CMKM defendants see Spooner plead guilty
2015-09-10 09:45 CT - Street Wire
by Mike Caswell
Melissa Spooner, one of those connected to the pump-and-dump of CMKM Diamonds Inc., has pleaded guilty and agreed to testify for the government. She entered the plea in an appearance before Nevada Judge Jennifer Dorsey on the morning of Tuesday, Sept. 8. The judge allowed her to remain free until sentencing, set for Dec. 14, 2015.
Prosecutors claim that Ms. Spooner, a resident of Pennsylvania, participated in the sale of 2.2 billion unregistered shares in a handful of companies that arose from the same conspiracy that produced CMKM. While much of the attention surrounding the case has focused on CMKM, the government alleged there was a conspiracy to fraudulently sell shares of several companies. Ms. Spooner's role was to help sell shares of companies other than CMKM, prosecutors say. The amounts involved with those companies are small when compared with CMKM, but the sales still totalled over $10-million, according to the government. (All figures are in U.S. dollars.) It is not clear how much of that was attributable to Ms. Spooner, but her plea agreement includes a term that she make restitution of $3.3-million.
Undoubtedly of more concern for her co-defendants is the strong possibility that Ms. Spooner could end up testifying against them in return for a reduced sentence. Her plea agreement includes a term that she provide "complete and truthful information and testimony" at the government's request. In order to qualify for a reduced sentence, her co-operation must be substantial. Her plea agreement does not set out exactly what information she must provide, but it must be sufficient to satisfy the prosecution before she will qualify for a reduction.
This could be of particular concern to Ms. Spooner's former boyfriend, Jeffrey Turino, who is in jail awaiting trial. As part of her plea agreement, Ms. Spooner has admitted that she served as one of his nominees and that she was the president of a private entity he set up called Mountain Passages Inc. That entity sold shares during the pump-and-dumps of four companies, according to the government.
While Ms. Spooner's plea agreement has her aiding those pump-and-dumps, it describes her role with the scheme as relatively minor. In 2006, she opened several brokerage accounts through which she arranged the sale of fraudulently issued shares. The shares she was selling included those of Worldwide Cannery, a company that purportedly produced and sold millions of dollars worth of seafood. In reality, the company was not producing products or profits, and was in fact defunct, the plea agreement states.
Despite that, Mr. Turino and others created interest in the company through the issuance of many misleading news releases, according to the agreement. They allegedly promoted both the seafood deal and later a deal to import and market diamonds. Meanwhile Ms. Spooner and Mountain Passages sold $1.4-million worth of stock in Worldwide Cannery and its successor, Global Diamond Exchanges Inc., according to the agreement.
Ms. Spooner admits to participating in similar schemes with other listings as well. Her plea agreement lists them as Equitable Mining Corp., OMDA Oil and Gas Inc., and Grand Entertainment and Music Inc. In all, she has admitted to participating in the sale of at least two billion fraudulently issued shares.
Besides Mr. Turino, the defendants that Ms. Spooner's plea agreement mentions by name include John Edwards, the U.K. citizen who allegedly masterminded the promotions of CMKM and other companies. Also named is Nickolaj Vissokovsky, who divided the proceeds of the sales from four pump-and-dumps with Ms. Spooner and Mr. Turino, according to the plea agreement. Another name that frequently appears is Helen Bagley, the now-dead transfer agent who prosecutors claimed facilitated many share transfers as part of the scheme.
While it is not entirely certain what Ms. Spooner could testify about, there is some certainty in her sentence. She faces a maximum of five years, and will likely receive a considerably shorter term. Assuming that she fulfills all the conditions of her plea agreement, prosecutors have agreed to recommend a sentence in the low end of her sentencing range.
The CMKM indictment
The charges in the case are contained in an 87-page superseding indictment filed on March 24, 2010, in the District of Nevada. Prosecutors mostly complained about the promotion of CMKM, citing Mr. Edwards and Saskatchewan's Urban Casavant (who died on Feb. 14, 2014, during a routine surgical procedure) for a scheme in which they caused CMKM's outstanding share total to reach an extraordinary 800 billion shares. Although CMKM purported to be exploring for diamonds, its sole product was the massive number of shares that the company's "printing presses" turned out, the indictment stated.
As the company was churning out shares, Mr. Casavant and Mr. Edwards embarked on a two-year promotion that, according to prosecutors, attracted as many as 40,000 investors. The promotion, as described in the indictment, reached its peak in 2004 when the company started sponsoring a racing team called "CMKXtreme." The team participated in a series of races, sporting vehicles with the company's stock symbol. Attendees wore shirts with slogans such as "Got CMKX?" Mr. Casavant frequently attended the races as well.
Despite the substantial promotion, the company remained a hollow corporate shell, according to prosecutors. Although purportedly a multinational diamond exploration company, it never commercially produced or sold diamonds. Eventually the U.S. Securities and Exchange Commission halted the stock, citing questions about the accuracy of publicly available information on the company.
The charges in the case include conspiracy, fraud, insider trading, money laundering and racketeering. The defendants awaiting trial are: Mr. Edwards, Mr. Turino and Mr. Vissokovsky, as well as Brian Dvorak, Ginger Gutierrez, and James Kinney. All have pleaded not guilty. With the exception of Mr. Turino and Mr. Edwards, all are also free until trial. (A seventh defendant, Jeffrey Mitchell, pleaded guilty and, like Ms. Spooner, agreed to co-operate with the prosecution in return for a reduced sentence recommendation.) The trial, which has been delayed many times, is set for March 22, 2016.
(Further information regarding CMKM Diamonds and associated companies can be found in 85 Stockwatch articles dated Oct. 21, 2003; June 22; Sept. 16 and 24; Oct. 1, 15 and 20, 2004; Feb. 11, 14, 18, 22 and 23; March 1, 3, 4, 7, 14, 15, 16 and 21; June 6, 8, 9, 10, 13, 14, 15, 16, 17, 20, 21, 22, 29 and 30; July 1, 4, 6, 12 and 13; Aug. 2, 5 and 9; Sept. 7, 12, 27 and 30; Oct. 24, 26 and 31; Nov. 7, 11, 22 and 25; Dec. 1, 6, 9, 15 and 22, 2005; Jan. 3; Sept. 29; Oct. 4, 2006; Aug. 30, 2007; and April 7, 9, and 11, 2008; Sept. 21, 2009; Feb. 17 and 23; March 2, 5 and 10, 2010; May 18, 2010; Nov. 7, 2011; Jan. 20, April 25, Sept. 26, and Oct. 24, 2012; and Sept. 30, 2013, Oct. 7, 2013, Feb. 20, 2014, May 13, 2014, Aug. 14, 2014, Oct. 7, 2014, Dec. 3, 2014, and Jan. 29, 2015.)
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