CMKM Diamonds Inc (fka CMKX)

[ponokee]

SEC bars CMKM transfer agent Bagley

2012-01-20 14:20 ET - Street Wire

Also Street Wire (U-*SEC) U.S. Securities and Exchange Commission
Also Street Wire (U-CMKX) CMKM Diamonds Inc


by Mike Caswell

The U.S. Securities and Exchange Commission has permanently barred Helen Bagley, the transfer agent in the massive CMKM Diamonds Inc. fraud, from associating with brokers, dealers or other securities industry participants. The ban, contained in an administrative order handed down on Jan. 13, 2012, stems from her role in the CMKM scheme, which included helping the company's promoters issue 589.7 billion freely tradable shares. The order results from a negotiated settlement, in which Ms. Bagley did not admit to any wrongdoing.

The SEC claimed that Ms. Bagley's actions were essential to the CMKM manipulation that ran from 2002 to 2004, in which Saskatchewan's Urban Casavant and British citizen John Edwards dumped billions of shares. Ms. Bagley repeatedly issued tradable stock based on incomplete and in some instances forged documents, the SEC said. She ignored red flags that would have made it obvious she was facilitating illegal activity.

The administrative case is one of three actions Ms. Bagley has faced for the CMKM promotion. The SEC previously secured a $448,047 civil judgment against her for the scheme, which she is appealing. (All figures are in U.S. dollars.) She and several others also face criminal charges in Nevada, to which she pleaded not guilty on April 28, 2010.

SEC's complaint

The administrative case did not contain full details of the allegations against Ms. Bagley, instead referring to the complaint the SEC filed in the earlier civil case on April 7, 2008, in the District of Nevada. The complaint described how Ms. Bagley's transfer agency, 1st Global Stock Transfer LLC, helped issue 589.7 billion freely tradable shares during the CMKM promotion. (The U.S. Department of Justice puts the total number of shares issued in the scheme at approximately 800 billion.) The recipients included Mr. Edwards, Mr. Casavant or their nominees.

In most instances, she issued the stock based on flimsy or fraudulent paperwork, the SEC said. She accepted opinion letters from lawyers that did not identify who was receiving the stock, specify the number of shares issued to each recipient, or correctly list the company's name. Moreover, it was also obvious that some of the opinion letters were backdated, the complaint stated.

While the complaint dealt mostly with the CMKM promotion, it noted that Ms. Bagley had a business relationship with Mr. Edwards that began in the 1990s, when she served as the transfer agent for multiple companies that he traded. By the time of the CMKM scheme he was her largest customer, with CMKM work comprising over half of her business.

The other defendants in the civil suit included Mr. Edwards and Mr. Casavant, who the complaint described as the masterminds of the CMKM scheme. They heavily pushed the stock while dumping at least $64.2-million worth of shares, the SEC said. According to the complaint, they generated investor interest by issuing false news releases that, among other things, touted the "Casavant diamond brand" while failing to disclose that the company had yet to find a single diamond. The company also claimed to have an ancient Chinese jade collection, appraised at over $50-million, but the purported appraiser never had any involvement with CMKM.

The company's most effective promotional tool, according to the SEC, was appearances at "funny car" events (a class of drag racing). CMKM sponsored a race team called CMKXtreme, and put up a tent at races that contained geological maps, videos and promotional materials. According to the SEC, the fraud reached its height around June, 2004, when the CMKXtreme race team became popular. In total there were about 40,000 people who bought the stock.

During the scheme, Mr. Casavant dumped $31.5-million worth of stock, while Mr. Edwards sold $26.4-million worth, the SEC said. They used the money to pay gambling debts, invest in real estate and generate more shareholder interest, among other things, the complaint stated. The stock price varied between 0.01 cent and 0.1 cent, with daily volume sometimes over two billion shares.

The complaint sought disgorgement of ill-gotten gains, penny stock bans and appropriate civil penalties. Mr. Edwards settled out of court, agreeing to penalties that the judge later assessed at $54.9-million. He did not admit to any wrongdoing. Mr. Casavant did not contest the case, and the SEC won a $65.6-million summary judgment against him on Sept. 2, 2009.

In addition to the Thursday's ban against Ms. Bagley, the SEC has revoked the registration of 1st Global.

Ms. Bagley and several other CMKM figures still await trial in the criminal case. There has been no participation from Mr. Casavant or Mr. Edwards, as police have yet to arrest Mr. Casavant and Mr. Edwards awaits extradition from the United Kingdom, where he was arrested on the U.S. charges on Sept. 7, 2009.