Post by kenshin7 on May 14, 2010 9:59:56 GMT -5
May 13, 2010
To: CMKM Management
Re: Litigation Update
I received five phone calls yesterday from four pleasant and concerned shareholders. The fifth caller was rude and insulting but left his message after normal business hours so he did not reach anyone in my office. I have not had the chance to speak with him as of this writing but I will continue my efforts to reach him. This shareholder gave his name in such a way that his last name is not audible and he left his phone number with the last four digits trailing off to where it is indecipherable. I left messages at voice mails for two different numbers that could possibly have been the caller’s number but I have not received any return phone calls. After discussing the reasons for the influx of calls with these concerned shareholders, I have decided to issue an update on the status of the litigation for the benefit of all shareholders. These well meaning shareholders suggested that I address certain topics. I will endeavor to cover them from the legal perspective.
Desormeau Suit -- I was hired by CMKM after Kevin West became CEO in early 2007. I was in Las Vegas preparing to file a shareholder’s derivative suit against Dave Desormeau (former CFO for CMKM), John Edwards (owner of the CyberMark shell that became CMKM) and other insiders of CMKM. It was obvious that Company management prior to Mr. West’s appointment had neither desire nor inclination to bring suit against the parties I was prepared to sue. The facts uncovered since Mr. West has taken office along with indictments and other regulatory proceedings, confirm that such legal actions were appropriate on behalf of the Company. Mr. West, in one of his first decisions, asked me not to file the suit against Desormeau, et al as a derivative suit but to bring the action directly against the named Defendants on behalf of the Company. I did so. That action resulted in a $33,000,000 judgment in favor of CMKM against John Edwards. Most of you know by now that having a judgment against someone is not the same as receiving funds in that amount. Your Company and your legal team have spent significant monies to obtain judgments against certain defendants and there is hope for recovery of significant funds from these judgments.
Two pieces of real estate have been recovered on behalf of the Company in a related proceeding. Litigation was brought in North Carolina and Nevada in an attempt to attach certain pieces of real estate which were believed to have been bought with illegally obtained proceeds. A compromise was reached in the North Carolina proceeding which allowed for the transfer of these properties to CMKM while the $33,000,000 judgment against John Edwards with ongoing interest remains in full force and effect. It was agreed that John Edwards would be allowed credit for the value of these properties against the outstanding judgment. These properties were purchased with “ill gotten gains” from actions alleged in the Desormeau lawsuit and the Company has a duty and a right to collect any real estate or other assets that were acquired through such illegal activities. Collection efforts against John Edwards are ongoing to satisfy the remainder of this judgment. The Company is attempting to sell the real estate acquired through this lawsuit, but due to real estate market conditions no sales have occurred for the benefit of the Company as of the date of this writing.
I will make occasional references throughout this update to documents being filed and filing dates. You are directed to the Company website www.cmkmdiamondsinc.com to view the documents mentioned herein.
Recently CMKM has amended the petition in the Desormeau suit to add Wells Fargo, the STAMP Program, Stacy Ewing, Helen Bagley and First Global Stock Transfer. CMKM’s ongoing investigation headed up by Mr. West uncovered the actions described in the recent amendment which resulted in this new filing. In this amended filing CMKM alleges that the actions of Wells Fargo, its employee Stacy Ewing, along with Helen Bagley and the Company transfer agency, assisted John Edwards and others in the issuance of free trading shares which were not authorized by CMKM. The Court granted CMKM’s Motion to add Wells Fargo et al to the lawsuit in March of 2010. CMKM is awaiting a signed order from the Court so it may proceed with service on all the new parties. The investigation by CMKM shows that the CMKM stock certificates issued as a result of the negligence and wrongdoing of Wells Fargo and others totals over $50 million dollars. This amended portion of the Desormeau suit seeks damages for the losses caused to CMKM for the issuance of these shares.
Casavant/Glenn Suit -- In August of 2009 CMKM sued its former attorney Roger Glenn, his law firm Edwards Angell Palmer and Dodge, LLP, Rendal Williams, Cierra Williams, MonteVerde Holdings LLC and Patricia DeCosta by adding them to the Casavant suit filed in 2007. Roger Glenn’s attorneys filed a Motion to Dismiss aimed at certain claims in CMKM’s petition. CMKM amended its lawsuit and filed the Second Amended Complaint against Glenn, et al, on January 5, 2010. Glenn’s attorneys filed an answer on January 21, 2010. On March 2, 2010 a Joint Case Conference Report was filed which sets out certain discovery deadlines agreed to by the parties. CMKM received Glenn’s First Set of Interrogatories and a Request for Production in March. In response to Glenn’s discovery requests CMKM has provided to Glenn over a half a million pages of documents accumulated by the Company during its three years of investigation into the Company’s activities. For the specifics of what was provided to Glenn’s attorneys please view the Case Conference Report on the Company website. Glenn’s attorneys have provided in their initial disclosure to CMKM 1576 documents (which includes many duplicates) totaling less than 8,000 pages of records.
On February 17, 2010 all parties, through their respective attorneys, met by video conference call to work out the Case Conference Report and the particulars involving the initial disclosure required by the Nevada Rules. Glenn’s attorney took the deposition of Kevin West on March 23, 2010 with Kevin West being named as the Company representative most knowledgeable about the Company records. This proceeding is called a Rule 30 (b) (6) deposition. Mr. West testified for most of the day about the records of the Company and where Glenn might look to find documents of the Company. Glenn’s attorneys have issued a subpoena to Don Stoecklein, former CMKM attorney, for all of his firm’s records related to his representation of CMKM. Stoecklein forwarded these records to Glenn’s attorneys two weeks ago. Glenn’s attorneys amended their deposition after receiving the documents from Mr. Stoecklein and have now elected to depose Kristen Buck at their offices in Costa Mesa, California next week. I will attend the deposition to represent the Company. The Company is preparing their first round of discovery to Roger Glenn and intends to have it filed in the next thirty days. A trial date has not been set at this time. Due to time deadlines agreed to in the Case Conference Report, it is likely a trial could occur as early as May or June of 2011.
Share Cancellation Suits-Smith County, Texas -- After reviewing hundreds of thousands of pages of bank records, transfer agent records and other corporate documents, it became clear that billions of shares of CMKM common stock were issued to certain companies and individuals who never provided services nor paid for the receipt of those shares. In 2008, the Company began notifying those companies and shareholders that appeared to have large holdings of CMKM common stock yet the records of the Company did not show any proof that such stock had been paid for by either cash or services. The Company received responses from only a small number of the shareholders who were contacted. Most of the people who responded said they were unaware that stock was issued in their name or that any stock was currently outstanding in their name. CMKM management has a duty to cancel any and all shares that were never purchased or acquired legally. The Company has an ongoing investigation into illegally issued stock and will continue to identify those that received stock without paying for the same. Forty individuals and companies including a number of companies created by John Edwards and including a number of relatives of Urban Casavant and certain individuals known to be insiders of the Company have now been sued by CMKM. On March 25, a default was granted against some of the named Defendants. On April 20, 2010 Mr. West appeared in Court and testified about the circumstances surrounding the issuance of the shares sought to be cancelled. He also testified about the methods suggested for awarding damages for the acts of the Defendants. The Court awarded CMKM nearly $30 million dollars based on the sales price of the shares that were ultimately sold by the named Defendants. Approximately 20 billion shares have been cancelled as a result of this litigation. New Defendants in this suit will be added in the coming months.
Al Hodges’ Bivens Suit -- After discussing this issue with a couple of shareholders, I thought it necessary to explain CMKM’s legal position regarding the Hodges’ suit with more clarity. Kevin West and the all those associated with CMKM including the new COO, the Board of Directors and all the lawyers being employed by the Company are dedicated to seeing this Company succeed and become a trading entity again. The promises made to shareholders before the current management took over have left many shareholders with the hopes and expectations of fabulous wealth and windfall profits from relatively small investments. The hope for wealth from this investment lives in many of us. The claims made in the Hodges’ suit are good reason for hope to continue. CMKM management has been on a steady course for three years to rebuild this Company. Because the previous management did not file tax reports, the Company is having to reconcile each year beginning in year 2002 in order to file each period accordingly to regain reporting status. The Company plans to maintain its course while the Hodges’ litigation comes to some resolution. I make these comments in regards to the Hodges’ suit for this reason. All work being performed by Kevin, his staff and his Board is for the sole purpose of benefitting all shareholders and bringing the Company back to trading status.
When Kevin West took the job, he became duty bound to do things that are required of corporate officers. CMKM’s investigation does not reveal that any trust fund exists. The Company has stated publicly that it does not have any evidence of funds awaiting the shareholders. This does not mean there are no funds being held in trust for the shareholders. The Company simply has no evidence of the existence of these funds. This position by the Company does not mean the Company is opposed to the finding of funds belonging to the shareholders. Quite to the contrary, the Company exists for the sole reason of increasing the value of the stock to the shareholders. If it comes in the form of a windfall from a trust fund, then so be it. I personally think Al Hodges is a very capable and experienced attorney. I am hopeful that his litigation is successful but CMKM management does not have the luxury of waiting to see what will come of that lawsuit. Based on the recovery sought in the Hodge’s suit, if it is successful, the matters being litigated by the Company will pale in significance. The Company will watch the proceedings in the Hodge’s suit with great interest and hope that something of value comes of that litigation for the shareholders.
Communication to Shareholders -- I was informed that many shareholder resent the Company’s inability or refusal to communicate with shareholders. You are advised that Kevin West has been a key witness, and without a doubt the most important witness, on behalf of the Company. He has already testified in court on numerous occasions. He has been named as a witness by me and by Roger Glenn’s attorney in our formal disclosure documents. The act of naming someone as a witness has significant legal ramifications. Mr. West will be deposed at some point in the future by Roger Glenn’s attorney as may any officer or board member. He may be deposed in other lawsuits related to his work for the Company. Any remarks made by Mr. West whether written or verbal to third parties is discoverable by the opposing parties. Any information he imparts may subject him to cross examination. Statements made outside court are often used in court against a witness. Since casual conversations or general dialogues about the Company business are difficult at best to screen or scrutinize. I am forced to restrict any officer or board member in what he or she can discuss and to whom he or she can discuss matters with.
I have a legal obligation to prepare these cases for trial and I am duty bound to instruct Company witnesses on the potential harm that could come from discussing Company business for the entire world to hear and see. Additionally, the parties have entered into a Protective Order signed by the Court which directs all parties to protect as confidential any materials deemed by the parties to be confidential. I think the Order is posted on the Company web site, but if it is not, I will see if we can get it posted. If any officers or board members were to discuss or display to shareholders documents deemed confidential, he could be subjecting himself and the Company to sanctions or be exposed to a contempt of court action. It is extremely difficult in a case involving large volumes of business records and confidential documents for an attorney to police his witnesses as to what areas they can talk about and what areas they cannot discuss publicly. I have advised the officers and board members not to discuss Company business because of this litigation. Are you entitled to answers to your questions? Depending on the question, you may well be entitled to answers or certain information. But in light of the mountain of litigation being brought by this Company, you will be required to get your answers in a more controlled fashion. You are not entitled to unlimited and uncontrolled access to the corporate officers or board members when your questions involve matters that are subjects of the litigation. Any lawyer who would suggest otherwise would not be doing his job in my opinion.
Information Request -- I have been receiving a number of faxes and emails from people who are telling me they have been instructed to send me proof of their holdings. I will assume this is an honest mistake on somebody’s part. One nice individual has sent me a quote from a current message thread but the quote is five years old where John Martin was asking shareholders to send proof of their holdings by fax to my office. I have no idea why anyone would suggest there is some need to do that at the present time. The thread that was sent to me was written by Mr. Martin when I was compiling the information we gave to the SEC following the administrative hearing. This is a waste of time for the shareholders who are being told to do this and it serves no purpose whatsoever.
Sincerely,
Bill Frizzell
To: CMKM Management
Re: Litigation Update
I received five phone calls yesterday from four pleasant and concerned shareholders. The fifth caller was rude and insulting but left his message after normal business hours so he did not reach anyone in my office. I have not had the chance to speak with him as of this writing but I will continue my efforts to reach him. This shareholder gave his name in such a way that his last name is not audible and he left his phone number with the last four digits trailing off to where it is indecipherable. I left messages at voice mails for two different numbers that could possibly have been the caller’s number but I have not received any return phone calls. After discussing the reasons for the influx of calls with these concerned shareholders, I have decided to issue an update on the status of the litigation for the benefit of all shareholders. These well meaning shareholders suggested that I address certain topics. I will endeavor to cover them from the legal perspective.
Desormeau Suit -- I was hired by CMKM after Kevin West became CEO in early 2007. I was in Las Vegas preparing to file a shareholder’s derivative suit against Dave Desormeau (former CFO for CMKM), John Edwards (owner of the CyberMark shell that became CMKM) and other insiders of CMKM. It was obvious that Company management prior to Mr. West’s appointment had neither desire nor inclination to bring suit against the parties I was prepared to sue. The facts uncovered since Mr. West has taken office along with indictments and other regulatory proceedings, confirm that such legal actions were appropriate on behalf of the Company. Mr. West, in one of his first decisions, asked me not to file the suit against Desormeau, et al as a derivative suit but to bring the action directly against the named Defendants on behalf of the Company. I did so. That action resulted in a $33,000,000 judgment in favor of CMKM against John Edwards. Most of you know by now that having a judgment against someone is not the same as receiving funds in that amount. Your Company and your legal team have spent significant monies to obtain judgments against certain defendants and there is hope for recovery of significant funds from these judgments.
Two pieces of real estate have been recovered on behalf of the Company in a related proceeding. Litigation was brought in North Carolina and Nevada in an attempt to attach certain pieces of real estate which were believed to have been bought with illegally obtained proceeds. A compromise was reached in the North Carolina proceeding which allowed for the transfer of these properties to CMKM while the $33,000,000 judgment against John Edwards with ongoing interest remains in full force and effect. It was agreed that John Edwards would be allowed credit for the value of these properties against the outstanding judgment. These properties were purchased with “ill gotten gains” from actions alleged in the Desormeau lawsuit and the Company has a duty and a right to collect any real estate or other assets that were acquired through such illegal activities. Collection efforts against John Edwards are ongoing to satisfy the remainder of this judgment. The Company is attempting to sell the real estate acquired through this lawsuit, but due to real estate market conditions no sales have occurred for the benefit of the Company as of the date of this writing.
I will make occasional references throughout this update to documents being filed and filing dates. You are directed to the Company website www.cmkmdiamondsinc.com to view the documents mentioned herein.
Recently CMKM has amended the petition in the Desormeau suit to add Wells Fargo, the STAMP Program, Stacy Ewing, Helen Bagley and First Global Stock Transfer. CMKM’s ongoing investigation headed up by Mr. West uncovered the actions described in the recent amendment which resulted in this new filing. In this amended filing CMKM alleges that the actions of Wells Fargo, its employee Stacy Ewing, along with Helen Bagley and the Company transfer agency, assisted John Edwards and others in the issuance of free trading shares which were not authorized by CMKM. The Court granted CMKM’s Motion to add Wells Fargo et al to the lawsuit in March of 2010. CMKM is awaiting a signed order from the Court so it may proceed with service on all the new parties. The investigation by CMKM shows that the CMKM stock certificates issued as a result of the negligence and wrongdoing of Wells Fargo and others totals over $50 million dollars. This amended portion of the Desormeau suit seeks damages for the losses caused to CMKM for the issuance of these shares.
Casavant/Glenn Suit -- In August of 2009 CMKM sued its former attorney Roger Glenn, his law firm Edwards Angell Palmer and Dodge, LLP, Rendal Williams, Cierra Williams, MonteVerde Holdings LLC and Patricia DeCosta by adding them to the Casavant suit filed in 2007. Roger Glenn’s attorneys filed a Motion to Dismiss aimed at certain claims in CMKM’s petition. CMKM amended its lawsuit and filed the Second Amended Complaint against Glenn, et al, on January 5, 2010. Glenn’s attorneys filed an answer on January 21, 2010. On March 2, 2010 a Joint Case Conference Report was filed which sets out certain discovery deadlines agreed to by the parties. CMKM received Glenn’s First Set of Interrogatories and a Request for Production in March. In response to Glenn’s discovery requests CMKM has provided to Glenn over a half a million pages of documents accumulated by the Company during its three years of investigation into the Company’s activities. For the specifics of what was provided to Glenn’s attorneys please view the Case Conference Report on the Company website. Glenn’s attorneys have provided in their initial disclosure to CMKM 1576 documents (which includes many duplicates) totaling less than 8,000 pages of records.
On February 17, 2010 all parties, through their respective attorneys, met by video conference call to work out the Case Conference Report and the particulars involving the initial disclosure required by the Nevada Rules. Glenn’s attorney took the deposition of Kevin West on March 23, 2010 with Kevin West being named as the Company representative most knowledgeable about the Company records. This proceeding is called a Rule 30 (b) (6) deposition. Mr. West testified for most of the day about the records of the Company and where Glenn might look to find documents of the Company. Glenn’s attorneys have issued a subpoena to Don Stoecklein, former CMKM attorney, for all of his firm’s records related to his representation of CMKM. Stoecklein forwarded these records to Glenn’s attorneys two weeks ago. Glenn’s attorneys amended their deposition after receiving the documents from Mr. Stoecklein and have now elected to depose Kristen Buck at their offices in Costa Mesa, California next week. I will attend the deposition to represent the Company. The Company is preparing their first round of discovery to Roger Glenn and intends to have it filed in the next thirty days. A trial date has not been set at this time. Due to time deadlines agreed to in the Case Conference Report, it is likely a trial could occur as early as May or June of 2011.
Share Cancellation Suits-Smith County, Texas -- After reviewing hundreds of thousands of pages of bank records, transfer agent records and other corporate documents, it became clear that billions of shares of CMKM common stock were issued to certain companies and individuals who never provided services nor paid for the receipt of those shares. In 2008, the Company began notifying those companies and shareholders that appeared to have large holdings of CMKM common stock yet the records of the Company did not show any proof that such stock had been paid for by either cash or services. The Company received responses from only a small number of the shareholders who were contacted. Most of the people who responded said they were unaware that stock was issued in their name or that any stock was currently outstanding in their name. CMKM management has a duty to cancel any and all shares that were never purchased or acquired legally. The Company has an ongoing investigation into illegally issued stock and will continue to identify those that received stock without paying for the same. Forty individuals and companies including a number of companies created by John Edwards and including a number of relatives of Urban Casavant and certain individuals known to be insiders of the Company have now been sued by CMKM. On March 25, a default was granted against some of the named Defendants. On April 20, 2010 Mr. West appeared in Court and testified about the circumstances surrounding the issuance of the shares sought to be cancelled. He also testified about the methods suggested for awarding damages for the acts of the Defendants. The Court awarded CMKM nearly $30 million dollars based on the sales price of the shares that were ultimately sold by the named Defendants. Approximately 20 billion shares have been cancelled as a result of this litigation. New Defendants in this suit will be added in the coming months.
Al Hodges’ Bivens Suit -- After discussing this issue with a couple of shareholders, I thought it necessary to explain CMKM’s legal position regarding the Hodges’ suit with more clarity. Kevin West and the all those associated with CMKM including the new COO, the Board of Directors and all the lawyers being employed by the Company are dedicated to seeing this Company succeed and become a trading entity again. The promises made to shareholders before the current management took over have left many shareholders with the hopes and expectations of fabulous wealth and windfall profits from relatively small investments. The hope for wealth from this investment lives in many of us. The claims made in the Hodges’ suit are good reason for hope to continue. CMKM management has been on a steady course for three years to rebuild this Company. Because the previous management did not file tax reports, the Company is having to reconcile each year beginning in year 2002 in order to file each period accordingly to regain reporting status. The Company plans to maintain its course while the Hodges’ litigation comes to some resolution. I make these comments in regards to the Hodges’ suit for this reason. All work being performed by Kevin, his staff and his Board is for the sole purpose of benefitting all shareholders and bringing the Company back to trading status.
When Kevin West took the job, he became duty bound to do things that are required of corporate officers. CMKM’s investigation does not reveal that any trust fund exists. The Company has stated publicly that it does not have any evidence of funds awaiting the shareholders. This does not mean there are no funds being held in trust for the shareholders. The Company simply has no evidence of the existence of these funds. This position by the Company does not mean the Company is opposed to the finding of funds belonging to the shareholders. Quite to the contrary, the Company exists for the sole reason of increasing the value of the stock to the shareholders. If it comes in the form of a windfall from a trust fund, then so be it. I personally think Al Hodges is a very capable and experienced attorney. I am hopeful that his litigation is successful but CMKM management does not have the luxury of waiting to see what will come of that lawsuit. Based on the recovery sought in the Hodge’s suit, if it is successful, the matters being litigated by the Company will pale in significance. The Company will watch the proceedings in the Hodge’s suit with great interest and hope that something of value comes of that litigation for the shareholders.
Communication to Shareholders -- I was informed that many shareholder resent the Company’s inability or refusal to communicate with shareholders. You are advised that Kevin West has been a key witness, and without a doubt the most important witness, on behalf of the Company. He has already testified in court on numerous occasions. He has been named as a witness by me and by Roger Glenn’s attorney in our formal disclosure documents. The act of naming someone as a witness has significant legal ramifications. Mr. West will be deposed at some point in the future by Roger Glenn’s attorney as may any officer or board member. He may be deposed in other lawsuits related to his work for the Company. Any remarks made by Mr. West whether written or verbal to third parties is discoverable by the opposing parties. Any information he imparts may subject him to cross examination. Statements made outside court are often used in court against a witness. Since casual conversations or general dialogues about the Company business are difficult at best to screen or scrutinize. I am forced to restrict any officer or board member in what he or she can discuss and to whom he or she can discuss matters with.
I have a legal obligation to prepare these cases for trial and I am duty bound to instruct Company witnesses on the potential harm that could come from discussing Company business for the entire world to hear and see. Additionally, the parties have entered into a Protective Order signed by the Court which directs all parties to protect as confidential any materials deemed by the parties to be confidential. I think the Order is posted on the Company web site, but if it is not, I will see if we can get it posted. If any officers or board members were to discuss or display to shareholders documents deemed confidential, he could be subjecting himself and the Company to sanctions or be exposed to a contempt of court action. It is extremely difficult in a case involving large volumes of business records and confidential documents for an attorney to police his witnesses as to what areas they can talk about and what areas they cannot discuss publicly. I have advised the officers and board members not to discuss Company business because of this litigation. Are you entitled to answers to your questions? Depending on the question, you may well be entitled to answers or certain information. But in light of the mountain of litigation being brought by this Company, you will be required to get your answers in a more controlled fashion. You are not entitled to unlimited and uncontrolled access to the corporate officers or board members when your questions involve matters that are subjects of the litigation. Any lawyer who would suggest otherwise would not be doing his job in my opinion.
Information Request -- I have been receiving a number of faxes and emails from people who are telling me they have been instructed to send me proof of their holdings. I will assume this is an honest mistake on somebody’s part. One nice individual has sent me a quote from a current message thread but the quote is five years old where John Martin was asking shareholders to send proof of their holdings by fax to my office. I have no idea why anyone would suggest there is some need to do that at the present time. The thread that was sent to me was written by Mr. Martin when I was compiling the information we gave to the SEC following the administrative hearing. This is a waste of time for the shareholders who are being told to do this and it serves no purpose whatsoever.
Sincerely,
Bill Frizzell