CMKM Diamonds Crew Gets More Attention from DOJ
by Janice Shell
May 18, 2010
Urban Casavant, the Canadian stock promoter now infamous as the chief executive officer of CMKM Diamonds Inc., has received an upward adjustment in rank, a grade increase of sorts, from the U.S. Department of Justice. To the criminal fraud charges against him the DoJ has added racketeering and tax evasion.
Followers of the CMKM Diamonds saga have recently read about a Securities and Exchange Commission enforcement action, two lawsuits brought by shareholders, and a U.S. Department of Justice criminal prosecution.
On May 6, 2010, the DOJ unsealed a second superseding indictment in the CMKM case. The original indictment was not made public; the first superseding indictment was filed on May 27, 2009, and unsealed on Sept. 18, 2009. In March 2010 that superseding indictment was resealed; the new indictment was filed on March 24, 2020.
This complex 85-page document names additional defendants and adds RICO (Racketeer Influenced and Corrupt Organizations Act) charges and an allegation of tax evasion by Urban Casavant, CMKM's former promoter and chief executive officer.
Six defendants were charged in 2009: John Edwards, Urban Casavant, Helen Bagley, Brian Dvorak, Ginger Gutierrez, and James Kinney. In that indictment, Mr. Edwards and Mr. Casavant were characterized as the "masterminds" of the CMKX pump and dump scheme. Ms. Bagley was CMKX's transfer agent. Mr. Dvorak is an attorney who the DoJ says wrote fraudulent opinion letters freeing up unregistered stock for trading. Ms. Gutierrez and Mr. Kinney were Mr. Casavant's assistants and investor relations representatives.
As usual, the defendants all enjoy the presumption of innocence unless they are found guilty.
The new indictment
The newly-unsealed indictment expands the scope of the prosecution considerably. Originally, the case was focused exclusively on the CMKM pump and dump scheme; it has been broadened to cover a period extending back from the present to 1997, and it addresses the actions of an alleged group of conspirators in connection with nine stocks, including CMKM.
The additional defendants named are Jeffrey Turino, once CEO of Pinnacle Business Management, Inc. (PCBM); Nickolaj Vissokovsky, once CEO of Global Diamond Exchange, Inc. (GBDX), Melissa Spooner, an exotic dancer who was Mr. Turino's mistress; and Jeffrey Mitchell, Ms. Bagley's son, also a transfer agent. The companies of which the entire group stands accused of manipulating are PCBM, CMKM, St. George Metals, Inc. (SGGM), U.S. Canadian Metals (UCAD), BioTech Medics, Inc. (BMCS), GBDX, Equitable Mining Corporation (EQBM), OMDA Oil and Gas, Inc. (OOAG), and Grand Entertainment and Music, Inc. (GMSC).
Some of them at one time traded on the U.S. OTC Bulletin Board, but all ended up on the Pink Sheets. The DoJ alleges that they played a role in what could be described as a serial scam. The perpetrators moved from one to another, selling enormous amounts of unregistered stock until the authorities took action or no potential buyers were left.
The indictment is written in narrative form; it even includes "chapters" in which the expansion of the conspiracy is explained in detail. Though complicated, it is a satisfying read.
The plot's beginnings
All of the defendants will be tried on criminal charges, but only Mr. Turino, Mr. Edwards, Mr. Casavant, Mr. Vissokovsky and Ms. Spooner are identified as RICO conspirators. According to the DoJ, the plot began in 1997, the year in which Pinnacle Business Management (PCBM) was incorporated in Nevada. Pinnacle was a subsidiary of a British Columbia mining company called 300365 BC, Ltd. (doing business as Peakers Resources Company) that traded publicly in the U.S. Mr. Edwards was involved in this corporate shell, but he kept a low profile, appointing Mr. Turino CEO of the company. The two men quickly completed a reverse merger with 300365 BC. Originally the stock traded on the OTC-BB, but it was delisted to the Pink Sheets in 2000.
In 2001, Pinnacle acquired the assets of a Pennsylvania corporation called Lo Castro and Associates (also known as All Pro). Vincent Lo Castro was president of All Pro, and became an officer of Pinnacle. (Mr. Lo Castro has not been named in the DoJ action.) By 2003, Pinnacle's authorized shares had ballooned to 24.9 billion common and 100 million preferred. Most of the common was issued and outstanding.
The transfer agent who facilitated the issuance of all that stock was, according to the DoJ, Ms. Bagley of 1st Global Stock Transfer. Much of the stock was issued to trusts and entities controlled by Mr. Edwards, who then sold it through a number of brokerage accounts.
To help create a market for this avalanche of unregistered stock, the conspirators published misleading and deceptive press releases, and disseminated fraudulent "preliminary and unaudited" financials, says the government.
By the spring of 2002, the pump and dump scheme had caught the attention of the SEC. On May 8, the regulator filed a civil lawsuit against Pinnacle, Mr. Turino and Mr. Lo Castro. Both men consented to the entry of judgments against them, without admitting or denying the allegations. They were fined and were banned from participating in penny stock offerings for five years.
On July 6, 2004, Pinnacle's registration was revoked by the SEC. The first part of the scheme was over, but the second was already well underway.
The glory days of CMKM Diamonds
Mr. Turino ignored the penny stock ban imposed upon him by the judge in the civil case. As the government's litany of monkey business has it, long before Pinnacle sank below the waves, he, Mr. Edwards, and Ms. Bagley were hard at work on their next massive pump and dump scheme, CMKM Diamonds. As before, Mr. Edwards gained control of a publicly traded shell, this one a Delaware company called Cyber Mark International Corp. Calling himself "Ian McIntyre," Mr. Edwards changed the company's state of incorporation to Nevada, using as its address a postal drop box.
On Nov. 25, 2002, Cyber Mark agreed to acquire "mining claims or interests" purportedly held by five companies owned by Urban Casavant and his family. This time, no reverse merger took place. Instead, Mr. Casavant received controlling interest in Cyber Mark, and became its sole director, president, and CEO. The company's name was changed to Casavant Mining Kimberlite International in December, 2002, and to CMKM Diamonds, Inc. in February, 2004.
Though CMKM was required to report to the SEC, on Jan. 22, 2003, the company fraudulently filed for an exemption from that obligation. That move provided what the DoJ calls a "cloak of secrecy" that greatly helped the conspirators.
Under this cloak of secrecy, CMKM authorized the issuance of 800 billion shares of common stock, and issued nearly all of it. According to the DoJ, "the extraordinary number of authorized CMKM Diamonds shares rendered the price per share almost meaningless: the conspirators controlled the printing presses and issued themselves a seemingly inexhaustible supply of shares and stock certificates; having evaded registration and reporting requirements, the conspirators were able to surreptitiously issue themselves hundreds of billions of shares without disclosure."
Others entered the picture at this point, according to the indictment. Ms. Bagley enlisted her son Jeffrey Mitchell to work for her. Brian Dvorak wrote hundreds of opinion letters, freeing up stock so it could be sold immediately. Mr. Turino was not an officer of CMKM, but he received a chunk of shares for unspecified "services," and met regularly with Mr. Edwards and Ms. Bagley at Ms. Bagley's office.
As with Pinnacle, Mr. Edwards distributed most of the stock to his trusts and alter-egos. Ginger Gutierrez and James Kinney also received large amounts of stock, as did Mr. Turino's "associates and nominees" in Florida. Nearly all of the stock was sold through numerous brokerage accounts held by the conspirators, and some of the profit was kicked back to the Canadian, Mr. Casavant.
Off to the races
Though CMKM did some nominal exploratory drilling, that was just for show. The DoJ points out that "CMKM Diamonds' sole product was the billions of shares of stock issued as part of the conspiracy and scheme."
In early 2004, the company announced that it was sponsoring a racing team called "CMKXtreme" that eventually expanded to include a "funny car," a motorcycle, and a truck. Mr. Casavant frequently attended the races, which proved to be a fertile ground for attracting new, and usually unsophisticated, suckers. (The DoJ calls them investors.) Offering modest hospitality to all comers, he talked up CMKM enthusiastically. As the DoJ notes, to account for the stock's wildly high trading volume, Mr. Casavant floated rumors of "naked short-selling." Gullible investors found that explanation plausible; many cling to it even six years later, in the absence of any proof at all.
In conjunction with the CMKM fraud, the conspirators gained control of two other shell companies, U.S. Canadian Minerals (UCAD) and St. George Metals (SGGM). Both announced multi-million dollar "investments" in CMKM, though in reality money was merely being shuffled among accounts controlled by the conspirators themselves.
The registration of CMKM's stock was revoked by the SEC on Oct. 28, 2005.
BioTech Medics, Global Diamond Exchange and more
BioTech Medics (BMCS) was originally a spinoff of Pinnacle. It went through several incarnations before acquiring its current name and ticker. Unlike the alleged conspirators' other shells, BMCS had assets and business operations, but Mr. Turino and his associates nonetheless exploited it by "fraudulently issuing, reissuing, transferring, offering and selling" millions of its shares.
Global Diamond Exchange (GBDX) evolved out of a shell purchased by Mr. Edwards in 2001. The shell was controlled indirectly by Nickolaj Vissokovsky and Mr. Turino. To advance this scheme, two Minnesota corporate corporations were set up. One of them, called Mountain Passages, Inc., was entrusted to Melissa Spooner; the other, Austin Funding, LLC., to an associate of Mr. Turino's not named in the indictment. Once again, billions of shares of unregistered stock were issued and sold into the market by the conspirators.
Austin Funding and Mountain Passages also controlled Equitable Mining Corporation, OMDA Oil and Gas, Inc. and Grand Entertainment & Music, Inc. Thd DoJ says that as always, the conspirators issued and sold large quantities of stock in these shells, profiting greatly.
The indictment closes with additional counts of conspiracy, fraud, insider trading and money laundering, all acts committed in connection with the schemes outlined above. Mr. Casavant alone is charged with tax evasion.
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