Update from Kevin West and Bill Frizzell 12/10...
December 31, 2010
Dear shareholders,
Another year has come to a close and we would like to wish you and your families the very best in 2011.
While the Company has been quiet for the last few months, please know that we are still working daily on litigation and other Company matters moving forward. Although shareholders are understandably focused upon a return on their investment, there has been much that has taken place behind the scenes to help revive and put a foundation under a Company that was left for dead several years ago. In this past year, outside of litigation matters to be updated below, there have been two major corporate accomplishments that have been underway for a very long time…. 1. For the first time in the history of CMKM Diamonds, Inc, all tax periods dating back to year 2002 have been prepared and filed; 2. The company has interviewed and selected a new transfer agent. Even though it is not something that can be measured by shareholders, please be advised that the Company has incurred hundreds of man-hours of time that went into the finalization of just these two projects alone.
Many questions are coming to the Company regarding the issue of a fund to be paid out to shareholders. The Company has publicly stated its position on this matter several times in the past and continues to stick by that position; after several years and countless hours of investigation into the matters surrounding the past history of this Company and the possession of hundreds of thousands of pages of documents, the Company has not come across one document indentifying a trust fund held on behalf of the Company or its shareholders.
Many have asked about my position on the matters that Al Hodges is working on. I continue to stand by my previous statements of June 25, 2010. I personally believe that Mr. Hodges is looking out for the best interests of the shareholders and that he believes, without any doubt, in the information that he has shared with you. I have spoken with Mr. Hodges in the last two weeks and although he still cannot share details with me or the Company, I am of the personal opinion that he is still 100% confident in his facts and has not wavered in those beliefs. I have let him know that I am just a phone call away if my help should be needed.
The NEW CO, J/V agreement with 1010 is still a valid opportunity for our company. 1010 and CMKM have worked together throughout the year to develop a business plan however at this time, the Company has been unable to provide the large amount of funds needed to move this venture forward. Mr. Koch has continued to secure the claims that hold potential value for the NEW Co and ultimately the sake of the shareholders.
Please see the litigation update provided by the Frizzell Law Firm to the Company below.
Very sincerely,
Kevin M West
CEO / President
December 31, 2010
To: CMKM Management
Re: Litigation Update
Desormeau Suit – Work continues on many fronts in this lawsuit. Enormous amounts of due diligence, private investigation and legal work have been expended in our effort to collect the $33,000,000 judgment which was obtained by the company in July of 2008. I reported in my litigation update in May of this year of the recovery by CMKM of properties in Georgia and Virginia. As of this date CMKM has not accepted any offers on either property. The real estate market for these valuable properties is not favorable as is the case in most parts of the country. CMKM management is currently considering contracts with new listing agents and has some real estate brokers in the area providing feedback to the company.
In September of 2009 thanks to some good work by one of our shareholder volunteer researchers, the company was informed that a property which we had once identified as a property belonging to John Edwards had recently sold in Las Vegas. This office has developed quite a database of information on properties purchased by John Edwards and held through the names of various fictitious entities and trusts. Upon learning of the sale of that property, we began an investigation into the trail of funds following the sale. Since these funds belonged to John Edwards, they were subject to our judgment. We have known for quite some time that John Edwards has historically used lawyers’ trust accounts to purchase properties.
As our investigation developed into this transaction, it was apparent to us that Mr. Edwards was using a particular lawyer and law firm and its trust account to conduct business with third parties. We noticed two lawyers in Las Vegas for depositions and requested that they turn over all files, documents and records of business dealings and investments of John Edwards. The lawyers informed me when they appeared for the deposition that they gathered the documents we requested but due to their confidential relationship with their client they could not turn them over to us without a court order. We reached an agreement where the lawyers would prepare a privilege log and we would ask Judge Delaney to review the logs and decide if the documents identified were discoverable. Judge Delaney ultimately ruled in our favor on August 18, 2010 and turned over to us each and every document which was being withheld by the Mr. Edwards’ attorneys. It took nearly 8 months and numerous court appearances in Las Vegas by Kevin West, myself and our Las Vegas counsel and the filing of several briefs to obtain this ruling.
These documents contained a wealth of material about Mr. Edwards’ business dealings. We found evidence of investments in other countries. I am confident you can understand why I must be rather vague about the matters we uncovered in these documents. We obtained a flow chart which I will provide for the company to post in the document section of the company web site which came from these documents showing some projects related to investments of Mr. Edwards. I have dedacted certain names of companies and individuals for obvious reasons. We are still in the process of investigating the matters learned of in the documents obtained from John Edwards’ lawyers.
Based on information obtained in these privilege logs your company chose to secure counsel in the UK. We have hired a top firm to assist us in our investigations in the UK. Company management spent a great deal of time searching out the right law firm and gathering the requested information to obtain their services. Mr. Edwards has been incarcerated in London since September of 2009 and has engaged counsel in the UK as well.
Our collection work continues in foreign jurisdictions as it is clear Mr. Edwards made large investments and moved money outside of the U.S..
We have recently located properties in Nevada, Florida and California which we have proven belongs to Mr. Edwards. Post judgment collection activities have begun including hiring local counsel in the locales where the properties are located. The company will customarily file a Lis Pendens in the respective locale of the property and then proceed with litigation to have the property legally seized subject to our judgment. Such activities are in progress at this time. Again, for obvious reasons, I am choosing not to specifically identify the properties until we have the appropriate legal proceedings in process to protect your company’s interests.
Once again I was notified by one of shareholders that Can Cal Resources Ltd. had made an SEC filing indicating that it had defaulted on a note the company had with two John Edwards’ entities. The note was secured by 120 acres of land in San Bernadino County, California and originated in 2000. All properties belonging to John Edwards, regardless of how the property is held or when it was acquired is subject to the judgment obtained by your company. Can Cal has recently devoted resources to testing the land to ascertain the land’s potential for mineral development. The officers presently running Can Cal were not in control in 2000 when the note was made with John Edwards. Can Cal has asserted they are unable to contact Mr. Edwards but are desirous of working out an amicable settlement with CMKM. Pursuant to those discussions I began appropriate legal proceedings to consummate an agreement with Can Cal. I filed a garnishment proceeding in a local Texas District Court on July 20, 2010 which would have allowed the company to receive a negotiated amount of money and execute a full release of the note to Can Cal. Because the property and the debt are not in Texas, this Texas garnishment proceeding would only be a viable venue if the parties reach an amicable settlement. Discussions at one time were amicable and a settlement amount was agreed to. A hearing date was set in a Tyler court to get Court approval of the agreement. Company management invested many hours in getting information to Can Cal and in discussing the ways to resolve this matter amicably. A significant amount of money and legal time was spent with Can Cal attorneys to substantiate the claim of the company. Can Cal for various reasons withdrew from these negotiations and we are renewing our efforts to collect on this note.
Your company will in short order dismiss the Garnishment action mentioned above. Our rights to collect on this note are not in jeopardy because of this dismissal. We are now proceeding in Nevada and California to assert CMKM’s rights to a turnover order of the note. Plans are being made to seize the property upon failure of Can Cal to pay the note owing to Mr. Edwards.
After extensive meetings a new plan is underway to aggressively pursue the many properties that we have found and to further our investigation into the information we have obtained about the assets of John Edwards. We have the right to conduct post judgment discovery in every state of the United States to aid us in enforcing our judgment. The procedures on how we conduct this discovery vary somewhat from state to state. Your company is in the process of engaging counsel in the various states to help us. Two firms have already been engaged. This post judgment discovery allows us to send out sworn interrogatories to individuals and companies and to take sworn depositions of people who may have information which would lead us to assets which might be subject to our judgment. We have five individuals in three different states targeted for these depositions. These individuals are people we know have had business dealings with Mr. Edwards and we believe they have information which will assist us as we pursue collection of our judgment.
Casavant/Glenn Suit – Discovery is ongoing in the Casavant/Glenn suit. If this is the first update you have read, you might want to go to the company web site (www.cmkmdiamondsinc.com) to see what transpired prior to May of this year in this case. Since my last update, your company has received a second set of interrogatories and we have responded to those interrogatories. Your company has sent its first request for production of documents to Glenn’s attorneys. Glenn has produced a number of documents pursuant to our request and has made various objections to some of the requests. Your company has recently sent a Request for Admissions to Glenn which includes over 100 requests. Request for Admissions is a discovery tool designed to narrow the contested issues in a law suit. Rules allow the parties thirty days to respond to most discovery including a Request for Admission.
A deposition of one board member was taken this year with our Las Vegas counsel representing the company and the board member. We participated in the deposition of Neil Levine, the CPA that withdrew from representing the company on the day of the administrative hearing in 2005. This deposition took place in Mr. Levine’s attorney’s office in New York City on October 20, 2010. The deposition was an all day deposition. We participated in the deposition of Don Stoecklein in his office in San Diego on October 28, 2010. This deposition was an all day deposition. We participated in the deposition of Mark Faulk in a law office in Oklahoma City on September 16, 2010. This was an all day deposition. An enormous amount of work goes into preparation for these depositions. Mr. West was previously deposed as company representative by Mr. Glenn’s attorney. His deposition as a fact witness will be taken in January.
Your company has hired an expert to testify on behalf of the company. Our expert will give his opinion on certain matters at issue in this litigation. Your expert will be given information pertaining to the legal work done by Mr. Glenn and his firm. He will then give his opinion regarding the work. Experts are commonly used in cases of this sort. The courts allow expert testimony when a matter is being litigated that might be above the common understanding of a lay person. It would be helpful to a lay juror to have information from an expert in some of the issues being tried in this lawsuit. Mr. Glenn has already announced the name of their expert witness. We expect to offer our witness up for a deposition and we expect to depose their expert. I will also be deposing Mr. Glenn but we have not yet scheduled that deposition as of this date.
A scheduling order has been put in place by the trial court. This case will be called for trial on August 1, 2011. I expect this case to be tried sometime during the month of August.
A protective order has been agreed to by the parties and signed by the Judge which cloaks many discovery documents with confidentiality by agreement. I think this scheduling order is a matter of public record. If it is, I will allow company management to post it in the document section of the company web site.
Declaratory Judgment Suit in Tyler--Service issues are being resolved due to Mr. Edwards being incarcerated in London. Once service has been obtained, this matter will proceed.
Al Hodges’ Bivens Suit – I will only make a brief comment on the Al Hodges litigation. The company has made its position very clear on several occasions. I reiterated the company’s position in my update this past May. Please reread my comments if there is any misunderstanding of my position and that of the company. There is an open line of communication between Mr. Hodges’ office, your company and my office. If any help or assistance is needed by Mr. Hodges from me or the company, Mr. Hodges knows we stand ready to do whatever is needed. Having said that, a lengthy in-depth investigation by myself and your company has been ongoing into related matters since March of 2007. Your company management has met with Mr. Hodges. We have received the same information most of you have received about this matter. The company’s position has not changed. Mr. Hodges has been relentless in his pursuit of the monies identified in his lawsuit. He is firm in his belief that he will eventually be able to obtain the funds he believes are being held in trust for the shareholders.
Communication to Shareholders – I feel compelled once again to ask you to use your common sense and be patient with the officers and directors of your company as this litigation proceeds. The law is clear that when I discuss company plans which involve litigation with the officers and directors, those discussions are privileged and not discoverable. When your officers and directors communicate with third parties, whether in my presence or not, that communication is no longer privileged. Discovery requests have been filed with us seeking communications between all parties involved and shareholders. I do not allow the officers and directors to go online or engage in conversations with shareholders about the details of the company business. The cases we are litigating are very important to this company.
Thanks and Best Wishes For 2011 – I want to thank the many shareholders who have tirelessly contributed their time and efforts to the cause of this company. I am very much aware that this update will not excite the masses out there who are in daily anticipation of the funds being sought by Mr. Hodges. Should his efforts come to fruition, I will be as happy as any shareholder alive. But I am proud of the legal work that has been done for this company. We will continue to exert our time, money and efforts until these matters are all resolved and this company is back to trading. I have confidence that our hard work and efforts will be rewarded in the end. Have a safe and Happy New Year.
Sincerely,
Bill Frizzell
AI
