CMKM defendant Kinney avoids jail, receives probation
2018-11-15 20:31 ET - Street Wire
by Mike Caswell
A Nevada judge has imposed a probationary sentence on James Kinney, one of the accused in the massive CMKM Diamonds Inc. fraud. Mr. Kinney, who admitted to selling 60 billion shares during the scheme, must serve five years of probation. The judge also directed him to perform 150 hours of community service.
Mr. Kinney, 48, previously pleaded guilty to a criminal charge stemming from the 2004 scheme, which was run by Saskatchewan's Urban Casavant. Prosecutors said that he and others dumped billions of shares as the company touted the "Casavant diamond brand" and a purported $50-million jade collection. (All figures are in U.S. dollars.) Mr. Kinney entered his guilty plea on June 11, 2018. In doing so, he admitted that he had sold $6.5-million worth of stock during the fraud, and had sent $3.4-million of the money to Mr. Casavant.
The probationary sentence for Mr. Kinney is contained in a judgment released on Thursday, Nov. 15. In addition to five years of probation, the judge imposed a $2.8-million restitution order on Mr. Kinney and ordered him to pay a $10,000 criminal fine. During his probation, Mr. Kinney must undergo substance abuse treatment and drug testing, the costs of which he must pay himself. His 150 hours of community service must be complete within three years.
The probationary term is a setback for prosecutors, who had asked the judge to put Mr. Kinney in jail for one year. They said that he played an important part in a $70-million fraud. He sold shares on behalf of others, allowing his co-conspirators to unload billions of shares based on false news releases and a "veil of secrecy" that hid from investors the true number of shares that CMKM had issued.
Moreover, Mr. Kinney was far from a law-abiding citizen, even at the outset of the scheme, prosecutors said. They pointed out that he has four prior felony convictions. These include assault with a deadly weapon (he fired a gun three or four times at a car), attempted manufacture of a controlled substance (he operated a meth lab), possession of a controlled substance and unlawful possession of cannabis.
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The judge has not provided any reasons for the probationary sentence, but she undoubtedly took into account the submissions that Mr. Kinney made through his lawyer. In a memorandum filed on Nov. 8, 2018, he pointed out that he had stayed out of trouble for the last 10 years, and claimed that he was "a changed man." He blamed his criminal past on a difficult upbringing. He said that he had a Japanese mother and was subject to considerable bullying as a youth, with he and his five sisters being called "half-breeds" and being accused of having "slanted eyes." He started getting into trouble as a teenager and was placed in special schools.
Mr. Kinney is not the only person to avoid jail for the CMKM fraud. Two of his co-defendants, Ginger Gutierrez and Jeffrey Mitchell, also received probationary sentences. Both pleaded guilty as well, with Ms. Gutierrez admitting that she sold 16 billion shares during the scheme.
With Mr. Kinney's sentence, only two defendants have served any jail time for the scheme. They include one of the alleged masterminds, U.K. national John Edwards. He was in custody awaiting trial for seven years, and died of cancer on April 18, 2018. The other person who went to jail was Jeffrey Turino, a Nevada man who helped route billions of CMKM shares through nominee accounts in Florida. Prosecutors had listed him as one of the more predominant sellers of the stock. He pleaded guilty and served six years in jail. He died shortly after his release, suffering complications during heart surgery. Also dead is Mr. Casavant, who was never in custody on the charges. His death occurred during a routine surgical procedure in Saskatchewan in 2014.
The only remaining defendant is Colorado lawyer Brian Dvorak, who will avoid a jail term as well. He entered something called the pretrial diversion program. Assuming he is accepted into the program and completes it, prosecutors will drop the charges against him. (Such programs usually require a defendant to place himself under supervision for a period of up to 18 months. The supervision may include counselling, education, job training, psychiatric care and community service.)
Details of the scheme are contained in an 87-page superseding indictment that prosecutors filed on March 24, 2010, in the District of Nevada. They claimed that Mr. Edwards and Mr. Casavant, with the help of others, illegally issued billions of CMKM shares between November, 2002, and August, 2004. Their actions caused the company's outstanding share total to reach an extraordinary 800 billion shares, according to the indictment.
Much of the scheme revolved around CMKM's sponsorship of a racing team called "CMKXtreme." In 2004, 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. In all, as many as 40,000 investors purchased the stock, according to prosecutors.
The charges in the indictment included conspiracy, fraud, insider trading, money laundering and racketeering. Besides Mr. Dvorak, the surviving defendants have all pleaded guilty, with one exception. Still unaccounted for is Nickolaj Vissokovsky, who remains wanted and has never been in U.S. custody.
