Letter from Frizzell:
FRIZZELL LAW FIRM
305 S. Broadway, Suite 302
Tyler, Texas 75702
(903)595-1921
Fax (903)595-4383
E-Mail bfrizzell@tyler.net
To: CMKX Owners Group 4-13-05
The prehearing conference was just concluded. The SEC was represented by Leslie Hakala and John Bulgozdy. Your company was represented by Donald Stoecklein. Judge Brenda Murray presided over the conference. I entered an appearance on your behalf. There was much discussion over re-scheduling of the hearing date. The rescheduling was required because of the many matters that need to be accomplished before the hearing. The Judge wanted to make the hearing convenient to the parties and suggested two alternative sites All parties agreed to Los Angeles as the city for the hearing. The site of the hearing is undetermined at this point. I expect the hearing to convene in a Federal Courtroom in Los Angeles.
The new hearing date is May 10, 2005. We will receive an order from the judge regarding the place and time the hearing will convene. The judge discussed the issues presented by the SEC?s order and CMKM?s response. Mr. Stoecklein elaborated on the defenses he raised in the company?s response. In summary, the Judge seemed inclined to view the issues narrowly meaning the most critical issue is whether or not the required reports have been filed.
There were discussions about depositions and subpoenas that may or may not be requested as the parties prepare for the hearing. This hearing has the potential for numerous witnesses and the judge will include a deadline for the parties to tell each other and the court who the witnesses will be at the hearing. The Court agreed to consider any requests from the parties if subpoenas were necessary by either the company or the SEC. The SEC urged the Court to consider summary disposition (rule in favor of the SEC without a hearing) but the Court did not agree to do that at this time.
The Court ruled that if either party wished to present experts at the hearing, the party presenting such expert testimony would have to follow her procedure of having certain parts of that expert?s testimony ?pre-circulated?. The judge has said very emphatically that this hearing is a fact finding hearing and she will consider all the evidence and hand down a ruling within the 120 days from the date the order was filed by the SEC. This judge is very dedicated to seeing that there is ?transparency? in these proceedings. She used this word in the order allowing us to intervene and she mentioned it again. This is a good thin g for the shareholders. Transparency in this sense means there should be no hidden agendas or evidence that is secreted or kept from the parties and the public.
There are complications in preparing for this hearing due to the UCAD investigation. It would not be appropriate for me to go into the details of the problems presented by the UCAD investigation. I will direct you back to the press releases which discussed subpoenas to certain company officials as a result of that investigation. I am pleased with how the Judge has agreed to handle any disputes between the parties over this separate investigation. My suggestions to the Court on how to handle the disputes over the UCAD investigation were not well received by the SEC attorneys.
This hearing went as good as could be expected for the shareholders. The company can use the additional time as they work through the problems presented by this SEC action. Donald Stoecklein is doing an excellent job representing the company. The SEC enforcement attorneys are representing their agency in earnest as well. There have been no discussions about resolving this proceeding in any fashion other than asking the Court to deregister the company. I am very impressed with the efforts of Judge Murray to remain an independent jurist befor e hearing any evidence in this case.
Many people are wondering about discussions of naked shorting and there was not a discussion of naked shorting during this prehearing conference. That is not surprising to me. Our investigation in this area is ongoing. The investigation we are conducting is separate and apart from the things I am working on to prepare for this hearing. I will continue our investigation with the company?s assistance while I prepare for the hearing.
We are discussing a meeting with the SEC in the next few days for a review of the file. The Respondents to this type of proceeding are typically allowed to view the administrative hearing file and obtain copies of certain parts of the file. If I attend that meeting I will report to you the results of this meeting when it occurs.
Sincerely,
Bill Frizzell
