quite nice diamonds" that had been recovered, although he added that he had not seen any of the stones. In any case, Shore will have to establish its diamond value across a significant, run-of-mine diamond parcel, not just in a few promotable gems, and that is the primary purpose of the current program.
The next results
Shore has now run about 14,000 tonnes of kimberlite through its dense media separation plant, and final counts from the next eight batches are expected in two to three weeks. Shore has managed to keep to its rough reporting schedule, taking an average of about 16 days to reveal additional diamond tallies since its first batch in late June.
All of the next batches, which weigh in excess of 1,800 tonnes, were extracted from various regions at the 235-metre level, and the company might reasonably expect something close to 300 carats from that material, based on the current results.
Shore said it had mined 20,500 tonnes of kimberlite by the end of August and according to Mr. Read, the company's tally still stands at a bit more than 20,000 tonnes. That might suggest that Shore has encountered problems with its underground operation, but not so, said Mr. Read. "The underground program is charging ahead," he stated, adding that Shore was mining about 200 tonnes of kimberlite daily.
Mr. Read said that the apparent tonnage drop was the result of Shore using a different value for the density of its kimberlite, which produced a lower theoretical weight for the extracted kimberlite. Mr. Read said that the change did not affect any of the results for the bulk sample. The kimberlite is sent over a weightometer at the company's plant prior to diamond recovery, which produces a very accurate measurement of the weight of the kimberlite.
The inspiration
If a subsequent resource calculation supports an average grade of about 0.16 carat per tonne for the early Joli Fou kimberlite, and if the value of the Star diamonds reaches $150 (U.S.) per carat, the rock would have a gross value of $24 (U.S.) per carat, and that would be a promotable value in the Fort a la Corne region of Saskatchewan.
In 1995, a scoping study commissioned by Kensington Resources Ltd. suggested that a large mine in the area could run with operating costs of about $10 (U.S.) per tonne, and although inflation would have boosted that mark significantly over the past decade, Shore and its Fort a la Corne rivals continue to tout that value, or an even lower one, as reasonable.
Those parameters undoubtedly spark pleasant visions in the minds of Shore's faithful shareholders, as a 60,000-tonne-per-day mine based on the rosier numbers could theoretically generate something approaching $300-million (U.S.) in pretax cash flow from operations. Such an operation, or any Star mine for that matter, is still a long way off however, as Shore will have much work to accomplish before it can complete a prefeasibility study on the project.
The challenge
With grade and value possibly topping even Shore's hopes, there will be added pressure to provide answers to other concerns. The company will have to correlate its bulk sample results to the microdiamond recoveries and translate that over the remainder of the pipe to establish a resource for Star, and that will undoubtedly require a significant amount of new core drilling. Shore will also have to conduct detailed engineering work to develop a workable mine plan and outline the expected capital and operating costs.
A prefeasibility study will also have to better delineate the late Joli Fou kimberlite phase. The lower-grade material lies above the richer rock and Shore will have to determine if it would be economic to process the rock, or if it should be treated as waste.
Despite the remaining unknowns, Mr. Read was optimistic that the combination of value and grade will put Shore in an economic position. Speculators seem to think so as well, as Shore' shares popped up to $2.70 early this month, although the stock lost a nickel on Thursday, closing at $2.45.
Shores best batch to date.
2004-09-17 12:36 ET - Street Wire
by Will Purcell
Ken MacNeill's Shore Gold Inc. produced its best batch of diamonds to date from a large bulk sample of its Star kimberlite in the Fort a la Corne area. The program was designed to collect 3,000 carats from 25,000 tonnes of rock, and it seems that the company will achieve that target with room to spare. That is no great surprise to Shore's vice-president of exploration, George Read, who said earlier this year that the sample could produce as much as 5,000 carats if everything went Shore's way. Nevertheless, the sample has produced a few unexpected results, which have been highlighted in the latest batches.
Better grades
The latest five lots of kimberlite came from the 235-metre level, and once again, it was the rock from the southeastern drive that produced the most promotable grades. Three batches from this region were processed, and 187.84 carats of diamonds were recovered from 724.5 tonnes of rock, for a grade of 0.26 carat per tonne. So far, about 3,068 tonnes of kimberlite from the southeast drive at the 235-metre level has accounted for 663.24 carats, good enough for a grade of nearly 0.22 carat per tonne.
Although speculators were ogling the better grades and large diamonds in the latest result, there also was some good news in the diamond recoveries from the northern drive that may have been overlooked. Two of the lots came from this region, and Shore recovered 78.52 carats from 474.37 tonnes of kimberlite, indicating a grade of just less than 0.17 carat per tonne.
That is particularly promising, as two earlier lots from that area had produced a grade of less than 0.10 carat per tonne, and other parts of the early Joli Fou phase of kimberlite also had grades that were significantly lower than what had been found along the southeastern drive. The improved results in the northern area would appear to confirm that higher-grade zones exist in other parts of the pipe.
The latest tallies have upped the average grade for the other parts of the early Joli Fou phase to nearly 0.12 carat per tonne, based on 535 carats from 4,500 tonnes of kimberlite. In all, Shore has processed 7,570 tonnes of early Joli Fou kimberlite, recovering nearly 1,200 carats, indicating a grade of nearly 0.16 carat per tonne.
As a result, it was no surprise that Mr. Read was suitably pleased with the results, although he added that the grades were what they had been expecting. Mr. Read stated that the company's microdiamond recoveries had indicated that they would find the better grades that have now made their appearance.
Larger diamonds
Still, Shore has come up with a few pleasant surprises from its multimillion dollar bulk sample, and the diamond size distribution of Star appears to be at the top of the list, as Mr. Read said that the abundance of large stones was beyond expectations.
The latest samples produced several larger diamonds, much to the delight of Shore and its shareholders. The largest diamond weighed 14.6 carats and a second diamond weighed 10.14 carats, while at least two others exceeded six carats in weight. The three largest diamonds had all come from the southeastern drive, an area that appears to have a promotable combination of grade and stone size distribution going for it.
There were 41 diamonds larger than one carat in the latest haul, and that parcel of larger stones likely weighed in excess of 100 carats. That would account for approximately 40 per cent of the total weight of the diamonds, which is a hefty jump over the earlier tallies that had already been quite impressive. So far, one-carat diamonds appear to account for a bit more than one-third of the weight of the diamond haul from the early Joli Fou phase.
That is comparable with what came from a 9,400-tonne test of the Jericho pipe, which Tahera Diamond Corp. hopes to mine, and it is significantly better than what Winspear Resources Ltd. produced in 1999 from a 6,000-tonne test of its Snap Lake dike, which De Beers Canada Corp. now plans to mine. About one-quarter of the weight of the diamonds recovered during the Snap Lake test was contained in stones weighing at least one carat.
Shore will not have a firm picture of the value of its Star diamonds until the entire parcel is shipped off for appraisals toward the end of this year, but the healthy diamond size distribution should augur well for a promotable result. Earlier, Mr. Read had expressed his opinion that the diamond value would top $100 (U.S.) per carat, but the latest numbers have given him cause for more optimism. Mr. Read now says that he believes a value of $125 (U.S.) per carat would be conservative, although he continues to caution that such values are purely speculative.
The Star diamonds appear to have other qualities going for them. About two-thirds of the one-carat diamonds in the latest batch of stones were classified as white, and Mr. Read said that the largest diamonds were single crystals. Earlier, the company had recovered a 19.71-carat stone, but the diamond was described as an aggregate crystal, which was not a particularly inspiring description.
Such stones could be in a distinct minority in the Star sample. Mr. Read indicated that there were 16 diamonds in the latest haul that were larger than two carats, and all of the stones were single crystals. Half of them were octahedral diamonds, while the remaining stones were generally fragments of larger stones.
That could result in some valuable gems being present in the Shore sample. Mr. Read said that there apparently were "some quite nice diamonds" that had been recovered, although he added that he had not seen any of the stones. In any case, Shore will have to establish its diamond value across a significant, run-of-mine diamond parcel, not just in a few promotable gems, and that is the primary purpose of the current program.
The next results
Shore has now run about 14,000 tonnes of kimberlite through its dense media separation plant, and final counts from the next eight batches are expected in two to three weeks. Shore has managed to keep to its rough reporting schedule, taking an average of about 16 days to reveal additional diamond tallies since its first batch in late June.
All of the next batches, which weigh in excess of 1,800 tonnes, were extracted from various regions at the 235-metre level, and the company might reasonably expect something close to 300 carats from that material, based on the current results.
Shore said it had mined 20,500 tonnes of kimberlite by the end of August and according to Mr. Read, the company's tally still stands at a bit more than 20,000 tonnes. That might suggest that Shore has encountered problems with its underground operation, but not so, said Mr. Read. "The underground program is charging ahead," he stated, adding that Shore was mining about 200 tonnes of kimberlite daily.
Mr. Read said that the apparent tonnage drop was the result of Shore using a different value for the density of its kimberlite, which produced a lower theoretical weight for the extracted kimberlite. Mr. Read said that the change did not affect any of the results for the bulk sample. The kimberlite is sent over a weightometer at the company's plant prior to diamond recovery, which produces a very accurate measurement of the weight of the kimberlite.
The inspiration
If a subsequent resource calculation supports an average grade of about 0.16 carat per tonne for the early Joli Fou kimberlite, and if the value of the Star diamonds reaches $150 (U.S.) per carat, the rock would have a gross value of $24 (U.S.) per carat, and that would be a promotable value in the Fort a la Corne region of Saskatchewan.
In 1995, a scoping study commissioned by Kensington Resources Ltd. suggested that a large mine in the area could run with operating costs of about $10 (U.S.) per tonne, and although inflation would have boosted that mark significantly over the past decade, Shore and its Fort a la Corne rivals continue to tout that value, or an even lower one, as reasonable.
Those parameters undoubtedly spark pleasant visions in the minds of Shore's faithful shareholders, as a 60,000-tonne-per-day mine based on the rosier numbers could theoretically generate something approaching $300-million (U.S.) in pretax cash flow from operations. Such an operation, or any Star mine for that matter, is still a long way off however, as Shore will have much work to accomplish before it can complete a prefeasibility study on the project.
The challenge
With grade and value possibly topping even Shore's hopes, there will be added pressure to provide answers to other concerns. The company will have to correlate its bulk sample results to the microdiamond recoveries and translate that over the remainder of the pipe to establish a resource for Star, and that will undoubtedly require a significant amount of new core drilling. Shore will also have to conduct detailed engineering work to develop a workable mine plan and outline the expected capital and operating costs.
A prefeasibility study will also have to better delineate the late Joli Fou kimberlite phase. The lower-grade material lies above the richer rock and Shore will have to determine if it would be economic to process the rock, or if it should be treated as waste.
Despite the remaining unknowns, Mr. Read was optimistic that the combination of value and grade will put Shore in an economic position. Speculators seem to think so as well, as Shore' shares popped up to $2.70 early this month, although the stock lost a nickel on Thursday, closing at $2.45.
SEC Denies responsibility for Trade Settlement Enforcement - September 17, 2004 By Dave Patch
http://www.investigatethesec.com/index1.php ... Media Links
It has been a long and arduous task trying to get the SEC to take responsibility for securities fraud associated with “Naked Shorting”. From one form of denial to another the SEC has relinquished all responsibility to enforce the settlement of our securities. SEC’s media relations spokesman John Heine claims settlement failures are not securities law violations but in fact contract law violations. According to Mr. Heine “the SEC is not in the enforcement of contract law”. Actually the SEC is rarely in the enforcement of anything.
Trade Settlement failures is a violation of Securities Law if you assume that the SEC is responsible for enforcing the Securities Act of 1934.
In the General Rules and Regulations Promulgated by the Securities act of 1934 comes Rule 15c6-1. Rule 15c6-1 addresses the Settlement Cycle for all trades executed. This rule states that no Broker-Dealer may enter into a contract for the sale of a security whereby the payment for that security and the delivery of that security is greater than 3 business days. The only exemption to this comes when a written agreement between both parties has been entered into. http://www.law.uc.edu/CCL/34ActRls/rule15c6-1.html
Today the SEC and NASD have agreed that trade settlement failures are not only harmful to the markets, but also admit that in some cases the settlement failures will exceed the entire public floats of companies. For this to be the case, Broker-Dealers are not meeting the guidelines of Rule 15c6-1. Broker-Dealers are entering into contracts for trades that exceed 3 business days and yet the SEC refuses to enforce the rules. Ameritrade recently told one client that if they wanted physical delivery of shares it would take 4 – 6 months and they would be restricted from selling during that timeframe. Mr. Heine claims it is not the SEC’s job to address these violations. If not the SEC’s whose is it?
I went deeper into my research and began to look up Client agreements between an investor and their broker-dealer. I found that much of the issue we speak of as investors hinges on the word settlement. The SEC claims that settlement simply refers to a share showing up electronically into your account. It is not, however, what investors think of as the meaning of settlement nor is it what we have written into our client agreements. To most settlement is the actual transfer of ownership of a security and all rights that go with it.
Let’s review how settlement is defined:
Section 17A of the Securities Act of 1934: Establish a system …”prompt and accurate clearance and settlement of securities transactions, including the transfer of record ownership”
SEC Regarding Trade plus 3 Settlement: “Investors must settle their security transactions in three business days…. When you sell a security, you must deliver to your brokerage firm your securities certificate no later than three business days after the sale.”
NASD Glossary: Settlement: “The conclusion of a securities transaction; a broker/dealer buying securities pays for them; a selling broker delivers the securities to the buyer's broker.”
ETRADE Agreement: Settlement Date. The day on which a transaction is to be completed. On this day, buyers are to pay for their purchases and sellers are to deliver their securities. Generally, for equity transactions, settlement date is three (3) days after a trade executes, for options trades settlement date is the day after the trade executes, and settlement for mutual funds can vary depending on the particular fund family.
But what about the “Book-Entry” settlement? The SEC has denied the abusive nature of the issue by claiming shareholders are not harmed due to “Book-Entry” settlement whereby our Broker will put shares into our account prior to them actually receiving transfer of ownership from the seller. Unfortunately, there is no publication I could find that justifies this position.
The SEC defines “Book-Entry” Settlement here: "Street Name" Registration — The security is registered in the name of your brokerage firm on the issuer's books, and your brokerage firm holds the security for you in "book-entry" form. "Book-entry" simply means that you do not receive a certificate. Instead, your broker keeps a record in its books that you own that particular security.”
You can’t own something until you take delivery.
How harmful is unsettled trades?
The SEC publication to Investors: “Unsettled trades pose risks to our financial markets, especially when market prices plunge and trading volumes soar. The longer the period from trade execution to settlement, the greater the risk that securities firms and investors hit by sizable losses would be unable to pay for their transactions”. To these words Mr. Heine states: “No Question the language is correct”. http://www.sec.gov/investor/pubs/tplus3.htm
So with the harm that unsettled trades can have to our financial markets, why is it the SEC refuses to step in and address the issue? Who is responsible for enforcing rule 15c6-1? If trades are not being settled, and brokers are entering into these contracts knowing that these trades will not settle in 3 days, who is responsible for enforcing actions against the brokers for entering the contracts or breaking the contracts without written approval of the clients? The Industry has the information; all the client has is a false account statement that claims trades settle when they haven’t. The Industry is now fighting hard to insure that the pending lawsuits do not go into discovery where they would have to open their books for investors to finally see the realities of what is happening.
To seek these and other answers I once again asked Mr. Heine for answers and once again I got the SEC duck. No Comment!
I had asked the SEC in a written request for specifics on what circumstances the SEC would see as justification for trades failing the 3 day settlement period. In the request I asked what the SEC felt were reasonable causes for settlement failures and what would be a natural timeline for those trades to then settle. Mr. Heine initially stated that the question was unanswerable and later suggested I speak with investor relations. Mr. Heine was smart, he was not about to give up on the secrets only the SEC is allowed to know and understand. Even the NASD proposed a maximum limit of 10 days to settle trades but the SEC denied that proposal for unknown reasons. The NASD proposal now lies dormant in the halls of the SEC’s Division of Market Regulation.
The bottom line is simple. The SEC is negligent in performing duties that support the best interests of all investors.
Trade settlement failures are a violation of securities laws and are a breach of securities agreements between the SEC and the broker-dealers, the broker-dealers to each other, and the broker-dealer to the client. There is no written agreement for an alternate settlement date between parties. The Brokers act in a “good-ole-boy” network where they forgive each other’s sins at the safety of our investments and the financial markets. The SEC in turn looks the other way in violation of enforcement of the Securities Act of 1934.
The SEC’s doubletalk and confusion on this issue is clear. The SEC does not want to enforce trade settlements. Years ago the SEC initiated actions to move from T+5 to T+3 and now they have a concept release to go to T+0. These are wasted and costly efforts if the SEC won’t stand up with a backbone and enforce the rules. It is time the SEC accounts for their actions.
It is now time Congress steps out and takes hold of this situation.
Nipawin Journal — Kensington to get more say
BY JORDIE DWYER
Journal Staff
In a major move for more say, Kensington Resources (KRT) and diamond giant DeBeers have agreed to restructuring of the management of the Fort a la Corne joint venture project.
The agreement, announced last week, will give more input for Kensington in the planning process and the first meeting of new team - with three members each from Kensington and DeBeers - will take place next month.
"The team will be examining ways to accelerate a development decision on the Fort a la Corne project and we are pleased to be able to contribute our experience and knowledge to reach this goal," said Kensington president Robert McCallum.
In addition to McCallum, the Kensington team will include Raj Annand, a principal part of RKA Engineering Consultants in Edmonton with over 25 years experience in design, planning and construction of mines, and current project geologist and project manager for Kensington Brent Jellicoe.
The team is expected to make a presentation to the DeBeers board of directors early next year.
Kensington also announced last week it is looking for as much as $6 million Cdn in new investment in the company through a private placement offering.
Half of the offering will consist of flow-through common shares at $1.30 Cdn each with the rest consisting of non-flow through units at $1.05 Cdn.
CMKM, UCAD at it again
U.S. Canadian Minerals (UCAD) has come up with the money and exercised its purchase option of CMKM Diamonds.
The Las Vegas based explorations companies have entered several agreements for mineral rights options in order to finance diamond exploration work in the Fort a la Corne region.
UCAD was able to come up with $2.5 million U.S. last week to buy 1.66 per cent interest in all of CMKM's mineral claims, bringing to a total of 9.16 per cent interest bought by UCAD.
There is still one outstanding agreement between the two companies - a one year $15 million U.S. option for a total of 10 per cent interest in all CMKM claims. If taken advantage of, it would give UCAD a 15 per cent interest overall.
Janice - you like to fish?
Come join us - Edna would love your company.
http://users3.ev1.net/~jtclay/fishin.htm
Link me to it diamonddonna - I haven't seen the other pic you refer to.
thx
Another Shore Gold neighbor ...
http://www.forestgate.ca/images/L400E_Model.gif
Stock Symbol: SGF: TSX-VEN September 15, 2004 SHORE GOLD INC. Saskatoon, Saskatchewan STAR DIAMOND PROJECT: MORE LARGE STONES 14.6, 10.1 and 7.6 CARAT DIAMONDS IN 266 CARAT PARCEL George H. Read, P. Geo., Senior Vice President Exploration, is pleased to announce the sixth set of diamond recoveries from the Star Kimberlite. The diamond recoveries to date total 1,392.83 carats from 12,124 dry tonnes processed. These results are for five kimberlite batches of a total of some 80 to 100 kimberlite batches that will be processed as part of the bulk sampling program on the Star Diamond Project, the aim of which is to recover a parcel of some 3,000 carats for valuation purposes. A total of 1,706 commercial sized diamonds (greater than 1.18 millimetre square mesh screen), collectively weighing 263.01 carats, has been recovered from the treatment of 1,198.88 dry tonnes of kimberlite. Forty-one diamonds greater than one carat have been recovered and the four largest stones are: 14.60, 10.14, 7.68 and 6.23 carats, respectively. In addition, 213 diamonds (3.35 carats) were recovered down to 0.85 millimetre square mesh. The colour of 64 percent of these diamonds has been classified as white, with a further 21 percent classified as off-white. These five kimberlite batches (of a total of 33 processed) have been mined from the Southeast drive (Batches 22, 24 and 25) and the North drive (Batches 21 and 23) developed from the 235 metre shaft station. All of these kimberlite batches have been recovered from within the Early Joli Fou equivalent kimberlite. Results to date have shown that higher diamond grades are associated with the Early Joli Fou equivalent kimberlite than with the Late Joli Fou equivalent kimberlite. The relationships between these two kimberlites types are illustrated in cross sections available on the Shore Gold website: www.shoregold.com. Batches 26, 27, 28, 29, 30, 31, 32 and 12A (all from 235 metre level) have been processed on-site and the concentrates dispatched to the sorting laboratory for final diamond recovery. A total of 13,991 dry tonnes has been processed through the on-site DMS plant. Results from these batches are pending. All batches processed to date are classified as crater facies volcaniclastic kimberlites. Kimberlite processed and diamond results for five sample batches are listed in the table below. Grades are expressed in carats per hundred tonnes (cpht). Batch # Location (metres below surface) Dry Tonnes Diamonds Number of Stones Total (carats) Grade (cpht) Largest Stone (carats) 21 235 m Level: N drive 226.29 337 32.89 14.53 1.29 22 235 m Level: SE drive 268.71 460 50.05 18.63 3.41 23 235 m Level: N drive 248.08 331 45.63 18.39 6.23 24 235 m Level: SE drive 201.43 460 60.24 29.91 7.68 25 235 m Level: SE drive 254.37 331 77.55 30.49 14.60 Total 1,198.88 1,919 266.36 22.22
Page 2 The four largest stones are: 14.60 (Batch 25, White), 10.14 (Batch 25, White), 7.68 (Batch 23, White) and 6.23 (Batch 25, Grey) carats, respectively. Sixteen diamonds exceed two carats and 41 diamonds exceed one carat, of which 27 are white, 9 are off-white, 3 are grey and 2 are brown. A total of 86 diamonds exceed 0.5 carat. Sixty-four percent of the total diamond parcel is classified white in colour, with a further 21 percent classified as off-white. The diamond parcel includes 10 pink, 16 yellow and 6 amber stones. Over 98 percent of the carat weight of this parcel occurs in diamonds greater than 1.18 millimetre square mesh. Senior Vice President Exploration, George Read, states: “These latest results include a significant number of large stones and higher grades, particularly for Batches 24 and 25. The frequency of plus one carat stones in the Star Kimberlite will have a highly positive effect on the forthcoming diamond valuation. Results to date indicate an average grade of 15.83 cpht for the Early Joli Fou equivalent kimberlite (1,198 carats recovered from 7,570 dry tonnes)”. The diamond recovery procedure includes on site processing of kimberlite through the modular dense media separator (DMS), after which DMS concentrates are batch fed through an X-ray Flow-sort. In order to ensure the recovery of low luminosity diamonds, the Flow-sort tailings are processed over a grease table. Flow-sort and grease table concentrates are transported by a secure carrier to SGS Lakefield Research for final diamond recovery. The SGS Lakefield Research process includes drying, screening, magnetic separation, manual sorting and diamond weighing and description. SGS Lakefield Research is accredited to the ISO/IEC 17025 standard by the Standards Council of Canada as a testing laboratory for specific tests. Senior Vice President Exploration, George Read, Professional Geoscientist in the Provinces of Saskatchewan and British Columbia, is the Qualified Person responsible for the verification and quality assurance of analytical results. The Star Diamond Project is designed to recover a parcel of at least 3,000 carats of diamonds to enable an accurate valuation of the stones. Up to 25,000 tonnes of kimberlite will be recovered from the shaft and drifts and processed on site to produce this diamond parcel. Shore is a Canadian based corporation engaged in the acquisition, exploration and development of mineral properties. Shares of the Company trade on the TSX Venture Exchange under the trading symbol “SGF”. For further information please contact: Kenneth E. MacNeill, President & C.E.O.; George Sanders, Vice President Corporate Development; or George H. Read, P. Geo., Vice President Exploration at (306) 664-2202. - END - “The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release”
Star Diamond Project: More large stones - 14.6, 10.1 and 7.6 carat diamonds in 266 carat parcel
9/15/04
SASKATOON, SK, Sep 15, 2004 (Canada NewsWire via COMTEX) --
George H. Read, P. Geo., Senior Vice President Exploration, is pleased to announce the sixth set of diamond recoveries from the Star Kimberlite. The diamond recoveries to date total 1,392.83 carats from 12,124 dry tonnes processed. These results are for five kimberlite batches of a total of some 80 to 100 kimberlite batches that will be processed as part of the bulk sampling program on the Star Diamond Project, the aim of which is to recover a parcel of some 3,000 carats for valuation purposes. A total of 1,706 commercial sized diamonds (greater than 1.18 millimetre square mesh screen), collectively weighing 263.01 carats, has been recovered from the treatment of 1,198.88 dry tonnes of kimberlite. Forty-one diamonds greater than one carat have been recovered and the four largest stones are: 14.60, 10.14, 7.68 and 6.23 carats, respectively. In addition, 213 diamonds (3.35 carats) were recovered down to 0.85 millimetre square mesh. The colour of 64 percent of these diamonds has been classified as white, with a further 21 percent classified as off-white.
These five kimberlite batches (of a total of 33 processed) have been mined from the Southeast drive (Batches 22, 24 and 25) and the North drive (Batches 21 and 23) developed from the 235 metre shaft station. All of these kimberlite batches have been recovered from within the Early Joli Fou equivalent kimberlite. Results to date have shown that higher diamond grades are associated with the Early Joli Fou equivalent kimberlite than with the Late Joli Fou equivalent kimberlite. The relationships between these two kimberlites types are illustrated in cross sections available on the Shore Gold website: www.shoregold.com.
Batches 26, 27, 28, 29, 30, 31, 32 and 12A (all from 235 metre level) have been processed on-site and the concentrates dispatched to the sorting laboratory for final diamond recovery. A total of 13,991 dry tonnes has been processed through the on-site DMS plant. Results from these batches are pending. All batches processed to date are classified as crater facies volcaniclastic kimberlites.
Kimberlite processed and diamond results for five sample batches are listed in the table below. Grades are expressed in carats per hundred tonnes (cpht).
------------------------------------------------------------------------- Batch Location Diamonds Total Grade Largest No. (metres below Dry Number of (carats) (cpht) Stone surface) Tonnes Stones (carats) ------------------------------------------------------------------------- 21 235 m Level: N drive 226.29 337 32.89 14.53 1.29 ------------------------------------------------------------------------- 22 235 m Level: SE drive 268.71 460 50.05 18.63 3.41 ------------------------------------------------------------------------- 23 235 m Level: N drive 248.08 331 45.63 18.39 6.23 ------------------------------------------------------------------------- 24 235 m Level: SE drive 201.43 460 60.24 29.91 7.68 ------------------------------------------------------------------------- 25 235 m Level: SE drive 254.37 331 77.55 30.49 14.60 ------------------------------------------------------------------------- Total 1,198.88 1,919 266.36 22.22 -------------------------------------------------------------------------
The four largest stones are: 14.60 (Batch 25, White), 10.14 (Batch 25, White), 7.68 (Batch 23, White) and 6.23 (Batch 25, Grey) carats, respectively. Sixteen diamonds exceed two carats and 41 diamonds exceed one carat, of which 27 are white, 9 are off-white, 3 are grey and 2 are brown. A total of 86 diamonds exceed 0.5 carat. Sixty-four percent of the total diamond parcel is classified white in colour, with a further 21 percent classified as off-white. The diamond parcel includes 10 pink, 16 yellow and 6 amber stones. Over 98 percent of the carat weight of this parcel occurs in diamonds greater than 1.18 millimetre square mesh.
Senior Vice President Exploration, George Read, states: "These latest results include a significant number of large stones and higher grades, particularly for Batches 24 and 25. The frequency of plus one carat stones in the Star Kimberlite will have a highly positive effect on the forthcoming diamond valuation. Results to date indicate an average grade of 15.83 cpht for the Early Joli Fou equivalent kimberlite (1,198 carats recovered from 7,570 dry tonnes)".
The diamond recovery procedure includes on site processing of kimberlite through the modular dense media separator (DMS), after which DMS concentrates are batch fed through an X-ray Flow-sort. In order to ensure the recovery of low luminosity diamonds, the Flow-sort tailings are processed over a grease table. Flow-sort and grease table concentrates are transported by a secure carrier to SGS Lakefield Research for final diamond recovery. The SGS Lakefield Research process includes drying, screening, magnetic separation, manual sorting and diamond weighing and description. SGS Lakefield Research is accredited to the ISO/IEC 17025 standard by the Standards Council of Canada as a testing laboratory for specific tests.
Senior Vice President Exploration, George Read, Professional Geoscientist in the Provinces of Saskatchewan and British Columbia, is the Qualified Person responsible for the verification and quality assurance of analytical results.
The Star Diamond Project is designed to recover a parcel of at least 3,000 carats of diamonds to enable an accurate valuation of the stones. Up to 25,000 tonnes of kimberlite will be recovered from the shaft and drifts and processed on site to produce this diamond parcel. Shore is a Canadian based corporation engaged in the acquisition, exploration and development of mineral properties. Shares of the Company trade on the TSX Venture Exchange under the trading symbol "SGF".
"The TSX Venture Exchange has not reviewed and does not accept
responsibility for the adequacy or accuracy of this release"
VIEW ADDITIONAL COMPANY-SPECIFIC INFORMATION: http://www.newswire.ca/en/releases/orgDisplay.cgi?okey=14555
For further information: Kenneth E. MacNeill, President & C.E.O.; George Sanders, Vice President Corporate Development; or George H. Read, P. Geo., Vice President Exploration at (306) 664-2202
News release via Canada NewsWire, Calgary 403-269-7605
LMRI R/A
the average number of peas in a pod is 5. So far I can count 3 ,,, Matix, Janice and you.
Janice, most outcomes of suits settled out of court are kept hushed. But I heard it was dismissed in exchange for a US$27,500 payment and an agreement to remove certain materials from the Web site.
Do you want to comment on that?
The circumstance you describe ... "Companies which release bad news or have stock prices not inline w/ their fundamentals ..." is adequately handled by legal shorting ... which is borrowing what has been issued. There's no need for the public to become involved in creating shares that don't exist.
The only reason I come back to this issue matix is because it is a recommendation of a so-called retired COMPLIANCE OFFICER.
What he's recommending is unworkable.
matix, there is a legal way to short stock, and an illegal way ...
The legal way doesn't involve "rigging" the game under the sham of fairness in the market - as described by the retired industry executive. That author is recommending the public be permitted to short the illegal way as the market-makers are doing with the aid of their "different set of rules".
Euthydemus, I’ve read that letter again and find it shocking, coming as a recommendation from a senior compliance officer who has worked with several of the large Wall Street firms -
He’s recommending that because the industry has been infiltrated by crooks and thieves, the regulatory bodies (SEC & NASD) don’t clean it up, but permit everybody to pile in and do the same ... as a way to “level the playing field”. What a bizarre mindset. My guess is he wouldn't be saying this if he weren't now retired and could could continue doing it as before from the 'inside'.
“ … However, on the flip side, market makers and broker/dealers have rigged the game so they can play by a different set of rules than the general public and, to date, this ha been protected by the regulatory bodies. These market makers and broker/dealers have done this for no other reason than to line their own pockets, under the sham of maintaining "fairness" in the market. Every day, market pros short sell IPO's, short sell on downticks, and short sell without regard to the availability of certificates, all things done at the expense of individual investors, who do not have the right to do the same. They do it quietly, without regulation, and without a requirement for disclosure; often in direct contradiction to the public "recommendations" of analysts from the very same firms which I believe is another area that the regulatory bodies should be aware of (for example look at the recent action in AMZN where outlandish price targets were placed on the stock creating a price run right before the stock pre-announced a financial warning). The public will be best served by administering the markets so that every investor wishing to place their own money in an "at-risk" trade be allowed to do so under the same rules.
Therefore, I urge you to eliminate current restrictions on short selling, and allow the public to sell short by the same rules as market makers.
http://www.sec.gov/rules/concept/s72499/loverde1.txt
El Cor -
Schwab has reported it's getting out of the market making business after many successful years and inspite of the profits it continues to bring in. Also (NITE) Knight Trading CEO is resigning. I suspect JEFF is involved.
http://yahoo.reuters.com/financeQuoteCompanyNewsArticle.jhtml?duid=mtfh15504_2004-09-10_21-06-09_wen...
Janice, you don't, but do you think Roger might understand?
” … Frankly I don't understand what's sustaining the price ...”
El ... these are the rules for posting on this board. Bashers can post here but will be removed if they bash.
Rules of the Board (Incorporated 5/22/04)
1. Personal attacks or threats will not be tolerated
2. This board was intended to be an alternative to the nonsense of the RB Boards (and others), any posting that threatens the integrity of the board will be removed.
3. We will not allow Bashing in any way.
4. Any issues with other posters should be taken care of through private messages.
lucky - will it be a trick or treat party?
It's only legal Spark, if the certificates backing the shares exist and can be delivered to the purchaser within the 3 day settlement period. The broker/dealers get around this requirement by rotating their obligation to a fellow broker/dealer every 3 days like a hot potato to begin the clock ticking for another 3 days all over again. If they get to feel the heat they bring in their hedgefund co-conspirators to tie everything up longterm.
What you seem to overlook owclar ...
.. is the complicity of the SEC and DTC in the matter. Neither want to change, they've made themselves a golden goose and that's how they want to keep it. They're not going to "work it out". They've been aware for almost 10 years .. keep saying they're going to plug the loopholes, but never do.
Read R. J. Shapiro's recent followup letter to SEC.
August 30, 2004
The Honorable William H. Donaldson
Chairman
Securities and Exchange Commission
450 Fifth Street, NW
Washington, D.C. 20549
Dear Chairman Donaldson:
I am Robert J. Shapiro, chairman of Sonecon LLC, an economic advisory firm in Washington, D.C., and a long-time observer and analyst of U.S. and global financial markets. I served as Under Secretary of Commerce for Economic Affairs from 1998 to 2001, Vice President and co-founder of the Progressive Policy Institute from 1989 to 1998, and principal economic advisor to Governor William J. Clinton in the 1992 presidential campaign. I hold a Ph.D. from Harvard University and have been a Fellow of the National Bureau of Economic Research, the Brookings Institution, and Harvard University. I want to convey my serious concerns about the impact of the final version of Regulation SHO regarding short sales, issued by the Securities and Exchange Commission (SEC) on July 30, 2004,[1] on the equity and transparency of our equity markets
The SEC is certainly correct in its effort to broaden the terms of regulation of short sales. Regulation SHO takes an important step that could lead to more effective monitoring of short sales by extending the regulation to all equity transactions and directing broker dealers to mark all equity orders as “long,” “short” or “short exempt.” More important, the new “locate and delivery” requirements could substantially reduce stock manipulation carried out through naked short sales -- but only if those requirements are widely applied and strictly enforced. Unfortunately, Regulation SHO does not meet either of these two standards. The troubling result is that the Regulation, in effect, establishes an official level of tolerance for unsettled or naked short sales.
As Regulation SHO now stands, strict requirements to locate and deliver borrowed shares in short sale transactions are directed only to a very small subset of securities, called “threshold” securities, that 1) already have fails to deliver at a registered clearing agency of at least 10,000 shares for five consecutive settlement days, 2) when those failures equal at least one-half of one percent of the outstanding shares, and 3) the security is already included on a daily list of securities meeting these requirements published by an SRO. Only when all three of these conditions are met is a broker dealer carrying out a short sale required by Regulation SHO to borrow the security or enter into a bona fide arrangement to do so. These provisions set a new and troubling standard for short sales: A broker can now sell short a security without borrowing the shares or arranging to do so, so long as the security does not meet one or more of those three conditions. The Depository Trust and Clearing Corporation (DTC) estimates that just 4 percent of public equities have settlement failures exceeding 0.5 percent of their outstanding shares. The SEC definition of “threshold” securities, therefore, excludes 96 percent of all traded securities from strict locate requirements for short sales, or nearly 9,000 of the estimated 9,350 companies currently traded on U.S. exchanges and markets.
Instead, Regulation SHO allows a broker dealer to satisfy the “locate” requirement for short sales in the securities of 96 percent of publicly-traded firms without either borrowing shares or entering into an agreement to do so, if (s)he has “reasonable grounds to believe that the security can be borrowed so that it can be delivered on the date delivery is due.”[2] The Regulation further states that this “reasonable grounds” standard will be satisfied if the equity being sold short is included in a current “Easy to Borrow” list. Yet, Regulation SHO sets no standards for these “Easy to Borrow” lists, other than that repeated failures to deliver securities included on a list will indicate that reliance on that particular list does not satisfy the “reasonable grounds” test. This provision allows a broker dealer to carry out a series of short sales without any direct evidence that the particular security being sold short is even available for borrowing. At a minimum, the SEC should establish clear and strict standards for inclusion on “Easy to Borrow” lists based not on a list’s past record of including other securities that were not ultimately delivered, but on current evidence of the actual availability for borrowing of the number of shares of the particular security to be sold short.
Similarly, the final Regulation imposes strict delivery requirements once an extended failure to deliver has occurred only on short sales in “threshold” securities: When the short seller of a “threshold” security has failed to deliver the securities for 10 days after the normal settlement date, or 13 consecutive settlement days, Regulation SHO requires the clearing agency to step in and itself purchase the securities for delivery. But the Regulation provides virtually no means of enforcing the delivery of non-threshold shares sold short – again, covering the securities of an estimated 96 percent of all publicly-traded companies, or nearly 9,000 from a total of 9,350 companies. Stated another way, Regulation SHO imposes no enforcement requirements on those who sell short and fail to deliver the shares, so long as the uncovered short sales of the targeted company equal less than 0.5 percent of its outstanding shares.
Nor will this “threshold” test of 0.5 percent of a company’s outstanding shares protect honest investors from those who seek to manipulate a company’s share price through large-scale naked short sales. Among the young public companies that are often the target of naked short sellers, most outstanding shares are held by company executives and original investors and restricted from trading trade freely. In all such cases, short sales equivalent to less than 0.5 percent of the company’s outstanding shares can amount to as much as 20 to 30 percent of the shares actually available for actual trading, allowing stock manipulators to drive down the share price with naked shorts that still do not breach the 0.5 percent ceiling set by Regulation SHO. If the 0.5 percent standard for threshold securities is retained, the Commission at a bare minimum should apply it to registered shares available for free trading, not to outstanding shares.
These and other provisions of the final Regulation SHO are far weaker than even the draft version. The final Regulation has dropped a provision from the earlier draft that would have directed clearing agencies to report to the National Association of Security Dealers (NASD) and the designated examining authority any investor failing to deliver. More important, the final Regulation eliminated a promising proposal in the draft version that would have withheld the benefits of mark-to-market payments (e.g., return of collateral as the share price declines) from investors who fail to deliver the shares they have sold short. Without this means of enforcing the delivery of shares sold short, those who fraudulently carry out naked short sales to manipulate the price of a company’s shares can continue to collect their profits, to the detriment of millions of honest investors. Regulating short sales in a way that still provides those who don’t deliver the shares they sell short with the profits from their uncompleted short sales violates the most basic principles of a fair and free market. Moreover, no outside authority will be alerted, so long as they target their fraud to any of the nearly estimated 9,000 companies whose equities are classified as “non-threshold” securities, and limit the fraud in any single case to 0.5 percent of the company’s outstanding shares.
I strongly concur with the comments of the North American Securities Administrators Association (NASAA) on the draft rule: “[We are] unable to determine why the Commission proposes to permit significant settlement failures at all. While there are instances when settlement may be legitimately delayed, existing regulations provide for extensions for settlement. If the Commission continues to allow settlement failures, it may well facilitate the harm that the proposal is designed to remedy.”
By exempting from strict locate and delivery requirements any failures to deliver in equity issues with existing failures of less than 0.5 percent of their outstanding shares, Regulation SHO appears to establish an official level of acceptance and tolerance for unsettled or naked short sales. I respectfully submit that that these provisions could end up providing tacit SEC approval for billions of dollars in unsettled short sales. With the value of the publicly-traded shares on all exchanges and markets totaling an estimated $20.415 trillion[3], do these provisions effectively permit unsettled short sales of 0.5 percent of that total or an estimated $102 billion a day? I respectfully request that the SEC provide an estimate of the maximum unsettled short sales that could occur under Regulation SHO without triggering locate and delivery requirements.
By permitting the widespread settlement failures that rightfully concern the NASAA and all honest investors, Regulation SHO effectively tolerates abuses, principally through naked short sales, that can undermine basic confidence in U.S. equity markets. Under the terms of this Regulation, naked short sellers will be able, in effect, to inject into the markets millions of shares that do not exist without triggering strict locate or delivery requirements. Whatever the legal definition, naked short sales are an economic equivalent of counterfeiting. Until Regulation SHO, this economic counterfeiting has been facilitated by electronic record keeping and the apparent practice of the DTCC and its subsidiary National Securities Clearing Corporation (NSCC) of often disregarding persistent unsettled short positions. With Regulation SHO, the SEC has provided its implicit imprimatur for the same practice in cases covering the vast majority of public companies and billions of dollars.
I urge the SEC to reconsider the provisions of Regulations SHO and, at a minimum, apply the “locate and delivery” requirements for threshold securities to all short sale transactions, and adopt a zero-tolerance policy for significant settlement failures. American investors should feel confident that the SEC will ensure the integrity of every equity transaction they undertake and fully protect their right to receive what they have paid for.
Sincerely,
Robert J. Shapiro
cc: Cynthia A. Glassman, Commissioner, Securities and Exchange Commission
Harvey J. Goldschmid, Commissioner, Securities and Exchange Commission
Paul S. Atkins, Commissioner, Securities and Exchange Commission
Roel C. Campos, Commissioner, Securities and Exchange Commission
Jill M. Consodine, Chairman and CEO, Depository Trust Company
Donald F. Donahue, President, Depository Trust Company and President, National Securities Clearing Corporation
Robert R. Glauber, Chairman and CEO, National Association of Security Dealers
Chairman
Sonecon, LLC
601 13th Street, NW
Suite 1100-North
Washington, D.C. 20005
owclar, it would be possible to prove if there were to be transparency as on the senior exchanges where short sales have to be reported for all to see.
How is a company to survive on the OTC or Pinks if unregistered share credits can be created from thin air but never have to be reported?
What good reason does the concealment of illegal short sales serve other than to benefit the broker/dealers who together with the regulators, are the owners and rule writers of this fraudulent game?
"Cellular Boxing" shows how crooked these security dealers can be.
These massive naked short positions need to be looked upon as huge assets that need to be developed. Hopefully the regulators will come to grips with the reality of naked short selling and tactics like "Cellar boxing" and quickly address this fraud that has decimated thousands of U.S. micro cap corporations and the tens of millions of U.S. investors therein.
http://www.siliconinvestor.com/stocktalk/msg.gsp?msgid=19890743
"Cellar Boxing"
There’s a form of the securities fraud known as naked short selling that is becoming very popular and lucrative to the market makers that practice it. It is known as “Cellar boxing” and it has to do with the fact that the NASD and the SEC had to arbitrarily set a minimum level at which a stock can trade. This level was set at $.0001 or one-one hundredth of a penny. This level is appropriately referred to as “the cellar”. This $.0001 level can be used as a "backstop" for all kinds of market maker and naked short selling manipulations.
“Cellar boxing” has been one of the security frauds du jour since 1999 when the market went to a “decimalization” basis. In the pre-decimalization days the minimum market spread for most stocks was set at 1/8th of a dollar and the market makers were guaranteed a healthy “spread”. Since decimalization came into effect, those one-eighth of a dollar spreads now are often only a penny as you can see in Microsoft’s quote throughout the day. Where did the unscrupulous MMs go to make up for all of this lost income? They headed "south" to the OTCBB and Pink Sheets where the protective effects from naked short selling like Rule 10-a, and NASD Rules 3350, 3360, and 3370 are nonexistent.
The unique aspect of needing an arbitrary “cellar” level is that the lowest possible incremental gain above this cellar level represents a 100% spread available to MMs making a market in these securities. When compared to the typical spread in Microsoft of perhaps four-tenths of 1%, this is pretty tempting territory. In fact, when the market is no bid to $.0001 offer there is theoretically an infinite spread.
In order to participate in “cellar boxing”, the MMs first need to pummel the price per share down to these levels. The lower they can force the share price, the larger are the percentage spreads to feed off of. This is easily done via garden variety naked short selling. In fact if the MM is large enough and has enough visibility of buy and sell orders as well as order flow, he can simultaneously be acting as the conduit for the sale of nonexistent shares through Canadian co-conspiring broker/dealers and their associates with his right hand at the same time that his left hand is naked short selling into every buy order that appears through its own proprietary accounts. The key here is to be a dominant enough of a MM to have visibility of these buy orders. This is referred to as "broker/dealer internalization" or naked short selling via "desking" which refers to the market makers trading desk. While the right hand is busy flooding the victim company's market with "counterfeit" shares that can be sold at any instant in time the left hand is nullifying any upward pressure in share price by neutralizing the demand for the securities. The net effect becomes no demonstrable demand for shares and a huge oversupply of shares which induces a downward spiral in share price.
In fact, until the "beefed up" version of Rule 3370 (Affirmative determination in writing of "borrowability" by settlement date) becomes effective, U.S. MMs have been "legally" processing naked short sale orders out of Canada and other offshore locations even though they and the clearing firms involved knew by history that these shares were in no way going to be delivered. The question that then begs to be asked is how "the system" can allow these obviously bogus sell orders to clear and settle. To find the answer to this one need look no further than to Addendum "C" to the Rules and Regulations of the NSCC subdivision of the DTCC. This gaping loophole allows the DTCC, which is basically the 11,000 b/ds and banks that we refer to as "Wall Street”, to borrow shares from those investors naive enough to hold these shares in "street name" at their brokerage firm. This amounts to about 95% of us. Theoretically, this “borrow” was designed to allow trades to clear and settle that involved LEGITIMATE 1 OR 2 DAY delays in delivery. This "borrow" is done unbeknownst to the investor that purchased the shares in question and amounts to probably the largest "conflict of interest" known to mankind. The question becomes would these investors knowingly loan, without compensation, their shares to those whose intent is to bankrupt their investment if they knew that the loan process was the key mechanism needed for the naked short sellers to effect their goal? Another question that arises is should the investor's b/d who just earned a commission and therefore owes its client a fiduciary duty of care, be acting as the intermediary in this loan process keeping in mind that this b/d is being paid the cash value of the shares being loaned as a means of collateralizing the loan, all unbeknownst to his client the purchaser.
An interesting phenomenon occurs at these "cellar" levels. Since NASD Rule 3370 allows MMs to legally naked short sell into markets characterized by a plethora of buy orders at a time when few sell orders are in existence, a MM can theoretically "legally" sit at the $.0001 level and sell nonexistent shares all day long because at no bid and $.0001 ask there is obviously a huge disparity between buy orders and sell orders. What tends to happen is that every time the share price tries to get off of the cellar floor and onto the first step of the stairway at $.0001 there is somebody there to step on the hands of the victim corporation's market.
Once a given micro cap corporation is “boxed in the cellar” it doesn’t have a whole lot of options to climb its way out of the cellar. One obvious option would be for it to reverse split its way out of the cellar but history has shown that these are counter-productive as the market capitalization typically gets hammered and the post split share price level starts heading back to its original pre-split level.
Another option would be to organize a sustained buying effort and muscle your way out of the cellar but typically there will, as if by magic, be a naked short sell order there to meet each and every buy order. Sometimes the shareholder base can muster up enough buying pressure to put the market at $.0001 bid and $.0002 offer for a limited amount of time. Later the market makers will typically pound the $.0001 bids with a blitzkrieg of selling to wipe out all of the bids and the market goes back to no bid and $.0001 offer. When the weak-kneed shareholders see this a few times they usually make up their mind to sell their shares the next time that a $.0001 bid appears and to get the heck out of Dodge. This phenomenon is referred to as “shaking the tree” for weak-kneed investors and it is very effective.
At times the market will go to $.0001 bid and $.0003 offer. This sets up a juicy 200% spread for the MMs and tends to dissuade any buyers from reaching up to the "lofty" level of $.0003. If a $.0002 bid should appear from a MM not "playing ball" with the unscrupulous MMs, it will be hit so quickly that Level 2 will never reveal the existence of the bid. The $.0001 bid at $.0003 offer market sets up a "stalemate" wherein market makers can leisurely enjoy the huge spreads while the victim company slowly dilutes itself to death by paying the monthly bills with "real" shares sold at incredibly low levels. Since all of these development-stage corporations have to pay their monthly bills, time becomes on the side of the naked short sellers.
At times it almost seems that the unscrupulous market makers are not actively trying to kill the victim corporation but instead want to milk the situation for as long of a period of time as possible and let the corporation die a slow death by dilution. The reality is that it is extremely easy to strip away 99% of a victim company’s share price or market cap and to keep the victim corporation “boxed“ in the cellar, but it really is difficult to kill a corporation especially after management and the shareholder base have figured out the game that is being played at their expense.
As the weeks and months go by the market makers make a fortune with these huge percentage spreads but the net aggregate naked short positions become astronomical from all of this activity. This leads to some apprehension amongst the co-conspiring MMs. The predicament they find themselves in is that they can’t even stop naked short selling into every buy order that appears because if they do the share price will gap and this will put tremendous pressures on net capital reserves for the MMs and margin maintenance requirements for the co-conspiring hedge funds and others operating out of the more than 13,000 naked short selling margin accounts set up in Canada. And of course covering the naked short position is out of the question since they can’t even stop the day-to-day naked short selling in the first place and you can't be covering at the same time you continue to naked short sell.
What typically happens in these situations is that the victim company has to massively dilute its share structure from the constant paying of the monthly burn rate with money received from the selling of “real” shares at artificially low levels. Then the goal of the naked short sellers is to point out to the investors, usually via paid “Internet bashers”, that with the, let’s say, 50 billion shares currently issued and outstanding, that this lousy company is not worth the $5 million market cap it is trading at, especially if it is just a shell company whose primary business plan was wiped out by the naked short sellers’ tortuous interference earlier on.
The truth of the matter is that the single biggest asset of these victim companies often becomes the astronomically large aggregate naked short position that has accumulated throughout the initial “bear raid” and also during the “cellar boxing” phase. The goal of the victim company now becomes to avoid the 3 main goals of the naked short sellers, namely: bankruptcy, a reverse split, or the forced signing of a death spiral convertible debenture out of desperation. As long as the victim company can continue to pay the monthly burn rate, then the game plan becomes to make some of the strategic moves that hundreds of victim companies have been forced into doing which includes name changes, CUSIP # changes, cancel/reissue procedures, dividend distributions, amending of by-laws and Articles of Corporation, etc. Nevada domiciled companies usually cancel all of their shares in the system, both real and fake, and force shareholders and their b/ds to PROVE the ownership of the old “real” shares before they get a new “real” share. Many also file their civil suits at this time also. This indirect forcing of hundreds of U.S. micro cap corporations to go through all of these extraneous hoops and hurdles as a means to survive, whether it be due to regulatory apathy or lack of resources, is probably one of the biggest black eyes the U.S. financial systems have ever sustained. In a perfect world it would be the regulators that periodically audit the “C” and “D” sub-accounts at the DTCC, the proprietary accounts of the MMs, clearing firms, and Canadian b/ds, and force the buy-in of counterfeit shares, many of which are hiding behind altered CUSIP #s, that are detected above the Rule 11830 guidelines for allowable “failed deliveries” of one half of 1% of the shares issued. U.S. micro cap corporations should not have to periodically “purge” their share structure of counterfeit electronic book entries but if the regulators will not do it then management has a fiduciary duty to do it.
A lot of management teams become overwhelmed with grief and guilt in regards to the huge increase in the number of shares issued and outstanding that have accumulated during their “watch”. The truth however is that as long as management made the proper corporate governance moves throughout this ordeal then a huge number of resultant shares issued and outstanding is unavoidable and often indicative of an astronomically high naked short position and is nothing to be ashamed of. These massive naked short positions need to be looked upon as huge assets that need to be developed. Hopefully the regulators will come to grips with the reality of naked short selling and tactics like "Cellar boxing" and quickly address this fraud that has decimated thousands of U.S. micro cap corporations and the tens of millions of U.S. investors therein.
"Cellar Boxing"
There’s a form of the securities fraud known as naked short selling that is becoming very popular and lucrative to the market makers that practice it. It is known as “Cellar boxing” and it has to do with the fact that the NASD and the SEC had to arbitrarily set a minimum level at which a stock can trade. This level was set at $.0001 or one-one hundredth of a penny. This level is appropriately referred to as “the cellar”. This $.0001 level can be used as a "backstop" for all kinds of market maker and naked short selling manipulations.
“Cellar boxing” has been one of the security frauds du jour since 1999 when the market went to a “decimalization” basis. In the pre-decimalization days the minimum market spread for most stocks was set at 1/8th of a dollar and the market makers were guaranteed a healthy “spread”. Since decimalization came into effect, those one-eighth of a dollar spreads now are often only a penny as you can see in Microsoft’s quote throughout the day. Where did the unscrupulous MMs go to make up for all of this lost income? They headed "south" to the OTCBB and Pink Sheets where the protective effects from naked short selling like Rule 10-a, and NASD Rules 3350, 3360, and 3370 are nonexistent.
The unique aspect of needing an arbitrary “cellar” level is that the lowest possible incremental gain above this cellar level represents a 100% spread available to MMs making a market in these securities. When compared to the typical spread in Microsoft of perhaps four-tenths of 1%, this is pretty tempting territory. In fact, when the market is no bid to $.0001 offer there is theoretically an infinite spread.
In order to participate in “cellar boxing”, the MMs first need to pummel the price per share down to these levels. The lower they can force the share price, the larger are the percentage spreads to feed off of. This is easily done via garden variety naked short selling. In fact if the MM is large enough and has enough visibility of buy and sell orders as well as order flow, he can simultaneously be acting as the conduit for the sale of nonexistent shares through Canadian co-conspiring broker/dealers and their associates with his right hand at the same time that his left hand is naked short selling into every buy order that appears through its own proprietary accounts. The key here is to be a dominant enough of a MM to have visibility of these buy orders. This is referred to as "broker/dealer internalization" or naked short selling via "desking" which refers to the market makers trading desk. While the right hand is busy flooding the victim company's market with "counterfeit" shares that can be sold at any instant in time the left hand is nullifying any upward pressure in share price by neutralizing the demand for the securities. The net effect becomes no demonstrable demand for shares and a huge oversupply of shares which induces a downward spiral in share price.
In fact, until the "beefed up" version of Rule 3370 (Affirmative determination in writing of "borrowability" by settlement date) becomes effective, U.S. MMs have been "legally" processing naked short sale orders out of Canada and other offshore locations even though they and the clearing firms involved knew by history that these shares were in no way going to be delivered. The question that then begs to be asked is how "the system" can allow these obviously bogus sell orders to clear and settle. To find the answer to this one need look no further than to Addendum "C" to the Rules and Regulations of the NSCC subdivision of the DTCC. This gaping loophole allows the DTCC, which is basically the 11,000 b/ds and banks that we refer to as "Wall Street”, to borrow shares from those investors naive enough to hold these shares in "street name" at their brokerage firm. This amounts to about 95% of us. Theoretically, this “borrow” was designed to allow trades to clear and settle that involved LEGITIMATE 1 OR 2 DAY delays in delivery. This "borrow" is done unbeknownst to the investor that purchased the shares in question and amounts to probably the largest "conflict of interest" known to mankind. The question becomes would these investors knowingly loan, without compensation, their shares to those whose intent is to bankrupt their investment if they knew that the loan process was the key mechanism needed for the naked short sellers to effect their goal? Another question that arises is should the investor's b/d who just earned a commission and therefore owes its client a fiduciary duty of care, be acting as the intermediary in this loan process keeping in mind that this b/d is being paid the cash value of the shares being loaned as a means of collateralizing the loan, all unbeknownst to his client the purchaser.
An interesting phenomenon occurs at these "cellar" levels. Since NASD Rule 3370 allows MMs to legally naked short sell into markets characterized by a plethora of buy orders at a time when few sell orders are in existence, a MM can theoretically "legally" sit at the $.0001 level and sell nonexistent shares all day long because at no bid and $.0001 ask there is obviously a huge disparity between buy orders and sell orders. What tends to happen is that every time the share price tries to get off of the cellar floor and onto the first step of the stairway at $.0001 there is somebody there to step on the hands of the victim corporation's market.
Once a given micro cap corporation is “boxed in the cellar” it doesn’t have a whole lot of options to climb its way out of the cellar. One obvious option would be for it to reverse split its way out of the cellar but history has shown that these are counter-productive as the market capitalization typically gets hammered and the post split share price level starts heading back to its original pre-split level.
Another option would be to organize a sustained buying effort and muscle your way out of the cellar but typically there will, as if by magic, be a naked short sell order there to meet each and every buy order. Sometimes the shareholder base can muster up enough buying pressure to put the market at $.0001 bid and $.0002 offer for a limited amount of time. Later the market makers will typically pound the $.0001 bids with a blitzkrieg of selling to wipe out all of the bids and the market goes back to no bid and $.0001 offer. When the weak-kneed shareholders see this a few times they usually make up their mind to sell their shares the next time that a $.0001 bid appears and to get the heck out of Dodge. This phenomenon is referred to as “shaking the tree” for weak-kneed investors and it is very effective.
At times the market will go to $.0001 bid and $.0003 offer. This sets up a juicy 200% spread for the MMs and tends to dissuade any buyers from reaching up to the "lofty" level of $.0003. If a $.0002 bid should appear from a MM not "playing ball" with the unscrupulous MMs, it will be hit so quickly that Level 2 will never reveal the existence of the bid. The $.0001 bid at $.0003 offer market sets up a "stalemate" wherein market makers can leisurely enjoy the huge spreads while the victim company slowly dilutes itself to death by paying the monthly bills with "real" shares sold at incredibly low levels. Since all of these development-stage corporations have to pay their monthly bills, time becomes on the side of the naked short sellers.
At times it almost seems that the unscrupulous market makers are not actively trying to kill the victim corporation but instead want to milk the situation for as long of a period of time as possible and let the corporation die a slow death by dilution. The reality is that it is extremely easy to strip away 99% of a victim company’s share price or market cap and to keep the victim corporation “boxed“ in the cellar, but it really is difficult to kill a corporation especially after management and the shareholder base have figured out the game that is being played at their expense.
As the weeks and months go by the market makers make a fortune with these huge percentage spreads but the net aggregate naked short positions become astronomical from all of this activity. This leads to some apprehension amongst the co-conspiring MMs. The predicament they find themselves in is that they can’t even stop naked short selling into every buy order that appears because if they do the share price will gap and this will put tremendous pressures on net capital reserves for the MMs and margin maintenance requirements for the co-conspiring hedge funds and others operating out of the more than 13,000 naked short selling margin accounts set up in Canada. And of course covering the naked short position is out of the question since they can’t even stop the day-to-day naked short selling in the first place and you can't be covering at the same time you continue to naked short sell.
What typically happens in these situations is that the victim company has to massively dilute its share structure from the constant paying of the monthly burn rate with money received from the selling of “real” shares at artificially low levels. Then the goal of the naked short sellers is to point out to the investors, usually via paid “Internet bashers”, that with the, let’s say, 50 billion shares currently issued and outstanding, that this lousy company is not worth the $5 million market cap it is trading at, especially if it is just a shell company whose primary business plan was wiped out by the naked short sellers’ tortuous interference earlier on.
The truth of the matter is that the single biggest asset of these victim companies often becomes the astronomically large aggregate naked short position that has accumulated throughout the initial “bear raid” and also during the “cellar boxing” phase. The goal of the victim company now becomes to avoid the 3 main goals of the naked short sellers, namely: bankruptcy, a reverse split, or the forced signing of a death spiral convertible debenture out of desperation. As long as the victim company can continue to pay the monthly burn rate, then the game plan becomes to make some of the strategic moves that hundreds of victim companies have been forced into doing which includes name changes, CUSIP # changes, cancel/reissue procedures, dividend distributions, amending of by-laws and Articles of Corporation, etc. Nevada domiciled companies usually cancel all of their shares in the system, both real and fake, and force shareholders and their b/ds to PROVE the ownership of the old “real” shares before they get a new “real” share. Many also file their civil suits at this time also. This indirect forcing of hundreds of U.S. micro cap corporations to go through all of these extraneous hoops and hurdles as a means to survive, whether it be due to regulatory apathy or lack of resources, is probably one of the biggest black eyes the U.S. financial systems have ever sustained. In a perfect world it would be the regulators that periodically audit the “C” and “D” sub-accounts at the DTCC, the proprietary accounts of the MMs, clearing firms, and Canadian b/ds, and force the buy-in of counterfeit shares, many of which are hiding behind altered CUSIP #s, that are detected above the Rule 11830 guidelines for allowable “failed deliveries” of one half of 1% of the shares issued. U.S. micro cap corporations should not have to periodically “purge” their share structure of counterfeit electronic book entries but if the regulators will not do it then management has a fiduciary duty to do it.
A lot of management teams become overwhelmed with grief and guilt in regards to the huge increase in the number of shares issued and outstanding that have accumulated during their “watch”. The truth however is that as long as management made the proper corporate governance moves throughout this ordeal then a huge number of resultant shares issued and outstanding is unavoidable and often indicative of an astronomically high naked short position and is nothing to be ashamed of. These massive naked short positions need to be looked upon as huge assets that need to be developed. Hopefully the regulators will come to grips with the reality of naked short selling and tactics like "Cellar boxing" and quickly address this fraud that has decimated thousands of U.S. micro cap corporations and the tens of millions of U.S. investors therein.
http://www.siliconinvestor.com/stocktalk/msg.gsp?msgid=19890743
Lots of interest in CMKM on Stockhouse too.
http://www.stockhouse.com/bullboards/forum.asp?symbol=CMKX&table=LIST&all=0&t=0&time...
plucky ...
THIS IS SHOUTING ... this is talking.
Who's right?
USCD conversion at 0.000009
or
USCD conversion at 0.00001555
http://www.investorshub.com/boards/read_msg.asp?message_id=3988691
Both from the same Ameritrade.
BadBassPlayer ...
.. which character in your signature pic is you?
CMKX - CMKM Diamonds Inc. To Be Featured on National Radio Show "Prosperity for God's People"
CT Global Media, a subsidiary of Christian Traders Inc, is excited to announce their new radio show "Prosperity for God's People."
Phoenix, AZ (PRWEB) September 8, 2004 -- Christian Traders (http://christiantraders.com), the Internet's fastest growing faith-based online investment community, is pleased to announce an exciting development which will enable the company to share it's corporate and spiritual vision worldwide, via a new national radio show "Prosperity for God's People".
The show, dealing with Christians and their investments, can be heard live in Phoenix on KXEG 1280AM or worldwide via the Internet, at http://familyvaluesradio.com .
The show is broadcast live at 2:30 Pacific time and 5:30 Eastern time every Tuesday and Wednesday afternoon. Archives of previous programs are available at http://christiantraders.com and current programs can be replayed 24/7 at http://familyvaluesradio.com .
On today's show, "CT" - Pastor DeWayne Reeves, CEO and President of Christian Traders Inc., will be discussing CMKX - CMKM Diamonds Inc. CMKX is currently the hottest topic on Wall Street, trading more shares per day than Microsoft, Intel, and Cisco combined. Opinions on CMKX range from The Green Baron's statement, "CMKM Diamonds is The Stock Play of a Lifetime", to Stock Patrol's viewpoint of "Where are the diamonds?". CT has remained somewhat neutral, currently holding somewhere between 7-10 million shares, simply as a trading opportunity. When asked to expand, CT's reply was,"A million shares costs less than a trip to Vegas, the odds are slightly better, and the entertainment value alone increases with each passing day".
Callers wishing to express their opinion on CMKX can reach CT live in the studio at 623-936-4230.
Visit http://christiantraders.com for more information and to become a member of the online community. Some message boards are available to guests, but to receive full access requires a 30-second registration.
Current company profiles along with CMKX are -
AZCO Mining Inc. - AZMN - http://azco.com
Desert Health Products - DHPI - http://dhpi.com
Dale Jarrett's Racing Adventure - DJRT - http://racingadventure.com
CT recently stunned the online community and the investment world at large when he announced he would be stepping down as lead columnist for Christian Traders. While he was not specific as to the reason for his decision, his final column, "Jesus is my Passion" does give some clues.
Administrative duties have been turned over to Debbie Kiontke. Ms. Kiontke is an accomplished trader, author of the column "Grace Notes", and a Christian singer/songwriter who works as an Artist Associate with World Vision.
Mr. Glen Landry has assumed the duties of Global Administrator, Mr. Randy Degner will continue to fulfill his role as the official CT Technical Analyst and the mystery columnist known only as "Savant", will continue providing economic and market commentary.
A performance chart of the CT Index covering all 197 selections made by CT from 6-20-04 through 7-29-04 is now available at the site. Although CT will no longer be publishing his editorial column, he has stated he will continue to post nightly trading selections as time permits.
Trading selections issued by CT, should not be confused with his long-term "Buy"recommendations. Currently CT holds only three companies in the CT Portfolio. Of those three, his favorite by far, is AZCO Mining - AZMN. CT reiterated his confidence in AZMN a few weeks ago, when the stock hit a mid-day low of .09. The stock closed yesterday on strong volume at .21, leaving a lot of investors puzzled, and the "smart money" smiling. CT has suggested that the true AZMN rally is yet to begin.
In a press release issued yesterday, Chief Executive Dr. Pierce Carson stated the following - "Returning to current reporting status will be essential for the company to be able to aggressively move ahead with its strategic agenda, including acquiring precious and base metal assets, arranging financing for its mica operation and creating value for shareholders."
CT was asked to comment on the press release and offered the following remarks -
"Since Dr Carson is one of the foremost and most accomplished explorationists of our time with a proven track record of not only a string of substantially valuable discoveries over his 33 year career, he's also been the architect of a dozen major projects and therefore it stands to reason he means what he says on the AZCO website -
("I intend to redirect the strategic future of this company to include identification and acquisition of high quality Gold, Silver and Copper resources."
Dr. W. Pierce Carson
President - CEO
Azco Mining Inc)
In my opinion, any additional value that might be added through deft acquisitions is likely to not only enhance Azco's current intrinsic value but could enable the company to grow towards a much more richly deserved valuation of $300 million plus. But again, since $300 million represents AZMN's "proven" reserves, (which account for only 5% or 1/20th of it's estimated total inground reserves of some 88 Million tons of ore, with potential valuations in the Billions), then it's reasonable enough to assume that with $300 Million being two thirds of the potential goal of $500 Million, it might not take too much acquisition-wise to set AZMN on an upward path towards what really could be a realistic future valuation. Such heady valuations would put AZMN's share price in the $7 to $12 realm or some 50 times or 5,000% upwards from here."
Additional commentary from CT regarding AZMN is available exclusively at http://christiantraders.com .
Disclaimer: Christian Traders Inc. is not a registered securities firm. CT is not a licensed securities broker or financial planner. Any information contained in this press release, at http://christiantraders.com , or on "Prosperity for God's People", is simply the opinion of this editor, CT, guests, columnists or members. Christian Traders does not accept cash, stock, warrants, or promises thereof, to select or profile any company. CT brings new meaning to the term - "Investor Relations Firm". He actually works for you, the investor.
That was for you, this is for the SEC -
This is not a solicitation to purchase securities. The information contained herein is for informational purposes only. The information contained herein regarding risks and uncertainties, which may differ materially from those set forth in these statements, in addition to the economic, competitive, governmental, technological and other factors, constitutes a "forward-looking statement" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, the Private Securities Litigation Reform Act of 1995 and is subject to the safe harbors created thereby. While the company believes that the assumptions underlying such forward-looking information are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the forward-looking information will prove to be accurate. Accordingly, there may be differences between the actual results and the predicted results, and actual results may be materially higher or lower than those indicated in the forward-looking information contained herein. Further, the company assumes no obligation to update or otherwise publicly revise the forward-looking information disclosed herein to reflect circumstances existing after the data hereof.
Don't you love it?
First, chisox ...
Is this a hypothetical question?
There's dozens and dozens. Give me the 3 names ... If mine's not one of them, you're wrong.
Days of 'Naked' Short Selling in Biotech Might be Numbered
By Randall Osborne, Editor
BioWorld Financial
http://www.bioworld.com/
August 30, 2004
TO those who don't know better, "naked short selling" might conjure the image of an online day trader, tapping away on his keyboard in the nude. Many who do know better wish they didn't, since the reality of the illegal practice is much less amusing - especially for companies on the wrong end of the deals, such as smaller-cap biotechnology firms.
Short selling, of course, is perfectly legal, though regarded as somewhat shady by many investors (not to mention quite risky for practitioners). It involves selling shares borrowed from a broker, in hopes that the price falls and the shares then can be bought back at the lower amount, thus taking a profit and returning the borrowed stock. There's no formal certificate and the lender is not disclosed.
In naked short selling, the seller has not determined the stock can be borrowed, so the buyer never gets the phantom securities he or she thinks they have bought. More shares are traded than actually exist and the stock's value is diluted, sometimes to a degree that smaller companies can ill afford. And it's typically the small-cap and micro-cap firms trading "over the counter" that are targeted.
In certain instances, naked short selling also can be legal - that is, if it's done by a market-making entity and only for a few days, with the shares truly bought later. But that's not what investors are most concerned about.
The SEC in June voted to adopt what it calls Regulation SHO, which brought rule changes regarding short selling, but has delayed implementing SHO - which critics say is hardly enough anyway - until January. The National Association of Securities Dealers has taken steps, too, with its Short Sale Act Reporting Requirements for the OTC BB and Pink Sheet securities, but those rules also have been held up and won't take effect until late September (the previous date had been July 26).
So bad has the situation become that crusaders for more serious laws have used the term "StockGate" to describe the secret operations of short sellers, which are becoming less and less secret, if still feebly regulated. The SEC is alleged not only to drag its feet, but to have a prejudiced reason for adopting rules too weak to help small companies - rules that some say are only reiterations of what already exists.
One private investor commenting on SHO as proposed, for example, cited the requirement that broker-dealers "locate" and "annotate" trade certificates in writing before going ahead with any short sale. "The rule has merit and should be implemented," she wrote to the SEC. "However, history warns us that without an officer of the SEC standing over the shoulder of every broker-dealer's trader, this rule will be ignored, just like current rules have been ignored."
There's even an online organization gathering steam called www.investigatethesec.com.
"Naked shorting creates an imbalance between normal supply and demand and will depress any security being abused by the overselling of its stock," the website declares, adding that the practice "steals some of the greatest ideas, products and services in America. Small micro-cap companies are driven out of business by this abuse and we are left with the unknowns of what these companies and their employees had to offer our futures. The opportunities for the next Microsoft may never be felt as naked shorting snuffed out that creativity before it was ever brought to fruition. Ultimately, naked shorting steals from the very foundation of our nation as it steals the American dream of opportunity."
A Canadian firm, RGM Communications Inc., is toiling to get the word out regarding naked short selling, and is asking companies and individuals to sign the online organization's website. "Since the mid 1990's, the SEC has been aware of naked short selling and has failed to adequately respond to investor and company complaints alike," RGM's own website charges, adding that the FBI and SEC "have conducted numerous investigations into naked short selling and have followed these illegal stock sales through to money laundering and other illegal schemes. By [its] lack of enforcement and passive neglect, the SEC is therefore guilty of aiding and abetting criminal activities."
Naked short selling seems to have spread overseas in a big way, at least in Germany. To be listed there, a firm need not request it. In fact, companies might find themselves listed unawares, simply because a broker "sponsored" the company on the exchange. It happened. A lot.
Introgen Therapeutics Inc. in July saw its shares jump 32 percent after asking the Berlin-Bremen Stock Exchange to halt trading of its stock - which the exchange apparently was trading without Introgen's knowledge or consent. David Nance, Introgen's CEO, said such unauthorized listings might be part of an effort to avoid the SEC rules (such as they are) against naked short selling. Many observers had no doubt about it.
Nance's company hardly was alone. An avalanche of biotechnology firms have asked to be taken off the exchange this summer, including Commonwealth Biotechnologies Inc., Cell Genesys Inc., OxiGene Inc., Avant Immunotherapeutics Inc., Molecular Imaging Corp. and Genetronics Biomedical Inc. A handful more asked for Berlin-Bremen delisting just this month: Insmed Inc., V.I. Technologies Inc., CytRx Corp. and Mediscience Technology Corp.
But the situation is severe in the U.S., too, said Russell Godwin, RGM's president, who was a broker for 10 years.
"The proposed [SEC] rule changes aren't going to do a damned thing," Godwin told BioWorld Financial Watch, alleging that "the police aren't policing" because they want to protect the brokerage firms for which many SEC employees end up working after their stints with the commission, much the way military people work for contractors following their service and lawyers eventually become judges.
"It's a matter of time before this breaks open," he said. Although "people smarter than I am" are getting involved in the fight for reform, he added, the most likely scenario for eye-opening scandal will be a situation in which a larger firm takes over a smaller firm - and finds out shares of the smaller firm, outstanding on paper, don't exist.
"This hasn't happened yet but it will occur, most likely with a mining company or a biotech company," Godwin said, blaming electronic trading for much of the sham exchanges that take place.
"If they ever go to all electronic trading, you might as well hand the keys to the crooks," he said.
R. J. Shapiro's followup letter to SEC.
August 30, 2004
The Honorable William H. Donaldson
Chairman
Securities and Exchange Commission
450 Fifth Street, NW
Washington, D.C. 20549
Dear Chairman Donaldson:
I am Robert J. Shapiro, chairman of Sonecon LLC, an economic advisory firm in Washington, D.C., and a long-time observer and analyst of U.S. and global financial markets. I served as Under Secretary of Commerce for Economic Affairs from 1998 to 2001, Vice President and co-founder of the Progressive Policy Institute from 1989 to 1998, and principal economic advisor to Governor William J. Clinton in the 1992 presidential campaign. I hold a Ph.D. from Harvard University and have been a Fellow of the National Bureau of Economic Research, the Brookings Institution, and Harvard University. I want to convey my serious concerns about the impact of the final version of Regulation SHO regarding short sales, issued by the Securities and Exchange Commission (SEC) on July 30, 2004,[1] on the equity and transparency of our equity markets
The SEC is certainly correct in its effort to broaden the terms of regulation of short sales. Regulation SHO takes an important step that could lead to more effective monitoring of short sales by extending the regulation to all equity transactions and directing broker dealers to mark all equity orders as “long,” “short” or “short exempt.” More important, the new “locate and delivery” requirements could substantially reduce stock manipulation carried out through naked short sales -- but only if those requirements are widely applied and strictly enforced. Unfortunately, Regulation SHO does not meet either of these two standards. The troubling result is that the Regulation, in effect, establishes an official level of tolerance for unsettled or naked short sales.
As Regulation SHO now stands, strict requirements to locate and deliver borrowed shares in short sale transactions are directed only to a very small subset of securities, called “threshold” securities, that 1) already have fails to deliver at a registered clearing agency of at least 10,000 shares for five consecutive settlement days, 2) when those failures equal at least one-half of one percent of the outstanding shares, and 3) the security is already included on a daily list of securities meeting these requirements published by an SRO. Only when all three of these conditions are met is a broker dealer carrying out a short sale required by Regulation SHO to borrow the security or enter into a bona fide arrangement to do so. These provisions set a new and troubling standard for short sales: A broker can now sell short a security without borrowing the shares or arranging to do so, so long as the security does not meet one or more of those three conditions. The Depository Trust and Clearing Corporation (DTC) estimates that just 4 percent of public equities have settlement failures exceeding 0.5 percent of their outstanding shares. The SEC definition of “threshold” securities, therefore, excludes 96 percent of all traded securities from strict locate requirements for short sales, or nearly 9,000 of the estimated 9,350 companies currently traded on U.S. exchanges and markets.
Instead, Regulation SHO allows a broker dealer to satisfy the “locate” requirement for short sales in the securities of 96 percent of publicly-traded firms without either borrowing shares or entering into an agreement to do so, if (s)he has “reasonable grounds to believe that the security can be borrowed so that it can be delivered on the date delivery is due.”[2] The Regulation further states that this “reasonable grounds” standard will be satisfied if the equity being sold short is included in a current “Easy to Borrow” list. Yet, Regulation SHO sets no standards for these “Easy to Borrow” lists, other than that repeated failures to deliver securities included on a list will indicate that reliance on that particular list does not satisfy the “reasonable grounds” test. This provision allows a broker dealer to carry out a series of short sales without any direct evidence that the particular security being sold short is even available for borrowing. At a minimum, the SEC should establish clear and strict standards for inclusion on “Easy to Borrow” lists based not on a list’s past record of including other securities that were not ultimately delivered, but on current evidence of the actual availability for borrowing of the number of shares of the particular security to be sold short.
Similarly, the final Regulation imposes strict delivery requirements once an extended failure to deliver has occurred only on short sales in “threshold” securities: When the short seller of a “threshold” security has failed to deliver the securities for 10 days after the normal settlement date, or 13 consecutive settlement days, Regulation SHO requires the clearing agency to step in and itself purchase the securities for delivery. But the Regulation provides virtually no means of enforcing the delivery of non-threshold shares sold short – again, covering the securities of an estimated 96 percent of all publicly-traded companies, or nearly 9,000 from a total of 9,350 companies. Stated another way, Regulation SHO imposes no enforcement requirements on those who sell short and fail to deliver the shares, so long as the uncovered short sales of the targeted company equal less than 0.5 percent of its outstanding shares.
Nor will this “threshold” test of 0.5 percent of a company’s outstanding shares protect honest investors from those who seek to manipulate a company’s share price through large-scale naked short sales. Among the young public companies that are often the target of naked short sellers, most outstanding shares are held by company executives and original investors and restricted from trading trade freely. In all such cases, short sales equivalent to less than 0.5 percent of the company’s outstanding shares can amount to as much as 20 to 30 percent of the shares actually available for actual trading, allowing stock manipulators to drive down the share price with naked shorts that still do not breach the 0.5 percent ceiling set by Regulation SHO. If the 0.5 percent standard for threshold securities is retained, the Commission at a bare minimum should apply it to registered shares available for free trading, not to outstanding shares.
These and other provisions of the final Regulation SHO are far weaker than even the draft version. The final Regulation has dropped a provision from the earlier draft that would have directed clearing agencies to report to the National Association of Security Dealers (NASD) and the designated examining authority any investor failing to deliver. More important, the final Regulation eliminated a promising proposal in the draft version that would have withheld the benefits of mark-to-market payments (e.g., return of collateral as the share price declines) from investors who fail to deliver the shares they have sold short. Without this means of enforcing the delivery of shares sold short, those who fraudulently carry out naked short sales to manipulate the price of a company’s shares can continue to collect their profits, to the detriment of millions of honest investors. Regulating short sales in a way that still provides those who don’t deliver the shares they sell short with the profits from their uncompleted short sales violates the most basic principles of a fair and free market. Moreover, no outside authority will be alerted, so long as they target their fraud to any of the nearly estimated 9,000 companies whose equities are classified as “non-threshold” securities, and limit the fraud in any single case to 0.5 percent of the company’s outstanding shares.
I strongly concur with the comments of the North American Securities Administrators Association (NASAA) on the draft rule: “[We are] unable to determine why the Commission proposes to permit significant settlement failures at all. While there are instances when settlement may be legitimately delayed, existing regulations provide for extensions for settlement. If the Commission continues to allow settlement failures, it may well facilitate the harm that the proposal is designed to remedy.”
By exempting from strict locate and delivery requirements any failures to deliver in equity issues with existing failures of less than 0.5 percent of their outstanding shares, Regulation SHO appears to establish an official level of acceptance and tolerance for unsettled or naked short sales. I respectfully submit that that these provisions could end up providing tacit SEC approval for billions of dollars in unsettled short sales. With the value of the publicly-traded shares on all exchanges and markets totaling an estimated $20.415 trillion[3], do these provisions effectively permit unsettled short sales of 0.5 percent of that total or an estimated $102 billion a day? I respectfully request that the SEC provide an estimate of the maximum unsettled short sales that could occur under Regulation SHO without triggering locate and delivery requirements.
By permitting the widespread settlement failures that rightfully concern the NASAA and all honest investors, Regulation SHO effectively tolerates abuses, principally through naked short sales, that can undermine basic confidence in U.S. equity markets. Under the terms of this Regulation, naked short sellers will be able, in effect, to inject into the markets millions of shares that do not exist without triggering strict locate or delivery requirements. Whatever the legal definition, naked short sales are an economic equivalent of counterfeiting. Until Regulation SHO, this economic counterfeiting has been facilitated by electronic record keeping and the apparent practice of the DTCC and its subsidiary National Securities Clearing Corporation (NSCC) of often disregarding persistent unsettled short positions. With Regulation SHO, the SEC has provided its implicit imprimatur for the same practice in cases covering the vast majority of public companies and billions of dollars.
I urge the SEC to reconsider the provisions of Regulations SHO and, at a minimum, apply the “locate and delivery” requirements for threshold securities to all short sale transactions, and adopt a zero-tolerance policy for significant settlement failures. American investors should feel confident that the SEC will ensure the integrity of every equity transaction they undertake and fully protect their right to receive what they have paid for.
Sincerely,
Robert J. Shapiro
cc: Cynthia A. Glassman, Commissioner, Securities and Exchange Commission
Harvey J. Goldschmid, Commissioner, Securities and Exchange Commission
Paul S. Atkins, Commissioner, Securities and Exchange Commission
Roel C. Campos, Commissioner, Securities and Exchange Commission
Jill M. Consodine, Chairman and CEO, Depository Trust Company
Donald F. Donahue, President, Depository Trust Company and President, National Securities Clearing Corporation
Robert R. Glauber, Chairman and CEO, National Association of Security Dealers
Chairman
Sonecon, LLC
601 13th Street, NW
Suite 1100-North
Washington, D.C. 20005
R. J. Shapiro's followup letter to SEC.
August 30, 2004
The Honorable William H. Donaldson
Chairman
Securities and Exchange Commission
450 Fifth Street, NW
Washington, D.C. 20549
Dear Chairman Donaldson:
I am Robert J. Shapiro, chairman of Sonecon LLC, an economic advisory firm in Washington, D.C., and a long-time observer and analyst of U.S. and global financial markets. I served as Under Secretary of Commerce for Economic Affairs from 1998 to 2001, Vice President and co-founder of the Progressive Policy Institute from 1989 to 1998, and principal economic advisor to Governor William J. Clinton in the 1992 presidential campaign. I hold a Ph.D. from Harvard University and have been a Fellow of the National Bureau of Economic Research, the Brookings Institution, and Harvard University. I want to convey my serious concerns about the impact of the final version of Regulation SHO regarding short sales, issued by the Securities and Exchange Commission (SEC) on July 30, 2004,[1] on the equity and transparency of our equity markets
The SEC is certainly correct in its effort to broaden the terms of regulation of short sales. Regulation SHO takes an important step that could lead to more effective monitoring of short sales by extending the regulation to all equity transactions and directing broker dealers to mark all equity orders as “long,” “short” or “short exempt.” More important, the new “locate and delivery” requirements could substantially reduce stock manipulation carried out through naked short sales -- but only if those requirements are widely applied and strictly enforced. Unfortunately, Regulation SHO does not meet either of these two standards. The troubling result is that the Regulation, in effect, establishes an official level of tolerance for unsettled or naked short sales.
As Regulation SHO now stands, strict requirements to locate and deliver borrowed shares in short sale transactions are directed only to a very small subset of securities, called “threshold” securities, that 1) already have fails to deliver at a registered clearing agency of at least 10,000 shares for five consecutive settlement days, 2) when those failures equal at least one-half of one percent of the outstanding shares, and 3) the security is already included on a daily list of securities meeting these requirements published by an SRO. Only when all three of these conditions are met is a broker dealer carrying out a short sale required by Regulation SHO to borrow the security or enter into a bona fide arrangement to do so. These provisions set a new and troubling standard for short sales: A broker can now sell short a security without borrowing the shares or arranging to do so, so long as the security does not meet one or more of those three conditions. The Depository Trust and Clearing Corporation (DTC) estimates that just 4 percent of public equities have settlement failures exceeding 0.5 percent of their outstanding shares. The SEC definition of “threshold” securities, therefore, excludes 96 percent of all traded securities from strict locate requirements for short sales, or nearly 9,000 of the estimated 9,350 companies currently traded on U.S. exchanges and markets.
Instead, Regulation SHO allows a broker dealer to satisfy the “locate” requirement for short sales in the securities of 96 percent of publicly-traded firms without either borrowing shares or entering into an agreement to do so, if (s)he has “reasonable grounds to believe that the security can be borrowed so that it can be delivered on the date delivery is due.”[2] The Regulation further states that this “reasonable grounds” standard will be satisfied if the equity being sold short is included in a current “Easy to Borrow” list. Yet, Regulation SHO sets no standards for these “Easy to Borrow” lists, other than that repeated failures to deliver securities included on a list will indicate that reliance on that particular list does not satisfy the “reasonable grounds” test. This provision allows a broker dealer to carry out a series of short sales without any direct evidence that the particular security being sold short is even available for borrowing. At a minimum, the SEC should establish clear and strict standards for inclusion on “Easy to Borrow” lists based not on a list’s past record of including other securities that were not ultimately delivered, but on current evidence of the actual availability for borrowing of the number of shares of the particular security to be sold short.
Similarly, the final Regulation imposes strict delivery requirements once an extended failure to deliver has occurred only on short sales in “threshold” securities: When the short seller of a “threshold” security has failed to deliver the securities for 10 days after the normal settlement date, or 13 consecutive settlement days, Regulation SHO requires the clearing agency to step in and itself purchase the securities for delivery. But the Regulation provides virtually no means of enforcing the delivery of non-threshold shares sold short – again, covering the securities of an estimated 96 percent of all publicly-traded companies, or nearly 9,000 from a total of 9,350 companies. Stated another way, Regulation SHO imposes no enforcement requirements on those who sell short and fail to deliver the shares, so long as the uncovered short sales of the targeted company equal less than 0.5 percent of its outstanding shares.
Nor will this “threshold” test of 0.5 percent of a company’s outstanding shares protect honest investors from those who seek to manipulate a company’s share price through large-scale naked short sales. Among the young public companies that are often the target of naked short sellers, most outstanding shares are held by company executives and original investors and restricted from trading trade freely. In all such cases, short sales equivalent to less than 0.5 percent of the company’s outstanding shares can amount to as much as 20 to 30 percent of the shares actually available for actual trading, allowing stock manipulators to drive down the share price with naked shorts that still do not breach the 0.5 percent ceiling set by Regulation SHO. If the 0.5 percent standard for threshold securities is retained, the Commission at a bare minimum should apply it to registered shares available for free trading, not to outstanding shares.
These and other provisions of the final Regulation SHO are far weaker than even the draft version. The final Regulation has dropped a provision from the earlier draft that would have directed clearing agencies to report to the National Association of Security Dealers (NASD) and the designated examining authority any investor failing to deliver. More important, the final Regulation eliminated a promising proposal in the draft version that would have withheld the benefits of mark-to-market payments (e.g., return of collateral as the share price declines) from investors who fail to deliver the shares they have sold short. Without this means of enforcing the delivery of shares sold short, those who fraudulently carry out naked short sales to manipulate the price of a company’s shares can continue to collect their profits, to the detriment of millions of honest investors. Regulating short sales in a way that still provides those who don’t deliver the shares they sell short with the profits from their uncompleted short sales violates the most basic principles of a fair and free market. Moreover, no outside authority will be alerted, so long as they target their fraud to any of the nearly estimated 9,000 companies whose equities are classified as “non-threshold” securities, and limit the fraud in any single case to 0.5 percent of the company’s outstanding shares.
I strongly concur with the comments of the North American Securities Administrators Association (NASAA) on the draft rule: “[We are] unable to determine why the Commission proposes to permit significant settlement failures at all. While there are instances when settlement may be legitimately delayed, existing regulations provide for extensions for settlement. If the Commission continues to allow settlement failures, it may well facilitate the harm that the proposal is designed to remedy.”
By exempting from strict locate and delivery requirements any failures to deliver in equity issues with existing failures of less than 0.5 percent of their outstanding shares, Regulation SHO appears to establish an official level of acceptance and tolerance for unsettled or naked short sales. I respectfully submit that that these provisions could end up providing tacit SEC approval for billions of dollars in unsettled short sales. With the value of the publicly-traded shares on all exchanges and markets totaling an estimated $20.415 trillion[3], do these provisions effectively permit unsettled short sales of 0.5 percent of that total or an estimated $102 billion a day? I respectfully request that the SEC provide an estimate of the maximum unsettled short sales that could occur under Regulation SHO without triggering locate and delivery requirements.
By permitting the widespread settlement failures that rightfully concern the NASAA and all honest investors, Regulation SHO effectively tolerates abuses, principally through naked short sales, that can undermine basic confidence in U.S. equity markets. Under the terms of this Regulation, naked short sellers will be able, in effect, to inject into the markets millions of shares that do not exist without triggering strict locate or delivery requirements. Whatever the legal definition, naked short sales are an economic equivalent of counterfeiting. Until Regulation SHO, this economic counterfeiting has been facilitated by electronic record keeping and the apparent practice of the DTCC and its subsidiary National Securities Clearing Corporation (NSCC) of often disregarding persistent unsettled short positions. With Regulation SHO, the SEC has provided its implicit imprimatur for the same practice in cases covering the vast majority of public companies and billions of dollars.
I urge the SEC to reconsider the provisions of Regulations SHO and, at a minimum, apply the “locate and delivery” requirements for threshold securities to all short sale transactions, and adopt a zero-tolerance policy for significant settlement failures. American investors should feel confident that the SEC will ensure the integrity of every equity transaction they undertake and fully protect their right to receive what they have paid for.
Sincerely,
Robert J. Shapiro
cc: Cynthia A. Glassman, Commissioner, Securities and Exchange Commission
Harvey J. Goldschmid, Commissioner, Securities and Exchange Commission
Paul S. Atkins, Commissioner, Securities and Exchange Commission
Roel C. Campos, Commissioner, Securities and Exchange Commission
Jill M. Consodine, Chairman and CEO, Depository Trust Company
Donald F. Donahue, President, Depository Trust Company and President, National Securities Clearing Corporation
Robert R. Glauber, Chairman and CEO, National Association of Security Dealers
Chairman
Sonecon, LLC
601 13th Street, NW
Suite 1100-North
Washington, D.C. 20005
Diamonds In The Wild
by James Hale
A century after the Klondike Gold Rush, a portion of Canada's North is again booming with activity centred on the stuff of men's dreams. This time, though, the objects of wealth are diamonds, and the challenges associated with turning raw materials into profits are greater than ever.
To listen to the experts on Canada's economy, like Harvard's Michael Porter, is to believe that technology--not natural resources--held the key to our future success. So, how do you account for the explosion in the annual worth of the domestic diamond industry, which has gone from zero to estimates as high as $9 billion in just five years?
The answer lies 200-300 kilometres below the Earth's surface, where a combination of heat and pressure crystallized pure carbon particles into diamonds about three billion years ago.
Diamonds are the pure products of the Earth's evolutionary process. Although they are formed in the upper mantle of the planet's core, where the temperature reaches 1,000 degrees Celsius and the pressure can climb to 50 kilobars, they are carried to the surface by volcanic eruptions of molten rock called kimberlite after the city of Kimberley, South Africa, where the process was first discovered.
Kimberlite volcanoes are not that rare, but only a few pass through diamond-rich areas of the upper mantle with enough force and speed to carry diamonds to the surface. If the volcanic material moves too slowly, the pressure on the diamonds drops dramatically and they revert to graphite. As the molten kimberlite reaches the surface, the gases it contains expand rapidly, creating a massive explosive force as it breaks through. In addition to diamonds, chrome diopsides and garnets are also blown out of the crater, along with boulders, lava and other material. These emerald-coloured chrome diopsides and multi-hued garnets form critical indicators of the potential presence of diamonds.
Indicators are essential because, over time, the site of a kimberlite eruption becomes less obvious, as soft, grey-green kimberlite rock is compacted and weathered. What remains below the surface--deep, cone-shaped fissures called "pipes"--is the key to the future discovery, and recovery of diamonds. These pipes can range in surface area up to 145 hectares. Although an estimated 5,000 pipes exist around the world, only about one per cent is thought to be commercially viable, and just 15 pipes are currently being mined.
Charles Fipke, a Kelowna, B.C., geologist, first started looking for diamonds at the site of kimberlite pipes in 1978, when he was hired in Colorado by Hugo Dummett, who worked for Superior Oil. Numerous sites in North America have been discovered--ranging from Kentucky north to Kirkland Lake, Ont.,--but deposits rich enough to mine commercially had eluded discovery, despite ongoing efforts by the giant De Beers mining company.
By 1979, Fipke was out on his own in his native province, searching near the town of Golden, roughly 210 kilometres northwest of Calgary. His wife's discovery of a large green chrome diopside brought some funding and another B.C. geologist, Stewart Blusson. A longtime employee of the Geological Survey of Canada, Blusson had mapped large sections of the West and knew the Rockies well. Together, Fipke and Blusson located 26 kimberlite pipes near Golden, sealing their resolve to continue their joint efforts, although none of the B.C. pipes were viable.
They followed a trail of leads north to the Mackenzie River, where a De Beers-owned exploration company was prospecting, but by 1982 their funding had run out. Fipke carried on apart from Blusson, founding a company called Dia Met Minerals to raise money on the Vancouver Stock Exchange. His initial share offering was priced below 20 cents a share. Fipke concentrated his new search in an area known as the Slave Craton, just north of Lac de Gras, 180 kilometres northeast of Yellowknife. He established a camp near Exeter Lake and began staking claims, based on the discovery of a rare type of diamond garnet. But he wasn't alone in the area, and secrecy and speed became critical.
In 1990, flying over the area in a helicopter, Fipke spotted a small, round lake that he hadn't noticed before and came to the conclusion that the reason that he had failed to find any kimberlite pipes in the area--despite the overwhelming presence of indicators--was that they had been covered by water following the retreat of the glacier. It was a turning point in Canadian mining.
Needing additional exploration money, Fipke contacted Hugo Dummett, now North American exploration chief for BHP Minerals, a subsidiary of Australia's Broken Hill Proprietary Company. In September 1990, BHP joined Dia Met in an exploration deal, and the pace of work accelerated.
A year later, Blusson rejoined the team, just in time for the exploratory drilling of what was now named Point Lake. On Sept. 9, the drill team broke through into a huge kimberlite pipe. From a 59-kilogram core sample, 81 diamonds emerged. BHP and Dia Met held their cards close for several weeks, but their announcement of their findings prior to the end of the year sparked a torrent of activity in the marketplace. De Beers and a number of junior players cranked up their work in the area, analysts estimated that Canada might be capable of supplying up to one-third of the global gemstone diamond production, and Dia Met's share price soared above $20.
The discoveries weren't over, either; in 1994, a young geologist named Eira Thomas found 138 million carats of very high-grade diamonds under Lac de Gras itself. Her find is estimated at $8 billion in rough diamonds.
But, turning rough diamonds into jewels is a huge undertaking, particularly in an area with a climate as hostile as that of Lac de Gras. The average temperature at the mine site is 11 degrees, with temperatures dropping to 40 in winter. To construct Canada's first diamond mine--named EKATI from the Dene and Dogrib word for "fat lake"--HP and Dia Met trucked in 40 million kilograms of building materials across a 475-km ice road. The project cost almost $900 million before it opened in 1998.
Complicating the project was the fact that the companies were committed to protecting the environment at Point Lake and its other sites to an unprecedented degree. The draining of the lake and the strip mining of its bed must be done in a way that allows it to be returned to its original condition when the diamond supply is exhausted. The federal Environmental Assessment Review Panel approved the EKATI mine in 1996.
Agreements were also necessary with the Northwest Territories government and four Aboriginal groups. As part of these agreements, the mine pays significant benefits to the people of the North--paying, for example, $1.2 million to the Dogrib tribe, and employing more than 475 local people. More than 40 per cent of the employees are Aboriginal.
The EKATI mine and BHP Billiton--the renamed company that purchased Dia Met's share in 2001--also generate significant employment in the North due to the way rough diamonds are processed before they reach the marketplace.
Each day, about 10,000 tonnes of kimberlite are stripped from the bottom of Point Lake, now renamed the Panda Pipe. From this, about 10,000 carats of diamonds are extracted. That's enough to fill a one-litre coffee can, an amount that's worth about $1 million.
Every five weeks, the rough diamonds are flown to BHP Billiton's sorting and valuation centre in Yellowknife, where employees sort the stones according to their value. At that point, Canada Customs inspects the diamonds and values them for taxation purposes. About 65 per cent of the diamonds are shipped to BHP Billiton's marketing office in Antwerp, Belgium. Antwerp has been the traditional centre for the international diamond market for more than a century. Approximately 80 per cent of the world's diamonds pass through the city. Thirty-five per cent go to the De Beers-owned Diamond Trading Company in London, England. Less than one per cent of BHP Billiton's share goes to three cutting and polishing factories in Yellowknife, where veteran and newly trained local specialists perform the work that transforms ancient carbon into jewels that reflect the light and sparkle on the fingers, necks and ears of our loved ones.
Increasingly, diamonds have become branded commodities. One of the three Northern cutting and polishing factories--Sirius Diamonds--laser cuts a polar bear into each gem and has aggressively marketed its Polar Bear brand. Arslanian Cutting Works NWT produces AURIAS (formerly EKATI) brand diamonds for BHP Billiton. The branding is part of a global effort to separate Canadian diamonds from so-called "blood diamonds" that have come from the mines of war-torn or politically oppressed countries in Africa, but for Canadian consumers its also a matter of pride.
Mo Charania's family has been selling diamonds since 1952. He was 11 when his father and two uncles fled Uganda. Re-establishing themselves in Ottawa, the Charanias became one of Ontario's largest jewellers. He has seen phenomenal growth in the sales of AURIAS diamonds in his four stores. "It has been around 15 to 20 per cent a year, and with the awareness of Canadian diamonds has come great excitement, too. About half of the people who know about Canadian diamonds want only Canadian diamonds. You have to remember that people who are buying diamond jewelry are concentrated on beauty and the good feelings associated with the purchase, so knowing that the diamond is a Canadian product is a bonus to them.
"We also get a lot of customers calling us from the United States looking to find out more about Canadian diamonds. I think in those cases it's a combination of the awareness of the very high quality of the gems and the novelty of the new source.
"At this point, with the supply from Canadian cutters and polishers still tight, I just hope that we'll be able to keep up with the growing demand. It's a huge opportunity to build a market for something that is truly Canadian."
Supply may be tight now, but it promises to expand significantly over the coming decade as BHP Billiton brings its Koala and Misery pipes into production and Eira Thomas' large find‚--called the Diavik mine and operated by the British firm Rio Tinto--starts up. Thomas herself is reported to be working a new set of claims in Ontario. Meanwhile, De Beers, which still wields considerable power in the diamond industry despite legal battles in the United States and changing fortunes throughout the trade, has the rights to potentially rich stores of rough diamonds at Snap Lake, southwest of Lac de Gras, and Attawapiskat, south of Hudson Bay.
The thrill of first discovery may have cooled, but the realization of 20 or 30 diamond-powered boom years is just hitting the surface of the Canadian economy like a rush of volcanic kimberlite.
The Underworld Of Diamonds
"Diamonds are nothing more than compressed cash," says Corporal Les Bancroft, one of two RCMP officers assigned to the force's Diamond Protection Service. "Unlike, say, illegal drugs, diamonds are something you can put in your pocket, so they represent a nice, neat way to launder money."
Crime has followed the diamond trade wherever it has gone. Of the 23 countries currently producing diamonds, Bancroft says all admit that organized crime has infiltrated the industry to some degree. "Some countries lose about 12 per cent of what they produce; others lose up to 40 per cent."
Those statistics were well known to the RCMP in the early 1990s, when Charles Fipke and his associates found Canada's first significant cache of rough diamonds under Point Lake northeast of Yellowknife. Three years before the first diamonds were scraped out of the EKATI mine, Sergeant Ray Halwas--now retired --was assigned to become the RCMP's expert in diamond-related crime. He travelled to South Africa, Botswana and Australia to learn from other police forces and industry experts about what Canada was about to face.
He learned that diamond crime falls into six categories:
1. Insertion. That's where criminals seek employment in diamond mines with the intent of stealing rough diamonds.
2. Recruitment. This involves criminal groups coercing existing employees into stealing for them.
3. Opportunistic Theft. When diamonds are stolen during transit along the pipeline from mine to market.
4. Misrepresentation. When illegal diamonds are passed off as legitimate stones.
5. Valuation. When diamonds are under- or over-valued in order to launder money or avoid taxes.
6. Smuggling. When diamonds are smuggled across borders to evade customs duties or disguise the origin of the stones.
In 2001, Halwas, Bancroft and Constable Darrell Robertson were named to the Diamond Protection Service and based in Yellowknife to be close to the source. In keeping with the RCMP's contemporary approach to crime prevention, the new service set out to take a proactive, intelligence-led approach to its job. "We work closely with other police forces, various levels of government and with the industry itself," says Bancroft. "We aggressively share information. Partnerships are key to what we do. The mining, cutting and polishing companies all have their own security personnel, of course, but we're working with them to hold awareness sessions and educate them about how organized crime works.
"At this point, because the diamond industry is so new to Canada, a lot of what we're doing is just letting people know we're here. I think people generally want to do the right thing, and if we can prevent crime by the very fact that we have a presence we're happy with that."
When people don't want to do the right thing, Bancroft and Robertson are ready for that, too. Although he is reluctant to share details, Bancroft says arrests have been made in Canada for diamond-related crime. One problem in pursuing prosecution is that, to this point, Canada does not have laws related to possession of rough diamonds. "What we've seen so far is everything from small conspiracies to involvement by outlaw motorcycle gangs, but we think we've got the jump on these various criminal groups getting a foothold the way they have in other diamond-producing countries."
In addition to diamond crime prevention, the RCMP is also leading the world in developing a system of tracing diamonds beyond the voluntary paperwork that companies like BHP Billiton and De Beers now submit to. Using laser-based technology the RCMP Forensic Laboratories Service is working on a failsafe way of "fingerprinting" diamonds so that information about them can be stored in a database and retrieved in the case of theft or misrepresentation.
Of course they will ... and the vermin will follow.
I think their next step will be to get the basher-group "StockLemon" to put something out ... StockLemon produces the bashers' bible.