|Too funny, I missed this second article from Norris the other day.|
Floyd NORRIS, New York Times and CMKX again-September 29, 2006, 7:33 pm
Blame the Naked Shorts
Who was the man, mentioned in my column today, who sold 259 billion shares of stock in CMKM Diamonds, a stock that sold for fractions of a penny, and took in $53 million from sales of the stock? And where did he get the shares?
The NASD complaint gives only his initials, J.E., and an address that turns out to be a Las Vegas post office box that the company had used. A search of records turned up the fact that a John Edwards had used the address, but did not uncover a way to reach him.
When a Securities and Exchange Commission administrative law judge held a hearing on CMKM last year, an auditor who was hired to audit the company’s books, but quit after few records were provided, testified that he was recommended for the post by a friend of his named John Edwards, who sat in on the meeting where he was retained.
The auditor, Neil Levine of Bagell, Josephs & Company, said Mr. Edwards had brought him in for a number of audits after the accountant he had been using decided not to register with the Public Company Accounting Oversight Board in 2004.
According to the NASD, many of the shares sold by J.E. had been registered in the name of the stock transfer agent used by the company, a rather unusual procedure.
And how did he get those shares? I don’t know, but it appears that billions of shares were issued by the company with little in the way of explaination. “Isn’t it very unusual,” asked the judge, Brenda Murray in reference to one of the transactions, “that a company would issue 3 billion shares and not list a reason?” Mr. Levine agreed that it was.
He also testified that company officials told him it had no revenues during the three years that he was supposed to audit.
So what we have here is a company that seems to have spent little on its ostensible business, but spent millions on a race car that seemed intended to promote the stock, of which billions of shares were issued with little in the way of explanation, and sold by a man whose name was not on the certificates. The company filed a form it later admitted was false in order to get out of reporting its finances to the S.E.C.
We also have a president of the company, Urban Casavant (the C in CMCK) who chose to invoke his Fifth Amendment right not to incriminate himself, rather than testify at the S.E.C. hearing, and a board co-chairman, Robert Maheu, who testified he was not familiar with the company’s assets or liabilities, and had never visited its offices.
So who are shareholders mad at? The management? The man who sold more than a third of the shares outstanding without ever filing a form saying he owned more than 5 percent, and who may have been an insider? The S.E.C. for letting this go on for a couple of years before revoking the company’s registration, or for having not yet brought any charges against J.E. for selling them shares that may well be worthless?
No, not any of them. A few shareholders who contacted me today were furious about my column because it failed to identify the real villains, as they saw it — the naked short sellers who they say sold the shares without borrowing them.
As one of them so gently put it:
“Mr NORRIS…What possibly could be the reason you wrote about a worthless little pennystock…CMKM Diamonds..and placed it on the first page of the NY Times business section. Could it possibly be that the company has just about implicated every major brokerage firms in the country in the systematic rape of the American people due to the insidious practice of NAKED SHORT SELLING…COUNTERFEITING….Your boss’s on Wall Street will have to do some heavy.spin on this one Floyd…