CMKM and St. George get the Hook
by Lee M. Webb
Canada Stock Watch
October 31, 2005
CMKM Diamonds Inc., Saskatchewan native Urban Casavant's massively diluted pink sheet play, and St. George Metals Inc., a Nevada shell dusted off in brief support of Mr. Casavant's wild promotion, have both been given the hook by the U.S. Securities and Exchange Commission (SEC). The U.S. regulator entered finality orders with respect to the revocation of each company's stock registration on Oct. 28.
While CMKM and St. George followed somewhat different trajectories toward revocation, it is perhaps fitting that the SEC issued finality orders with respect to the separate administrative proceedings on the same day, given the connections between the two companies.
Some observers might also find some irony in the fact that the finality orders were issued on the one-year anniversary of a so-called "shareholders appreciation party" in Las Vegas, Nev., organized by CMKM and U.S. Canadian Minerals Inc., an associated company that is under investigation by the SEC.
Something of a pall was cast over the last year's ballyhooed party when the SEC suspended U.S. Canadian Minerals on Oct. 28, 2004. Nonetheless, with travel plans made and hotel rooms booked, hundreds of CMKM and U.S. Canadian shareholders showed up for the muted celebration.
Evidently some of the shareholders who made their way to Las Vegas party last year expected to hear some auspicious news or, at the very least, some uplifting words from company representatives.
In addition to the rampant rumours circulated by some of CMKM's cult-like followers and a motley assortment of Internet touts, the expectation of a momentous announcement at last year's party may have been bolstered by the fact that the banquet room for the gathering was outfitted with a stage overhung by a netting of balloons. Alas, the balloons were never dropped.
As the evening wore on and it became evident that no announcement was going to be made, a woman, reportedly from Alberta, rushed the stage, seized a microphone and, lacing her comments with phrases like "fucking bullshit," demanded some answers from the company. Those demands were not met as representatives of both companies bustled for the exits.
Many questions still remain unanswered and, barring some further regulatory or other legal action, may well remain that way now that the SEC has finally revoked CMKM's stock registration.
Among the many matters that may never be resolved is whatever became of the $13.5-million U.S. Canadian Minerals purportedly injected into CMKM or the $10-million and 200 billion shares purportedly peeled off by St. George in exchange for a 5-per-cent stake in the company's mining claims. (All amounts are in U.S. dollars.)
Perhaps one of the most significant issues that may go unresolved in the wake of the SEC revocation is exactly who ultimately benefited from the massive CMKM dilution, which stood at a staggering 703.5 billion shares at last report.
Notwithstanding the fact that many questions remain unanswered, the SEC can hardly be accused of acting precipitously with respect to either CMKM or St. George.
Stockwatch first wrote about CMKM in October of 2003 and then picked up its coverage of Mr. Casavant's overblown promotion in June of 2004.
As promotions go, CMKM did not manage to achieve much in the way of price appreciation, flirting only briefly with one-10th of a penny.
What CMKM lacked in price, however, it made up for in volume, with billions of shares worth millions of dollars regularly changing hands and the pink sheet company once notching an astounding volume of approximately 40 billion shares in a single session.
Stockwatch published more than a dozen articles about CMKM and the promotion attracted the attention of many seasoned critics before the SEC moved to suspend the company in March of 2005 and then followed up with an administrative proceeding to revoke the company's stock registration.
CMKM had ample opportunity to respond to the SEC allegations in prehearing pleadings, a May 10 evidentiary hearing at which Mr. Casavant asserted his Fifth Amendment privilege and in posthearing briefs.
Chief Administrative Law Judge Brenda P. Murray evidently found CMKM's pleadings and evidence unpersuasive. On July 12 she issued an initial decision revoking CMKM's stock registration.
CMKM appealed the initial decision and dragged the matter out until Oct. 24 when the company disclosed in an SEC filing that it had withdrawn its petition for review of Judge Murray's decision. The SEC obliged, dismissing the appeal and ordering the initial decision of Judge Murray revoking CMKM's stock registration effective Oct. 28.
Similarly, Stockwatch first raised questions about St. George's rather peculiar resuscitation and association with CMKM in September of 2004.
St. George flared from its subpenny level to briefly touch 75 cents per share last September in the wake of news that it was anteing up $10-million and peeling off 200 billion shares for a meagre 5-per-cent stake in CMKM's mining claims, which consisted largely of unexplored Saskatchewan moose pasture.
The St. George promotion may have been cut short when the SEC started nosing around CMKM's affiliate, U.S. Canadian Minerals. In any event, St. George fell silent shortly after its revival and the stock price headed south.
An attempt to revitalize the St. George promotion earlier this year did not generate much excitement and, after a brief rally, the stock price again tailed off.
The SEC did not institute administrative proceedings against St. George until July of this year.
The early indication that St. George would contest the SEC action faded when the company's replacement president and lawyer, William Haseltine, pulled the plug. Before cutting his ties with the company, however, Mr. Haseltine told the U.S. regulator that he did not know anything about the purported $10-million deal with CMKM.
On Sept. 29, just over a year after St. George had been dusted off in support of the CMKM promotion, Administrative Law Judge Robert G. Mahony issued an initial decision revoking St. George's stock registration. That initial decision, too, became final on Oct. 28.
While the SEC revocation orders have finally laid CMKM and St. George to rest, the story may well be far from over for Mr. Casavant's pink sheet promotion, in particular.
Just before disclosing that it had dropped its petition for review of the July 12 initial decision, CMKM unloaded its highly touted Saskatchewan mining interests in three deals involving Vancouver-based Entourage Mining Ltd., a cash-strapped company that trades on the OTC Bulletin Board, in exchange for 50 million shares.
According to CMKM's Oct. 24 SEC filing, the company plans to distribute the 50 million Entourage shares to its shareholders as part of the winding up process.
While the company has not disclosed a distribution ratio, based on the reported 703.5 billion CMKM shares outstanding, shareholders would receive approximately 71 Entourage shares for each one million CMKM shares held.
The three deals involving Entourage have not yet been finalized and CMKM has not set a record date or payment date for the planned distribution.
Indeed, at this point, CMKM does not even appear to have a plan in place for proceeding with the distribution, assuming that the deals close.
Whatever the process, if the distribution actually takes place, the task will be complicated by CMKM's revocation and it will undoubtedly take a considerable amount of time to complete.
Moreover, it is highly unlikely that financially challenged Entourage, headed by ex-broker Gregory Kennedy and backstopped by Howe Street familiar Paul Shatzko, will be in much of a rush to register the 50 million shares so that they can be traded in the U.S.
In any event, many of CMKM's cult-like followers are now refashioning their fantasies and pinning their hopes on Entourage.
The saga continues.
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