CMKM Unveils Liquidating Master Plan
by Lee M. Webb
Canada Stock Watch
November 7, 2005
CMKM Diamonds Inc., Saskatchewan native Urban Casavant's recently revoked pink sheet promotion, has unveiled its dubious master plan for a liquidating distribution of assets consisting of 50 million shares of Vancouver-based Entourage Mining Ltd.
As previously reported by Stockwatch, virtually on the eve of CMKM's revocation, cash-strapped Entourage entered into three agreements to acquire the pink sheet promotion's Saskatchewan mining interests in exchange for 50 million shares.
Entourage, which trades on the OTC Bulletin Board, has not yet announced that the deals, only two of which were directly negotiated with CMKM, have been consummated.
Nonetheless, Mr. Casavant, CMKM's only officer and director, is already forging ahead with winding up the revoked penniless promotion and distributing the 50 million Entourage shares.
CMKM task force
The proposed liquidating distribution will reportedly be under the oversight of a "task force" comprised of CMKM's Nevada lawyer Donald Stoecklein, 87-year-old former co-chairman Robert Maheu and Texas lawyer Bill Frizzell.
Mr. Stoecklein, who was hired as CMKM's attorney in February, packs some regulatory baggage of his own in connection with a U.S. Securities and Exchange Commission (SEC) action unrelated to CMKM.
The Nevada lawyer was unsuccessful in his touted efforts to guide CMKM through its "regulatory compliance requirements." Indeed, even with the ballyhooed securities lawyer Mr. Stoecklein on its payroll, CMKM seemed to have little grasp of regulations or the company's obligations.
For example, in a March 24 news release commenting upon the SEC's administrative proceeding against the company, CMKM rather snootily remarked that even if the U.S. regulator revoked its registration, CMKM's stock would continue to trade on the pink sheets.
Contrary that incorrect and repeated suggestion in the March 24 news release, it is against the law for any broker to effect a trade in the securities of an issuer that has had its registration revoked, something that should now be abundantly clear to CMKM shareholders stuck with the revoked stock.
In another example of ignorance, if not blatant disregard for securities laws, CMKM provided a false corporate address in an SEC filing submitted by one of Mr. Stoecklein's associates.
Mr. Stoecklein was also unsuccessful in countering the SEC allegations of CMKM's securities violations in the administrative proceeding against the company.
On July 12, Chief Administrative Law Judge Brenda P. Murray decided that CMKM was an egregious, repeat securities violator and issued an initial decision ordering its stock registration revoked.
Mr. Stoecklein did manage to drag the process out for more than three months, during which time tens of billions of CMKM shares changed hands, by successfully petitioning for a review of Judge Murray's initial decision.
On Oct. 24, however, Mr. Stoecklein withdrew the company's petition for review. On Oct. 28, the SEC issued a final order revoking CMKM's stock registration.
Mr. Maheu, a former private gumshoe who spent about 10 years working for Howard Hughes before being fired more than three decades ago, signed on as CMKM's trophy co-chairman for $40,000 per month in January "to improve corporate compliance." (All amounts are in U.S. dollars.)
At a May 10 SEC evidentiary hearing, however, Mr. Maheu's testimony revealed that he did not have a clue about the company's operations or financial condition.
Hearkening back to a job he had half a century ago with the precursor to the Small Business Administration, Mr. Maheu remarked that he "became known as the man with the whip."
"And I still have that whip," Mr. Maheu added, going on to testify that he had used that whip in helping CMKM develop its periodic reports for filing with the SEC.
Alas, Mr. Maheu was evidently oblivious to the fact that his whip cracking had no effect.
Mr. Maheu, touted as the man brought on board to shape up the company, was ignorant of the fact that requested records and documentation had not been provided to the company's bookkeeper and that CMKM's auditor, despite repeated requests, had not received any documentation.
None of the periodic reports were ever filed and with the cashless company headed for revocation, the octogenarian pulled the plug as CMKM's co-chairman on Oct. 20.
Mr. Frizzell rounds out the vaunted CMKM task force.
The Texas lawyer, with no securities experience, is a CMKM shareholder and, like many of the company's cult-like followers, believes that the massively diluted pink sheet promotion's woes can be largely attributed to naked short selling.
Mr. Frizzell was hired last year to represent fellow Texan and CMKM shareholder John Martin in matters related to his flagging investment in the company.
When the SEC instituted administrative proceedings against the company in March, Mr. Frizzell offered to represent other CMKM shareholders at a cost of $25 per person. Approximately 5,000 shareholders originally signed on.
With the help of Mr. Martin, Mr. Frizzell devoted considerable effort and a significant amount of the money collected from the shareholders known as the Owners Group to attempting to establish proof of a massive short position in CMKM.
Notwithstanding Judge Murray's prehearing ruling that short selling was irrelevant to the matters in question, Mr. Frizzell pressed on with his quixotic project. The lawyer's purported evidence of a crippling CMKM short position was never presented for public scrutiny.
After tapping the Owners Group for another $25 per person, Mr. Frizzell moved on to a second phase of representation. Only 2,500 shareholders signed on for the second phase representation.
In spite of the fact that the SEC recently provided Mr. Frizzell with evidence that CMKM delivery failures amounted to a paltry three million shares worth a picayune $300 at the end of April of this year, the Texas lawyer is apparently still convinced that there is a massive short position in the stock.
That conviction, in the face of clear evidence to the contrary, is still shared by many of CMKM's cult-like followers.
Indeed, the so-called "true longs" are heralding the proposed Entourage distribution as a master plan to trap short sellers.
The master plan
Under the proposed plan for winding up the massively diluted company, CMKM shareholders with shares in street name, which account for the majority of the staggering 703.5 billion shares outstanding, will have to obtain certificated CMKM shares in order to participate in the Entourage distribution.
"In order to be considered a bona fide stockholder of CMKM, a physical stock certificate issued in the shareholder's name will need to be presented to the distribution task force for confirmation on or before Dec. 31, 2005, or as extended at the sole discretion of the task force," the company advised in a Nov. 4 news release.
"Electronic and/or other forms of ownership (such as brokerage statements) will not be accepted by the task force as evidence of ownership," the news release continued. "Therefore, CMKM stockholders who hold their shares in 'street name' will need to demand physical certificates from their broker in order to be considered a bona fide CMKM stockholder and be entitled to their proportionate share of the Entourage common stock and any other assets of CMKM to be distributed to its bona fide stockholders."
CMKM shareholders who want to participate in the Entourage distribution under the terms set out by the company will have to ante up the cost of obtaining certificates. The cost, which varies from brokerage to brokerage, could range from approximately $50 to several hundred dollars.
Assuming the distribution of Entourage shares is eventually completed, Canadian shareholders may face further obstacles. Many Canadian brokerages will not accept deposits of share certificates of OTC-BB companies, which will leave Canadian investors scrambling for a place to park their Entourage shares.
While the distribution plan seems simple enough on its face, some veteran market observers suggest that it will turn into a quagmire and the process, if it is ever completed, will drag on for many months.
Critics also question whether Nevada-incorporated CMKM's plan for winding up the company and distributing its assets complies with Nevada statutes and other laws.
Barring intervention from some regulatory or law enforcement agency, however, CMKM, which has never been a paragon of compliance, seems determined to proceed.
Notwithstanding the many unanswered questions and unresolved issues, CMKM's excitable cult-like followers are in yet another tizzy over what they consider to be a brilliant master plan engineered by Mr. Casavant and the company's brain trust.
The Casavant manoeuvre
Some of CMKM's followers are also impressed by another snippet served up in the company's Nov. 4 corporate update.
Among the cockamamie fantasies previously embraced by many of the company's devoted Internet followers, and perhaps still faithfully held by some, was a so-called theory dubbed "the Casavant manoeuvre" that many believed would make them fabulously rich.
A perhaps far less entertaining, but more concrete, Casavant manoeuvre was outlined in the Nov. 4 news release.
"Urban Casavant, CMKM's sole officer and director, has informed the distribution task force that neither he nor his immediate family members will receive any of the Entourage shares in the distribution," the news release reported.
A great deal was made of this arguably largely empty gesture. Indeed, it was given several mentions in the Nov. 4 announcement, including some gushing comments from task force member Mr. Maheu.
"I want to commend Urban and his immediate family for deciding not to share in the distribution of the Entourage shares," Mr. Maheu remarked. "This goes a long way towards showing the Casavant family's continued commitment to the CMKM stockholders."
According to some reports, Mr. Maheu has quite a sense of humour, but there is nothing to indicate that his comments were offered tongue-in-cheek.
Nonetheless, more than a few observers arched an eyebrow over the former co-chairman's characterization of the Casavant family's abstention from the Entourage distribution as a demonstration of continued commitment to CMKM shareholders.
While it is not known exactly how many CMKM shares are presently held by Mr. Casavant and members of his immediate family, if any, it is known that they received and promptly dumped into the market many of the hundreds of billions of shares Mr. Casavant issued, all without so much as a peep to shareholders.
Indeed, by the time the SEC stepped in with its administrative proceeding against the company, Mr. Casavant and members of his family had unloaded the majority of their CMKM shares.
Apparently the task force's greybeard, Mr. Maheu, believes that CMKM shareholders should not be concerned with such trifling bygones.
"This is a time for the CMKM stockholders to look forward towards the future and forget the past," Mr. Maheu remarked after serving up his assessment of the Casavant family's commitment to shareholders.
Many of CMKM's cult-like followers evidently agree with Mr. Maheu and are already polishing their crystal balls and refashioning their fantasies of future riches.
With the help of fodder for febrile imaginations presented on the task force's website, CMKM's faithful followers are particularly reviving fantasies of a massive naked short position and astronomical settlements running to hundreds of billions of dollars.
The CMKM Task Force website is registered to Securities Law Institute, which is owned by Mr. Stoecklein and his close business associate, Anthony DeMint.
Mr. DeMint, who is listed as the administrative and technical contact for the website, controls dozens of blank cheque companies and has been involved with a number of issuers that have had their stock registration revoked by the SEC.
The website, which was registered on Nov. 3, is still under development, but it already offers some fantasy inspiring content, with the promise of more to come.
"We are diligently working on providing additional content to this Website so that it serves as the source of all information for the CMKX Cert Pull demand outlined by the Task Force in the recent Press Release," the task force website home page advises.
A "cert pull" is undoubtedly a phrase that is familiar to many of CMKM's Internet followers. Indeed, it is a rather common refrain on many chat sites hosting discussions of penny stocks, particularly when the wheels start to come off a promotion and the price collapses.
Investors caught when a penny stock promotion collapses frequently place the blame on short sellers. Since shares held in certificate form cannot be borrowed to facilitate a short sale, it is not unusual for investors to raise a hue and cry for a "cert pull," encouraging shareholders to take physical delivery of their shares to combat short selling.
It is not clear that the tactic has ever worked.
Moreover, according to some market observers, gullible investors left holding the bag and loath to accept responsibility for a poor investment decision are far too quick to point the finger at the short selling bogeyman when a promotion collapses. The real reason for the collapse, they argue, almost invariably lies elsewhere, often with the company, its insiders and promoters.
Interestingly, in a Jan. 7, 2003, news release, Mr. Casavant raised the notion of naked short selling, which occurs when shares are not borrowed to effect the transaction, and urged shareholders to take delivery of their certificates.
After suggestively waving at naked short sellers, Mr. Casavant went on to issue hundreds of billions of shares, many of them to friends and family members, without bothering to tell regulators or investors about the staggering dilution.
The spectre of naked short selling is repeatedly raised in the frequently asked questions section of the CMKM task force website.
After declaring that only shareholders who have physical possession of CMKM share certificates will be able to participate in the Entourage distribution, the task force website goes on to claim that a second reason for demanding a certificate pull "is to determine the actual number of CMKX shares held by all shareholders, worldwide."
"If the total number of CMKX shares exceeds CMKX's outstanding share count, this may be due to the existence of Naked Short Shares in the Market," the vaunted task force suggests.
A more explicit claim about purported naked short selling is made in a subsequent section.
"Credible information indicates the number of naked short shares is potentially as high as 2 trillion shares," the task force claims, offering no details regarding the source or exact nature of this incredible "credible information."
"However, these numbers must be legally confirmed and validated before any action can be taken," the greybeard and two lawyer task force continues. "That said, the time has arrived for all CMKX shareholders to flex our considerable collective power in this united campaign to achieve justice for friends, families and ourselves.
"It is our belief that CMKX shareholders have been handed, on a silver platter, the opportunity to become the most formidable force the naked short sale perpetrators have ever faced."
While the stated belief of CMKM's vaunted task force resonates well among the company's cult-like followers, some market-savvy critics claim that CMKM shareholders are being shovelled another bill of goods that diverts attention from the massive dilution, mismanagement, misrepresentations and ultimate gutting of the company.
"Please note that everyone who does pull certificates will be helping to right a monumental wrong that permeates our entire market system," the task force goes on to state. "This is an opportunity to participate in a history-making event.
"Our success may very well hinge on the shareholder community's perseverance in obtaining this proof of bona-fide share ownership."
Just when this history-making event or the Entourage share distribution, for that matter, will be realized remains an open question.
The saga continues.
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