Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Kinda like the face of the Madonna in the tortilla pan.
lol, yes...
lol, perhaps someone should do that. Do they have bounties there, like the ones they have here?
The ex-date is the first trading day after the paydate
on the 15th of May.
No. That's only the case for forward splits. This is a dividend, apparently. The ex date is the only important date, and it will be set by the Nasdaq. But only after IDWD gives them the information they need. Since that hasn't happened yet, the "record date" of 28 April has no relevance.
Then why don't you just participate here, and discuss the stock, the company, and the issues?
Not posters you dislike. The same goes for everyone here.
Urbie and his friends got it, obviously.
Look at the incredible amounts of stock given to Ginger Guiterrez and the IR guy in 2003. (Sorry, I forget his name, and I'm not gonna look it up at this hour.) You think they got to KEEP that money?
Or do you think much of it got kicked back?
Dividend notices should be filed with the Nasdaq ten days before the record date.
OMIGOD:
By: warged
29 Apr 2006, 11:28 PM EDT
Msg. 223704 of 223753
(This msg. is a reply to 223681 by notagolfer0.)
The question for the Div. of Homeland Security is where is all this money going, It can not be declared therefore it is not being taxed. Who are these people and what is being done with the money Trillions of dollars. This NSS with CMKM could not go unnoticed (billions per day every day)therefore the SEC has to be in on the Sting. There is no way the SEC could tell a Board of Inquirey they didn't notice or thought it was OK. IMO
http://ragingbull.lycos.com/mboard/boards.cgi?board=CMKI&read=223704
These are the people in whom you place your trust, Gump. They are insane.
And watch: I won't lose. How many times have I heard that? How many times has it not happened?
So you believe it's "not important" if one of your stocks can't trade anymore, and never will do again?
You really need to think about this stuff. And you also need to READ that order. The judge wasn't shy about making her feelings clear. She had access to more information than you do.
lol, that's another little.....inconsistency...
I think I may have cracked a couple of ribs...
http://ragingbull.lycos.com/mboard/boards.cgi?board=CMKI&read=223655
http://ragingbull.lycos.com/mboard/boards.cgi?board=CMKI&read=223673
http://ragingbull.lycos.com/mboard/boards.cgi?board=CMKI&read=223674
lol, I'm not gonna clear this up...
OOOOPS!! I was forgetting for a moment...
And they wonder why we stick around...
Even funnier, they're asking me if I'm being paid by the SEC...
You're wrong about that. There was a very clear verdict in the revocation hearing:
The Securities and Exchange Commission (Commission) issued its Order Instituting
Proceedings (OIP) on March 16, 2005, pursuant to Section 12(j) of the Securities Exchange Act
of 1934 (Exchange Act). The OIP alleges that the common stock of CMKM Diamonds, Inc.
(CMKM Diamonds), is registered with the Commission pursuant to Section 12(g) of the
Exchange Act, and that since registering its stock, CMKM Diamonds has not filed an annual
report on Form 10-K or 10-KSB since May 9, 2002, or a quarterly report on Form 10-Q or 10-
QSB since November 18, 2002. As a result, the OIP alleges that CMKM Diamonds has failed to
comply with Section 13(a) of the Exchange Act and Rules 13a-1 and 13a-13 thereunder.
CMKM Diamonds filed its Answer on April 12, 2005, in which it admitted that the
factual allegations in the OIP are true but denied that it failed to comply with Section 13(a) of the
Exchange Act and Rules 13a-1 and 13a-13. (Answer 1-2.)
I held a one-day public hearing on May 10, 2005, in Los Angeles, California, during
which six witnesses testified for the Division of Enforcement (Division), three witnesses testified
1
The Owners Group is a non-party granted limited participation.
2
for CMKM Diamonds, and more than sixty exhibits were admitted into evidence.2 At the
hearing, I read into the record the names of some twenty-five CMKM Diamonds shareholders
who sent letters concerning this proceeding. I ruled that those letters would be treated as exhibits
offered but not admitted into evidence. (Tr. 25-26.) Appendix A to this Initial Decision is a list
of additional letters received after the hearing, which will receive the same treatment. The
Division, CMKM Diamonds, and the Owners Group filed their Post-Hearing Briefs on June 6,
June 17, and June 20, 2005, respectively. The Division filed its Reply Brief on June 29, 2005.3
ISSUES
If CMKM Diamonds has failed to comply with Section 13(a) of the Exchange Act and
Rules 13a-1 and 13a-13, the issue is what remedial sanction, if any, is appropriate pursuant to
Section 12(j) of the Exchange Act.
FINDINGS OF FACT
The findings and conclusions herein are based on the entire record. I applied
preponderance of the evidence as the standard of proof. See Steadman v. SEC, 450 U.S. 91, 102
(1981). I have considered and rejected all arguments and proposed findings and conclusions that
are inconsistent with this Initial Decision.
Background
CMKM Diamonds was incorporated in Delaware in 1998 as Cyber Mark International
Corp. (Cyber Mark). (Answer at 1-2.) In April 2002, Cyber Mark changed its corporate
domicile to Nevada. (Answer at 2; Div. Ex. 3.) On November 25, 2002, Cyber Mark agreed to
acquire certain mineral claims held by five companies owned by the family of Urban Casavant
(Casavant) in exchange for $2 million and almost 3 billion shares of Cyber Mark restricted
common stock with registration rights. (Answer at 2; Div. Ex. 3 at 5.) Prior to his resignation on
November 25, 2002, Cyber Mark’s sole director appointed Casavant sole director, president, and
chief executive officer. (Answer at 2; Div. Ex. 3 at 7.) On November 26, 2002, Casavant
appointed his wife, Carolyn Casavant, as vice president of claims, his son, Wesley Casavant, age
twenty-two, to the position of corporate treasurer, and his daughter, Cindy Casavant, to the
position of corporate secretary. (Answer at 2-3, Div. Ex. 3 at 7.) On December 3, 2002, the
2
The Division called an independent auditor, a Commission information and technology
specialist, a transfer agent, a bookkeeper, a business man, and the president, chief executive
officer, and co-director of CMKM Diamonds to testify. CMKM Diamonds called a business
man, an attorney, and the co-director of CMKM Diamonds to testify.
3
Citations to CMKM Diamonds’s Answer will be noted as “(Answer __.).” Citations to the
transcript of the hearing will be noted as “(Tr. __.).” Citations to the Division’s and CMKM
Diamonds’s exhibits will be noted as “(Div. Ex. __.),” and “(Resp. Ex. __.),” respectively.
Citations to the Division’s, John Martin’s, and CMKM Diamonds’s Post-Hearing Briefs will be
noted as “(Div. Post-Hearing Br. __.),” “(Owners Group Post-Hearing Br. __.),” and “(Resp.
Post-Hearing Br. __.),” respectively.
3
company changed its corporate name to Casavant Mining Kimberlite International. (Answer at
3; Div. Ex. 3 at 7.) In February 2004, it changed its name to CMKM Diamonds. (Answer at 3.)
CMKM Diamonds currently is a Nevada corporation based in Las Vegas, Nevada, which
is purportedly engaged in the business of mineral exploration.4 (Answer at 6; Form 8-Ks, filed
March-May 2005 (official notice); Div. Ex. 6 at 14.) In the most recent information it has
provided to the public through a periodic filing, a Form 10-QSB for the quarter ending
September 30, 2002, CMKM Diamonds reported total assets of $344.00, all in cash, and total
liabilities of $1,672.00. (Div. Ex. 3 at 2.) Casavant currently is the president, chief executive
officer, and co-chair of CMKM Diamonds’s two-person board of directors. (Tr. 71-73; Div. Exs.
5, 18, 19, 24, 53; Form 8-Ks, filed March-May 2005 (official notice).) Casavant and his wife
have signatory authority on CMKM Diamonds’s bank accounts. (Tr. 183.) Casavant refused to
testify at the hearing, and asserted his Fifth Amendment privilege against self-incrimination to all
questions asked by the Division.5 (Tr. 242-61.)
From January 1, 2003 through April 19, 2005, the price of CMKM Diamonds’s stock
ranged from a low of $0.00013 per share to a high of $0.0135 per share. (Div. Ex. 17.) Its
average price during this period was $0.00071. (Div. Ex. 17.) The trading volume of CMKM
Diamonds’s stock from January 2003 until August 2003 exceeded 100 million shares per day on
four occasions. (Tr. 137-38; Div. Ex. 61.) From August 2003 to April 2005, however, the
trading volume of the company’s stock was significantly higher, frequently exceeding 1 billion
shares per day and sometimes exceeding 2 billion shares per day. (Tr. 138; Div. Exs. 17, 61.)
In a Form 8-K filed on March 14, 2005, CMKM Diamonds reported that on two
occasions during 2004, it had amended its articles of incorporation to change the number of
authorized shares. The first amendment, on March 1, 2004, changed the number of authorized
shares from 200 billion to 500 billion. The second amendment, on August 18, 2004, changed the
number of authorized shares from 500 billion to 800 billion. (Form 8-K, filed March 14, 2005
(official notice).) As of December 31, 2004, CMKM Diamonds had 2,033 shareholders of
record and more than 778 billion shares outstanding. (Tr. 159-61; Div. Ex. 14 at 504.)
Donald J. Stoecklein (Stoecklein), current counsel for CMKM Diamonds, owns the
Securities Law Institute in Las Vegas, Nevada, which assists approximately forty-two public
companies in their periodic reporting obligations, including CMKM Diamonds. (Tr. 315-16.)
Stoecklein also owns Opus Pointe, which is an accounting and bookkeeping company and a
division of the Securities Law Institute. (Tr. 167, 326-27.) Opus Point and the Securities Law
4
Cyber Mark was formerly engaged in the electronic game industry. (Div. Ex. 3 at 2.)
5
A trier of fact in a civil proceeding may draw adverse inferences from a respondent’s refusal to
testify. See Baxter v. Palmigiano, 425 U.S. 308, 319-20 (1976); John Kilpatrick, 48 S.E.C. 481,
486 & n.18 (1986). This may extend to a corporate defendant based on an officer’s refusal to
testify. See SEC v. Prater, 289 F. Supp. 2d 39, 50 (D. Conn. 2003). Nonetheless, I have not
drawn any adverse inferences from Casavant’s refusal to testify, because the evidence in the
record is more than sufficient to decide this matter. Casavant was represented by David Z.
Chesnoff, Las Vegas, Nevada, and Gerald W. Griffin, New York, New York.
4
Institute are working on CMKM Diamonds matters and an employee of each firm testified at the
public hearing. (Tr. 167, 314.)
On March 4, 2005, CMKM Diamonds announced that, effective March 1, 2005, it had
relocated its executive offices to 5375 Procyon Street, Suite 101, Las Vegas, Nevada. (Div. Ex.
53.) However, as of April 6, 2005, this address was occupied only by a “hot rod” shop. (Div.
Ex. 55.) “Debbie” at the Securities Law Institute, which is owned by CMKM Diamonds’s
counsel, reported in an e-mail sent on April 6, 2005, that a shareholder had visited the site,
discovered this fact, and reported it on the company’s Web site.6 “Debbie” advised that “You
might want to call Urban [Casavant] or Michael and have them ‘move in’ and talk to the owner
of the hot rod shop and also tell Andy what to tell shareholders when they call.” (Div. Ex. 55.)
CMKM Diamonds continued to report this false business address in two subsequent Form 8-K
filings. (Div. Ex. 12; Form 8-K, filed May 18, 2005 (official notice).)
Robert Maheu (Maheu) has known Stoecklein for a number of years and is part of a team
assembled by Stoecklein, which Maheu believes will clear up past mistakes and will result in
compliance going forward. (Tr. 285-86, 296.) Maheu set up the Small Defense Plant
Administration fifty years ago, and later the Small Business Administration. (Tr. 285, 287.)
Casavant appointed Maheu as co-chairman of CMKM Diamonds’s board in February 2005. (Tr.
283-84, 286, 293; Div. Exs. 53, 56.) Maheu is paid $40,000 per month. (Tr. 286.)
Failure to File Periodic Reports
CMKM Diamonds registered its securities with the Commission in 1999, pursuant to
Section 12(g) of the Exchange Act. (Answer at 1, 6.) Since that time, CMKM Diamonds has
failed to file annual reports for its fiscal years ended December 31, 2002, 2003, and 2004.
(Answer at 7; Tr. 51; Div. Ex. 1.) It has also failed to file quarterly reports for the periods ended:
March 31, June 30, and September 30, 2003; March 31, June 30, and September 30, 2004; and
March 31, 2005. (Answer at 7; Tr. 51; Div. Ex. 2.)
On March 31, 2003, the company filed a request for an extension of time to file its annual
report for the year ended December 31, 2002, because it had not yet completed its financial
statements. (Div. Ex. 4.) CMKM Diamonds never filed an annual report for 2002. (Div. Ex. 1.)
On May 16, 2003, the company filed a request for an extension of time to file its quarterly report
for the period ended March 31, 2003, claiming it had not yet completed its financial statements.
(Div. Ex. 7.) Despite having not filed an annual report for 2002, CMKM Diamonds erroneously
represented in this filing that it had filed all required reports for the preceding twelve months.
(Div. Ex. 7.) CMKM Diamonds never filed a quarterly report for the quarter ending March 31,
2003. (Div. Ex. 2.)
On July 22, 2003, CMKM Diamonds filed a Form 15, signed by Casavant, pursuant to
Exchange Act Rule 12g-4, in which it certified that it had approximately 300 shareholders of
6
In February 2005, Debbie Amigone was one of Stoecklein’s employees working on CMKM
Diamonds matters. (Tr. 163.)
5
record as of that date.7 (Div. Ex. 8.) The trading volume in CMKM Diamonds’s shares
inexplicably experienced a sharp increase shortly after it filed the Form 15.
On February 16, 2005, CMKM Diamonds revoked its original Form 15 filing because it
actually had 698 shareholders of record as of the filing date of the original Form 15.8 (Div. Exs.
9, 13.) The persuasive evidence is that the Division’s inquiry to CMKM Diamonds’s counsel on
December 23, 2004, led CMKM Diamonds to revoke the Form 15 because it contained a
materially false representation. (Div. Exs. 20, 21.)
Failure to Achieve Compliance
In early January 2005, CMKM Diamonds retained Bagell, Josephs & Company, LLC, to
audit the company’s financial statements. (Tr. 68-74, 79; Div. Ex. 24.) Neil Levine (Levine), a
certified public accountant with that firm and the engagement partner on the audit, met with
Casavant and others to discuss the requirements for the audit. (Tr. 68-73.) Since being retained,
Levine and his firm have not performed any audit procedures because CMKM Diamonds has
failed to provide them with any books, records, or supporting documents, despite their repeated
requests. (Tr. 69-71, 82-86, 95, 103, 109.) For example, Levine requested, but never received,
supporting documents, such as invoices, for the company’s stock issuances. (Tr. 82-86, 91.) He
did receive a memorandum with several pages of spreadsheets attached, identifying to whom
stock was issued in 2002 and 2003, as well as the number of shares. (Tr. 84-85; Div. Ex. 26.)
These documents were incomplete, however, as the stock price was not included for every
issuance and there was no information about stock issuances in 2004. (Tr. 85; Div. Ex. 26.)
In late February 2005, Levine sent a letter inquiring about the status of the information he
had requested, including general ledgers and documents supporting the company’s stock
issuances. (Tr. 90-91; Div. Ex. 27.) Levine never received a response. (Tr. 91.) Subsequently,
Levine met with Casavant, Stoecklein, and others in Las Vegas. (Tr. 92.) They discussed
Levine’s requests for documents, and he was informed that the company’s books and records
were being assembled. (Tr. 92-94, 103.) Levine did not receive any documents at this meeting,
and no one gave him a date by which he would receive such documents. (Tr. 93.) He later
contacted the company to gauge their progress in assembling the books and records. (Tr. 93-94.)
Its response informed him that things were progressing slowly. (Tr. 94.) One week before the
7
Form 15 is titled Certification and Notice of Termination of Registration Under Section 12(g)
of the Securities Exchange Act of 1934 or Suspension of Duty to File Reports Under Sections 13
and 15(d) of the Securities Exchange Act of 1934.
8
CMKM Diamonds’s assertion that it brought the incorrect Form 15 to the Commission’s
attention in February 2005, when it learned that CMKM Diamonds had more than 300
shareholders on July 22, 2003, is false. (Answer at 5, 11-12; Tr. 318-24, 342-47; Div. Ex. 54.)
On December 23, 2004, the Division inquired of counsel why CMKM Diamonds was not filing
periodic reports. (Div. Exs. 20, 21.) At that time, CMKM Diamonds was represented by David
G. Liston, Hughes Hubbard & Reed, LLP. (Id.) This correspondence establishes that the
Commission knew in December 2004 that CMKM Diamonds’s Form 15 was false.
6
hearing, Stoecklein told Levine that the company would be sending him documents. (Tr. 94.)
Levine did not receive anything. (Tr. 95.)
Levine opined that if he received all the necessary information in proper form, he may be
able to perform the required audits in three months. (Tr. 95-96.) Levine and his firm terminated
the engagement with CMKM Diamonds effective at the end of the hearing, due to the company’s
failure to provide the requested documentation and information required to perform the audit
work. (Tr. 96-98; Div. Ex. 59.)
In early March 2005, several months after the auditor was retained, Opus Pointe was
hired to compile CMKM Diamonds’s financial information for its financial statements.9 (Tr.
168.) Suzanne Herring (Herring) is an accountant with, and president of, Opus Pointe. (Tr.
167.) Since being retained, CMKM Diamonds has provided Opus Pointe with bank statements,
cancelled checks, contracts, and reports from the transfer agent. (Tr. 171-72, 179.) Though
Herring has made repeated requests for additional documents over several months, she has not
been provided with a “pretty substantial” amount of information that she needs to prepare the
financial statements. (Tr. 183.) For instance, Herring has repeatedly requested additional
documents from Casavant, Ginger Gutierrez, who was the office administrator at the company,
CMKM Diamonds’s former attorney, and a former company employee. (Tr. 172-79, 181-83.)
None of these persons have furnished any documents to Herring. (Tr. 172-79, 182-83.)
When Opus Pointe began its work in March 2005, CMKM Diamonds’s balance sheet,
financial statements, and general ledger were nonexistent. (Tr. 171.) Opus Pointe has since
posted some transactions to draft general ledgers for the fiscal years ended December 31, 2002,
2003, and 2004. (Tr. 171-72, 185; Div. Ex. 58.) These draft ledgers, which are the only books
and records prepared to date, are incomplete and based on incomplete information. (Tr. 185-86,
191, 204; Div. Ex. 58.) For example, Herring has not been provided documents that support
CMKM Diamonds’s issuance of more than $24 million in stock pursuant to an “unknown
agreement.” (Tr. 191-92.) She also is unsure whether CMKM Diamonds’s purported acquisition
of a jade collection, supposedly worth $56 million, has or has not been reversed. (Tr. 187-91.)
The draft ledger for 2003 reflects that deposits were made into CMKM Diamonds’s bank
account. (Tr. 193-96.) These deposits were not revenues earned by the company; instead, they
were loans from Casavant. (Tr. 194-96.) The draft ledger for 2003 reflects no revenues because
the company was not engaged in any revenue-producing activities. (Tr. 193-96; Div. Ex. 58.)
Similarly, the draft ledger for 2004 reflects no business operations and no revenues or income.10
9
CMKM Diamonds did not pay Opus Pointe’s retainer; rather, it was paid by the Securities Law
Institute. (Tr. 169.)
10
CMKM Diamonds’s business partners testified that the company did, in fact, have some
business operations. According to their testimony: CMKM Diamonds owns one mine shaft in
Ecuador, and Nevada Minerals is the operator of the mine. (Tr. 220-22, 237-38, 263-64.) U.S.
Canadian Minerals owns a processing facility in Ecuador, which processes the ore that is
extracted from CMKM Diamonds’s mine. (Tr. 216-21, 236-37, 267-68, 271.) Under the terms
7
(Tr. 196-97; Div. Ex. 58.) CMKM Diamonds had an accumulated deficit of more than $36
million as of December 31, 2004. (Tr. 197-203.)
Herring estimated that she would require approximately thirty days to reconstruct
CMKM Diamonds’s books and records for 2002, 2003, and 2004, once she had all the
information that she needed. (Tr. 203-04.) She has been unable to proceed because she lacks the
documents that she requested from the company. (Tr. 204.)
The meetings Maheu has attended concerning CMKM Diamonds have been held in
Stoecklein’s office, possibly because Casavant operates CMKM Diamonds out of his home. (Tr.
175, 291.) Maheu has no background in the mining business, and does not know how many
employees CMKM Diamonds has, if any, who they are, how much they are paid, or what kind of
work they perform. (Tr. 296-98.) He has never seen CMKM Diamonds’s general ledger and
does not know what the company’s assets and liabilities are. (Tr. 307-08.) Maheu incorrectly
assumed that an audit of the company’s financial statements had started as of the date of the
hearing. (Tr. 306-07.) Maheu was unaware that CMKM Diamonds had not responded to
requests for financial information and, at the hearing, he learned that CMKM Diamonds had not
provided auditors and bookkeepers with documents they requested from Casavant months
earlier. (Tr. 288-91.)
CMKM Diamonds currently has no independent auditor to audit its financial statements.
In fact, it has no financial statements to be audited. In addition, no drafts of any of CMKM
Diamonds’s missing periodic reports have been prepared. (Tr. 336-38.) No witness could
specify a date by which CMKM Diamonds would file any of its delinquent reports. (Tr. 275,
296, 354.)
CONCLUSIONS OF LAW
Section 13(a) of the Exchange Act and Rules 13a-1 and 13-13 thereunder require issuers
of securities registered pursuant to Section 12 of the Exchange Act to file periodic and other
reports with the Commission. Exchange Act Rule 13a-1 requires issuers to submit annual
of Nevada Minerals’s contract with CMKM Diamonds, Nevada Minerals is entitled to twenty
percent of the revenue that CMKM Diamonds collects. (Tr. 272-75.)
In 2004, CMKM Diamonds and U.S. Canadian Minerals purportedly split between
$90,000 and $120,000 in revenues. (Tr. 217-19, 222-23.) CMKM Diamonds did not, however,
actually receive this money, as it went to either Nevada Minerals or the purchase of safety
equipment. (Tr. 238-39, 275-76) CMKM Diamonds owed Nevada Minerals $180,000, as of one
week before the hearing. (Tr. 239, 273-76; Div. Exs. 22, 23.) As the result of a default letter, the
parties agreed in May 2005 that Nevada Minerals will take possession of the “sands” in Ecuador
to satisfy the debt that CMKM Diamonds owes Nevada Minerals. (Tr. 273.) Also, in December
2004, Nevada Minerals surrendered 75 billion shares of CMKM Diamonds stock to the company
for a $2.2 million promissory note due in December 2005. (Tr. 277-78.) CMKM Diamonds and
U.S. Canadian Minerals are also engaged in a joint venture in Canada, which has not generated
any revenues. (Tr. 240.)
8
reports, and Exchange Act Rule 13a-13 requires issuers to submit quarterly reports. No showing
of scienter is necessary to establish a violation of Section 13(a) or the rules thereunder. SEC v.
McNulty, 137 F.3d 732, 740-41 (2d Cir. 1998); SEC v. Wills, 472 F.Supp. 1250, 1268 (D.D.C.
1978).
The purpose of the periodic reporting provisions is to supply the investing public with
current and accurate information about an issuer so that the investing public may make informed
decisions. As stated in SEC v. Beisinger Indus. Corp., 552 F.2d 15, 18 (1st Cir. 1977) (quoting
legislative history):
The reporting requirements of the [Exchange Act are] the primary tool[s] which
Congress has fashioned for the protection of investors from negligent, careless,
and deliberate misrepresentations in the sale of stock and securities. Congress has
extended the reporting requirements even to companies which are “relatively
unknown and insubstantial.”
CMKM Diamonds admits that it has not filed an annual report since May 9, 2002, or a
quarterly report since November 18, 2002, but it contends that it did not violate the periodic
reporting provisions, because it had a good faith belief that the number of shareholders of record
identified in the original Form 15 was accurate, and that filing was not denied or revoked by the
Commission. (Answer at 5, 7; April 13, 2005, Prehearing Conference Tr. 12; Tr. 51-54; Resp.
Post-Hearing Br. at 2, 5-7, 15-16.) More specifically, CMKM Diamonds argues that the filing of
the Form 15 on July 22, 2003, suspended its duty to file periodic reports until it revoked the
Form 15 on February 17, 2005. (Answer at 5, 11-12; Tr. 51-54; Resp. Post-Hearing Br. at 2, 5-7,
15-16.)
Exchange Act Rule 12g-4 provides, in relevant part, that an issuer’s duty to file periodic
reports shall be suspended immediately upon filing a certification on Form 15 that its class of
securities registered under the Exchange Act is held of record by less than 300 persons. Implicit
in this rule is that the information reported be true and correct. See SEC v. Savoy Indus., 587
F.2d 1149, 1165 (D.C. Cir. 1978); SEC v. Kalvex, Inc., 425 F. Supp. 310, 316 (S.D.N.Y. 1975);
see also Black’s Law Dictionary, 124, 220 (7th ed. 1999) (a “certification” is an “attested
statement,” which means a statement affirmed to be true or genuine). The evidence establishes
that CMKM Diamonds knew, or was reckless in not knowing, that it had more than 300
shareholders of record when it filed the Form 15 on July 22, 2003.
On January 12, 2003, CMKM Diamonds issued 994,083,000 shares to 360 people for
“fieldwork in Canada.”11 (Tr. 157-59; Div. Exs. 15, 26.) CMKM Diamonds also issued almost 3
billion shares to twenty-nine companies on January 22, 2003. (Tr. 87-89; Div. Exs. 16, 26.) On
January 7, 2003, CMKM Diamonds announced that it was performing a shareholder audit
11
As sole director, Casavant has authorized the issuance of an unbelievable number of CMKM
Diamonds’s shares. The owner of CMKM Diamonds’s transfer agent, who I find credible based
on her demeanor, testified that she found this stock issuance to be strange, and she did not
transfer stock for any other company with over 778 billion shares outstanding. (Tr. 159, 166.)
9
designed to identify every shareholder of record. (Div. Ex. 29.) Two weeks later, the company
announced that it expected the audit to be completed in the next few days. (Div. Ex. 30.) Given
the company’s recent issuance of shares, this shareholder audit would have determined that
CMKM Diamonds had more than 300 shareholders of record as of January 2003.
Less than one month after filing the false Form 15, CMKM Diamonds announced a two-
for-one stock split, payable to all shareholders of record as of September 12, 2003. (Div. Exs.
34, 36, 38, 41.) Also, the company announced in September 2003 that it was spinning off a
portion of its business, and each shareholder of record as of September 19, 2003, would receive
one share of the subsidiary’s stock for each share of CMKM Diamonds stock they held. (Div.
Ex. 40.) These announcements indicate that CMKM Diamonds was well aware of the true
number of its shareholders of record in the months that immediately followed the filing of the
false Form 15.
The records of CMKM Diamonds’s transfer agent, 1st Global Stock Transfer, LLC (1st
Global), establish that CMKM Diamonds had 698 shareholders of record on July 22, 2003. (Tr.
141-42, 146-47, 151; Div. Ex. 13.) 1st Global would have retained a copy of a request by a
company for a shareholder list. (Tr. 155-57.) 1st Global has no record or recollection of CMKM
Diamonds requesting a copy of a shareholder list or otherwise inquiring as to the number of
shareholders it had in July 2003. (Tr. 155-57, 162, 165-66.) Thus, the evidence is that CMKM
Diamonds made no effort to confirm or verify the number of shareholders of record before filing
the Form 15.
Moreover, an attorney representing CMKM Diamonds wrote a letter to the transfer agent
dated February 5, 2004, stating that 1st Global’s records of the company’s share issuances since
January 2003 “match the records and remembrances of [CMKM Diamonds].”12 (Div. Ex. 57.)
As such, CMKM Diamonds must have known that it had more than 300 shareholders of record
when it filed the original Form 15.
In addition, Casavant and CMKM Diamonds issued statements throughout 2004 that: (1)
support my finding that the company either knew, or was reckless in not knowing, that the
original Form 15 was false; and (2) contradict the contention that CMKM Diamonds did not
believe it had any reporting obligations subsequent to filing the false Form 15. These statements
demonstrate that CMKM knew that the original Form 15 was false and that it remained subject to
the periodic reporting requirements.
Beginning in January 2004, Casavant mentioned to a business partner that CMKM
Diamonds “needed to be reporting,” and he assured him ten or twelve times in 2004 that CMKM
Diamonds was “working on getting reporting,” and that the company was “getting close to
be[ing] reporting.” (Tr. 208-09, 214.) Casavant wanted to announce that CMKM Diamonds
“was reporting” in October 2004 at a shareholder appreciation party. (Tr. 209-10.) In June
2004, CMKM Diamonds issued at least three press releases in which it announced that it was
12
The letter was written by Brian Dvorak of Dvorak & Associates, Ltd., another attorney
representing the company. (Tr. 176.)
10
taking steps to becoming fully reporting and that it was dedicated to complying fully with all
requirements.13 (Div. Exs. 43-45.) In September 2004, CMKM Diamonds announced that its
accountants were “working to complete the audit of the company’s financials. When that has
been accomplished, the company will be well on its way to becoming a reporting company
again.” (Div. Ex. 49.) Furthermore, in October 2004, Casavant stated in an interview broadcast
on an Internet Web site that the company was “working really hard” to bring current its
reporting, and that it was “ahead of schedule.” (Tr. 211; Div. Exs. 18, 19.) Although he did not
provide an exact date by which the audit would be completed, Casavant indicated that it may be
by the end of October 2004. (Div. Exs. 18, 19.)
Assuming arguendo that CMKM Diamonds honestly believed somehow that it had three
hundred or less shareholders on July 22, 2003, there is no evidence is that it made an effort to
confirm or verify such material information with its transfer agent prior to filing the false Form
15. By not doing so, and in light of its stock issuances and announcements before it filed the
Form 15, CMKM Diamonds turned a blind eye to information that would have revealed the
misrepresentation in the Form 15. See SEC v. Roor, 2004 U.S. Dist. LEXIS 17416 at *15, *26
(S.D.N.Y. 2004). Accordingly, CMKM Diamonds’s conduct in this regard was, at a minimum,
reckless. See id.; see also In re Fischbach Corp. Sec. Litig., 1992 U.S. Dist. LEXIS 373
(S.D.N.Y. 1992).
The evidence is overwhelming that CMKM Diamonds and Casavant knew or, at a
minimum, was reckless in not knowing, that the original Form 15 was false. I therefore conclude
that filing the false Form 15 did not suspend CMKM Diamonds’s reporting obligations.14 To
conclude otherwise would permit companies to deprive shareholders and the investing public
generally of information about the company by knowingly or recklessly filing materially false
forms with the Commission.
The facts of this case demonstrate a situation where management deprived shareholders
and investors of material information in official filings, but promoted the company to investors
through informal news releases and public statements that contained false information. Since
filing the false Form 15, CMKM Diamonds has told the public informally that it has engaged in
several multi-million dollar transactions. For example, in press releases issued on July 27, 2004,
and September 13, 2004, respectively, CMKM Diamonds announced the receipt of $3 million
from U.S. Canadian Minerals and $5 million from St. George Minerals. (Tr. 308-09; Div. Exs.
46, 48.) These press released also indicated that CMKM Diamonds would soon file its
delinquent reports. As a result of CMKM Diamonds’s failure to file periodic reports making
formal public disclosure of material information, the investing public has received only self-
serving statements from persons promoting CMKM Diamonds.
13
In two of the press releases, Casavant announced that CMKM Diamonds had retained the law
firm of Edwards & Angell. (Div. Exs. 44, 45.)
14
CMKM Diamonds presented no evidence to support its defense that it relied on the advice of
counsel in filing the original Form 15. (April 13, 2005, Prehearing Conference Tr. 12; Answer at
3.)
11
I conclude that CMKM Diamonds violated Section 13(a) of the Exchange Act and Rules
13a-1 and 13a-13 by failing to file: (1) annual reports since May 9, 2002; and (2) quarterly
reports since November 18, 2002.
Finally, at the hearing on May 10, 2005, CMKM Diamonds argued that its periodic
filings were only delinquent by twenty-two days.15 (Tr. 51-57; Resp. Post-Hearing Br. at 2, 5-7,
15-16.) However, CMKM Diamonds knew that revocation of the Form 15 required CMKM
Diamonds to file all missing periodic reports within sixty days, or by April 18, 2005. (Tr. 324.)
As of the date of this Initial Decision, CMKM Diamonds had not filed the missing reports.
Therefore, even if I accepted CMKM Diamonds’s position that it acted in good faith and
believed that the representations in its Form 15 were true, it is still in violation of Section 13(a)
of the Exchange Act and Rules 13a-1 and 13a-13.
SANCTIONS
Section 12(j) of the Exchange Act authorizes the Commission, “as it deems necessary or
appropriate for the protection of investors,” to revoke the registration of a security or suspend the
registration of a security for a period not exceeding twelve months if it finds, after notice and an
opportunity for hearing, that the issuer of such security has failed to comply with any provision
of the Exchange Act or the rules and regulations thereunder. Because I have already concluded
that CMKM Diamonds violated Section 13(a) of the Exchange Act and Rules 13a-1 and 13a-13,
the only remaining issue is the appropriate sanction.
In determining whether a sanction is appropriate under Section 12(j) of the Exchange
Act, the public interest factors identified in Steadman v. SEC are instructive. 603 F.2d 1126,
1140 (5th Cir. 1979), aff’d on other grounds, 450 U.S. 91 (1981); see also WSF Corp., 77 SEC
Docket 1831, 1836-37 (May 8, 2002) (12(j) case applying Steadman). The relevant factors
under Steadman are: (1) the egregiousness of the respondent’s actions; (2) the isolated or
recurrent nature of the infraction; (3) the degree of scienter involved; (4) the sincerity of the
respondent’s assurances against future violations; (5) the respondent’s recognition of the
wrongful nature of its conduct; and (6) the likelihood of future violations. 603 F.2d at 1140. No
one factor controls. See SEC v. Fehn, 97 F.3d 1276, 1295-96 (9th Cir. 1996).
CMKM Diamonds’s violations of the periodic reporting provisions were recurrent,
egregious, and evidence a high degree of scienter. Over a period of several years, it failed to file:
(1) required annual reports for its fiscal years ended December 31, 2002, 2003, and 2004; and (2)
required quarterly reports for the periods ended March 31, June 30, and September 30, 2003, and
2004, and March 31, 2005. Several of these violations occurred after the institution of this
proceeding, and each violation occurred after Casavant assumed control of the company.
Furthermore, CMKM Diamonds filed a registration statement on Form S-8 in May 2003, more
than two months before it filed the false Form 15. (Div. Ex. 6.) Thus, it was required to file
15
Exchange Act Rule 12g-4(b) provides that if the certification on Form 15 is subsequently
withdrawn, the issuer shall, within sixty days of such withdrawal, file with the Commission all
reports which would have been required had the certification not been filed.
12
periodic reports pursuant to Exchange Act Section 15(d) for at least the remainder of 2003.
CMKM Diamonds failed to do so. Lastly, the instructions to Form S-8 require that an issuer
may use Form S-8 only when it has filed all required periodic reports for the preceding twelve
months. CMKM Diamonds, however, was delinquent in filing its annual report for the fiscal
year ended December 31, 2002, when it registered its securities on Form S-8.
CMKM Diamonds’s violations involved important provisions of the Exchange Act.
Throughout the period during which it has filed no reports, CMKM Diamonds has operated in
secret, revealing scant information to the investing public regarding its purported multi-million
dollar transactions and stock issuances while the trading volume of its stock is consistently more
than 1 billion shares per day. Finally, CMKM Diamonds continues to report a false business
address in filings with the Commission.
The company’s and Casavant’s repeated statements during 2004 about “working on
getting reporting” and becoming compliant indicate that the company was acutely aware of its
failure to file required periodic reports. Furthermore, as discussed above, CMKM Diamonds
misrepresented the number of its shareholders of record in the original Form 15.
CMKM Diamonds does not appreciate the wrongfulness of its conduct and the
requirement that it provide the investing public with accurate information. It also has failed to
offer adequate assurances against future violations. Although CMKM Diamonds was purportedly
“working on getting reporting” during 2004, CMKM Diamonds’s first actual efforts at becoming
compliant were in January 2005, after the Division had already contacted it regarding its
delinquent reports. Prior to that time, the company’s financial statements were nonexistent and it
had retained no auditor. (Tr. 68-77, 171.) In fact, to this day its financial statements remain
nonexistent and its auditor has since resigned due to the company’s failure to cooperate with the
audit. In February 2005, CMKM Diamonds announced that it was “working toward completing
an audit of its financial statements.” (Div. Ex. 52.) In reality, however, the company had no
financial statements to audit and an audit had yet to begin. Since that time, the company has
refused to provide its auditor and bookkeeper with information, despite their repeated requests.
Additionally, CMKM Diamonds repeatedly misrepresented its business address in the following
months.
Maheu’s appointment as director does little to assure me that the company will be able to
effect prompt compliance, as he is without sufficient control of the company or the situation. For
example, as of the hearing, he was under the mistaken impression that an audit had commenced.
Furthermore, he learned at the hearing that the company had consistently failed to provide
documents requested by its auditor and bookkeeper.
Finally, CMKM Diamonds’s violations of the periodic reporting provisions will likely to
continue in the future. Opus Pointe has barely begun assembling the company’s financial
statements, and despite repeated requests, the company has yet to provide it with substantial
information necessary for their completion. Moreover, CMKM Diamonds’s auditor recently
terminated the engagement due primarily to Casavant’s failure to provide promised documents.
Thus, CMKM Diamonds has no independent auditor and no financial statements to be audited.
Furthermore, no drafts of CMKM Diamonds’s missing reports have been prepared and no
13
witness could specify a date by which the company would file any of its delinquent reports. As
such, it is highly likely that CMKM Diamonds will continue to violate the periodic reporting
provisions in the future.
The public hearing was an opportunity for CMKM Diamonds to address the allegations
in the OIP. It failed to do so. Casavant seems to be the only person running the company and he
refused to testify. Several witnesses testified that they tried to get financial information from
Casavant and he failed to supply it. CMKM Diamonds has been out of compliance since 2002,
and has made no good faith effort to remedy the situation.
CMKM Diamonds’s failure to file required periodic reports has deprived the investing
public of current, reliable information regarding its operations, purported million-dollar
transactions, and financial condition. Viewing the Steadman factors in their entirety, I conclude
that the appropriate sanction for the protection of investors is revocation of the registration of
CMKM Diamonds’s securities.
RECORD CERTIFICATION
Pursuant to Rule 351(b) of the Commission’s Rules of Practice, 17 C.F.R. § 201.351(b), I
hereby certify that the record includes the items set forth in the record index issued by the
Secretary of the Commission on July 6, 2005.
ORDER
Based on the findings and conclusions set forth above:
IT IS ORDERED THAT, pursuant to Section 12(j) of the Securities Exchange Act of
1934, the registration of each class of securities of CMKM Diamonds, Inc., is hereby
REVOKED.
This Initial Decision shall become effective in accordance with and subject to the
provisions of Rule 360 of the Commission’s Rules of Practice, 17 C.F.R. § 201.360. Pursuant to
that Rule, a party may file a petition for review of this Initial Decision within twenty-one days
after service of the Initial Decision. A party may also file a motion to correct a manifest error of
fact within ten days of the Initial Decision, pursuant to Rule 111 of the Commission’s Rules of
Practice, 17 C.F.R. § 201.111. If a motion to correct a manifest error of fact is filed by a party,
then that party shall have twenty-one days to file a petition for review from the date of the
undersigned’s order resolving such motion to correct a manifest error of fact. The Initial
Decision will not become final until the Commission enters an order of finality. The
Commission will enter an order of finality unless a party files a petition for review or a motion to
correct a manifest error of fact or the Commission determines on its own initiative to review the
Initial Decision as to a party. If any of these events occur, the Initial Decision shall not become
final as to that party.
____________________________
Brenda P. Murray
Chief Administrative Law Judge </i>
http://www.sec.gov/litigation/aljdec/id291bpm.pdf
And....
Why is George in Canada, while the company's "offices" are at a body shop in Brooklyn?
You probably should do. After all, he's been right about practically everything, and you've been wrong about absolutely everything.
LOL!! Great photo!
I have known the NSS existed but with those numbers it would make sence for a man of Maheu's caliper to be in charge of rounding up the crooks. IMO
Good thought about the casino. Bonus.
Guess what? There's a WHOLE lot of information about Hawaii on the web. You can even search for precise addresses, and see maps and photos.
Quito?
hmmmmm... Maybe we should try Timbuktu next time. Are you any good with camels?
Damn, that's always a problem in Tashkent. If you want anything done about it, you have to bribe the head goat.
Sigh.... I left detailed instructions for you at your hotel. No wonder you haven't been getting those checks.
Why do you think I sent you those first class tickets to Tashkent??
I'll see that it's sent to your drop box. You DO know where your drop box is, don't you?
I checked it several months ago. Not an appealing landscape.
Well, the truth is that I'm Elo's boss, so I hesitate to step on his story.
snicker, I'm afraid you'll have to ask Elo.
LOLOL!! What a whackjob!
By: elo54
29 Apr 2006, 08:24 PM EDT
Msg. 223551 of 223604
Jump to msg. #
Janice/44 (private message)
Janice hunny,they are about to fire you.You are bringing too much heat down on your pimp boss with all your legal problems.
We know you know the main nss players and maybe can help should the going get tough.
I would like to give you my Vegas address or phone number but I might not like some of your friends. This is the best I can do.
Call this number
702-891 0500 and ask for Bob Maheu.If Mr Maheu is not there leave a call back number.
ELO
http://ragingbull.lycos.com/mboard/boards.cgi?board=CMKI&read=223551
Wally?? How's Wally lying? I think he's been quite objective.
lol, check back with me on that in a couple of years.
Yes, actually you are "unreasonable". Maybe you should find out a little about me before asking.
I do it for fun, and because I enjoy doing research. I'd have stopped with the information about how suspensions worked, but I'm afraid that the mysterious George, and the odd pay phone and body shop numbers and addresses are quite...tantalizing.
Sure, naked shorting happens, usually in exchange listed stocks. But it doesn't last long, and isn't the enormous problem penny stock "investors" want to believe it is.
The real problem in penny stocks is toxic financing.
Many companies have tried cert pulls and all sorts of things. And they've never proved their much-touted short positions, borrowed or naked. Not once.
What usually turns out to be the case is that management has diluted and lied to shareholders about it.
Accepted, Gump. Yes, funerals do make you think...
I believe that 20 acres land in Hawaii is quite expensive considering HI is a tourist destination.
lol, not when it's in a "volcanic desert".
You know, for awhile I thought the people on this board were being reasonable.
Guess not. Now all the naked shorting bs begins. That is not what's happening here. What IS happening is that the SEC suspended the company because it had questions.
I merely find it astonishing that you readily believed that I was using another alias. You didn't even ask me: you just announced it as fact.
You should know me better by now. But then you believe all kinds of nonsense.