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Sorry if inappropriate but see DeBeers new advertising
http://www.aussiexbox.net/pictures2/honest_advert040.jpg
IN THE MATTER OF
THE SECURITIES ACT, 1988, S.S. 1988, c. S-42.2
AND
IN THE MATTER OF
URBAN ARMAND JOSEPH CASAVANT
DAVID DeSORMEAU
CASAVANT MINING KIMBERLITE INTERNATIONAL
CMKM DIAMONDS, INC.
MELVIN A. O'NEIL
TEMPORARY ORDER
(Section 134)
WHEREAS the Saskatchewan Financial Services Commission (the "Commission") has
delegated to the Director of the Securities Division (the "Director") the power to make orders
pursuant to Section 134 of The Securities Act, 1988 (the Act);
WHEREAS it has been represented to the Director by the staff of the Commission that:
1. Urban Armand Joseph Casavant ("Casavant"), David DeSormeau ("DeSormeau"),
Casavant Mining Kimberlite International ("CMKI"), CMKM Diamonds, Inc.
("CMKM") and Melvin A. O'Neil ("O'Neil"), (collectively the "Respondents") have
traded in the securities of CMKI and CMKM in Saskatchewan;
2. The Respondents traded in the securities of CMKI and CMKM when they were not
registered pursuant to section 27 of the Act;
3. The Respondents traded in the securities of CMKI and CMKM when no receipt had been
issued pursuant to section 58 of the Act with respect to those securities;
4. The Commission or Director has not issued an order pursuant to sections 83, 160 or any
other provision of the Act exempting the Respondents and the securities of CMKI and
CMKM from the registration and prospectus requirements of the Act;
5. The Respondents have, with the intention of effecting trades in the securities of CMKI
and CMKM, made statements which they know or ought reasonably to know are
misrepresentations, contrary to subsection 44(3.1) of the Act;
AND WHEREAS the Director is of the opinion that it is in the public interest to make this
Order;
AND WHEREAS the Director is of the opinion that the length of time required for a hearing
would be prejudicial to the public interest;
THE DIRECTOR HEREBY ORDERS:
1. Pursuant to clause 134(1)(d) of the Act that trading in all securities by and of
The Respondents cease forthwith up to and including November 9, 2004; and
2. Pursuant to clause 134(1)(a) of the Act, that the exemptions contained in sections 38, 39,
39.1, 81, 82 and 102 of the Act and the exemptions contained in The Securities
Regulations, R.R.S., c. S-42.2 Reg 1, which provide for exemptions from the
requirements of sections 27, 58, 71 or 104 to 109 of the Act, shall not apply forthwith up
to and including November 9, 2004, with respect to any trade in securities by the
Respondents;
AND TAKE NOTICE THAT:
1. This Order may be extended for such period as the Director considers necessary where
sufficient information is not provided to the Director on or before November 9, 2004;
2. The Commission will, at the request of any person or company named in this Order, grant
a hearing before the Commission with respect to the within matter, such hearing to be
held at such time and place as the Commission shall determine;
3. The purpose of such hearing will be to consider whether it is in the public interest that a
permanent cease trade order pursuant to clause 134(1)(d) of the Act and a permanent
prohibition of statutory exemptions pursuant to clause 134(1)(a) of the Act be made with
respect to the Respondents by reason of the conduct herein before described and by
reason of failing to provide the Commission with satisfactory information on or before
the date of the hearing or any extension thereof by the Commission;
4. Any party to these proceedings may be represented by counsel of their choice at any such
hearing before the Commission; and
5. Upon failure of any party to attend any such hearing at the time and place set therefore,
the hearing may proceed in the absence of such party and such party is not entitled to any
further notice of the proceedings therein.
DATED at Regina, Saskatchewan on October 26, 2004.
“Barbara Shourounis”
Barbara Shourounis
Director - Securities Division
Saskatchewan Financial Services Commission
I bought a pair as well in travels to New Zealand.
They were the Black Akoya ones - probably cheaper but the color is different and I thought nicer .. bottom line the wife liked them.
I copied the thread from CMKX.net below.
-------------------------------------------------
AuTigers234
Core Sampler
Joined: 20 Jul 2004
Posts: 122
Melvin came on paltalk to address the rumors of the CIM tender offer on the AMEX for monday. I think he came on to address this to the shareholders so that we would not get our hopes up and put all our beliefs in the rumor that this will be occuring monday. Melvin wants the shareholders to be happy, and he doesn't want to see us disapointed. Melvin did say he was pleased and excited about the company this week. This made me think of some other possible news. I am thinking that there will be either a PR stating a SGGM dividend to shareholders, or a PR stating another joint venture who I believe will be with NSDM North Star Diamonds. That is what I believe may be brewing this week. So lets sit back relax and wait to see what happens.
Very interesting
Posted: Sun Oct 24, 2004 10:38 am
tm228
Core Sampler
Joined: 07 Aug 2004
Posts: 167
Location: niagara falls,ny
could you please shed some light on this company North Star Diamonds?
Where did this one come from?Never heard of them in the CMKX Story.
I hope your idea has wings because The NASDAQ would be out of this world for CMKX affiliate!!!!!!!!
GO CMKX WIN ONE FOR THE LITTLE PEOPLE !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
_________________
Humble beginnings lead to Out of this world results ! GO CMKX !!!!!!!!!!!!!!!!!!!!
Posted: Sun Oct 24, 2004 1:35 pm
PennyWrangler
Gemologist
Joined: 08 Jun 2004
Posts: 1821
Location: Saint George, SC
http://northstardiamonds.net/
_________________
http://www.edwardsandangell.com/
Posted: Sun Oct 24, 2004 2:11 pm
louie
Diamond in the Rough
Joined: 13 Oct 2004
Posts: 18
Location: TN
YAY!!! another company...maybe I can start on the divvy trend now...every lil bit helps!
Re: Melvin On Paltalk What I Think He Was Doing....
Posted: Sun Oct 24, 2004 3:30 pm
diamondlil
Gemologist
Joined: 05 Jul 2004
Posts: 1041
AuTigers234 wrote:
Melvin came on paltalk to address the rumors of the CIM tender offer on the AMEX for monday. I think he came on to address this to the shareholders so that we would not get our hopes up and put all our beliefs in the rumor that this will be occuring monday. Melvin wants the shareholders to be happy, and he doesn't want to see us disapointed. Melvin did say he was pleased and excited about the company this week. This made me think of some other possible news. I am thinking that there will be either a PR stating a SGGM dividend to shareholders, or a PR stating another joint venture who I believe will be with NSDM North Star Diamonds. That is what I believe may be brewing this week. So lets sit back relax and wait to see what happens.
Sounds like Melvin is getting better at handling himself and his mouth. As for Northstar Diamonds, there was talk back in September that UCAD has signed a deal with them, but I have come to the conclusion that that is PROBABLY BS. I'll believe it when I see it in a PR. Period.
_________________
Do you believe, or do you just say you believe?
http://www.xenobuzz.com/
Posted: Sun Oct 24, 2004 3:47 pm
crebra64
Diamond in the Rough
Joined: 04 Oct 2004
Posts: 36
I keep thinking about what UC said during the GB interview and that CMKM would be fully reporting before the party; we all know the pps would go up because of that. Do we really need to trip up the MM's any more than we have? The only thing that is going to make this stock fly in my mind is just being fully reporting. I think the gold mine acquisition was a huge thing to show revenue coming into the company, and I am sure there would be a little time involved for recordation of the acquisition; maybe this is the only thing they have been waiting for.
I believe the audit has been completed, now they have acquired a source of revenue; maybe this gives them all they need to be fully reporting and move to the AMEX or other exchange. UC did say they were ahead of schedule and that they would be fully reporting before the party, and we have all of this coming week to find out. I don't think there is going to be a CIM TO. I think everything is going to come to us by CMKM doing everthing by the numbers and becoming a strong, stand-alone company before any supposed and rumored mergers, and I don't believe a TO is on the table for us at all. Of course I may be wrong, and only time will tell. I hope the week brings $$$ for us. Good luck, and God bless us all.
Posted: Sun Oct 24, 2004 6:20 pm
djkman
Diamond in the Rough
Joined: 25 Jun 2004
Posts: 34
crebra64 UC never stated that the company would be fully reporting before the party
all that he said was that he hoped to give us a date or rough idea by the end of the month
Posted: Sun Oct 24, 2004 6:31 pm
crebra64
Diamond in the Rough
Joined: 04 Oct 2004
Posts: 36
djkman,
Thanks. That makes me wonder. I didn't actually get the chance to listen to it; my computer would not do it. I had a friend listen to it, and I got the information from him; he listened to it, and that is what he told me.
Posted: Sun Oct 24, 2004 6:42 pm
djkman
Diamond in the Rough
Joined: 25 Jun 2004
Posts: 34
that shows how much only one persons view on whtat was said can change something that is why i only read most peoples posts for enjoyment
Posted: Mon Oct 25, 2004 3:20 am
PennyWrangler
Gemologist
Joined: 08 Jun 2004
Posts: 1821
Location: Saint George, SC
DJ, I'm glad that you're one of the folks who heard Urban correctly. Unfortunately Urban was being interviewed over a phone and he was a bit hard to hear, but it was clear to me that he said that we would have a date for becoming fully reporting by the end of the month. I expect this date will be anounced at the party. I'm really glad he said this, because I was expecting a PR announcing CMKX's fully reporting status at any time, and now I know that I don't need to bother looking for it because it's not going to happen this month. With any luck it will happen before Christmas.
Cre, don't feel too bad. Your friend isn't the only person who listened to that interview with rose colored headphones. I saw a number of folks on other boards/groups make the same mistake.
It's the same thing we've seen over and over again... some people see and hear only what they want to. Like that 8% debacle that a bunch of people latched onto, and that some still cling to. Too funny.
_________________
http://www.edwardsandangell.com/
Posted: Mon Oct 25, 2004 4:26 am
TTUhutch
Diamond Miner
Joined: 01 Jul 2004
Posts: 397
Location: Lubbock, TX
Personally, if UCAD keeps splitting and going up, splitting and going up I wouldn't figure they want to be reporting until they have milked MM's for as much as they can. Remember, most of this money is being tied up in restricted stock so that gives a lot money for hunting diamonds. Most of it compliments of the MM's.
_________________
"You just shot an unarmed MM!"
"Well, he should have armed himself"
Posted: Mon Oct 25, 2004 1:13 pm
PennyWrangler
Gemologist
Joined: 08 Jun 2004
Posts: 1821
Location: Saint George, SC
TTUhutch wrote:
Personally, if UCAD keeps splitting and going up, splitting and going up I wouldn't figure they want to be reporting until they have milked MM's for as much as they can. Remember, most of this money is being tied up in restricted stock so that gives a lot money for hunting diamonds. Most of it compliments of the MM's.
UHhh, UCAD is a reporting company. I'm pretty sure they've never been on the pinks. Rendal is reported as saying that he needed CMKX to be reporting "yesterday", so CMKX being on the pinks is hurting UCAD in some way. Probably because it's holding down the CMKX pps, which means CMKX cannot raise capital by selling stock, which is slowing down it's development.
_________________
http://www.edwardsandangell.com/
Posted: Mon Oct 25, 2004 1:27 pm
TTUhutch
Diamond Miner
Joined: 01 Jul 2004
Posts: 397
Location: Lubbock, TX
I am aware of that, but if 40+% of UCAD is tied up in restricted stock then that is at least a two year's of almost half of the market cap regardless of what they cash in. Since there are control of ownership issues if too much stock is sold, effectively UC, Roger, Rendal have build a vault out of UCAD.
I'm sure Rendal wants CMKX reporting if for no other reason than to justify the large chunk of UCAD given to a .0002, non-reporting company.
_________________
"You just shot an unarmed MM!"
"Well, he should have armed himself"
Penny, here is the link.
http://www.cmkx.net/forum/viewtopic.php?t=3421
NSDM mentioned again: Post from CMKX.Net Forum.
Melvin came on paltalk to address the rumors of the CIM tender offer on the AMEX for monday. I think he came on to address this to the shareholders so that we would not get our hopes up and put all our beliefs in the rumor that this will be occuring monday. Melvin wants the shareholders to be happy, and he doesn't want to see us disapointed. Melvin did say he was pleased and excited about the company this week. This made me think of some other possible news. I am thinking that there will be either a PR stating a SGGM dividend to shareholders, or a PR stating another joint venture who I believe will be with NSDM North Star Diamonds. That is what I believe may be brewing this week. So lets sit back relax and wait to see what happens.
The email I got said:
Visit us at www.northstardiamonds.net
We have over $42 million dollars (US) in diamonds for sale. These can be viewed on our web site - Diamond Selection
- All diamonds are GIA or IGI certified and non-conflict
- Priced from $500 to $50,000 +
- Over 7,200 individual pieces
- This is the best selection and these are the best prices anywhere
- We will assist you in your choice of setting the diamond in a ring or jewelry for a special occasion, for yourself or as a gift
- We deliver in Canada or the US
Please visit us at www.northstardiamonds.net
Off topic but an interesting link posted by someone in the CMKX.net forum. Enjoy,
http://extra.waag.org/users/aske/moviez/sicaf_sand.wmv
Fyi, Walter called and left me a message at my office to explain there will be a Canadian version of the site operating soon for Canadians to order Diamonds online. Not 100% clear on the timing but soon.
Profit is $incoming > $outgoing so operating in profit right now is great news. However how many years have they NOT been in this siutation .. must have carved up some debt.
'Operating at a profit' are the key words. The company still has years of debt to pay off.
2004-10-07 10:00 ET - News Release
BELLINGHAM, WA, Oct. 7 /PRNewswire-FirstCall/ -- North Star Diamonds, Inc. (NQB Pink Sheets: NSDM) is pleased to announce it has incorporated a wholly owned subsidiary to market Canadian Diamonds.
This is a strategic move for North Star Diamonds, Inc since Canada is now producing 16% of the world's diamonds. The diamonds originate from the mines in the North West Territories. This will lead to NSDM having its own brand of diamonds which it can market world wide, thus giving NSDM better returns.
NSDM is also pleased to inform shareholders that North Star Diamonds, Inc. is now operating at a profit due to its diamond sales. The profit from diamond sales will be used to finance the exploration program, as is already done by companies such as DeBeers and Aber.
Geophysical work has now begun on Phase 3 of the exploration program in Pelican Rapids (Swan River) which is located 235 miles NW of Winnipeg in Manitoba. This area has many Kimberlite Indicator Minerals and six to eight geophysical targets. The progress of this project will be posted on our website as soon as the images become available.
"We expect a busy season for diamond sales and also a busy exploration program" states Walter Stunder, President and CEO.
For further information on NSDM, visit http://www.northstardiamonds.net/
Interesting, a CEO that sends me a private email correcting my grammar!
Thanks, GWN. I have sent in many emails .... the only response I did get was when they thought I was having problems making a diamond purchase. All other emails on Phase 1, 2 and 3 of exploration have received no reponse.
CMKM Diamonds, Inc. dividend stocks rally big!
U.S. Canadian Minerals (UCAD) up 54% from $6.15 to $9.50 per share
on news
Juina Mining (GEMM) up 82% from .033 to .06 per share
Last month, The Green Baron Report interviewed Rendal Williams, CEO
of U.S. Canadian Minerals (UCAD) so that our readers could not only
hear first hand some of the exciting developments within UCAD, but
perhaps gain further confidence over the prospects of CMKX.
Subsequently, the president of our parent company, Ed Miller, was
interviewed by DeWayne Reeves of the radio show called "Prosperity
for God's People" at www.familyvaluesradio.com where he speculated
that UCAD stock could reach $30 per share over the next year based
his due diligence. At the time, UCAD was trading at about $5.00 per
share – today UCAD hit a new year high at $10.81 per share.
News announced this morning, October 5, 2004 , did not seem strong
enough by itself to send shares of UCAD up so much. UCAD stated
that it will be releasing the timetable for completion of the
previously announced funding transaction with a London based private
investment company within the next few days. John S. Woodward,
President of UCAD stated, "We are eagerly awaiting completion of
this transaction as it will allow us to continue on our path of
rapid growth and acquisition."
Coincidentally, CMKX shareholders of record on August 20, 2004 are
expected to receive shares of UCAD tomorrow, October 6, 2004 as
stated in a press release issued on September 24, 2004 . The
relationship between the dividend payout of 7.5 million UCAD shares
to CMKX shareholders and the rise in UCAD stock the past two days is
very interesting to say the least.
The Green Baron Report has learned from company officials that the
transfer agent for CMKX has audited the UCAD shares due each CMKX
shareholder, and this transfer agent has sent the DTC the shares by
overnight mail today. It is possible that the DTC may require a few
extra days to distribute the restricted UCAD shares to all accounts
due shares. We suggest to our members to not be alarmed if it takes
up to a week to see the UCAD dividend shares appear in your account.
Once again, we suggest our members who purchased CMKX to hold steady
during these times if you want to be assured of receiving all
dividends. Please recall in a number of previous Green Baron
updates that there is no guarantee that you will receive stock
dividends unless you are a shareholder of record on the record date
AND the payout date. We believe that price and volume of CMKX may
be jerked around more prior to dividend payouts to shake loose any
weak shareholders.
Shares of Juina Mining (GEMM) also rallied strongly to levels not
seen in over two months. GEMM traded over 4 million shares today
and hit a high of .069 per share, up more than double the prior
day's close. Although there has not been a publicly announced press
release to verify this information, a source has told The Green
Baron Report that CMKM Diamonds, Inc. has been given an extension to
the original 60 day option to purchase shares equivalent to an
additional 24% of the outstanding shares in GEMM for $500,000. It
has been posted that CMKX shareholders of record October 1, 2004
will receive the GEMM dividend on November 15, 2004 .
The Green Baron Report is still confident that a filing from CMKM
Diamonds is imminent. We believe CMKX is on the verge of clearing
up many questions from loyal shareholders and bashers alike. In the
end, the price of CMKX will separate the winners from the losers.
Right now, it appears as though doubters of UCAD are left scratching
their heads. We believe that CMKX will be the next stock to rally
big, and leave the nay-sayers wondering why they did not participate
in The Stock Play of a Lifetime.
Well at least UCAD gave some excitement today.
Thanks, sold out - new hot tub on order.
Come on NSDM your next!!!!
October 4, 2004. (FinancialWire) The illegal manipulative trading issue known as “naked short selling” that has embroiled almost the whole of Wall Street, including lawsuits against A.G. Edwards (NYSE: AGE), Citigroup’s (NYSE: C) Citibank, Charles Schwab (NYSE: SCH) and Ameritrade Holding Corp. (NASDAQ: AMTD), found some attention at the recent Securities and Exchange Commission’s Forum on Small Business.
Delegates to the September 20 annual forum passed several resolutions on the issue to be submitted to the SEC. Among them were:
1. Extend Reg. SHO to apply to all publicly traded companies including non-reporting companies.
2. Recommend that the SEC Commissioners reinstate the proposed provision in Regulation SHO that prohibited a selling shareholder from withdrawing his/her profits from the trade until after delivery of the underlying sold shares.
3. SEC should require all SROs, and any clearinghouse for an SRO that receives securities into accounts for security holders to disclose the fact of the ability to loan the securities in the accounts and allow security holders to opt out of allowing the securities to be loaned.
The campaign against illegal and manipulative naked short selling suffered a major blow recently as a U.S. District Judge dismissed Jag Media Holdings’ (OTC: JAGH) suit upon a motion by some 75 defendants, including A.G. Edwards (NYSE: AGE) and Citigroup’s (NYSE: C) Citibank.
It left leaders of the campaign disillusioned at the quality of legal work being performed by the vaunted law firms Christian, Smith, Wukoson and Jewell, and OQuinn, Laminack and Pirtle, whose notches already include environmental targets, the breast implant industry and the tobacco industry, and may have squelched purported plans by General Electric’s (NYSE: GE) Dateline NBC program to air an expose on the naked shorting controversy.
According to Dow Jones (NYSE: DJ) reporter Carol Remond who first broke the story, which still doesn’t seem to have been revealed to the company’s investors and shareholders via either a press announcement or SEC filing, Jag Media and Gary Valinoti, the company's former chief executive, sued over 100 brokerage firms, investment firms and financial institutions in July 2002, alleging that they entered into a civil conspiracy and concert of action to short sell Jag Media's stock.
“In the suit, originally filed in the Judicial District Court, Harris county in Texas and later removed to the U.S. District Court for the Southern District of Texas, Houston Division, Jag Media alleged that the financial institutions committed market manipulation and fraud and violated securities laws,” Remond reported, noting that U.S. District Judge Vanessa Gilmore dismissed the planitiffs’ allegations of securities fraud and illegal short selling because of filing deficiencies, specifically that they “failed to state a claim, failed to allege any wrongdoing by any specific defendants and failed to properly claim fraud.”
The attorneys, including famed lawyer John O’Quinn, apparently had plenty of notice and opportunity to get their acts together. Remond noted that in September, 2003, Judge Gilmore had found that Jag Media failed to establish that all or any of the defendants violated the securities exchange act. Gilmore said that Jag Media's second amended complaint lacked specifics and asked Jag Media to file an amended complaint.
“Jag Media filed its third amended complaint in October 2003. The company alleged in that complaint that its case involves an initial scheme by three of the defendants - Mark Valentine, Thompson, Kernaghan & Co. and CALP II Limited Partnership - to defraud Jag Media into selling convertible preferred stock at less than fair market value. According to Jag Media, this initial scheme was followed by a second scheme in which brokers and market makers manipulated the company's shares for their own profit. Jag Media claimed that the financial firms used various trading tactics such as matched trades, washed trades, ‘painting the tape’ and selling counterfeit, or non-existent shares.”
Stockgate Today, the newsletter of InvestigatetheSEC.com founder Dave Patch said for the “legal teams spearheaded by millionaire Texas lawyer John O’Quinn,” the latest result of those efforts “appears to be a repeat pattern.”
He pointed out that Judge Gilmore’s “scathing ruling” cited “repeated deficiencies in the attorneys’ abilities to file an amended complaint meeting the standards of law.”
He said that despite the article in the Dow Jones, the lawyers had claimed they had heard of no such ruling, leading to Patch to deliver the fatal blow: “The lawyers were the last to know.”
Patch said that the lawyers had “been given over a year, as well as the benefit of a 2003 Order to draft up a third and final filing that met the standards of laws and once again they failed. With that, the lawsuit, and the evidence at hand will not be used in a court of law to determine guilt or innocence. The victims in this case will remain victims for now.”
Patch called the setback an “embarrassment to all the people who fight against the abuses taking place against the lower tier companies and the middle class investors who put their investments in these companies.”
Stockgate, a growing global malady, is being contested on multiple levels, including judicial, legislative and political.
Robert Shapiro, chair of Sonecon LLC, an economic advisory firm and former Under Secretary of Commerce from 1998 to 2001 and principal economic advisor to President William Clinton in his 1992 campaign, has expressed “serious concerns about the impact of the final version of Regulation SHO regarding short sales on the equity and transparency of our equity markets.”
Shapiro holds a Ph.D. from Harvard University and has been a Fellow of the National Bureau of Economic Research, the Brookings Institution, and Harvard University.
Shapiro said the SEC is correct to broaden the terms of regulation of short sales, and applauded the section directing broker dealers to mark all equity orders as “long,” “short” or “short exempt.” More important, he said, 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,” Shapiro charged.
“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.
He said the Depository Trust and Clearing Corporation 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,” said Shapiro.
“Instead, he noted, 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, said Shapiro, 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, said Shapiro, 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 and the designated examining authority any investor failing to deliver.”
More important, stated Shapiro, 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.”
Shapiro said he strongly concurs with the comments of the North American Securities Administrators Association (NASAA) on the draft rule, which said NASAA was “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.”
Shapiro stated that 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, 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.”
Shapiro urged 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.”
While the battle is still waged in the U.S., some of the threats to small investors’ investments are being exacted overseas. Despite some 250 companies winning their exit pass, the FaulkingTruth.com website reported that dozens of companies are still being refused delistings from the Berlin-Bremin Exchange, including ImageWare Systems (AMEX: IW) and Action Products International (NASDAQ: APII). FinancialWire also reported that Sontra Medical Corp. (NASDAQ: SONT) is among those whose shares Berlin has resisted delisting.
In all, Faulk said Berliner Freiverkehr CEO Holger Timm reported he has been asked by 386 firms to cease their trading. He is said to have balked at the term delisting, noting that “Trading foreign shares on the third-tier market segment at the Berlin or any other German exchange is not being regarded as a 'listing', therefore it is incorrect to use the term 'delisting' if a company wants to cease trading."
FaulkingTruth said others refused delistings include Endevco Inc. (OTCBB: ENDE), Limelight Media Group (OTCBB: LMMG), IpVoice Communications (OTCBB: IPVO), now NewMarket Technology Inc, (OTCBB: NMKT), Force Protection (OTCBB: FRCP), Cyber Digital Inc. (OTCBB: CYBD), and XRAYMEDIA (OTCBB:XRYM). Others mentioned yesterday included Military Communications Technology (OTCBB: MLTA), Dalrada Financial Corp. (OTCBB: DRDF), and Mannatech Inc. (NASDAQ: MTEX).
Timm sent a letter to companies asking to be delisted, which promised if “after considering the above aspects, should you still prefer your stocks not to be traded in Germany we will respect your wish and apply for delisting on the Berlin stock exchange.”
However, for dozens of companies, that appears to have been an empty offer.
Timm responded to Faulk that “the current situation regarding the eight companies questioned by you is as follows: ImageWare is listed on the AMEX and has been trading in Berlin since May, 3rd, 2000. Action Products is listed on NASDAQ and has been trading in Berlin since August, 10th, 1999. Endevco has been trading in Berlin since October, 22nd, 1999 with relevant retail trading volume (e.g. 1,855,440 shares traded in 2004). New Market Technologies has been trading with small volumes in Berlin since November, 24th, 2003. Force Protection and Xraymedia have commenced trading in February and March of this year. Because of the trading activities (trading in Force Protection totalled 40,000 shares and Xraymedia totalled 150,000 this year) the exchange refused the cessation of trading in these stocks.”
Officials of the Berlin exchange, however, were not as clear about the trading activities or lack of them.
As to its meetings with U.S. regulators from the U.S. Securities and Exchange Commission and the NASD, Timm reportedly stated: "We met the officials once on June 4th, but were not further involved in any talks or meetings. I know that the German exchanges and the German surveillance authorities continue with their talks but I am unaware of the status quo. Particularly, I am unaware of any efforts being made in the US to stop obvious short selling practices. I have got the impression from numerous conversations, that in the meantime many companies understand that Germany is not a place for short selling practices against US companies."
In a comment letter to the U.S. Securities and Exchange Commission, Larry Thompson, Managing Director and Senior Deputy General Counsel for the DTCC, said it is a violation of Section 17A of the Securities Act of 1934 to impose any process or restriction that would cause delays in the settlement process, said the online newsletter, published by http://www.investigatethesec.com.
“Although not the intent of the comment letter, Mr. Thomson has just become part of a growing number of people who contend that the most recent short selling reform package out of the SEC, Regulation SHO, may not be in compliance with federal law.
“The letter submitted to the SEC on August 16, 2004 was addressing the SEC’s proposal to restrict all transfer agents from clearing trades on those issuers who created a ‘Custody Only”’ restriction on the trading of their securities,” noted the newsletter.
“Many companies have, in the past sought out this ‘self-help’ measure to reduce the abuses of naked short selling. Without regulatory support in the fraud this was the only possible means of protection available to these issuers. Thomson, whose agency would stand to lose business by this ‘Custody Only’ style of trading, was agreeing with the SEC’s proposal when he ventured into the legal aspects of the issuers proposed restrictions.
“His legal points, presumably unintended, actually shot squarely across the bow of the SEC’s Regulation SHO,” said StockGate Today, pointing to http://www.sec.gov/rules/proposed/s72404/s72404-14.pdf
“The Proposed Rule furthers the goals articulated by Congress when it adopted Section 17A of the Exchange Act in that the Proposed Rule will, among other things, promote the prompt and accurate clearance and settlement of securities transactions and eliminate the delay, inefficiencies and unnecessary costs inherent in "certificate only "trading sought to be imposed by certain issuers.
Actually, said the publication, the statute referenced, Section 17A of the Securities Act repeatedly states: “The prompt and accurate clearance and settlement of securities transactions, including the transfer of record ownership and the safeguarding of securities and funds related thereto, are necessary for the protection of investors and persons facilitating transactions by and acting on behalf of investors.”
“Thompson concludes his opinion letter to the SEC by surmising that the SEC should proceed on with this proposal as written because issuers are not authorized to put restrictions on their stock. For transfer agents to clear these stocks would be aiding and abetting unlawful conduct. The point of law being the settlement requirements defined in Section 17A of the Securities Act of 1934.
“Thus, asked the newsletter, with Thompson “claiming that a delay in the settlement of trades is unlawful how can Regulation SHO be grounded by the presumption that trade settlements are not a mandatory part of the Markets?
“The SEC, in Regulation SHO claims that 4% of all publicly traded companies have levels of settlement failures that exceed an abusive threshold. They also admit that in some cases the failures exceed the entire public float of companies. These are market conditions not only create delays and inefficiencies but fraud and manipulation as well. The SEC’s final package never addressed forced settlements and forced timelines on the failures but instead simply threatened ‘future enforcement’ possibilities and placed “restrictions’ above abusive levels.
“The NASD tried to impose a 10 day mandatory window for settlement on fails and the SEC shot down their proposal.
“If the SEC claims the failures under the present DTCC/NSCC settlement system results in 4% of our companies failing above an abusive level, and agrees that delays in settlement are against the law, where is the enforcement of the Securities Act today?” asks the newsletter.
Rumors have been rampant for weeks that the SEC and NASD are at odds over the NASD’s proposals for stronger regulations to squelch illegal market manipulation, proposals that apparently have fallen on deaf ears at the SEC. The frustration boiled over recently when NASD officials responded to inquiries from Dave Patch, editor of Stockgate Today, by venting against criticisms they themselves were being too soft on fraudsters, money launderers and offshore hedge funds who lurk among the illegal naked short sellers.
Patch editorialized that the individual interviewed by the PIPES Report should be terminated.
“By my interpretation, this SEC spokesman has just admitted that they are willing to allow the abuse to take place and only initiate penalties after settlement failures have reached abusive levels. While the SEC does place this restriction of ‘pre-borrowing’ for future short sales, it only becomes a restriction once the failures in settlement reach above a certain abusive threshold.,” said Stockgate Today.
“The SEC never then forces the trades that failed settlement above this level to be immediately settled either. So where is the pain?
What prevents the criminals from attempting the crime? “The NASD’s proposal, unlike the SEC’s, would eliminate any and all opportunity to reach that abusive threshold in the first place as they focus on forcing trades to settle promptly as mandated in Section 17A of the Securities Act.”
Patch said the NASD proposal, now in jeopardy at the SEC, “forces the market to act responsibly.”
Stockgate Today noted that the SEC, in going forward with Regulation SHO, has ignored the NASD, North American Association of Securities Administrators, investors and issuers.
The final Regulation SHO rules are at http://www.sec.gov/rules/final/34-50103.htm. The trade reporting requirements are at http://www.nasdr.com/2610_2004.asp#04-54.
Recently it was reported that regulated companies, such as dealers, brokers, mutual fund companies, financing firms, and investment houses, have been told they have to submit revised operating manuals to incorporate changes in the Anti-Money-Laundering Act of 2001 by Oct. 29.
The key is a requirement that regulated firms “must know their customers” to prevent money-laundering practices. The firms have to have a procedure to get satisfactory proof of the customer's identity and ensure that effective procedures for verifying the identity of new customers are in place.
Although prospective clients should be interviewed personally, procedures for verification of accounts without face-to-face contact include independent verification of the home or business numbers for telephone interviews, and possible confirmation of employment.
Those outside the country must submit passports, birth certificates, driver’s licenses, employment identification cards or incorporation and partnership papers for corporate accounts, authenticated by a consulate.
However, FinancialWire interviews with spokespersons at the SEC has determined that individuals may open nominee offshore firms without providing their identities to anyone, and by using a multiple number of such nominee firms can even gain complete control of a public company while never revealing their true identities.
The SEC told FinancialWire that it has no power to require identification of individuals behind such firms.
Columnist Jack Anderson has stated that millions if not billions of dollars are laundered through naked short selling schemes.
Meanwhile, opponents of the illegal schemes await the SEC’s acknowledgement of a public NASD proposal that mandates guaranteed settlement of trades after a specifically defined time limit of failure. The SEC and the NASD had apparently hoped the issue would just die, as the proposal is much tougher than the watered-down Regulation SHO that is now on the way to becoming law and implemented in January, 2005.
In an email seen exclusively by FinancialWire, Marc Menchel, Executive Vice President and General Counsel of NASD’s Regulatory Policy and Oversight’s Office of General Counsel, told Patch that “it is not unusual for the SEC and NASD to propose courses of actions that differ in scope and practice as has happened here. The SEC, after thorough deliberation from our point of view, has spoken to this matter in the adoption of Reg SHO. At this juncture, we are considering whether further amendments are warranted to our proposal.”
Menchel said that indeed “NASD and SEC have been in conversations on this topic and both have pursued courses of rulemaking to address the topic.”
Twenty civil cases have now been filed by O'Quinn, Laminack & Pirtle, Christian Smith & Jewell, and Heard, Robins, Cloud, Lubel & Greenwood, LLP, all of Houston, Texas. The consortium of law firms, famed for the giant awards they obtained suing tobacco companies. The group recently brought suit against the Depository Trust and Clearing Corp. for allegedly participating in the short-selling conspiracy through its “stock borrow” program which the attorneys say is nothing more than an illegal electronic printing press for stock certificates.
Lead counsel John O'Quinn said: "We are committed to the relentless pursuit of justice.”
All this has led to some major changes on Wall Street, if not regulatory attentiveness.
Charles Schwab & Co. recently said it is exiting the market-making business. It is one of several market makers that have been the subject of accusations and/or legal entanglements over naked shorting allegations and issues.
The company had said it is either the number one or number two market-maker in more than half of all of NASDAQ’s (OTCBB: NDAQ) listed stocks.
Recently observers were surprised to find a comment letter submitted to the SEC by Mike Alexander, Senior VP of Charles Schwab, that admits outright that brokerages regularly ignore rules and regulations, saying it is not rules that need to be written; it is changes in behavior that is needed.
The comments were directed towards proposed changes in the U.S. settlement system, but could easily apply to other regulations as well.
“Improvements in the U.S. settlement system will only be truly achieved if and when regulations are rationalized to ensure that all market participants are held accountable for compliance. For example, the industry has struggled with the issue of institutional trade affirmation for quite some time now. While the benefits to the clearance and settlement system are self-evident, Buy-Side firms and Custodian banks have been resistant to make those changes that provide for same-day trade confirmation / affirmation and assurance of trade settlement,” said Alexander.
“Schwab opposes the notion that securities intermediaries such as broker-dealers be required to police compliance,” he stated. “The NYSE and other SROs have had trade affirmation rules on their books for some time. However, such rules have not been effective in changing the behavior of Buy-Side firms or their custodians; nor do the rules provide assurance that the affirmed trade will settle.
“Recognition of this fact is evidence that changes to the settlement cycle not only require overhauling systems, but also changing behavior. We believe that only by holding all market participants directly accountable for making required affirmations will the necessary changes to behavior,” he stated at http://www.sec.gov/rules/concept/s71304/charlesschwab061604.pdf .
In a June 23 release, the SEC stated it has put into place Rule 202(T), which establishes procedures to allow the Commission to temporarily suspend the operation of the current "tick" test in Rule 10a-1, and any short sale price test of any exchange or national securities association, for specified securities.
Through a separate order, the Commission will suspend, on a pilot basis for a period of one-year, the tick test provision of paragraph (a) of Rule 10a-1, and any short sale price test of any exchange or national securities association, for approximately one-third of stocks in the Russell 3000 index.
The order also will suspend, on a pilot basis for a period of one year, the tick test provision of paragraph (a) of Rule 10a-1 for short sales executed in any security included in the Russell 1000 index after 4:15 p.m. Eastern, and all other securities after the close of the consolidated tape, and until the open of the consolidated tape the next day.
The pilot will commence on January 3, 2005 to permit broker-dealers and self-regulatory organizations to make the necessary programming adjustments.
The Commission deferred consideration of the proposal to replace the current "tick" test of Rule 10a-1 with a new uniform bid test. The Commission could reconsider any further action on these proposals after the completion of the pilot.
Rule 203, which will incorporate current Rule 10a-2 and will create a uniform Commission rule requiring broker-dealers, prior to effecting short sales in all equity securities, to "locate" securities available for borrowing.
There will be limited exceptions from the locate requirement, including for short sales by registered market makers in connection with bona-fide market making.
Rule 203 also imposes additional requirements on designated "threshold securities." Rule 203 defines a threshold security to mean an equity security for which there is an aggregate fail to deliver position for five consecutive settlement days at a registered clearing agency of 10,000 shares or more and that is equal to at least 0.5% of the issue's total shares outstanding.
Where a clearing agency participant has a fail to deliver position in threshold securities that persists for ten consecutive days after settlement, the participant must take action to close out the position. Until the position is closed out, the participant, and any broker-dealer for which it clears transactions, may not effect further short sales in the particular threshold security without borrowing or entering into a bona fide arrangement to borrow the security.
Rule 203 will become effective 30 days after publication with a compliance date of January 3, 2005, to permit firms to make programming and procedural adjustments.
Rule 200, which among other things, will redesignate current Rule 3b-3 with some modifications to define ownership and aggregation of securities positions, and include a requirement to mark all sell orders in all equity securities. Rule 200 will become effective 30 days after publication.
The Commission also adopted amendments to Rule 105 of Regulation M to remove the current shelf offering exception, and issued interpretive guidance addressing sham transactions designed to evade the rule.
The amendment applies to short sales effected within five days prior to the pricing of a shelf offering. Such short sales may not be covered with offering securities purchased from an underwriter or other broker-dealer participating in the offering.
The Rule 105 amendments will be effective 30 days after publication in the Federal Register, and the interpretive guidance will be effective upon such publication.
Opponents of naked short selling were, however, quick to denounce the provision that allows market makers an exemption, and many market observers said that the SEC should provide a public list of companies that fall into the “threshold security” category.
“The SEC claims that the number of companies involved in this ‘threshold security’ category is 4% of all publicly traded companies. If in fact it is that small the process is certainly manageable,” said the website InvestigatetheSEC.com at http://www.investigatethesec.com . “It is also the right of every issuer, in protecting their business and their investors to know the status of their stock trading.”
Some were discussing whether the SEC can keep such information private under the Freedom of Information Act.
The marketplace is already upset over promises by the Berlin Stock Exchange, since broken, that it would delist any company upon request.
“Please understand that cessation of trading in the shares of XRAYMEDIA Inc. (OTCBB: XRYM) is not possible,” the exchange told one such requester.
It’s not just U.S. companies such as Whistler Investments (OTCBB: WHIS), Sonoran Energy (OTCBB: SNRN), Celsion Corporation (AMEX: CLN), and eLinear Inc. (AMEX: ELU) or Israeli companies that have had serious concerns about their unannounced and unathrorized listings on the Berlin-Bremen Stock Exchange.
Apparently, some 150 British companies are protesting the same fate.
A number of UK-listed companies have demanded a London Stock Exchange investigation after they found that their shares are being traded.
Meanwhile, Whistler, Sonoran and eLinear have announced they have successfully secured their delistings, and the U.S. Securities and Exchange Commission has rescheduled its open hearing to consider the adoption of amendments to Regulation Sho to October 4 at 9:30 a.m. The announcement is at http://www.sec.gov/news/digest/dig061504.txt .
According to the London Money Telegraph, “several companies believe the market for their shares has been distorted and that they have fallen in value after trading started on the Berlin-Bremen exchange.
“Some smaller companies, whose shares are lightly traded in London, fear the Berlin market has been used by speculators to short-sell their shares.”
The Telegraph said the number of companies are thought to be as high as 150, including even “larger companies” such as Matalan (OTC: MATNF) and Halfords.
Mladen Ninkov, the chairman of Aim-listed Griffin Mining (OTC: GFNMF), was quoted as saying: "We were put on the Berlin market without our knowledge by a German broker and now we've got about 8m shares out in a short sale. It is horrifying - that is about 4 per cent of the company and it is forcing the price down."
A spokesman for the London Stock Exchange said: "If there is evidence of market abuse we would refer that on to the appropriate authorities."
Whistler said that according to its transfer agent records, “we have 5,504,680 shares held by DTC, but the ADP broker search indicates of 6,217,458 shares being reported by broker/dealers as being held on behalf of their customers, indicating a short position of more than 700,000 shares. A summary report can be viewed at http://www.whistlerinvestments.com/shorts.html .
“We have therefore commenced work with DTC for a formal review of the reported excessive broker/dealer holdings of our stock so that we can conduct our corporate affairs properly in view of our planned stockholders meeting and other upcoming corporate matters. We again advise our stockholders make sure that they receive delivery of any shares that they purchase, and also that their stock is not being borrowed without authorization.
Holly Roseberry, President of Whistler Investments, states "We intend to get to the bottom of the excessive short position and bring stability back into the trading of our stock. We're happy to say that we have 5,133 stockholders and we expect all our stockholders to benefit from the shorters having to cover their short positions.”
FinancialWire has reported on the disclosure that “Dateline,” the investigatory TV program aired by General Electric’s (NYSE: GE) NBC unit, has purportedly been preparing a blockbuster expose of “Stockgate” (see separate story at http://www.financialwire.net).
It is not known if “Dateline” has uncovered continuing underworld connections to the scandal, but FinancialWire reported that Dateline may be pointing a large finger of conflict at the U.S. Securities and Exchange Commission itself, which reportedly receives a slice of every transaction fee as part of its budget. According to court filings supported by the O’Quinn/Christian legal network, almost $1 billion annually is received by the Depository Trust and Clearing Corp. for its “Stock Borrow Program,” which the lawsuits claim is just a fancy name for counterfeiting, as the DTCC purportedly lends out many multiples of the actual certificates in the float. Apparently the SEC receives a transaction fee for each transaction facilitated by these loans of non-existent certificates, which could knock a hole in its budget should the revenues from the practice be halted.
The North American Securities Administrators Association, comprised of state and Canadian regulators, has pointedly told the SEC that either it must rethink its cozy DTCC relationship, or it hints, some of its more aggressive state practitioners (think Eliot Spitzer) may do the rethinking for the SEC.
Naked short selling is worrisome for hundreds of small U.S. companies, including those recently asking to be delisted from the Berlin Stock Exchange, such as Golden Phoenix Minerals, Inc. (OTCBB: GPXM), Nannaco, Inc. (OTCBB: NNCO), 5G Wireless Communications, Inc. (OTCBB: FGWC), CyberAds, Inc. (OTCBB :CYAD), Provectus Pharmaceuticals, Inc. (OTCBB: PVCT), House of Brussels Chocolates (OTCBB: HBSL), InforMedix, Inc. (OTCBB: IFMX), Tissera, Inc. (OTCBB: TSSR), Americana Publishing, Inc. (OTCBB: APBH), Celsion Corporation (AMEX: CLN), ChampionLyte Holdings, Inc. (OTCBB: CPLY), Pickups Plus, Inc. (OTCBB:PUPS), China Wireless Communications Inc. (OTC BB: CWLC), CareDecision Corp. (OTCBB: CDED), Titan General Holdings, Inc. (OTCBB: TTGH), IPVoice Communications, Inc. (OTCBB: IPVO), Whistler Investments (OTCBB: WHIS), WARP Technology Holdings, Inc. (OTCBB: WRPT), BGR Corp. (OTCBB: BGRR), ICOA, Inc., (OTCBB: ICOA), DICUT, INC. (OTCBB: DCUTE), NHC Communications Inc. (TSX: NHC; OTCBB: NHCMF), Stratus Services Group, Inc. (OTCBB: SERV), Golden Phoenix Minerals, Inc. (OTCBB: GPXM).
Berliner Freiverkehr (Aktien) AG has been singled out as the broker and market maker that has been “listing” the companies. It is suspected that one broker, RA Angsar Limprecht, is involved in all if not most of the listings.
Small public companies are squeezed not only by hedge funds, naked short sellers, overseas listers such as the Berlin Stock Exchange, and the out-of-control “Stock Borrow Program” run by the governance-conflict-laden Depository Trust and Clearing Corporation, but to the amazement of the industry, as often and not by their own regulators.
A new staff recommendation by Annette Nazareth, director of the division of market regulation at the U.S. Securities and Exchange Commission to “outlaw” ownership of paper certificates at the same time the Depository Trust and Clearing Corporation is under intense scrutiny for alleged electronic counterfeiting has begun hitting the small public company markets, company executives, shareholders and manipulative short-selling opponents like the proverbial ton of bricks.
A Dow Jones (NYSE: DJ) article by Judith Burns sparked the uproar, as the inextricably intertwined web of connections between the SEC and the DTC, which is sagging from the weight of conflicted governance by representatives from a rollcall of industry heavyweights, including NASD, which owns NASDAQ (OTCBB: NDAQ), the New York Stock Exchange, Goldman Sachs (NYSE: GS) and Lehman Brothers (NYSE: LEH), to name only a few.
The rule proposal would bar stock transfer agents from handling shares that carry any limitations on transfer. Control over stock certificates is one of the ways that small companies have combated illegal naked short sellers. Burns quoted Nazareth as saying that these companies’ “self-help” efforts “aren’t helping U.S. markets overall.” Nazareth was quoted as saying restrictions on stocks are “a significant step backwards” in the “move from paper stock certificates to automated computerized trading.”
Nazareth said that abusive “naked” short selling has been a problem “in some cases,” but that is “best dealt with by a pending SEC proposal,” presumably Regulation SHO.
SEC Commissioner William Donaldson purportedly publicly refused to answer any questions from the NASD about the timing of the Commission’s consideration of the Regulation at a conference where he was simultaneously proposing early reforms of the mutual fund scandals. The Dow Jones said, however, that Robert Colby, SEC deputy market regulation division director, predicted the SEC will take that to a vote in early June.
The Dow Jones report noted that “naked short-selling occurs when sellers don't buy shares to replace those they borrowed, a manipulative practice that can drive a company's stock price sharply lower.
The stock certiticate plan has been put to a 30-day comment periodl Then the SEC would have to vote to adopt it. If adopted, Colby was quoted as saying that regulators might “sue firms that seek to impose restrictions on stock transfers.”
The recent lawsuit filed by Nanopierce Technologies (OTCBB: NPCT) alleges that the Depository Trust and Clearing Corp. has a lot of reasons, almost one billion of them a year, to keep illegal naked short selling in operation. It was the shot across the bow by the legendary Houston law firms of Christian, Smith, Wukoson and Jewell, and OQuinn, Laminack and Pirtle, whose notches already include environmental targets, the breast implant industry and the tobacco industry, all brought to their knees.
In comments to the U.S. Securities and Exchange Commission, C. Austin Burrell, who is providing litigation support and research for the law firms, said that StockGate is more massive than anyone may have imagined. “Illegal Naked Short Selling has stripped hundreds of billions, if not TRILLIONS, of dollars from American investors,” and have resulted in over 7,000 public companies having been “shorted out of existence over the past six years.” Burrell said some experts believe as much as $1 trillion to $3 trillion has been lost to this practice.
He stated that the restrictions on short selling were deliberately put into the Securities Acts of 1933 and 1934 because of the first-hand evidence then available that the “sheer scale of the crashes was a direct result of intentional manipulation of US markets through abusive short selling by a massive conspiracy.”
Burrell noted that the 65-lawyer team presided over by lead lawyers Wes Christian and John O’Quinn has uncovered more than 1,200 hedge fund and offshore accounts working through more than 150 broker-dealers and market makers in a joint cooperative effort to strip small and medium size public companies of their value.
Recently the NASD and U.S. Securities and Exchange Commission approved an interim naked short-selling band-aid, requiring U.S. brokers to make an “affirmative determination” that short-sellers, even foreign short-sellers, mostly Canadian, can find certificates to cover before processing the order.
Last year, many besieged public companies sought refuge from the manipulation by seeking to exit the DTC, but on October 4, 2003, the SEC stated “the issues surrounding naked short selling are not germane to the manner in which DTC operates as a depository registered as a clearing agency. Decisions to engage in such transactions are made by parties other than DTC. DTC does not allow its participants to establish short positions resulting from their failure to deliver securities at settlement. While the Commission appreciates commenters' concerns about manipulative activity, those concerns must be addressed by other means.”
The Nanopierce lawsuit, said to be the first of many out of the box, emphatically suggests otherwise. According to lawyer Christian, et.al., the DTC is at the very heart of the problem, and has almost a billion dollars a year at stake in keeping the problem.
The Depository Trust Company (DTC) is a member of the U.S. Federal Reserve System, a limited-purpose trust company under New York State banking law and a registered clearing agency with the SEC. The depository supposedly brings efficiency to the securities industry by retaining custody of some 2 million securities issues, effectively "dematerializing" most of them so that they exist only as electronic files rather than as countless pieces of paper. The depository also provides the services necessary for the maintenance of the securities it has in “custody.”
According to the suit, the DTCC has an enormous pecuniary and conflicted interest in the entire short selling scandal through the huge income stream they were realizing from it every day. They have made literally billions of dollars lending individual real shares, in most cases over and over, getting a fee each time they made a journal entry in the “Stock Borrow Program.”
The Stock Borrow Program was purportedly set up to facilitate expedited clearance of stock trades. Somewhere along the line, the DTCC became aware that if it could lend a single share an unlimited number of times, it could collect a fee each time, according to Burrell. “There are numerous cases of a single share being lent ten or many more times,” giving rise to the complaint that the DTCC has been electronically counterfeiting just as was done via printed certificates before the Crash.
“Such re-hypothecation has in effect made the potential ‘float’ in a single company's shares virtually unlimited and the term ‘float’ meaningless. Shares could be electronically created/counterfeited/kited without a registration statement being filed, and without the underlying company having any knowledge such shares are being sold or even in existence.” Burrell said the Christian/O’Quinn lawsuits will seek to show that the “counterfeiting/creation of unregistered shares is a specific violation of the Securities Act of 1933, barring the ‘Sale of Unregistered Securities’.”
While the Nanopierce lawsuit has been filed at the state level, another companion lawsuit just heading to the courts on behalf of Exotics.com (OTC: EXII) will be argued at the Federal level.
Nanopierce’s suit in the 2nd Judicial District Court in Nevada, is Case No. CV04-01079, alleges that the DTC’s “stock borrow program” was “purportedly created to address SHORT TERM delivery failures,” but that the “end result of the program has been to create tens of millions of unissued and unregistered shares to be traded in the public market,” and in some instances resulting in “two or more shareholders who purchase shares in separate transactions to own the same shares.”
The complaint alleges that the DTC has a colossal disincentive to stop the “stock borrow” program, booking revenues from services of $425,416,000 and similarly, the NSCC deriving revenues of $293,133,000.
Further, the suit alleges that “open positions” resulting from this activity at the close of business on December 31, 2003, “approximated $3,025,467,000” due to NSCC, and $2,303,717,000 due by NSCC, and unsettled positions of $721,750,000 for securities borrowed through the NSCC’s “Stock Borrow Program.”
Nanopierce claims that DTCC and NSCC have joined in a “scheme” to “manipulate downward the price of the affected securities, thereby reducing the market value of the open fail to deliver positions.” The suit also claims that the s have permitted sellers to maintain open fail to deliver positions of tens of millions of shares for periods of a year and even longer.
It quotes the National Association of Security Dealers as admitting that “concerns have been raised by members, issuers, investors and other interested parties about potentially abusive short selling activities occurring in the marketplace. In particular, naked short selling, or selling short without borrowing securities to make delivery, can result in long term failures to deliver, including aggregate failures to deliver that exceed the total float of a security. NASD believes such extended failures to deliver can have a negative effect on the market. Among other things, by not having to deliver securities, naked short sellers can take on larger short positions than would otherwise be permissible, which can facilitate manipulative activity.”
Nanopierce claims that it had “relied on material misrepresentations and omissions by DTC and NSCC in trading its shares in the stock market “without knowledge of s’ fraud-on-the market through statements they made about the clearing and settlement services they provided.” Further, it claims that the s acted with “scienter” since they had a major financial financial motivation to falsely represent their services, which Nanopierce claims are also anticompetitive.
The largely unregulated DTC has become something of a defacto Czar presiding over the entire U.S. markets system, wielding more day-to-day influence and control than the SEC, the NASD and NASDAQ combined. And, as the SEC’s October 4 ruling indicates, its monopoly over the electronic trading system appears even to be protected.
The Depository Trust and Clearing Corp.’s two preferred shareholders are the New York Stock Exchange and the NASD, a regulatory agency that also owns the NASDAQ (OTCBB: NDAQ) and the embattled American Stock Exchange! Regulators, regulate thyself?
In an era when corporate governance is the primary interest for the SEC and state regulators, the DTCC is hardly a role model. Its 21 directors represent a virtual litany of conflict:
They include Bradley Abelow, Managing Director, Goldman Sachs (NYSE: GS); Jonathan E. Beyman, Chief Information Officer, Lehman Brothers (NYSE: LEH); Frank J. Bisignano, Chief Administrative Officer and Senior Executive Vice President, Citigroup / Solomon Smith Barney's Corporate Investment Bank (NYSE: C); Michael C. Bodson, Managing Director, Morgan Stanley (NYSE: MWD); Gary Bullock, Global Head of Logistics, Infrastructure, UBS Investment Bank (NYSE: UBS); Stephen P. Casper, Managing Director and Chief Operating Officer, Fischer Francis Trees & Watts, Inc.; Jill M. Considine,Chairman, President & Chief Executive Officer, The Depository Trust & Clearing Corporation (DTCC);
Also, Paul F. Costello, President, Business Services Group, Wachovia Securities (NYSE: WB); John W. Cummings, Senior Vice President & Head of Global Technology & Services, Merrill Lynch & Co. (NYSE: MER); Donald F. Donahue, Chief Operating Officer, The Depository Trust & Clearing Corporation (DTCC); Norman Eaker, General Partner, Edward Jones; George Hrabovsky, President, Alliance Global Investors Service; Catherine R. Kinney, President and Co-Chief Operating Officer, New York Stock Exchange; Thomas J. McCrossan, Executive Vice President, State Street Corporation (NYSE: STT); Eileen K. Murray, Managing Director, Credit Suisse First Boston (NYSE: CSR); James P. Palermo, Vice Chairman, Mellon Financial Corporation (NYSE: MEL); Thomas J. Perna, Senior Executive Vice President, Financial Companies Services Sector of The Bank of New York (NYSE: BNY); Ronald Purpora, Chief Executive Officer, Garban LLC; Douglas Shulman, President, Regulatory Services and Operations, NASD; and Thompson M. Swayne, Executive Vice President, JPMorgan Chase (NYSE: JPM).
In their comments to the SEC regarding Regulation SHO in January, the 50 state regulators, through their association, the North American Association of Securities Administrators (NASAA) issued what many consider to be a strong warning that if the DTC is not dealt with in the final regulations, state regulators such as New York State Attorney General Eliot Spitzer may step to the plate.
In what many considered to have been explosive comments, Ralph Lambiase, NASAA president and Director of the Connecticut Division of Securities, warned "NASAA urges the Commission to reconsider its stance regarding the role of the Depository Trust and Clearing Corporation (the DTC). As a threshold matter, NASAA believes that the Commission should explicitly prohibit the DTC from lending more shares of a security than it actually holds. The ability of the overall proposed rule would be severely impared unless the Commission undertakes to implement such a prohibition.”
As the Nanopierce lawsuit reveals, those were indeed strong words, meddling as it did, in a substantial revenues base for the DTCC.
Recently, leading market makers and brokers named in various lawsuits and other actions, including FleetBoston (NYSE: FBF), Goldman, Sachs & Co. (NYSE: GS), H. Myerson & Co., Inc. (NASDAQ: MHMY), Olde / H&R Block (NYSE: HRB), Charles Schwab (NYSE: SCH), Toronto-Dominion’s (NYSE: TD), TD Waterhouse Group, Bank of America's (NYSE: BAC) Banc of America Securities LLC, Societe Generale's (OTC: SCGLF) SG Cowen Securities Corp. vFinance, Inc. (OTCBB: VFIN), Knight Trading Group, Inc. (NASDAQ: NITE), A.G. Edwards, Inc. (NYSE: AGE), Ameritrade Holding Corp. (NASDAQ: AMTD), Deutsche Bank AG (NYSE: DB), and ETrade Group, Inc. (NYSE: ET), were forced to comply with new short-selling market regulations imposed by the NASD after the SEC had “sat on” the NASD request to plug material loopholes for almost 2-1/2 years.
“The new rules expand the scope of the affirmative determination requirements to include orders received from broker/dealers that are not members of NASD ("non-member broker/dealers").
The new rule is on the web at http://www.nasdr.com/2610_2004.asp#04-03
The rule itself, while welcomed by small companies and their shareholders in the U.S., nevertheless raised an outcry because the NASD’s request to put it into effect had set on a shelf at the SEC since 2001.
The scandal has embroiled hundreds of companies and dozens of brokers and marketmakers, in a web of internaitional intrigue, manipulative short-selling and cross-border acctions and denials.
Comments on Regulation SHO ended January 5, and may be viewed at http://www.sec.gov/rules/proposed/s72303.shtml .
Some 122 companies, including 13 brokers, such as FleetBoston (NYSE: FBF), Goldman, Sachs & Co. (NYSE: GS), H. Myerson & Co., Inc. (NASDAQ: MHMY), Olde / H&R Block (NYSE: HRB), Charles Schwab (NYSE: SCH), Toronto-Dominion’s (NYSE: TD), TD Waterhouse Group and vFinance, Inc. (OTCBB: VFIN). A.G. Edwards, Inc. (NYSE: AGE), Ameritrade Holding Corp. (NASDAQ: AMTD), Deutsche Bank AG (NYSE: DB), Knight (NASDAQ: NITE) and ETrade Group, Inc. (NYSE: ET), have been embroiled for over a year in a raging controversy
The remaining 109 companies among the 122 named to date have issued press releases or been named in the media as having been victimized, or as taking various actions, either alone or in concert with other companies, to oppose manipulative trading in the form of illegal naked short selling. The actions have ranged from lawsuits to withdrawals and threatened withdrawals from the electronic trading system managed by the Depository Trust & Clearing Corp., to withdrawals from toxic financings, to the issuance of dividends or name changes designed to squeeze manipulators, to joining associations or networks or to contacting regulatory authorities to provide documentation of abuses or otherwise complain.
The complete list of those 108 companies include Advanced Viral Research Corp. (OTCBB: ADVR), AdZone Research, Inc. (OTCBB: ADZR), Amazon Natural Treasures (OTC: ANTD), America's Senior Financial Services (OTCBB: AMSE), American Ammunition, Inc. (OTCBB: AAMI), AngelCiti Entertainment (OTCBB: AGLC), ATSI Communications, Inc. (OTC: ATSC), Federal Agricultural Mortgage / Farmer Mac (NYSE: AGM) Allied Capital (NYSE: ALD), American Motorcycle (OTC: AMCYV), American International Industries (OTCBB: AMIN), Ameri-Dream (OTC: AMDR), Adirondack Pure Springs Mt. Water Co. (OTCBB: APSW), ATSI Communications,Inc. (OTC: ATSC) Bluebook International (OTCBB: BBIC), Blue Industries (OTCBB: BLIIV), Bentley Communications (OTCBB: BTLY), BIFS Technologies Corporation (OTCBB: BIFT), Biocurex (OTCBB: BOCX). Broadleaf Capital Partners, Inc. (OTCBB: BDLF), Chattem, Inc. (NASDAQ: CHTT), Critical Home Care (OTCBB: CCLH), Composite Holdings (OTC: COHIA), CyberDigital, Inc. (OTCBB: CYBD). Diamond International Group (OTCBB: DMND), Dobson Communications Corp. (NASDAQ: DCEL), Eagle Tech Communications (OTC: EATC), Edgetech Services (OTCBB: EDGH);
Also, Endovasc Ltd. (OTCBB: EVSC), Enviro-Energy Corporation (OTCBB: ENGY), Environmental Products & Technologies (OTC: EPTC), Environmental Solutions Worldwide, Inc. (OTCBB: ESWW), EPIXTAR Corp. (OTCBB: EPXR), eResearchTechnologies, Inc. (NASDAQ: ERES), Flight Safety Technologies (OTCBB: FLST), Freddie Mac (NYSE: FRE), FreeStar Technologies (OTCBB: FSRCE), Front Porch Digital,
Inc. (OTCBB: FPDI), Geotec Thermal Generators, Inc. (OTCBB: GETC), Genesis Intermedia (OTC: GENI), GeneMax Corp. (OTCBB: GMXX), Global Explorations Inc (OTC: GXXL), Global Path (OTCBB: GBPI), GloTech Industries, Inc. (OTCBB: GTHI), Green Dolphin Systems (OTCBB: GLDS), Group Management (OTCBB: GPMT), Hop-On (OTC: HPON), H-Quotient, Inc., (OTCBB: HQNT), Hyperdynamics Corp. (OTCBB: HYPD), International Biochem (OTCBB: IBCL), Intergold Corp. (OTCBB: IGCO), International Broadcasting Corporation (OTCBB: IBCS), InternetStudios, Inc. (OTCBB: ISTO), ITIS Holdings (OTCBB: ITHH), Investco Corp. (OTCBB: IVCO), Lair Holdings (OTC: LAIR), Lifeline BioTechnologies Inc. (OTC: LBTT), Life Energy & Technology (OTCBB: LETH), MBIA (NYSE: MBI);
Also, MegaMania Interactive (OTC: MNIA), MetaSource Group, Inc. (OTCBB: MTSR),Midastrade.com (OTC: MIDS), Make Your Move (OTCBB: MKMV), Medinah Minerals (OTC: MDMN), MSM Jewelry Corp. (OTC: MSMC), Nanopierce Technologies, Inc. (OTCBB: NPCT), Nutra Pharmaceutical (OTCBB: NPHC), Nutek (OTCBB: NUTK), Navigator Ventures (OTC: NVGV), Orbit E-Commerce, Inc. (OTCBB: OECI), Pitts & Spitts (OTC: PSPP), Sales OnLine Direct (OTCBB: PAID), Pacel Corp. (OTCBB: PACC), PayStar Corporation (OTC: PYST),Petrogen Corp. (OTCBB: PTGC), Pinnacle Business Management (OTC: PCBM), Premier Development & Investment, Inc. (OTCBB: PDVN), PrimeHoldings.com, Inc. (OTC: PRIM), Phlo Corporation (OTCBB: PHLC), Resourcing Solutions (OTC: RESG), Reed Holdings (OTC: RDHC), Rocky Mountain Energy Corp. (OTCBB: RMECE), RTIN Holdings (OTCBB: RTNHE), Saflink Corp. (NASDAQ: SFLK), Safe Travel Care (OTCBB: SFTVV), Sedona Corp. (OTCBB: SDNA);
Also, Sionix Corp. (OTCBB: SINX), Sonoran Energy (OTCBB: SNRN), Starmax Technologies (OTC: SMXIF), Storage Suites America (OTC: SSUA), Suncomm Technologies (OTC: STEH), Sports Resorts International (NASDAQ: SPRI), Technology Logistics (OTC: TLOS), Swiss Medica, Inc. (OTCBB: SWME), Ten Stix, Inc. (OTCBB: TNTI), Tidelands Oil (OTCBB: TIDE), Titan Construction (OTC: TTCS), Trezac Corp. (OTCBB: TRZAV), Universal Express, Inc. (OTCBB: USXP), Valesc Holdings, Inc. (OTCBB: VLSHV), Vega Atlantic (OTCBB: VGAC), Viragen (AMEX: VRA), Viragen International (OTCBB: VGNI), Vista Continental Corporation, (OTCBB: VICC), Viva International (OTCBB: VIVI), Vtex Energy (OTCBB: VXENE) and Wizzard Software (OTCBB: WIZD), WorldTradeShow.com (OTC: WTSW) and Y3K Secure Enterprise Software, Inc. (OTCBB: YTHK).
Earlier in 2003, the SEC fined Rhino Advisors, Inc., $1 million for its representation of Amro International in the financing and manipulation of Sedona Corp. Amro, also known as AMRO, was registered in Panama, a secretive offshore haven, but was not named in the SEC settlement. Another 60 public companies may have been manipulated by the fined Rhino Advisors and its indicted principals, or its funding apparatus, Amro.
These include:
All American Food Group Inc (OTC: AAFGQ), Amanda Co Inc (OTC: AMNA), Antra Holdings (OTC: RECD), Aquis Communications Group Inc (OTCBB: AQUIS), Avanir Pharmaceuticals (AMEX: AVN), Bionutrics Inc (OTC: BNRX), Brilliant Digital Entertainment Inc (AMEX: BDE), Bravo! Foods International Corp. (OTCBB: BRVOE), Butler National Corp (NASDAQ: BUTL),Calypte Biomedical Corp (OTCBB: CYPT), Chemtrak Inc/DE (OTC: CMTR), Clicknsettle Com Inc (OTCBB: CLIK), Corporate Vision Inc (OTC: CVIA), Crown Laboratories Inc/DE (OTC: CLWB), Dental Medical Diagnostic Systems Inc (OTC: DMDS), Detour Media Group Inc (OTC: DTRM),
Also, Digital Privacy Inc/DE (OTC: DGPV), Senior Services Inc (OTC: DISS), International Inc (OTC: DYNX), Endovasc Ltd Inc (OTCBB: EVSC), Esynch Corp/CA (OTCBB: ESYN), Focus Enhancements Inc (NASDAQ: FSCE), Frederick Brewing Co (OTC: FRBW), Greystone Digital Technology Inc (OTC: GSTN), Havana Republic Inc/FL (OTCBB: HVNR), Henley Healthcare Inc (OTC: HENL), Hollywood Media Corp (NASDAQ: HOLL), Ibiz Technology Corp (OTCBB: IBZT), Diagnostic Systems Inc/FL (OTCBB: IMDS), Imaging Technologies (OTCBB: IMTO), Integrated Surgical Systems Inc (OTCBB: RDOC),
Also, Interferon Sciences Inc (OTC: IFSC), Interiors Inc (OTC: ITRNA), Laminaire Corp (OTC: THMZ), Medisys Technologies Inc (OTC: SCEP), Milestone Scientific Inc/NJ (AMEX: MS), Nevada Manhattan Group Inc (OTC: NVMH), Innovations Inc (OTCBB: NTGE),Systems Group (OTC: OSYM), Pacific Systems Control Technology Inc (OTCBB: PFSY), Professional Transportation Group Ltd Inc (OTC: TRUC), Rnethealth Inc (OTC: RNTT),
Also, Sand Technology Inc (NASDAQ: SNDT), Sedona Corp (OTCBB: SDNA), Silverado Foods Inc (OTC: SVFO), Stockgroup Information Systems (OTCBB: SWEB) Surgilight Inc (OTC: SRGL), Tasty Fries Inc (OTCBB: TFRY), Tech Laboratories Inc (OTCBB: TCHL), Teltran International Group Ltd (OTC: TLTG), Titan Motorcycle Co of America Inc (OTC: TMOTQ), Trans Energy Inc (OTCBB: TSRG), Motorcycle Co (OTC: UMCC), Universal Communication Systems Inc (OTCBB: UCSY), Medical Systems Inc (OTC: UMSI), Vianet Technologies Inc (OTC: VNTK),Viragen Inc (AMEX: VRA), Webcatalyst Inc (OTC: WBCL), Worldwide Wireless Networks Inc (OTCBB: WWWNQ), and ZAP (OTCBB: ZAPZ).
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Well Doc its 5:00 Sunday.....
Right, NSDM 'profitability' just a transfer of cash from BSM.
Let us know what you find out.
Thx GWN, the website sure is nicer then NSDMs.
So do you believe Black Sea Minerals is sitting idle or is that where Walter's attention is now?
Please Comment:
Anyone know anything of Black Sea Minerals? Does it still exist?
Is this pre=NSDM for Walter or still active as well?
Same address as NSDM, Walter noted as President.
http://www.blackseaminerals.com/enter.html
http://www.blackseaminerals.com/pages/management.html
CMKM Diamonds mired in outstanding muddle
2004-10-01 21:13 ET - Street Wire
Also Street Wire (U-UCAD) US Canadian Minerals Inc
by Lee M. Webb
CMKM Diamonds Inc., a highly touted pink sheet diamond exploration play featuring a funny car dragster as a promotional vehicle, is mired in an apparent muddle over its share structure. Published ratios for two CMKM dividend-in-specie schemes peg the outstanding total at approximately 780 billion shares, but a third dividend-in-specie ratio seems to set the total at an even more staggering 1.56 trillion shares.
Many CMKM shareholders, particularly members of the cult-like following that congregates on an Internet chat site called PalTalk, dismiss any suggestion that the company has anywhere near 780 billion shares outstanding, let alone an outstanding total of more than 1.56 trillion shares.
The outstanding muddle
CMKM is headed by Prince Albert, Sask., native Urban Casavant, a former prison guard and then U-Haul entrepreneur who moved on to become a self-taught prospector and minor stock promoter. Mr. Casavant now makes his home in Las Vegas, Nev., from whence he launched his latest promotion, which once featured another 22 Casavants as shareholders.
The company stopped filing with the U.S. Securities and Exchange Commission (SEC) in July of 2003, so there is little in the way of current information regarding CMKM available from official sources. Among other things, speculation regarding CMKM's share structure has been rampant since the company bowed out of reporting.
A brouhaha erupted in late June when a newly hired transfer agent, Pacific Stock Transfer, publicly pegged the number of outstanding shares at a staggering 400 billion. CMKM immediately dismissed Pacific Stock Transfer, but did not bother provide its own disclosure regarding the number of outstanding shares.
In a series of transactions in July, CMKM acquired shares in three other companies and subsequently announced three dividend-in-specie distributions of those shares. The company acquired 7.5 million shares of OTC Bulletin Board-listed U.S. Canadian Minerals Inc., 40 billion shares of privately owned Casavant International Mining and approximately 95.5 million shares of Juina Mining Corp., which changes hands on the pink sheets.
On Aug. 18, after announcing the dividend-in-specie schemes, CMKM filed an amendment with the Nevada Secretary of State increasing its authorized share total to 800 billion.
U.S. securities regulations require that information regarding dividend distributions, including the dividend ratios, be provided to the National Association of Securities Dealers. That information is now in the public domain, courtesy of the OTC. However, the muddle over the number of outstanding shares remains.
According to revised information regarding the distribution of 7.5 million shares of U.S. Canadian Minerals now payable on Oct. 6, shareholders will receive 0.00000962 of a restricted share of U.S. Canadian for each share of CMKM. A simple calculation using that ratio sets the number of outstanding CMKM shares at a staggering 779.6 billion.
A calculation based on published information regarding the dividend distribution of 95.5 million shares of Juina Mining reportedly payable on Nov. 15 yields a similar figure. Shareholders will receive 0.00012267 of a restricted share of Juina Mining for each share of CMKM held, setting CMKM's outstanding total at a comparably lofty 778.5 billion.
However, a calculation involving the dividend-in-specie distribution of shares of Casavant International Mining reportedly payable on Oct. 18 and falling in between the two other dividend-in-specie distributions yields an outstanding figure that is approximately double the amount produced by the other two calculations.
According to the published information regarding the dividend distribution of Casavant International Mining shares, shareholders will receive 0.0256 of a restricted share of Casavant International Mining for each CMKM share held. Assuming the full 40 billion shares of Casavant International Mining are distributed, that calculation pegs CMKM's outstanding total at more than 1.56 trillion shares.
While the distribution of only half of the 40 billion shares held by CMKM or even a share consolidation of Casavant International Mining on the basis of one new share for each two old shares might account for the peculiar discrepancy in the calculations, public information regarding privately owned Casavant International Mining is even sketchier than the public information available for CMKM.
Stockwatch contacted the Nevada Secretary of State for what little information is available regarding Casavant International Mining, formally headed up by CMKM's chief executive officer Mr. Casavant and now at least nominally led by Ron Casavant.
No information was provided that might explain the discrepancy in the calculations. Adding to the general muddle surrounding CMKM, however, the Nevada Secretary of State reported that as of Sept. 28 Casavant International Mining was only authorized to issue a modest 25 million shares.
Evidently some paper work will have to be completed before the Oct. 18 dividend-in-specie distribution of shares of Casavant International Mining.
In the meantime, many Internet followers of CMKM simply do not believe the company has issued approximately 780 billion shares or more.
A favourite mantra among the CMKM PalTalk faithful is, "Don't believe anything unless you see it in a PR." Melvin O'Neil, the company's investor relations spokesman, has intoned the same mantra during his frequent participation in the PalTalk chats.
Since CMKM has not disclosed either the number of outstanding shares or even the dividend-in-specie ratios in press releases, the faithful profess not to believe the officially published ratios or the staggering number of outstanding shares revealed by those ratios.
Of course, that particular mantra is only selectively invoked. It does not seem to apply, for example, to fantasies about a massive short position responsible for depressing the company's share price, an "intrinsic valuation" of a trillion dollars or higher, unsupported claims about the largest diamond find in the world or many other wild speculations embraced by the CMKM faithful.
Whether by design or chance, CMKM has managed to attract a remarkably large number of naive, excitable, imaginative and intensely loyal shareholders, many of whom have brought relatives, friends, co-workers and other acquaintances into the stock. Indeed, CMKM seems to have tapped into a promoter's dream, a growing, proselytizing vanguard of believers zealously searching out potential converts for the promotion.
The promotion
CMKM's promotion turns on the company's various interests in a number of Saskatchewan mining claims, particularly some property in the vicinity of Fort a la Corne, where there are two advanced diamond exploration projects entirely unrelated to CMKM. The company's own modest drilling efforts in the Fort a la Corne area have not produced much in the way of toutable results.
Indeed, as disclosed on June 15 by CMKM's Canadian joint venture partners, Consolidated Pine Channel Gold Corp. and United Carina Resources Corp., only one of 12 samples from a five-hole drilling program on the previously drilled Smeaton property yielded any microdiamonds, two tiny stones with a combined weight of 0.000005 carat.
While the less than impressive drilling results had some negative impact on CMKM's subpenny stock price, they did not seem to have much of an impact at all on the enthusiasm of many of the company's devoted followers. Indeed, a remarkably large number of the CMKM acolytes believe that the company has made a massive diamond discovery, but is keeping the find secret until it is ready to reveal a so-called "master plan."
The touts
Promotion is an important part of any mining play, and paid touts are a rather common feature of mining promotions. CMKM has benefited from both compensated and reportedly uncompensated touts.
Earlier this year, an outfit based in Boca Raton, Fla., distributed a CMKM tout consisting of an article lifted from the Prince Albert Daily Herald, 11 factoids widely available on the Internet regarding diamond exploration in Saskatchewan and a two-paragraph closing blatantly plagiarized from an Oct. 21, 2003, Stockwatch article. The real investment pitch was none too subtly inserted into the material plagiarized from the Stockwatch article.
The Boca Raton tout outfit, which seems to have since vanished into cyberspace, received one billion free trading shares of CMKM for its efforts. According to the disclaimer that no longer appears in cached versions of the tout, PartTime Management Inc. anted up the one billion CMKM shares.
Interestingly, a search of Nevada-registered corporations reveals a company named Part Time Management Inc., with "Part" and "Time" not elided. The registered agent for Part Time Management is David Desormeau, who has a number of connections to Mr. Casavant. Part Time Management's officers are identified as James Kinney and Ginger Gutierrez. Mr. Kinney and Ms. Gutierrez previously served as investor relations representatives for CMKM.
Mr. Casavant's pink sheet promotion has more recently piggybacked on a paid tout for an associated company that trades on the OTC Bulletin Board, U.S. Canadian Minerals.
On July 18, OTCPro.com published a tout for U.S. Canadian Minerals that led off with two paragraphs primarily devoted to CMKM and followed up with several more mentions of the company and eight bulleted factoids about diamond mining in Saskatchewan.
"OTCP has been compensated 50,000 free trading shares of UCAD (U.S. Canadian Minerals) by IB2000, a non-affiliated third party," the disclaimer at the end of the tout notes. At the time the tout was published, U.S. Canadian Minerals was changing hands for $4.50 per share and within seven trading days jumped to $7.35 per share. (All amounts are in U.S. dollars.)
Interestingly, a search of Nevada-registered corporations reveals a company named IB 2000.com., with "IB" and "2000" not elided. The resident agent and only officer of IB 2000 is identified as John E. Dhonau, reportedly a key figure behind CMKM, U.S. Canadian Minerals and associated companies.
CMKM has perhaps received even more promotional mileage from reportedly uncompensated touts who have flocked to the play.
Harold (Hal) Engel, who does his compensated and uncompensated promoting under the banner of WillyWizard.com, supplemented by thousands of Internet posts, was an early cheerleader and remains one of the most prolific CMKM touts.
Mr. Engel, who ran afoul of U.S. regulators in connection with some compensated touting three years ago, reportedly holds approximately 940 million shares of CMKM, but has not received compensation for his yeoman's work spinning out fantastic tales about the company's prospects.
The Green Baron, headed by Ed Miller, is a relative newcomer to the stable of CMKM touts and has provided free tout services for both CMKM and U.S. Canadian Minerals. He has also touted CMKM as a guest on a radio program called Prosperity for God's People.
Mr. Miller apparently holds a position in CMKM, as does his father upon his recommendation, but the extent of those holdings has not been disclosed. The Green Baron has been beating the drum for CMKM as "the stock play of a lifetime."
Pastor Dewayne Reeves, chief executive officer of Christian Traders and radio host of Prosperity for God's People, has also been spreading the good word about CMKM. Like WillyWizard and the Green Baron, Christian Traders holds shares of CMKM, but the good pastor disclaims receiving any compensation for touting the stock.
In addition to some of the more established touts, a number of bullish CMKM gurus have staked out positions on several Internet message boards where fantastic tales are served up to like-minded CMKM supporters.
The most bullish, imaginative and faithful group of CMKM Internet followers congregate daily on PalTalk in a virtual room called Sterling's New Classroom, named after one of the most popular CMKM Internet touts, Sterling Collins.
The PalTalk room, hosted at a cost of approximately $600 per month, offers text, audio and even video capabilities. The room has a capacity of 500 participants and on some occasions when the room's namesake appears to address the followers an overflow room has been opened to accommodate a few more hundred people.
The PalTalk following
The hundreds of CMKM fans who congregate on PalTalk under the watchful eyes of a few bullish administrators charged with maintaining some order in the room bristle at any suggestion that they are members of a cult-like following. Indeed, many claim that they welcome differences of opinion and open discussion.
In fact, it should be acknowledged that there has been a great deal of open discussion regarding different opinions among the PalTalk CMKM followers. For example, different opinions regarding the relative significance to this nascent mining giant of diamonds, gold, silver, uranium, oil, potash, zinc and so on have been entertained and roundly discussed.
Opinions regarding the "intrinsic value" of CMKM, imagined by many to be upwards of a trillion dollars, have likewise been the subject of much discussion.
Different opinions regarding the size of the imagined massive short position have also been discussed at length, with estimates ranging from hundreds of billions of shares to a trillion or more.
While these and other matters are the subject of extensive discussion and at least modest differences of opinion, there are very clear and narrow limits with respect to the extent of acceptable differences.
While wild fantasies regarding a wide spectrum of mineral resources, a multitrillion-dollar valuation and a massive short position are accepted and embraced, anyone with the temerity to argue that CMKM is far from establishing any mineral reserves, or that its properties are little more than "moose pasture" at this point, or that the company is grossly overvalued with its current market capitalization of approximately $235-million, or that there is no evidence at all of a short position would quickly receive a drubbing and almost undoubtedly be bounced or even banned from the room.
Among PalTalk's CMKM following, where "believe" is one of the most frequently used words, very little criticism of the favoured fantasies is tolerated and open skepticism is simply not on.
The influence of the cult-like PalTalk following extends beyond the virtual gathering of the CMKM faithful. Indeed, many members of the group have been active with the real-world CMKM promotion involving the sponsorship of a funny car dragster.
The promotional vehicle
Prior to dropping its SEC filing obligations, CMKM reportedly intended to acquire a time-share interest in an "ancient Chinese jade collection" purportedly appraised at $50-million.
"The Company believes that the jade collection will provide it with both a $50,000,000 asset base for reporting purposes and it will also serve as the centerpiece for a traveling jade museum show in venues throughout North America, including Las Vegas, NV (where major hotels and casinos have offered world master artwork collections, treasuries of the Russian Czars, treasurers from the Titanic, and motorcycle collections as revenue generating tourist attractions)," CMKM reported on Feb. 3, 2003.
Apparently CMKM planned to use the ancient Chinese jade collection as a promotional tool, but that plan was scrapped.
Earlier this year, CMKM unveiled a new plan and a new promotional vehicle: a funny car dragster. At first, even some of the company's faithful followers arched an eyebrow over that news, but CMKM has garnered a remarkable amount of promotional mileage from the funny car.
While gaudily painted cars thundering down a quarter-mile track in less than five deafening seconds before deploying a parachute might not be as highbrow as, say, a travelling ancient Chinese jade collection, CMKM may have targeted an appropriate market.
In any event, members of the PalTalk following who have gone to the races around the U.S. to rub shoulders with the executives and key players in CMKM and associated companies, meet fellow shareholders and file the latest "race news," not to mention heavily embellished rumours, seemingly invariably return reaffirmed in their belief in the company and quite enthused with the racy promotion.
In addition to the beer and burgers, the pep talks and the general camaraderie, shareholders attending the races share in promoting the company. Promotional literature, CMKM poker chips and T-shirts emblazoned with "Got CMKX?" are stuffed into bags and reportedly given away by the thousands.
While some shareholders have openly described their promotional efforts as "working the crowd," others simply report that giving away T-shirts and other promotional items is just a great way to meet people and chat about the company.
Just how many of the funny car crowd regaled with tales of a subpenny pink sheet stock with an "intrinsic valuation" of a trillion dollars or more, a convoluted "master plan," a massive short position soon to be remedied by a price-spiking short squeeze or other PalTalk "beliefs" have been sufficiently wowed to plop down some money on "the stock play of a lifetime" is an open question.
In any event, the PalTalk consensus seems to be that the funny car is a great promotional vehicle and that every shareholder should make an effort to attend at least one of the races.
As it happens, many shareholders are at least tentatively planning to attend a funny car race and shareholder appreciation party hosted by CMKM and U.S. Canadian Minerals in Las Vegas at the end of October. For many, however, those plans are contingent upon being able to free up some cash by selling some shares of CMKM at a profit before the end of the month.
Perhaps not surprisingly, a widely held belief among the PalTalk faithful is that enough of the so-called master plan will be revealed well before the end of October to drive CMKM's share price up so that they will be able to attend the Las Vegas party.
In any case, the outstanding muddle should be resolved, at least for most people, by next week, following the distribution of the dividend of restricted shares of U.S. Canadian Minerals payable on Oct. 6.
Meanwhile, there has been some unusual trading activity in U.S. Canadian Minerals. On Oct. 1, a record 963,234 shares changed hands and the stock gained 65 cents to close at $5.40.
CMKM, however, has been losing traction and struggling to keep from falling further into the subpenny basement. Approximately 6.1 billion shares of CMKM traded during the final session of the week and the stock ended the day at three-100ths of a penny.
The saga will continue.
Comments regarding this article may be sent to lwebb@stockwatch.com.
Lots of rumors out there, just can't trust the sources. I'm still curious (for some stupid reason) why the www.CMKX.net site includes NSDM in the ticker .. perhaps someone knows something.
No kidding, this is sad. I'd like to see some excitement around UDVE as well but nothings going on there either ... no hype, no bashers, no company action ....
Need a good diversion from CMKX, the # of boards, websites, posters is incredible.
Thanks Deann. Advice taken, however this board is so quiet, I'll respond to the Doc ... for what its worth.
Gooddoc - where and how are you getting this new information about Walter & Company?
Well NSDM will not be profitable by end of September.
If the profits (or only income at this point) is coming from sale of Diamonds fromt he website... it just can't happen that fast especially to cover the exploration costs to date.
So again my vote is no ... even though a PR will come out slanting the truth.
If you want to see the CMKX web:
Check out http://www.cmkx.net/empire.php which shows all the players in CMKX (quite the maze).
l
Wonder when the the rest of the companies like NSDM will be added? They do show NSDM in the stock ticker on top of http://www.cmkx.net
Read through the follwoing link:
http://cmkxdiamond.proboards32.com/index.cgi?board=general&action=display&num=1096277858
Lots of NSDM/UCAD/CMKX partnership rumors
Just hunting around and found this:
Didn't go in to far but this site shows some class with respect to Diamonds
http://www.canadia.com/new/index.html
Got this email today:
Dear Shareholder,
North Star Diamonds, Inc is pleased to announce that you, the shareholder, are now able to purchase diamonds from our company at a discount from the published price list.
For your selection from approximately 7,200 diamonds in our data base, please go to our home page (www.northstardiamonds.net), then to the buy a diamond and make your selection! We suggest you enter your price range first and then the shape of the diamond you desire. Select your diamond and telephone us toll free. Mr. Stunder, President, will be pleased to personally assist you in this purchase.
North Star Diamonds, Inc.
contact@northstardiamonds.net
Toll Free: 1-877-454-7872
Tel: 604-685-1527
Fax: 604-685-1596
Sponsor but no booth?
http://www.gov.mb.ca/itm/mrd/minerals/convention/conventionfloor.html
Have you seen the CMKX Video on the UCAD site:
http://www.uscanadian.net/video.asp
I guess you've heard the quote:
'Diamonds are a girls best friend; Dogs Mans best friend - whos the smarter sex?'
I'm with ya - Disappointed but I too believe there is potential here.
In case you haven't checked the website lately. When you search the diamonds the site indicates the ones that have been sold. Gives you a sense of what they are selling.
2004-09-16 09:12 ET - Street Wire
See Street Wire (U-SGGM) St. George Minerals Inc
by Lee Webb
St. George Metals Inc., a recently revived Nevada-incorporated shell that can trace its lineage to the former Vancouver Stock Exchange (VSE), has become the latest patron of Urban Casavant's pink sheet company, CMKM Diamonds Inc. St. George will ante up $10-million (U.S.) and a whopping 200 billion restricted shares for a five-per-cent stake "in any and all mineral claims" held by CMKM. (All amounts are in U.S. dollars unless otherwise indicated.)
As with many things involving CMKM, exactly how many mineral claims the company holds is a matter of some conjecture. Based on sketchy information provided by the company, it appears that CMKM may have varying interests in claims covering between 1.4 million acres and 1.9 million acres in Saskatchewan.
Most of the company's prodigious promotional and modest exploration efforts centre on its heavily touted diamond prospects in the Fort a la Corne area where there are two advanced diamond projects, one owned by a group headed by De Beers Canada Corp. and Kensington Resources Ltd. and the other owned by Shore Gold Inc.
Notwithstanding the many years and many millions of dollars spent by the De Beers and Kensington group and Shore Gold, neither of those projects has yet been established as economically viable. Nonetheless, they provide some promotional mileage for CMKM, which purports to be "racing to find more diamonds" in Saskatchewan.
It remains to be seen whether the cash infusion from St. George will give some traction to the racy CMKM promotion, widely touted as the "stock play of a lifetime."
CMKM reports that it has already received $5-million in two equal payments from St. George, the most recent on Sept. 13, and expects two additional payments of $2.5-million over the next 30 days.
At this point, the source of that $10-million is a mystery, and it may well remain so. Like CMKM, the resuscitated St. George trades on the unregulated pink sheets, free from the burden of even rudimentary disclosure requirements.
Another CMKM backer, U.S. Canadian Minerals Inc., trades on the OTC Bulletin Board and is subject to reporting requirements with the U.S. Securities and Exchange Commission (SEC).
So far, U.S. Canadian Minerals has peeled off 7.5 million shares in exchange for five per cent of CMKM's mineral claims and has made two cash payments totalling $5.5-million under a one-year option agreement allowing it to purchase an additional 10-per-cent interest for $15-million.
Nearly penniless U.S. Canadian Minerals, flagged with a going-concern warning, executed an initial $3-million purchase under its option agreement with CMKM on July 28. An Aug. 23 SEC filing disclosed that the source of the $3-million was a subscription agreement for 600,000 shares of U.S. Canadian Minerals priced at $5 per share from an otherwise unidentified "related party to CMKM Diamonds."
After announcing on Sept. 8 that it had secured a further $3-million by way of a private placement, U.S. Canadian Minerals doled out another $2.5-million to CMKM on Sept. 9. The participant or participants in the Sept. 8 financing have not been even vaguely identified yet, inviting speculation among some skeptics that a party related to CMKM may have been involved in that private placement, too.
Meanwhile, questions have also surfaced regarding a relationship between Mr. Casavant's CMKM and the company's newest patron, St. George. According to a recent article by Dow Jones reporter Carol S. Remond, however, Mr. Casavant claims that he has nothing to do with St. George and knows nothing about it being a dormant shell.
The recently revived St. George is now headquartered in Vegreville, Alberta, a farming community with a large Ukrainian presence and several nearby Hutterite colonies. With a population of approximately 5,800, Vegreville is not known as a financial hub, but it does lay claim to being the home of the world's largest Easter egg.
Vegreville is reportedly also home to Mark Giebelhaus, president of St. George and the only identified officer of the company at this point. A directory search returns a surprising 21 Vegreville telephone listings for the surname Giebelhaus, but no public listing for Mark Giebelhaus.
St. George's investor relations spokesperson Vicki Curran also lives in Vegreville, as does her father, Victor Casavant, who happens to be Urban Casavant's brother. In a Stockwatch interview, Ms. Curran readily acknowledged that she was Urban Casavant's niece.
According to Ms. Curran, Victor Casavant is not involved with St. George. While he may not be directly involved with St. George, it does appear that he is at least "close" to the play.
A call to Victor Casavant's telephone number and a request to speak with Vicki brought the response that she was on another phone. Moreover, it appears that St. George at least briefly used a Vegreville postal box that has also been used by Victor Casasvant, including appearing below his signature on a 1995 settlement agreement with the Alberta Securities Commission.
Victor Casavant evidently ran afoul of Alberta securities regulators in connection with an illegal distribution of shares of a non-reporting issuer, Striker Minerals Ltd. The terms of the settlement agreement, a $1,000 (Canadian) fine and an acknowledgement of "the requirement to be more diligent when raising capital in the future," suggest that it was considered a relatively minor breach of securities regulations.
Ms. Curran told Stockwatch that she is new to St. George, but has about 13 years of experience in investor relations with other companies, both public and private. She would not disclose the names of the companies she was previously involved with, however, telling Stockwatch that the information would be provided in press releases issued over the next week.
While reluctant to discuss her specific background when contacted by Stockwatch, Ms. Curran offered some information regarding her former husband without any prompting at all. According to Ms. Curran, Kevin Curran served a brief stint as investor relations representative for Northern Star Resources Inc.
It is not clear why Ms. Curran volunteered that information regarding her ex-husband, but perhaps it had something to do with the fact that VSE-listed Northern Star was the successor to Petro Plus Inc., a company once headed by her uncle, Urban Casavant.
Mr. Casavant took charge of Petro Plus in November of 1995 when the stock price was languishing at about 15 cents. Under Mr. Casavant's guidance the share price climbed above $1 within a matter of months, amidst much nattering in news releases about "visible gold" in drill samples from one of the company's properties.
Petro Plus's stock price subsequently collapsed as quickly as it had risen and Mr. Casavant abruptly and rather intriguingly parted company with Petro Plus on Oct. 25, 1996. Petro Plus, which was halted at the time of Mr. Casavant's surprise departure, did not even bid him a fond farewell.
Three weeks after Mr. Casavant either jumped or was shoved out of Petro Plus, the company, which was still halted, served up a few more details about the affair including a share sale agreement between Mr. Casavant and the company's new president, Randy Studer. Under the agreement reportedly signed shortly after his departure, Mr. Casavant sold more than 1.9 million shares and more than one million warrants exercisable at 20 cents per share to Mr. Studer.
"Contemporaneously with the share sale agreement, an agreement was entered into between the company and Urban Casavant and certain extended family members to terminate any formal relationships or positions (excepting the rights under certain mineral claim option agreements)," the company went on to report in its Nov. 13, 1996, news release.
Petro Plus did not identify the "certain extended family members" whose formal relationships or positions with the company were terminated, so there is no way of knowing whether any of them are among the 22 Casavants disclosed as holding shares in CMKM. In any event, regulatory filings and various court documents related to litigation involving the Casavants suggest that family members are frequently associated with Mr. Casavant's enterprises.
Petro Plus closed out its news release with a rather curious statement.
"The transaction between Randy Studer and Urban Casavant was a positive agreement for all concerned and will now enable the company to focus on the business of mineral exploration," the company declared, perhaps raising the question of just what business the junior exploration company had been focusing on during Mr. Casavant's tenure.
As it turned out, the newly enabled focus did little for the company or the share price. With the stock changing hands at a Canadian penny in January of 1999, Petro Plus consolidated its shares on the basis of one new share for each five old shares and changed its name to Northern Star. Just over a year later, with the stock trading at five Canadian cents, Northern Star executed a similar rollback and changed its name to Odaat Inc.
Odaat, still under the direction of Mr. Studer, limped along until January of this year before executing yet another share consolidation, this time on the basis of one new share for each four old shares, and changed its name to Explor Resources Inc. Explor trades thinly and sporadically, sometimes going days between trades. It last changed hands on Sept. 9, registering a volume of 250 shares and closing at 34 Canadian cents.
While the Petro Plus affair is long behind Mr. Casavant, he at least briefly teamed up with his Petro Plus successor and current Explor president Mr. Studer again last year. On Aug. 27, 2003, CMKM awarded a reported $3-million mineral exploration and drilling contract to Mr. Studer's privately held Durama Enterprises.
Just how long that ballyhooed contract lasted and how much money changed hands, if any, are open questions. CMKM's last mention of Durama came in an Oct. 30, 2003, news release announcing that the company's Fort a la Corne diamond exploration had been delayed due "to unexpected magnetic storms caused by 'sunspots.'"
Meanwhile, some of the unanswered questions regarding CMKM's latest associate, St. George, should be answered over the next few days, according to Ms. Curran.
Among other things, Ms. Curran told Stockwatch that information regarding St. George's "brand new board of directors" would be released this week.
Ms. Curran would not disclose whether St. George had already raised the full $10-million needed to complete the announced deal with CMKM. Remarking that "it's definitely raising some flags to the investors," Ms. Curran said the "explanation will be in all the reports" to be issued this week.
According to Ms. Curran, "a handful of press releases" to be issued this week will provide the background of the company, where it is going, "levels of priority" and other information. A new Web site is also scheduled to be operational this week.
"I kind of feel like I'm helpless right now just because there is not a whole lot I can release unless it's public knowledge," Ms. Curran said.
At this point, there is very little information in the public domain regarding the revived shell.
According to company information provided on the pink sheets Web site, St. George had approximately 16.9 million shares outstanding as of Sept. 6. With a staggering 200 billion restricted shares comprising part of the deal with CMKM, that figure will see an astronomical revision. St. George is authorized to issue 950 billion shares, so the outstanding share total could be subject to more massive revisions.
While such lofty share figures are beyond the experience of most investors, they are old hat to shareholders of CMKM, which recently bumped its authorized share total to 800 billion. Based on information provided by the company regarding a dividend-in-specie distribution of 7.5 million shares of U.S. Canadian Minerals scheduled for Sept. 24, CMKM has more than 779 billion shares outstanding.
Notwithstanding the fact that the dividend ratio was first provided to regulators as required under U.S. securities regulations by CMKM's much touted lawyer, D. Roger Glenn, and subsequently revised by the company at about the time it raised its authorized shares to 800 billion, many of the hundreds of cult-like Internet followers of Mr. Casavant's promotion dismiss any suggestion that CMKM has issued more than 779 billion shares.
Indeed, some CMKM shareholders are prepared to argue, speculate and theorize at painfully convoluted length that there are really only a few billion shares outstanding. Others go even further, claiming that there are no real shares outstanding at all.
Given that fantasies trump facts among many of the starry-eyed CMKM shareholders, the dearth of information regarding the revived St. George may be much more of a boon than a bane for the company's imaginative devotees.
While there is little in the way of information regarding the current St. George, there is a considerable amount of historical information available regarding the former VSE-listed company. Some select and dated snippets regarding St. George caused quite a tizzy among CMKM's cultish followers.
Legend and History
Just how the former VSE-listed company came to be named is probably lost in the dustbin of history, but many people will undoubtedly associate the name with the legendary dragon slayer and patron saint of England, St. George.
The notion of dragon slaying may resonate well with many CMKM shareholders, particularly the band of loyal followers who congregate by the hundreds on PalTalk, an Internet chat site that provides participants with both text and audio communication.
Among the "dragons" that fantasy-loving CMKM shareholders would like to see vanquished are the market makers they believe are shorting this sub-penny pink sheet stock. The fantastic estimates of the size of the imagined short position, served up repeatedly by the PalTalk faithful, range from hundreds of billions of shares to a trillion or more.
The belief in a huge short position is evidently shared by CMKM's investor relations representative, Melvin O'Neill, affectionately known as Uncle Melvie. Mr. O'Neill is a frequent participant in the PalTalk palavers; indeed, he checks in almost daily.
"This company is being shorted to the bejeesus," Mr. O'Neill proclaimed on Aug. 12, much to the delight of the assembled throng. He went on to claim that Mr. Casavant and Mr. Glenn, the company's highly touted lawyer, are both convinced of the same thing.
According to the CMKM faithful, Mr. Glenn will be taking care of the shorting "problem," and many believe that Vegreville-based St. George will play a role in that trumpeted problem-solving exercise.
While the popularized exploits of St. George are widely known, including Disneyfied tales of his legendary dragon slaying in England, the actual historical figure never set foot in England. He was martyred in Palestine around 300 AD and pilgrims and crusaders carried the already embellished stories of his deeds back to England several centuries later.
Among the accounts of St. George that eventually found their way into manuscripts are tales that he was put to death three times, chopped up and buried, but resuscitated to carry on with his mission of converting heathens to the true faith. While the substance of those tales is generally discounted, some parallels might be drawn with the corporate history of the newly revived St. George.
St. George Minerals Inc., which was little more than a garden-variety VSE-listed junior mining company, began trading more than two decades ago. Among the early participants in St. George, however, were two people whose names have caused a tizzy among the excitable CMKM followers: Stewart Blusson; and Ross Blusson.
Stewart Blusson has near-legendary status among those familiar with Canadian diamond exploration. Along with the perhaps more widely known Chuck Fipke, Stewart Blusson discovered the diamond deposit in the Northwest Territories that became Canada's first diamond mine, the Ekati mine.
Alas, at least for the excitable CMKM fans, Stewart Blusson's association with St. George Minerals was fleeting and distant. He is recorded as receiving shares of St. George Minerals to satisfy a debt, something that occurred long before the company completed its makeover into St. George Metals in January of 1991.
Ross Blusson's association with St. George Minerals was more extensive and direct. He, too, received shares for debt, but he also participated in a private placement and served a stint as a company director.
Alas, again, at least for the CMKM fans excited by the very mention of the name, Ross Blusson was long gone before St. George Minerals executed its 1991 transformation into St. George Metals.
The liquidation of St. George Minerals and the amalgamation with its U.S. subsidiary was proposed by the company's five-member board of directors, which did not include anyone with the name Blusson, in January of 1990. The proposal received shareholder approval at the annual general meeting on May 31, 1990.
The liquidation and consolidation was consummated on Dec. 31, 1990, and St. George Minerals was delisted from the VSE on Jan. 29, 1991.
With St. George Minerals laid to rest, St. George Metals began trading on the VSE on Feb. 1, 1991. The resuscitated St. George Metals boasted seven directors, none of whom were named Blusson.
In less than a year after being called to trade on the VSE, St. George Metals racked up 12 delinquent filer notices before being cease traded by the British Columbia Securities Commission.
The company cleaned up its filings and the cease trade order was rescinded on Dec. 30, 1991, but less than six months later it was again being cited as a delinquent filer.
St. George soldiered on for a time, but the cash-strapped company ceased operations at its Dean Mine in Nevada in September of 1993. After tallying another eight delinquent filer notices, it was finally suspended from trading in 1995 and then ignominiously delisted from the VSE early in 1996.
Before its recent awakening, the shell traded sporadically on the pink sheets, eking out only occasional trades over the past year, most at one-10th of a penny. That changed rather dramatically following the Sept. 2 news release regarding the $10-million deal with CMKM.
On Sept. 8, St. George hit a dizzying high of 75 cents before settling back to 35 cents on a volume of more than 650,000 shares. More than 2.4 million shares changed hands the following day, but the price slid a bit further, ending the session at 26 cents. With just over one million shares trading on Sept. 10, St. George climbed back up to 37 cents.
The trading volume has dropped off this week as investors, including CMKM's faithful and excitable shareholders, await the promised announcements from St. George. None of the handful of information-packed news releases that were to be issued this week has yet appeared.
With a more modest 57,530 shares changing hands, St. George closed at 44 cents on Sept. 15.
Meanwhile, CMKM's share price has not enjoyed any lift at all from the deal with St. George, much to the consternation of the company's faithful followers. Indeed, the share price has been under some pressure, dipping as low as two-100ths of a penny over the past couple of days.
With more than 2.1 billion shares changing hands, and thanks to yet another of the rather frequent 50,000-share trades at the daily high logged at the bell, CMKM closed at four-100ths of a penny on Sept. 15.
The saga will continue.
Comments regarding this article may be sent to lwebb@stockwatch.com
NSDM getting attention and rumors flying on other boards.
GEMM+CMKX+NSDM+UCAD Merge