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Strategies & Market Trends : Anthony @ Equity Investigations, Dear Anthony,

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From: StockDung4/10/2008 12:56:38 PM
   of 122081
Diamond mine scam netted more than $64-million: SEC
Chris Purdy, Canwest News Services Published: Thursday, April 10, 2008

SASKATOON - American securities officials have charged a Prince Albert man who headed a diamond mining company that allegedly scammed millions of dollars from investors around the world.
Urban Casavant, the 51-year-old former CEO of CMKM Diamonds Inc., was among 11 people charged earlier this week with fraud and other offences by the United States Securities and Exchange Commission (SEC).

The agency claims the group conspired to illegally sell unregistered stock -- 622 billion shares -and lined their pockets with at least $64-million from 40,000 investors between 2003 and 2005.

Urban Casavant, the 51-year-old former CEO of CMKM Diamonds Inc., was among 11 people charged earlier this week with fraud and other offences by the United States Securities and Exchange Commission (SEC).

Mark Faulk, an author from Oklahoma City, Okla. who has researched the case for two years for an upcoming book, believes the numbers are actually much higher.

He said Wednesday thousands of people across the U.S., Canada, Europe and Asia were actually swindled out of $250-million.

"This may be the largest fraud of its kind ever in the stock market," said Faulk.

Mr. Casavant is alleged to have personally pocketed at least $31.5-million while running the scheme out his home in Las Vegas.

Mr. Faulk said Mr. Casavant blew most of the money on his extravagant lifestyle, which included lavish homes and nights out drinking and gambling.

Mr. Casavant was a known "high-roller," who would often gamble more than $100,000 a night at various casinos, said Mr. Faulk.

Mr. Casavant grew up in Prince Albert and worked in the city as both a prison guard and U-Haul franchise owner -- before he moved on to bigger ambitions with mining and stock markets.

According to SEC court documents filed in Nevada, he controlled several private Canadian companies that later entered into a reverse merger with a public shell owned by John Edwards, a British man living in Las Vegas, and the alleged mastermind in the ensuing scheme.

CMKM was created in 2002 and claimed to have mineral rights for nearly two million acres covering northern Saskatchewan in the Forte a la Corne region, east of Prince Albert.

The SEC alleges the company issued the billions of shares of unrestricted stock with suspect and inconsistent attorney opinion letters.

At times, the shares were considered a bargain on the penny stock market.

"Although CMKM's stock sold for well under a penny a share, the defendants were able to reap millions in profits by conspiring to flood the market with billions of unregistered shares while falsely promoting CMKM's value," Rosalind Tyson with the SEC's office in Los Angeles, Calif. said in a press release.

The court documents allege the company had no meaningful mining operations or records. CMKM solely focused on issuing and promoting stock.

It's marketing machine allegedly included phony and misleading news releases. One release in December 2002 said the company had opened an office in Belgium to promote the "Casavant diamond brand."

The company, however, had not yet found a single diamond.

Another press release in early 2004 announced a discovery of kimberlite ore, in which diamonds are usually found. The site was named "the Carolyn Pipe," after Mr. Casavant's wife.

Mr. Casavant also hyped the company on the Internet and in one webcast interview said CMKM was ahead of schedule and "drilling 24-7 up in Canada."

His most effective promotion tool was the creation of a CMKXtreme team of motorbike and car racers that travelled to events across the U.S.

Hundreds of shareholders who attended the races visited a CMKM tent, where they where they could study a map of alleged mineral claims and watch a looped video of mining work.

One shareholder from Chicago, who brought his 11-year-old daughter to a race in 2004, said he was happy to shake hands with Mr. Casavant in the company's tent.

"(Casavant) said, 'We're driving truckloads of diamonds out of there.' And then he looked down at my daughter and said, 'Your daddy is going to be so rich.' "

The shareholder, who did not want to give his name, said he sunk about $7,500 into the scheme and convinced his brother to invest thousands as well.

He said the racing team was perfect for targeting novice investors in "middle-class America." According to the SEC, the company's racing team was extremely popular and did help increase stock transactions.

In the fall of 2004, over questions of accurate public information on the company, both the SEC and the Saskatchewan Financial Services Commission (SFSC) issued temporary cease-trade orders against CMKM.

The truth of much of the company's activities became public a year later, during an evidentiary hearing, and the SEC issued a final order de-registering the company's stock.

In March, 2007, Mr. Casavant resigned from CMKM. It's believed he returned to Canada.

Molly White, an SEC lawyer involved with the case, said Mr. Casavant has not yet been served with court documents. She could not confirm whether officials are having trouble finding him.

She explained the SEC charges are civil, not criminal. And if found guilty, Mr. Casavant and those co-accused in the case will not face prison time.

The SEC is seeking fines and the return of what's left of the stolen investment money, said White.

As well, the SEC is seeking an order preventing Mr. Casavant from acting as an officer or director of any public company in the U.S.

Mr. Faulk said he has learned the Federal Bureau of Investigation, Internal Revenue Service and the U.S. Department of Justice are also investigating the case, so criminal charges could be laid in the U.S. in the future.

Ed Rodonets with the SFSC office in Regina, said his group exchanged information with the SEC to help with the investigation.

He estimates there are at least 100 affected shareholders in Saskatchewan.

Faulk said some of the shareholders he interviewed threw a few thousand dollars into the company on a whim. Others "lost every single penny they had."

The scam cost some people their homes and marriages, he said. Some died while waiting for their diamond windfall.

CMKM, now based in Texas with a new CEO, faces several lawsuits. It has also launched its own suits to recover property and assets purchased with stolen investment funds so it can rebuild the business.

The StarPhoenix 2008
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