Here's another summary of the hearing. This guy did a very nice job and mentions some more details than what we've heard from other attendees. He still has some more to write. Unfortunately, he didn't list what questions the SEC asked Urbie.
I arrived at the courthouse at approx. 9:00AM today. Upon arrival, I met several CMKX supporters, and got the infamous T-Shirt (lol)
There were about 45 shareholders/interested parties there, and enough spare seating for about 50. The judge was very concerned about ensuring all interested shareholders could observe the proceedings, to the point of offering up seats from the main courtroom area, and even leaving the door open so others outside the room could hear. The mood was what I'd call an 'anxious excitement".
The judge was also very fair IMO, contrary to pre-hearing rumorizing by a certain non-proboards32 poster. She stated clearly that she will have to take everything back to Wash DC, and wait for the official court-reporter's transcript. The case will be decided on the record ONLY...the record is the only evidence that can be used. In fact, she entered into record twenty letters she received from investors, including one from a specific (female CPA) investor received May 4, who thought the judge was (quote) "a dummy"...the only letter she commented on out of the twenty (I didn't take that as a positive form of recognition for that writer, BTW).
Mr Frizzell and Mr Stocklein appeared quite comfortable working together. Mr Frizzell is in a unique position, due to the fact that his right to be there was a bit precarious...but he did an outstanding job of fighting for us, as I will explain later.
The judge opened the case by stating the primary issue at hand was the fact that the reports weren't filed.
The judge also spoke of her rulings on motions before the hearing, including the one that NSS was not an allowed topic of discussion.
The SEC's opening argument was:
- CMKX "failed utterly to file required reports". CMKX's fiscal year ends on Dec 31; the last filed report covered FY2001; there has been no report for 2002, 2003, or 2004....CMKX acknowledged this, it is not disputed.
- Further, CMKX has produced no auditable records.
- In 2003, I believe (my hand was smoking from taking 12 pages of notes), CMKX filed for non-reporting status based on having 300 shareholders, which is allowed under SEC regulations; however the SEC states they in fact had 698 shareholders, which requires the company to be in reporting status. CMKX later admitted the numbers submitted on Form 15 that allowed us to be non-reporting were wrong, and filed an amendment (this was all in the PRs, BTW). In Mar 2005, CMKX admitted to inability to report.
- SEC believes excess of 700 billion CMKX shares are in existance.
- SEC hints at inappropriate action by company leadership, but never directly makes accusations.
- SEC requested suspension or revocation of CMKX's trading registration.
At this point, the judge brought forward a documented similar case, in which the parties agreed to settle out of court. (OPINION: I think the judge wanted the parties to settle out of court, without saying it directly).
Then Mr Stocklein began his opening remarks:
- Is working back to Dec 2002. We have hired an excellent CPA to help take on this issue (part of Stocklein team). CMKX is not denying the fact that the reports weren't filed. Rule 126 allowed CMKX to suspend reporting requirements via Form 15 in July 2003...and while the numbers proved later to be wrong, no request to correct this error was received from the SEC or anyone else.
- Our CFO from 2002-2004, David Desormo (sp?) was apparently paid $1.5M for company accounting. In the end, the company received a 25 page report on shareholder equity.
- One of our attorneys (name escaped me, sorry)(Roger Glenn/E&A)(added by golden1101) was paid $250K for legal assistance. The company received a one page report saying no files were available.
- Neil Levine, our hired Auditor (I didn't get the company name, but I believe it's in a PR), was paid a $100K retainer to audit our financials. Last Friday (May 6), he notified the company that he was terminating his position as the auditor...and was billing the company approx. $71K for services rendered. He produced no reports for us.
- Robert Mahue (referred to as IBM from here in my notes) was assembling a new team to fix these problems.
Mr Stocklein appeared (to me) to be very competent and on his game at this stage.
Mr Frizzell's opening remark was that he believes there are actually 60,000 shareholders, and that there are trillions of shares in existance in reality...and skirted the issue of NSS existance in the market. The judge asked back if the shareholders buying today were aware they may be buying "these kinds of shares"? Mr Frizzell responded he believed most people knew about the difficulties the company faced in this area.
Mr Frizzell has a good strong Texas accent and style, and he's got a lot going on upstairs...I was proud to have him representing us today.
First SEC Witness: Neil Levine (CPA), the resigning CMKM auditor.
As stated in the opening remarks post, he was paid a retainer of $100K, even though he only required a $50K retainer. When the judge asked why CMKX paid more, he stated it appeared they wanted the job done quickly, with many of his staff working on it almost immediately. He was hired on/about Jan 10, and requested the financials again on Jan 17. Requested financials included general ledgers, statements, and general corporate documents; none were provided. When CMKX received it's subpeonas, John Edwards referred Mr Levine to UC.
Mr Levine was dealing directly with UC, Mr Dessormo (sp)(former CFO). He stated that UC seemed quite eager to get reporting, in fact he hired him the same evening as they spoke. UC also spoke of his desire to move to another trading board, specifically the bulletin boards or even higher. Mr Levine said the SEC subpoena was in effect at the time, but he was not informed of it at the time. He was provided a copy by Mr Stocklein, who also informed him in March 2005 that he (Stocklein) had his subcontractors working on the books.
Levine went on to describe progress as "slow". In April 2005, the company continued to tell Mr Levine that work on the reports was still progressing slowly, with no reasons given. The judge asked how long it would take to get completely caught up on the financials, Mr Levine replied "three months", if a perfect set of financials were provided to him. The financials build on previous years, so they would have to be audited in sequence.
Mr Levine's letter of termination to CMKX was read to the court.
On cross-examination by Mr Frizzell, Mr Levine testified that the transfer agent would be the source for O/S info on the 10Ks. Mr Frizzell was a strong presence...he fired up a court room that was feeling the effects of financial testimony and a long sit on a hard bench.
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Second SEC Witness: Chris Nall, greenbaron.com Mr Nall (sp?) was called basically to discuss a chart many of us in the spectator section couldn't see, that referenced information regarding CMKI/CMKM/CMKX's volume on bar graphs and the PPS on a line graph, as I understood it. He was asked by the SEC about the 2004 webcast he conducted with UC and RW. Not a lot there to tell ya'll about, in honesty, from my POV.
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Third SEC Witness: Helen Bagley, owner, First Transfer (our stock agent).
Under SEC questioning, Helen stated she believed the shareholder records were accurate.
She also went on to explain how the "shareholder of record" process worked briefly; she stated that broker shares are not part of the total. A company called "Cede and Co." holds the shares for all non-certificate holders. According to her records, there were 17B shares in 2003, divvied up among 698 shareholders.
She went on to discuss the categories of shares she tracked: "Issued shares" refers to share that are in distribution via certificate; "Surrendered Shares" refer to Issued Shares that are returned (usually because of a transfer in ownership); Outstanding Shares (O/S) is simply a calculation of the Issued Shares, minus the Surrendered Shares.
She is unable to tell how many shareholders have shares in street name.
When asked by the SEC, Helen stated there was no record of CMKX management inquiring into the number of shareholders in July 2003.
She went on to state there were 300+ shareholders in Jan 2003.
As of Dec 2004, 2 trillion shares were issued, and 1.4 trillion shares surrendered, leaving an O/S of approx. 778 billion shares.
Helen also testified she had no knowledge of the "stock borrow program.
Based on the questions posed by the judge, it appears the O/S issue is very much on her mind.
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Fourth SEC Witness: Susan Herring, OTIS Point; CMKM Book Keeper
Brought on in the beginning of Mar 2005. $20K retainer was paid (by Stocklein, I believe). Bill rate is approx. $45-150 per hour. Previous book keeper was David Desormo (sp), former CFO; she's never spoken to him directly. Previous records consisted of three inches of materials in a binder.
She's currently gathering data on drilling costs, etc. She believes the SCMKX office is now located in UC's personal residence. She has never visited there because she is uncomfortable with going to his home.
Mr Stocklein's office is straight across the hallway from Susan's office.
Susan testified of continuing delays in getting financial data from CMKX. UC's wife (Carolyn) has signatory authority for the accounts; no controls on use of CMKX funds exist to her knowledge. Carolyn used authority during UC's serious illness last year to keep operations running.
Susan has put together a draft general ledger for 2002-2004. It is incomplete and not verified, so it is a draft. There was a $56M jade collection purchase made, but apparently it was reversed too...but the paperwork for the reversal hasn't made it in yet. A second jade collection valued at $60M was made (no dates I can recall, sorry)...no reversal action taken to date.
The draft ledger also listed a $24M undisclosed arrangement, and no revenues are presently recorded for 2002/2003/2004. UC has apparently loaned the company money, but has no documentation on those loans presently. (If I understood it correctly) we were $36M in the hole, as of Dec 2004, based on the incomplete draft ledger numbers.
It would take Susan's team approx. 30 days to complete the 2002-2004 reports, once all the data was handed over to her.
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Fifth SEC Witness: Rendell Williams; CEO, USCA First met UC in Jan 2004; Ed Dhoneu (CEO, Nevada Minerals) was also present. UC brought up that CMKM "needed to be reporting". Rendell was surprised CMKX wasn't reporting already. Over the following year, UC told RW approx. 10-12 times that he was getting close to being ready to be fully reporting. He believed UC wanted to announce at the shareholder party that the company was reporting.
RW stated he didn't know why CMKX hasn't been reporting, or when they would be.
SEC played recording of RW and UC's Oct 18, 2004 GreenBaron interview. RW testified it took place at UC's home. The SEC requested to play the webcast in it's entirety; Mr Stocklein objected, stating everyone in the court room had already heard it. The judge stated she believed the shareholders would like to hear it; she then asked the shareholders how many had heard it (nearly every hand in the spectator section was raised). This seemed to surprise her; she then asked "how many would prefer we don't play it again?"...again, nearly every hand rose.
The judge overruled all of us! LMAO!
We then listened to all 17 minutes of the interview. RW sat next to the computer playing the webcast (it was using the witness microphone to play the webcast over the courtroom speaker system). He looked like he was burdened, especially so during the interview discussion where the 3:1 stock split was discussed.
RW also stated Robert Glenn (RG) was brought on board to solve problems, get reporting, and remove obstacles.
Cross Examination: Mr Stocklein questioned RW; RG is still doing USCA's legal work.
Discussion evolved to roles in the Yellow River mining in Equador. As RW described it, USCA's role was to process ore...and the operation was generating revenue. Apparently Yellow River is owned 100% by USCA; CMKX owns the shafts and claims, USCA processes the ore and is responsible for selling the minerals. CMKX gets 50% of the haul. Most of the revenues generated to date have been put back into the mine operations. Processed approx $90-120K (gross) in 2004, 50% of which was paid to CMKX. RW receives weekly reports from So. America.
The shaft CMKX owns is called "American Mine". Been in operation since the 1900's, has 14 levels. Named as such, because Americans dug it out. There was no revenue for 2003, and no data vailable for 2005 yet.
The subject of RW's background was brought up. He has been in the mining industry for two years...before that, he was in food processing (baby formulas).
Mr Frizzell then cross examined. He asked RW if USCA was invested into CMKX, or the other way around; RW stated it was the former. RW couldn't recall how much he invested in CMKX. He paid stocks to CMKX (more than 1M shares), which were distributed to the shareholders. Mr Frizzell asked if there was anything unusual about the Oct 2004 Shareholder Appreciation party...RW stated he had no recollection of anything unusual (the shareholders present were obviously ruffled by this statement). RW went on to state he wasn't planning to make any announcements during the party...just thought UC may announce that CMKX was reporting.
USCA is also a few weeks behind on their last report...but OK on all others.
Mr Frizzell asked RW to describe all the roles at Yellow River in more detail. RW stated CMKX started processing minerals in Sept 2004. In short, CMKX pulls minerals out, Nevada Minerals operates the mine, and USCA processes the ore. USCA is also responsible for selling the gold.
RW went on to state he has no idea how much it costs to run the operation in Yellow River. He believes CMKX has paid all money due to USCA, but knows CMKX still owes Nev. Minerals some money.
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Final SEC Witness: Urban Casavant; CEO, CMKM/CMKX Urban took the stand, and asserted his 5th amendment rights under the US Constitution for all questions asked of him on the stand. The judge took the time to explain the ramifications; in a criminal court, a jury is instructed NOT to infer anything negative when a defendent invokes his right to non-self incrimination. But in a civil matter (like this hearing), an "adverse inference" may be drawn on the company by a refusal of a CEO to testify. UC's demeanor was calm, reserved during questioning. All questions answered the same: "5th Amendment". The SEC still questioned him on several detailed points, to which the same answer was given.
Check out what the TA said: "As of Dec 2004, 2 trillion shares were issued, and 1.4 trillion shares surrendered, leaving an O/S of approx. 778 billion shares."
So, Urbie apparently had issued way over the a/s as some of us suspected.
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