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   Strategies & Market TrendsAnthony @ Equity Investigations, Dear Anthony,

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From: train_wreck4/7/2008 9:15:43 PM
   of 122080
They were posting the letter from the OIG this weekend on the message boards.

SEC Inspector General Considering Audit, Investigation on Naked Shorting
Posted April 07, 2008 10:15AM PST
The inspector general of the Securities and Exchange Commission is considering an audit or investigations relating to the SEC's past handling of complaints involving naked short selling of stock.

Inspector General David Kotz met March 26 with David Patch, founder of the web site and a well-known advocate against naked short selling. Kotz said April 7 that he is considering what action is warranted on the issue. Possibilities include an audit or investigations. An audit is a broad look at the SEC's practices in a particular area, while investigations focus on specific allegations of wrongdoing by SEC staff.

"We're looking at the information Mr. Patch provided us," Kotz said. Naked short selling "is definitely a matter of great concern to a lot of people."

An official from the Government Accountability Office also attended the meeting with Kotz and his staff, Patch said. GAO officials couldn't immediately be reached to comment.

Naked short selling is the practice of selling a stock short without borrowing or delivering the shares sold. Patch and others argue that the practice has diluted the values of some stocks, and particularly of small cap companies, by putting thousands of "phantom shares" into circulation. Critics of the SEC say that it hasn't aggressively moved against naked short sellers.

Read this story and more at

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To: train_wreck who wrote (103249)4/7/2008 11:47:48 PM
From: peter michaelson
   of 122080
I hope someone will inform Mr. Kotz in a comprehensive way of the nature of the vast majority of vociferous complainants and their motivations.

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To: peter michaelson who wrote (103250)4/8/2008 7:27:33 AM
From: Bill from Wisconsin
   of 122080
It sounded more like a polite brush off

If the strongest quote they could come up with is "naked short selling is definitely a matter of great concern to a lot of people", it's likely they aren't taking Patch seriously either.

I agree with the statement. There ARE a ton of people "concerned" with naked shorting. Doesn't mean the PROBLEM is naked shorting. The problem is how people come to believe in these scammy fantasies.

If the feds appear totally uninterested, the scammers will then float the further accusation that the SEC is in wall street's pocket because the whole financial system would collapse if the extent of naked shorting is revealed. We've heard Patch say stuff like that before.

SEC will spend time and resources on this "problem" and a certain number of scammers will slip through the cracks because of this diversion of resources.

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From: Glenn Petersen4/8/2008 11:12:32 AM
   of 122080
Fears That the Market Watchdog Is Losing Its Bite

April 8, 2008


Not long ago the market police at the Securities and Exchange Commission gave JPMorgan Chase the Wall Street equivalent of a traffic ticket. The penalty: $25 million.

But the agency’s commissioners overruled their Wall Street enforcers, calling the judgment too harsh. The agency recently lowered the bank’s bill to $2 million — less than one-tenth the amount that the enforcement staff initially recommended.

To some inside and outside the S.E.C., the case, and others like it, underscores a worrying development: The nation’s market watchdog, its critics say, is losing its bite.

Wall Street and the broader business community have pushed aggressively in recent years to roll back regulation, arguing the United States is losing its competitive edge. But with the recent financial crisis, which many call the worst since the Depression, critics wonder whether the S.E.C. has given in to the push to lighten up.

“There has been less emphasis on investor protection and more on this issue of the competitiveness of markets,” said Senator Jack Reed, Democrat of Rhode Island.

In March, Senator Reed and Senator Christopher J. Dodd, Democrat of Connecticut, asked the Government Accountability Office to look into the penalties that the S.E.C. has been levying lately. Penalties, together with the return of ill-gotten gains, fell by half in the 2007 fiscal year, to $1.6 billion.

Staff lawyers in the S.E.C. enforcement division say high turnover, tight budgets and a new, looser attitude toward corporate wrongdoing are sapping morale. The staffing and budget of the S.E.C. have lagged far behind the explosive growth of the markets the commission must police.

The Bush administration has left the S.E.C., normally headed by its chairman and four other presidentially appointed commissioners, firmly in the hands of Republicans with the departure of one Democrat last fall and another in January. Nominations for both positions have been submitted.

Turnover is high. The percentage of employees who leave annually rose to 8.6 percent in 2007, the highest level in five years, from 7.5 percent in 2005, when Mr. Cox arrived (turnover in the late 1990s was much higher, and generally surges in bull markets, said John Nester an S.E.C. spokesman). Staff levels are down and falling. The S.E.C. budgeted for 1,093 enforcement jobs in 2009, down from 1,232 full- time enforcement employees in 2005.

“The slight decrease in personnel, despite record spending on enforcement, is directly attributable to the overall higher salaries paid to enforcement personnel consistent with the S.E.C.’s priority of attracting and retaining the highest caliber staff,” Mr. Nester said.

But since Christopher Cox, a former Republican congressman from California, took over as chairman in 2005, spending on enforcement has fallen from $316.3 million to $298 million in 2007.

“What Cox has done to this agency is to pull state patrolmen off the highways and shackle them in one way or another in a parking lot,” said Lynn E. Turner, who served as the S.E.C.’s chief accountant from 1998 to 2001.

But to many on Wall Street, Mr. Cox has struck the right balance for the times.

“First and foremost the S.E.C. is a law enforcement agency, and Chris Cox has continued that longstanding tradition,” said Ira D. Hammerman, senior managing director for the Securities Industry and Financial Markets Association, the industry’s main trade group.

Mr. Cox succeeded William H. Donaldson, another Republican, who moved aggressively to punish mutual funds engaged in market timing, regulate hedge funds and give shareholders a more powerful vote in corporate matters. Mr. Donaldson infuriated the business community, and his five-member commission was often divided.

Mr. Cox, by contrast, has made consensus among his commissioners a priority.

“He was more moderate in his approach on many issues at the start of his chairmanship,” said Joel Seligman, president of the University of Rochester and author of a book on the history of the S.E.C. “He worked very hard to build consensus to an extent that many people thought was appropriate and wise.”

Mr. Cox has tried to clarify the commission’s policy toward penalties with guidelines released in January 2006. He has said the S.E.C. generally wants to avoid punishing one set of shareholders for corporate wrongdoing that benefited another group of shareholders.

But enforcement staff have argued that other policies have hampered their ability to bring tough cases. Previously, for example, staff lawyers negotiated settlements and then brought them to the commissioners for approval. Now, under a pilot program, the commission requires a majority of the commissioners to approve a range for settlements. Some staff members complain that this makes them feel as if they must get permission to do their jobs.

But the commission has argued this change gives its lawyers more leverage. When they negotiate, companies know any settlement cannot be voted down by the commission later.

Whatever the case, total disgorgements and penalties, which are subject to business cycles and individual factors affecting cases, have fallen recently. The penalties portion — the punishment that a company faces, excluding any return of ill-gotten gains — fell from $977 million in 2006 to $505 million in 2007. But accompanying that decrease is a decline in disgorgement, suggesting that companies and officers are engaged in less wrongdoing than that the S.E.C. staff is bringing fewer cases. Return of ill-gotten gains fell to $1.1 billion in 2007 from $2.4 billion in 2006.

Mr. Cox responded to Senator Dodd’s inquiry on April 1, pointing out that in the fiscal year ended 2007, the S.E.C. brought the largest number of corporate penalty cases in its history. Since 2006, the S.E.C. has settled some high-dollar cases, including a penalty for Fannie Mae that totaled $400 million. Yet the JPMorgan case, in which the S.E.C. said the bank failed to detect wrongdoing at a client for which it was a trustee, is not the only recent case in which the commissioners have reduced bills for companies. (JPMorgan, as is usual in S.E.C. settlements, neither admitted nor denied wrongdoing.)

On March 5, in a particularly high-profile case, the agency accused Fidelity Investments and 13 former and current employees of accepting more than $1.6 million in improper gifts, entertainment and travel paid by brokers doing business with the fund company.

Among those charged was Peter Lynch, vice chairman and former portfolio manager for the Magellan Fund. He struck a deal with the S.E.C. to pay almost $30,000 in disgorgement, but the commission, excluding Mr. Cox who was recused, later reduced that to about $16,000, saying gifts should be valued at retail prices, as they are for federal employees.

A spokesman for Mr. Lynch declined to comment.

Arthur Levitt, who served as S.E.C. chairman under President Clinton, is critical that the agency is not as active as it should be. When the Treasury Department proposed a blueprint that would have stripped the S.E.C.’s powers, Mr. Cox did not condemn it.

“Together with other actions taken and some not taken with respect to a number of issues important to investors, it is unlikely that this commission will be known as an activist one,” Mr. Levitt said.

Copyright 2008 The New York Times Company

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To: Bill from Wisconsin who wrote (103251)4/8/2008 11:27:49 AM
From: willjeffers2
   of 122080
Hopefully they wont put too much credence into the paranoid, delusional charlatans like patch-job.

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From: StockDung4/8/2008 11:41:53 AM
   of 122080
Making Millions From Fraud
April 7, 2008, 4:21 pm

The S.E.C. today filed a civil fraud complaint against the promoters of CMKM Diamonds, a tiny stock that never sold for as much as three cents a share, and was often under a penny. But it turns out you can get rich even at those prices, at least if you issue billions of shares illegally.

This case may not have set any speed records for filing, but it is worth reading, at least for those who have focused on the evil of naked short selling. The fraud, the S.E.C. alleges, took place from 2003 to 2005. I wrote about it in a column in the fall of 2006, noting an enforcement action by NASD, now known as FINRA, regarding the issuance of billions of shares for no apparent reason.

As the S.E.C. tells it, “CMKM’s C.E.O. Urban Casavant generated investor interest in the company through false press releases, Internet chat boards, and “funny car” race events across the country without disclosing that he ran the company from his house in Las Vegas and that CMKM’s primary activity was to issue and promote its own stock.”

The commission claims that Mr. Casavant and others made $64 million by fraudulently selling hundreds of billions of shares of illegally issued stock.

And how were the buyers fooled? Here is the S.E.C. explanation, from the suit filed in Federal District Court in Nevada:

“To divert attention from their own dumping of CMKM shares, Casavant persuaded CMKM’s investors that the reported high trading volume in CMKM stock reflected extensive ‘naked short selling’ rather than ordinary stock dilution.”

When I wrote that column, I got an e-mail message from a reader, which I reported in a blog item. It read:

“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…”

Do you think that reader will admit he was fooled? I don’t.

Comments (21)
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21 comments so far...
April 7th,
4:47 pm
If Zimbabwe’s Robert Mugabe doesn’t want to succeed Bernanke as the National Money Printer, what about Urban Casavant?

— Posted by MARK KLEIN, M.D.

April 7th,
5:26 pm
No mention of Roger Glenn an attorney that represented CMKM Diamonds or Robert Mahue, the Trustee of this company (Former Alter Ego of Howard Hughes)…..why is that? Does anyone think “Sting”, “Set Up”….we’ll see.

— Posted by CMKM Shareholder

April 7th,
5:35 pm
Floyd, glad to see you’re still following this story closely. Back in 2006 you replied to one of my comments to you by stating that you didn’t “know how big a problem f.t.d’s were in our markets. You have recently pulled that comment down. Any comment as to your timing? I wanted to highlight it considering Chris Cox’s recent work with 10B-21. Would love to read your thoughts as to where you are now with naked short selling.


Floyd Norris replies: To my knowledge, nothing has been taken off the blog.

— Posted by jfarn

April 7th,
6:05 pm
The point still is Floyd that when billions upon billions in subprime mortgage losses were being set up, you were writing about a penny stock, with less than $100 million in stock sales. that’s less than one of a good payout for Countrywide execs.

— Posted by Sidney

April 7th,
6:16 pm
floyd, got little problem with the story but one….If you read the SEC notice, they went after NevWest for selling massive levels of shares on behalf of John Edwards. The SEC claiming that they should have suspected something.

Fact is, NevWest was in constant communication with the SEC regarding each cert Edwards came in with. The SEC attorney responsible for investigating CMKX was providing NevWest with instructions to sell the shares each time they contacted her.

The reason this fraud reached the levels it did was because the SEC was witnessing it for a tremendous amount of time (like they did mutual fund late trading/market timing) and took a controllable fraud into an uncontrollable one.

Today, many of those brought up on charges have fled the country.

— Posted by Don't be fooled

April 7th,
7:25 pm
There was no “sting”, only an SEC investigation that netted a bunch of insiders on fraud charges. Glenn and Mahue did nothing and were engaged in nothing. They were on the payroll when all this insider fraud was taking place. Anybody that does not see that now that this news is out is clearly in denial.

— Posted by Get Real

April 7th,
7:36 pm
I don’t know this stock for anything; I do believe that in some companies, management was in on dumping the companies. I might even have been burned in one. Not sure, but it is odd a corporate officer would buy a 150,000 dollar custom built shotgun. Oh well. Water under the dam.

However, I find it odd that someone of your stature continues to beat this drum. With all the news about Bear Stearns, with Dick Fuld saying publically he has proof Bear was manipulated, why do continue to visit this mud hole but to push the spotlight off what hurts?

Good grief. Even Jim Cramer loves the Baloney Brigade. He wants to join, but we’re sorta picky; he’s a little looney even for us.

— Posted by lenofus

April 7th,
7:47 pm

thank you for helping the US Fed become non private and bear stearns get a black eye.


you just took the bait!

— Posted by Ramon

April 7th,
7:48 pm

Stop. Back in 2006 you worked rather hard to refute that Naked Short Selling a.k.a. fails to deliver existed to a point where they might have any impact in the market. Are you going to deny such a position?

You asked a former CMKM investor to state that he/she was fooled. I ask you to comment on 10B-21 and how Cox’s recent work conflicts with your earlier assumptions. Have some courage Floyd and at the very least, demonstrate what you asked that CMKX poster to do today.


— Posted by jfarn

April 7th,
7:50 pm
jfarn, No post of yours was removed from this blog.

And there was never a significant FTD in this stock. The data from the DTCC has been published. At the same time the flake lawyer for the company was claiming “TRILLIONS” of naked shorts, the actual FTD’s amounted to a hundred bucks of stock.

— Posted by star.the.wonder.pup

April 7th,
7:50 pm
Folks you all can say what you want, along with the SEC, DTCC, AND MM’S. We are not stupid!!! NSS is abig problem, and it will not go away. The SEC never mention Roger Glenn or Robert Mahue and a few others. Plus the SEC should of never even let this company out on the internet trading CMKM certs. The SEC is gone and for a good reason, plus if most investors look on there trading statment, you can see that even the SEC was making money off the trades. Might not be all that much, but you still took money from the investor. But I think that soon, people will start to see that the market is not as safe as everyone thinks it is. New motto is: Make your money and get the hell out.


— Posted by Dan Schoonover

April 7th,
7:56 pm
CMKX was a scam before one share was ever sold. I have been blowing the sirens on this scam for 5 years on Raging Bull. Costing me over 5,000 different aliases because I get removed for posting truth. Now that the SEC charges are out, the few remaining faithful are still spinning the truth into the fact that this is all a part of the master plan constructed by Urban.

Then there are the Paltalk rooms that have literally 100’s of not the brightest people on Earth that pay room rent just to listen to the rantings of the cult leaders that Urban created.
CMKX was not only a scam, but it ended up being a sickness that none of these people will ever recover from.

The real Jonas Grumby

— Posted by Jonas Grumby

April 7th,
7:59 pm
I would just like to say it is great that this is out in the open and that people know about the BS that transpired with cmkm. I guess everyone thought we (cmkm shareholders) would just go away. NOT!!!!!!!!!!!

— Posted by jbeezy

April 7th,
8:30 pm
Just another wall street reporter saving there fraudulent market again. You have no respect from me too much BS you spin. Why did ex-SEC lawyer Roger Glen hired by Urban raises the AS? The greedy crooked market makers & brokers got so fat at the table they couldn’t get out the door. Why would an ex-FBI agent named Robert Mahue be on the board of directors of CMKM Diamonds? Was to catch those fat greedy market makers & brokers they locked them in with a cert pull. SEC was so infiltrated by wall streeters they were oozing manipulation everywhere. SEC wouldn’t let a short squeeze happen they would save shorty’s butt & just halt the company and falsely accuse the co. of pump & dump. Bear raids were just ok with the SEC faster they went down the better. Just disgusting! Just the fact they created the SHO list ought to make you want to puke. No such thing as counterfeited stocks? pfff sucker!

— Posted by Foolish Reporters

April 7th,
8:48 pm
The SEC is no angel in this matter and that is why today they are handling this mess. They can cover up thier tracks all they want but the fact is they were all in this together. They can make up all the stories they want and sugar coat it but the fact is that there are thousands of cmkx shareholders that have suffered for over 4 yrs now a lot of which spend thier life savings. Some have got sick and died in this time and that is the major story here.

— Posted by snowy

April 7th,
10:10 pm

I am an avid Times reader and know some of your columnists well. Your lack of objectivity with regard to naked short selling is on par with RUTENBERG’s, THOMPSON’s, KIRKPATRICK’s and LABATON’s hack job on McCain. What is going on with my beloved paper?

Your slant is a bit much to handle Floyd as evidenced by the lackey’s coming to your defense.

I am a bit miffed as to why you didn’t pay much mind to a near systemic meltdown and you’re playing I told you so with some penny stock investor from two years ago.

Keep your eye on the ball: What you say about Cox’s comments and work with 10b-21 and do still dismiss any significance of NSS and its effects on our markets?

April 7th,
7:50 pm

jfarn, No post of yours was removed from this blog.

And there was never a significant FTD in this stock. The data from the DTCC has been published. At the same time the flake lawyer for the company was claiming “TRILLIONS” of naked shorts, the actual FTD’s amounted to a hundred bucks of stock.

— Posted by star.the.wonder.pup

— Posted by jfarn

April 7th,
11:58 pm
WE SHAREHOLDERS waited so long to see this come out. THIS is MASSIVE. They are not getting away from this NAKED SHORT SELLING.

— Posted by WAITED SO LONG

April 8th,
1:33 am
Floyd, to write about one company is one thing, to imply that all companies that have state that their shares have been manipulated by naked selling is outright irresponsible. You have no first hand knowledge to support such an implication. Could it be possible that the Inspector General of the SEC, the Chairman of the SEC, Jim Cramer and Barney Frank have it ALL WRONG…………..don’t think so, but nice try lumping CMKM with all the others….

— Posted by thegameisover

April 8th,
5:15 am
How many times Wall Street crooks have quietly agreed to pay penalties . In fact the Wall Street crooks have been charged, and paid huge fines,Talk about cover up’s on what Spiter was really doing,who really wanted him out of the way…They really go after the guy’s who is trying to do his job…
If the claims in canada were fake or was not real or had no valuable,why do you think DeBeers would be fighting this little mining co. for claim’s long ago…How come sec took such interest so long Foyd ? Think………
Major story here, you bet…
I want to know how many more small companies were unexpectedly nake shorted..
Sec let the dog’s roam main street, then slap wall street on the rist,sec got their money and let the dog’s out to bit someone else..Sounds like a partnership, hay hay.. Part of the National Trust is to invest in a small business we thought.
If this hole story got out ,no one would trust wall street or any stock ever..!
To put good hard working people though this most unkind suffering is just shame on America, and to not beleive what 40,000 shareholders were saying about how they were getting taken.. It is unbelievable that such cruelty and injustice is occurring right here on American soil.If all of this story got out to the world what other country would trust us…They don’t trust us now because of the war..
Congess is on the wrong side of our America….
It took 40,000 shareholder’s to make new rule’s to protect the next investor…These people should receive high honers in both state and national..
We need more people like them to wake up America..
Stay stong cmkx cmkm …good job…
America wake up or you won’t have a house to smell your coffee in……………!

— Posted by sena

April 8th,
7:25 am
Spare me. The story is how a con man and his affiliates created a cult of naif “investors” who somehow thought they would be millionaires from a hundred buck investment.

— Posted by star.the.wonder.pup

April 8th,
9:41 am
Kind of interesting, how both this and the USXP articles raise the same sort of response. Some people on either side (it’s a scam or it’s a conspiracy against the company), both very vocal (and sometimes rather desparate-sounding) plus some people shooting the messenger.

In response to the latter group, I’d point out that there’s plenty already being written about BSC, so a post by Mr Norris on that every day would be a bit uninteresting. In fact, given the high profile of the BSC fiasco, CDOs, MBSs, CDSs, Thornburg et al., a look at how the “small” scammers are still operating, and how they’re making (usually small investors’) lives a misery, is both interesting and informative.

In any case, the level of posting (on either side) in response to these posts indicates that they are indeed newsworthy.

— Posted by Lew from York, UK

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From: StockDung4/8/2008 11:43:31 AM
   of 122080
The SEC Cracks a Naked Short Nut-Case
Monday, April 07, 2008

In the "Baloney Blitzkrieg" chapter of Wall Street Versus America, I describe the looniness surrounding a grimy little diamond mining shell company called CMKM Diamonds -- a company that barely existed except for a share-generating mechanism, a loudmouth CEO named Urban Casavant, and a handful of exceedingly stupid shareholders who made fools of themselves on picket lines when they weren't sending threatening emails to journalists and regulators.

It was a good example of how a small group of determined crackpots can cause damage to our regulatory system, in this case by pushing a fraudulent "stock counterfeiting" conspiracy theory.

Above all, CMKM was a textbook case of corporate blame-shifting, and today the SEC put the blame where it really belonged, charging the company with a massive fraud in which Casavant personally raked in $31 million.

The SEC complaint observes:

Casavant generated investor interest in CMK by using false press releases, Internet chat boards, and "funny car" race events across the country. To divert attention from their own dumping of CMK shares, Casavant persuaded CMK's investors that the reported high trading volume in CMK stock reflected extensive "naked short sellng" rather than ordinary stock dilution. This promotion was extremely successful, and about 40,000 investors purchased CMK stock during the period of the fraud. In reality, Casavant ran the company from his house in Las Vegas, and CMK had no meaningful operations other than issuing and promoting its own stock. [emphasis added]

Patrick Byrne of has taken over the naked shorting banner from Casavant, and, naturally, his company has never made a dime in profits and is also under SEC investigation.

Unfortunately, it took CMKM years to grind its way through the SEC system, and the Overstock case is "only" two years old. So stay tuned--but be patient.

Floyd Norris, commenting on a typically paranoid email from a naked shorting nut, says "Do you think that reader will admit he was fooled? I don’t."

I agree, and the snail-like SEC, which did not "set any speed records for filing," as Floyd points out, must share the blame for that.

Apart from its extreme slowness in processing this and other cases -- Overstock's is a good example -- the SEC has made matters worse by pandering to naked shorting loons. The agency has diverted valuable resources in pursuit of its "Regulation SHO" idiocy, which has no real effect on the markets while fueling conspiracy theories that gull the naive.

© 2008 Gary Weiss. All rights reserved.

Labels: CMKM Diamonds, naked short-selling,, Patrick Byrne

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From: StockDung4/8/2008 12:04:43 PM
   of 122080
Alberta Securities Comm. Hearing Against CMKM Diamonds on April 9

By Jeff Miller Posted: 03/19/08 14:02 [Submit Comment]

RAPAPORT... The following notice was issued today against CMKM Diamonds. For more information on CMKM, please scroll past this notice to read related stories.

The Alberta Securities Commission (ASC) has issued a Notice of Hearing to seek an order reciprocal to Saskatchewan and Manitoba orders against CMKM Diamonds Inc. ASC staff alleges that CMKM sold shares to Alberta residents without registering with the ASC or filing the proper documents required for distribution of securities under the Alberta Securities Act. The ASC hearing is scheduled for Wednesday, April 9, 2008.

CMKM is the subject of orders issued by the Saskatchewan Financial Services Commission, Securities Division (SFSC) on November 9, 2004 and by the Manitoba Securities Commission (MSC) on October 31, 2007. The SFSC issued its orders based on allegations that CMKM violated securities laws in Saskatchewan by trading CMKM securities in Saskatchewan despite the facts:

- it was not registered to do so;
- SFSC had not issued a receipt with respect to those securities;
- SFSC had not issued an order granting exemptions from
registration and prospectus requirements.

The MSC issued its order under the reciprocal enforcement provisions of the Manitoba Securities Act. Both jurisdictions have banned all trading of CMKM securities and the use of securities law exemptions.

A copy of the Notice of Hearing outlining the allegations in their entirety is available on the ASC website at

The ASC is the regulatory agency responsible for administering the province's securities laws. It is entrusted to foster a fair and efficient capital market in Alberta and to protect investors. As a member of the Canadian Securities Administrators, the ASC works to improve, coordinate and harmonize the regulation of Canada's capital markets.

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From: StockDung4/8/2008 12:27:14 PM
   of 122080
CMKM Diamonds players named in $64-million SEC lawsuit

2008-04-07 20:16 ET - Street Wire

Also Street Wire (U-*SEC) U.S. Securities and Exchange Commission

by Lee M. Webb

CMKM Diamonds Inc., a revoked pink sheet woofer, and its founder, Saskatchewan native Urban Casavant, are among 14 defendants in a securities fraud lawsuit filed by the U.S. Securities and Exchange Commission (SEC).

The U.S. regulator claims that Mr. Casavant and his cronies pocketed more than $64.2-million during the fraudulent CMKM stock promotion. (All amounts are in U.S. dollars.)

The SEC, which acknowledges the assistance of the Financial Industry Regulatory Authority and the Saskatchewan Financial Services Commission, filed its complaint against the alleged fraudsters in the U.S. District Court for the District of Nevada on April 7.

None of the defendants has yet filed an answer to the SEC complaint and the allegations have not been tested in court.

The defendants

In addition to 51-year old Mr. Casavant, who skedaddled from Las Vegas, Nev., back to Saskatchwan about a year ago, the SEC tags 65-year-old John Edwards as one of the two masterminds and principal beneficiaries of the fraudulent scheme.

According to the U.S. regulator, Mr. Casavant made approximately $31.5-million from the stock scam and Mr. Edwards's take came in at a more modest $26.4-million.

Ginger Gutierrez and James Kinney, both 37-years old, are identified as two of Mr. Casavant's nominees. The pair served as CMKM investor relations representatives for a time and were allegedly instrumental in unloading more than 88 billion shares for Mr. Casavant and his family members, keeping a significant cut of the proceeds for themselves.

A husband-and-wife team of paperhangers from Boca Raton, Fla., 67-year-old Anthony Tomasso and 56-year-old Kathleen Tomasso, allegedly served as nominees for Mr. Edwards.

According to the SEC, approximately 77.3 billion CMKM shares were issued to five entities owned by the Tomassos, who generated at least $6.5-million by dumping stock. They allegedly wired more than $2.2-million to Mr. Edwards and transferred substantial amounts of money to some of his associates, keeping approximately $648,500 for themselves.

CMKM's transfer agent, 1st Global Stock Transfer, and its owner, Helen Bagley, are also named as defendants. According to the complaint, CMKM stock issuances and transfers accounted for more than 50 per cent of the transfer agent's business from 2003 to 2005.

The SEC claims that 61-year-old Ms. Bagley accepted suspicious payments from Mr. Edwards and his nominees while turning a blind eye to obviously bogus opinion letters and issuing more than 589.7 billion unrestricted CMKM shares to several of the defendants and others.

NevWest Securities Corp., which had its registration yanked last July, its chief executive officer and chief trader, 37-year-old Sergey Rumyantsev, chief compliance officer and general counsel, 42-year-old Anthony Santos, and 39-year-old broker Daryl Anderson are also named in the lawsuit.

According to the U.S. regulator, Mr. Edwards opened at least 36 brokerage accounts at NevWest where his accounts were handled by Mr. Anderson. With the help of NevWest and its accommodating broker, Mr. Edwards allegedly unloaded approximately 259.9 billion CMKM shares for proceeds of more than $53.3-million.

The SEC claims that NevWest and its principals turned a blind eye to the suspicious share dumping, which generated more than $2.5-million in commissions for the firm and accounted for more than 35 per cent of its revenue. Mr. Anderson earned approximately $2.3-million for handling Mr. Edwards's CMKM trades.

Nevada-licensed attorney Brian Dvorak, now living in Colorado, rounds out the list of defendants.

The U.S. regulator alleges that Mr. Dvorak wrote at least 464 attorney opinion letters authorizing the issuance of more than 606 billion unrestricted CMKM shares. The vast majority of those opinion letters were fraudulent.

In return for writing hundreds of bogus opinion letters, the regulator says that Mr. Dvorak received at least $495,000 from Mr. Casavant and his nominees during 2004.

Bare bones

Given that Stockwatch has published more than 60 articles dating back to October of 2003 about Mr. Casavant's wild pink sheet promotion, many readers may be familiar with the saga of the enterprising Saskatchewan native who managed to unload a staggering 703.5 billion shares on gullible investors before the SEC pulled the plug on the company in October of 2005.

In addition to Mr. Casavant, almost all of the defendants in the lawsuit have featured in previous Stockwatch articles.

SEC attorney Leslie Hakala, who is handling the regulator's civil complaint against the 14 defendants, is also quite familiar with the outrageous CMKM promotion. Ms. Hakala represented the SEC in the administrative proceeding that finally led to CMKM's revocation in 2005.

In future articles, Stockwatch will examine the Nevada lawsuit more closely and flesh out some of the details, but for now will offer a bare bones review of the promotion as it is laid out in the April 7 filing.

As noted in the SEC suit, CMKM fraudulently stopped filing periodic reports with the U.S. regulator in July of 2003. At the same time, the company gagged the transfer agent and would not publicly disclose how many of its shares were outstanding.

As part of the early promotion, CMKM asked shareholders to help "combat naked short selling" by holding their shares in certificate form. The naked short selling bogeyman figured prominently in the CMKM promotion.

Mr. Casavant then set about touting the company's purportedly fantastic mineral properties in Saskatchewan, which consisted of nothing more than untested moose pasture that saw almost no exploration work during the promotion.

In early 2004, the company dramatically announced a "kimberlite ore discovery" after some limited drilling on one of its properties, sparking a frenzy among some gullible investors who believed that CMKM had made a fantastic diamond find.

Mr. Casavant named the supposedly "new kimberlite discovery" the "Carolyn Pipe" after his wife. As Stockwatch quickly reported, however, the kimberlite body had actually been found in 1996.

"CMKM and Casavant also propped up interest in the company's stock -- while selling into the market -- through a variety of Internet activities designed to foster shareholder interest and excitement," the SEC claims.

Indeed, Mr. Casavant was incredibly successful in attracting a huge, cult-like Internet following.

"Perhaps Casavant's most effective tool to promote CMKM was 'CMKXtreme,' a team of motorbike, truck and 'funny car' racers," the U.S. regulator says.

Whether by luck or design, the funny car promotion was also a fantastic success.

"Hundreds of CMKM shareholders attended the races and visited the CMKM-sponsored tent, where they could study a map of CMKM's alleged mineral claims, watch a video loop of CMKM's purported drilling work, and meet and greet Casavant and his family," the SEC states.

"The press releases, Internet hype, and racing promotions were successful in attracting and maintaining a loyal shareholder base for CMKM for almost two years," the regulator continues. "The sustained demand for CMKM stock fueled by the constant promotional efforts allowed the defendants to continue selling newly issued stock to the public.

"About 40,000 people purchased CMKM stock in market transactions during the fraud, particularly after June 2004 when CMKXtreme became extremely popular."

As it happens, more than 40,000 people still hold worthless CMKM shares and some of them believe that the company will be revived.

The saga continues.

Comments regarding this article may be sent to

(Further information regarding CMKM Diamonds and associated companies can be found in Stockwatch articles dated Oct. 21, 2003; June 22; Sept. 16 and 24; Oct. 1, 15 and 20, 2004; Feb. 11, 14, 18, 22 and 23; March 1, 3, 4, 7, 14, 15, 16 and 21; June 6, 8, 9, 10, 13, 14, 15, 16, 17, 20, 21, 22, 29 and 30; July 1, 4, 6, 12 and 13; Aug. 2, 5 and 9; Sept. 7, 12, 27 and 30; Oct. 24, 26 and 31; Nov. 7, 11, 22 and 25; Dec. 1, 6, 9, 15 and 22, 2005; Jan. 3; Sept. 29; Oct. 4, 2006; and Aug. 30,2007.)


Reader Comments - Comments are open and unmoderated, although libelous remarks may be deleted. Opinions expressed do not necessarily reflect the views of Stockwatch.


Sounds just like $0.0001 Indocan Resources run by Jeffrey R. Bruhjell out of North Vancouver, BC, 5 BILLION shares!

Posted by Jeffrey @ 2008-04-07 20:24


LOL 5 billion Jeffery?? That's peanuts man!

Posted by I was scammed by CMKX @ 2008-04-07 20:39


got to hand it to Urban, he fleeced 'em good. Has to go down as one of the all time best scams.

Posted by Ron @ 2008-04-07 20:54


There is a day of reckoning coming for everyone and we all reap what we sow. Will Urban disappear before he is brought to justice? Go into hiding? Receive a visit from one of his many enemies looking for restitution? One thing is certain he will stand and give account for what he has done. We'll see what the next chapter of the unfolding saga delivers.

Posted by Kerry @ 2008-04-07 21:31


What took the SEC so long? How could they have possible let these crooks dump 700 billion shares?

Posted by Jeffrey @ 2008-04-07 21:41


Does the Urbie love-in cult now realize that they were duped? I bet there's still some out there that believe there's diamonds in d'em dar hills...and this is all just part of Urbie's master plan to make a million millionaires!

Posted by skruggs @ 2008-04-07 23:28


hey urban, saskatchewan is not that big, especially prince albert.welcome home!!!????????

Posted by night vision @ 2008-04-08 00:48


I didn't invest in CMKM, but it's too bad I didn't know Urban was involved or maybe I could have done something to warn everyone before it was too late. Then again, maybe shareholder greed would have made them deaf any ways.

Some of you might remember how he screwed everyone over quite a number of years ago with Petro Plus Ventures on the old Alberta exchange.

Sooner or later he will get what he deserves. Eventually everyone does!

Posted by Burned, but wiser for it @ 2008-04-08 01:27


Urban is a good Catholic boy and we must pray for him and dear Carolyn. They are losing their house. Please send anything you can in care of the Salvation Army in Saskatoon Saskatchewan.

Posted by Donny Brasco @ 2008-04-08 02:19


Urban will get what he deserves. The US sec will see to that. What a rotten piece of garbage he is,I hope he's proud of himself.

Posted by Jimmy Crusher @ 2008-04-08 02:42


If the SEC knew of this since 2003/4 why have they not done anything till now.

Posted by art brown @ 2008-04-08 11:17


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From: StockDung4/8/2008 1:40:49 PM
   of 122080
GunnAllen told to pay ex-manager
By Helen Huntley, Times Staff Writer

Published Monday, April 7, 2008 8:36 PM

Tampa brokerage Gunn­Allen Financial and the national sales manager it fired over allegations of sexual misconduct three years ago both are claiming victory after a recent arbitration ruling.

Arbitrators for the Financial Industry Regulatory Authority ordered GunnAllen to pay former sales manager David McCoy $333,000 for compensatory damages for "intentional and malicious" breach of contract and for termination for a wrongful reason.

GunnAllen maintains that McCoy "engaged in extremely inappropriate conduct involving activities of a sexual nature at the GunnAllen offices," said Tampa lawyer William Schifino Jr., who represented the company. McCoy's New York lawyer, Richard Roth, says GunnAllen offered a female employee money to file a complaint against McCoy, but she refused.

"The panel never believed Dave did anything wrong," Roth said. The panel ordered Gunn­Allen to shoulder the costs of the arbitration, which involved 20 days of courtlike hearings, and to reimburse McCoy for $54,428 in costs incurred.

But the award was a whole lot less than the $34-million McCoy had requested. In fact, GunnAllen said it offered to settle the case years ago for more than McCoy received through arbitration. "We are ecstatic with the award," Schifino said. He said the company plans to bring a court action to confirm the arbitration decision and ask for an award of attorney's fees against McCoy based on his claims arbitrators rejected, including allegations of fraud.

The panel settled a stock dispute by ruling McCoy is obligated to sell 200,000 shares of GunnAllen stock back to the private company for $150,000, but he can keep 200,000 shares and options for 400,000 more shares. At one time McCoy claimed his shares were worth $12-million. The panel also said McCoy has to repay a GunnAllen loan of $182,407 but doesn't have to reimburse the company for $40,332 in business expenses charged to the company's American Express card.

McCoy now works in New York as national sales director for National Securities. Arbitration is commonly used to settle disputes between brokerages and employees or investors.

Helen Huntley can be reached


or (727) 893-8230.

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