posted September 25, 2003 22:27         

From his 23rd-floor suite of offices in Houston's Lyric Centre, John M. O'Quinn is plotting what he hopes will be his next multibillion-dollar jackpot. Not that the 62-year-old senior partner of O'Quinn, Laminack & Pirtle needs the dough; FORBES estimates his law firm has won $1.5 billion in fees from the makers of silicon breast implants and cigarettes. This time he's aiming at Wall Street. O'Quinn has a hand in 15 lawsuits alleging that various brokerages (including Ameritrade and E-Trade) and marketmakers like Knight have destroyed his clients by helping to sell the companies' shares short in a scheme to run the stock prices into the ground. The damage is daunting: O'Quinn says 1,000 companies have lost at least $100 billion in market capitalization. "If you short a stock for the sole purpose of killing the value," he says, "that's a threat to the view that we have an honest market."

The fuss is over naked shorting, a practice that's been around for decades and that is sometimes legal. Normal short-selling involves borrowing real certificates for stock, selling the stock, buying new shares at a later date, and using the new certificates to replace the ones borrowed. Naked short-selling differs in that no real certificates change hands. Instead, the short-seller creates a paper entry showing that it owes shares to the stock buyer and will get around to delivering them later.

Naked short-selling is legal if done by a marketmaker in a temporary arrangement; it's normal for a marketmaker to be net short for a day or two and then close out the position by buying real shares later. Naked shorting can be illegal if done with the conscious intention of leaving the short position as a paper entry indefinitely.

It's often hard to tell the legal variety of shorting from the illegal. Nowadays most stock available for trading is held in book-entry form, and thus takes the form of electronic blips on the books of a stock-clearing company. Depository Trust &Clearing Corp.'s subsidiary is one of the leaders in the clearing business. In the normal course of business DTCC tolerates so-called failed-to-deliver entries of shares offered for sale by, say, brokers. This means the seller doesn't have the certificates on hand but promises to be good for them eventually. Is the clearing firm too tolerant of failed-to-delivers, thereby facilitating illegal naked shorting by brokers (or their customers)? That's the allegation in the lawsuits.

O'Quinn and his top lawyer on these cases, James W. Christian, senior partner with Houston-based Christian, Smith & Jewell, claim that over the last three years billions of uncovered naked shares were sold; that marketmakers (and/or their clients) took profits after waiting for share prices to fall before buying in--if at all; and that brokerages allowed fictitious shares to be traded two, three and four times over, in possible violation of Securities & Exchange Commission rules. Defendants deny the charges and have tried to dismiss some of the cases.

"It's the perfect murder," says O'Quinn, who is quick to smell collusion. "We've got a situation where the cop can't arrest the suspect because it causes too many problems for the police department."

But in this case the police seem to be getting involved. Last February the SEC levied a $1 million civil penalty against Rhino Advisors, a small New York City investment house, and its president, Thomas Badian, for using offshore accounts to short the stock of Sedona Corp., a King of Prussia, Pa. software maker and an O'Quinn client. (Rhino and Badian didn't admit or deny any wrongdoing.) Just last month Louisiana's attorney general issued a subpoena on behalf of that state's Sedona shareholders against UBS PaineWebber. (He's seeking information on failed stock deliveries, among other things.) In a separate civil suit Sedona wants a hefty $2 billion in damages against 17 defendants, including Credit Suisse FirstBoston's Pershing clearing unit and Westminster Securities, alleging their naked shorting knocked Sedona's share price so low that several big vendors shied away from doing business with it. New York's Attorney General, Eliot Spitzer, is interested in the case.

Still, a tobacco-size payoff for O'Quinn is not in the bank. The case of Universal Express, a Manhattan-based logistics firm (and not an O'Quinn client), illustrates one reason it's hard to collect. In 2001 it received a $389 million award levied against three Florida defendants found liable for fraud and stock manipulation, including naked short-selling. But Universal is having a tough time seeing a penny: It says the assets are in offshore accounts.

Before anyone can collect, plaintiffs have to prove fraud or manipulation--and that's tough. It's not enough to show a sliding stock price, wild discrepancies in daily volume or even a disparity between a company's authorized number of outstanding common and the number of shares traded. The key lies in demonstrating manipulation of the entire trading system.

"These claims divert attention away from the real problems: failed business plans, poor management, little revenue and no prospects," says Michael S. Rosenblum, a Los Angeles lawyer who has represented some of the defendants in these cases.

A lot of O'Quinn and Christian's success will rest on whether they can demonstrate hanky-panky within the DTCC's stock-lending pool. These are shares set aside to assist members that come up short during the day. Marketmakers, for example, borrow them and promise to make good on the missing certificates--eventually. But here's where it gets fuzzy. The SEC's Rule 15c3-3 allows for "temporary lags" in possession of the shares, "provided that the broker or dealer takes timely steps in good faith to establish control." And therein lies an area of ambiguity larger than Texas.

Temporary, shmemporary, says Nutek, a Las Vegas holding company that includes a data processing and market survey firm. Last year its stock price fell from a high of 13 cents a share to 4 cents. Scrambling to raise equity capital (it made $732,000 on sales of $6.6 million in 2002), it issued at depressed prices at least 35 million more shares than it intended to, which it blames in large part on naked shorting. Earlier this year Nutek and its shareholders filed suit against 12 brokers for failure to deliver the shares. The brokerages proposed a settlement to deliver the certificates but only a few shareholders have received them. Now Nutek has hired Michael Morrison, a Reno lawyer affiliated with O'Quinn, to pursue a civil action.

Endovasc, an early-stage drug development firm in Montgomery, Tex., is bringing similar charges against marketmakers, including Knight. The suit alleges, among other things, the company's stock was oversold by at least 1 million shares in October 2002. Christian will try to prove the marketmakers profited by letting the open positions sit for months and then buying in, if at all, at a cheaper price. During 2002 Endovasc's stock went from a split-adjusted $7.50 a share to 65 cents. It's an easy stock to be bearish about: Endovasc has lost $5.4 million on revenues of $293,000 over the nine months ended Mar. 31.

Which raises the question of whether some of O'Quinn's clients are really worth rescuing. Amazon Natural Treasures, which was a Las Vegas-based maker of herbal supplements in the 1990s, sued DTCC, arguing its clearing firm improperly allowed unregistered shares to be sold on the open market. The case was settled. In the meantime Amazon's fortunes sank. The last time it filed a complete 10-K, Amazon reported a loss of $4.8 million on sales of $392,000. That was for 1998.

What's really making these stocks go down: the way the trades are cleared--or how the managers run the firms?

posted September 25, 2003 22:29         

"We have two Press Releases in two days that have come to a convergence on a major securities scandal that brings into question the very nature of our Securities Regulation and the SEC itself.

Yesterday Judith Burns of the Dow Newswire was quoting the SEC Director of Market Regulation Annette Nazereth regarding Illegal "Naked" shorting. Ms. Nazereth was quoted as stating that the SEC has been aware of the complaints regarding the manipulation illegal shorting takes upon companies since 1999 and has been searching for solutions. Since that time, nearly 4 years or more, the SEC has come to the conclusions that reforms are necessary and are looking at trade settlement penalties and fines as appropriate venues to thwart this manipulative trading practice. Now, being 4 years later, exactly how many trade settlement failures have been allowed to continue while the SEC came to these rather simple solutions. Solutions I must say I pitched to both the SEC and Senate nearly 4 months ago and I have only been on this campaign for a little over a year.

Tonight, Rob Wherry of FORBES, has once again brought the story to light. Rob is identifying the entire settlement process and the collusion between the Brokers and the DTC in allowing trade settlement "Forgiveness" to be the root to detriment of the actual security values themselves. Mr. Wherry challenges the very venue in which the SEC has admitted that they are investigating as the means to a corrupt end.

I guess in all of this controversy we need to understand the operations and accountability of the SEC itself. It is, after all, the SEC that admits they have been investigating the abuse for 4 years. How then could they allow collusion to continue, through a bear market where shorting a stock exacerbates the issue, and not step in and enforce resolution? Excess dilution in a bear market is like adding fuel to a house fire after the house is already in a rage. The SEC did that as they allowed the shorts to exist unsettled in a counterfeit state due to their negligence in enforcement.

The market crash that we recently went through where $100.00 Blue Chip stocks tanked to single digit values was a haven for short sellers. Now, we find that short sellers could, through a collusion between brokers and the DTC, sell short without the need to deliver and flood more shares into the market in order to drive further reductions in the security values. While this would be more controlled on the NYSE and Nasdaq markets the OTCBB, already nicknamed the "Wild West", had no controls and quickly became a market of rampant abuses. The SEC admits it, Mr. Wherry is identifying the process, where was enforcement? The SEC even went so far as to identify "collusion" in illegal shorting in their judgment against Rhino Advisors just this past February but only now comes forward with their 4 year investigation. Why have they delayed action for so long?

Over this past year the SEC and Congress have challenged the State Regulators over their regulatory powers. I think that it should be the other way around. The SEC has been clearly negligent over these past 4 years as they have sat patiently by watching the collusion take place. They have allowed the DTC, a self regulatory agency controlled by our brokers, to forgive the broker dealers from their obligations to settle trades. An obligation every investor would never give up as it systematically dilutes their own investment. Instead the SEC, DTC, and Brokers colluded to shield us from our awareness that this was taking place. Our Brokers entered counterfeit shares into our accounts, our commissions were taken, and the DTC hid the data from the interested companies seeking answers. Only now does the SEC come forward because the Companies themselves are making this a public issue.

The SEC, Chairman Donaldson, Director Cutler, and the SRO's including the NASD and the DTCC need to be audited for their participation in the cover-up of this fraud. The State regulators should take the lead and should seek all criminal charges they can should they find these agencies and the people who run them culpable to the crimes in question. The regulators themselves should be called into question and some should be put in jail!"

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This is gettin mighty hot for those guys in Regulatorville,,,,is the 2x4 coming??

posted September 26, 2003 00:00         

Concerned
Rick

posted September 26, 2003 21:56         

The following 7 Condition Codes can be combined with any of the codes above
(C) Corrected
(X) Cancelled
(I) Inserted
(S) Out of sequence
(B) Official best bid
(O) Official best offer
(F) Informational

posted September 26, 2003 22:09         

Have a great weekend Ric+Sandi

posted September 26, 2003 22:18         

Have a great weekend!

Sandi

quote:

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Originally posted by KostaVan:
Wasn't one of the points of buying this stock to get the CMI shares? If we are buying now we won't get anything...correct?

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posted September 30, 2003 08:59         

COME ON URBAN, "SHOW US THE DIAMONDS"

posted September 30, 2003 09:04         

Casavant Mining Kimberlite International Announces Retirement of 6 Billion CMKM Shares of Stock
Tuesday September 30, 9:02 am ET

LAS VEGAS, Sept. 30 /PRNewswire-FirstCall/ -- Urban Casavant, President of Casavant Mining Kimberlite International (Pink Sheets: CMKM - News) announced today that the company is Retiring Six Billion Shares of CMKM Stock to the Treasury. This stock is being retired from corporate insiders. All certificates retired will be announced later this week.
ADVERTISEMENT


This decision to retire CMKM stock was made by the Board of Directors of Casavant Mining International in an effort to create greater value to its shareholders. "This retirement of shares in no way effects the 2 for 1 stock split of CMKM stock for shareholders of record as of September 12, 2003," stated Urban Casavant, President of CMKI.

Drilling Update

Durama Enterprises, Ltd. has made tremendous progress in its efforts to begin drilling for Diamonds in the Forte a la Corne, Saskatchewan diamond fields. They have narrowed their efforts down to two key targets that have the most potential for finding Diamondiferous Kimberlite, and have increased their crews to drill both sites simultaneously.

Updates on Drilling efforts will be released as they are completed.

There is no guarantee that further exploration or drilling will produce any economic benefit to the company or the shareholders of the company.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: The statements, other than the statements of historical facts may be deemed to contain forward-looking statements with respect to events, the occurrence of which involves risk and uncertainties, including, without limitation, demand and competition for the company's products and services, the availability to the company of adequate financing to support its anticipated activities, the ability of the company to generate cash flow from operations and the ability of the company to manage its operations.

--------------------------------------------------------------------------------
Source: Casavant Mining Kimberlite International

Email this story - Set a News Alert

posted September 30, 2003 13:55         

Casavant Mining Kimberlite International Announces Retirement of 6 Billion CMKM Shares of Stock

LAS VEGAS, Sep 30, 2003 /PRNewswire-FirstCall via COMTEX/ -- Urban Casavant, President of Casavant Mining Kimberlite International (Pink Sheets: CMKM) announced today that the company is Retiring Six Billion Shares of CMKM Stock to the Treasury. This stock is being retired from corporate insiders. All certificates retired will be announced later this week.

This decision to retire CMKM stock was made by the Board of Directors of Casavant Mining International in an effort to create greater value to its shareholders. "This retirement of shares in no way effects the 2 for 1 stock split of CMKM stock for shareholders of record as of September 12, 2003," stated Urban Casavant, President of CMKI.

Drilling Update

Durama Enterprises, Ltd. has made tremendous progress in its efforts to begin drilling for Diamonds in the Forte a la Corne, Saskatchewan diamond fields. They have narrowed their efforts down to two key targets that have the most potential for finding Diamondiferous Kimberlite, and have increased their crews to drill both sites simultaneously.

posted September 30, 2003 14:20         

quote:

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Originally posted by PAUL:
Has anyone actually tried to SELL any shares at the .0002 level?

Were you able to sell the shares?

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posted September 30, 2003 14:24         

Not filed yet.

However my buy order was not reported as filled until right at the close the other day.

posted September 30, 2003 15:02         

Kevin

quote:

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Originally posted by VIP:
it this good new or bad new..

Casavant Mining Kimberlite International Announces Retirement of 6 Billion CMKM Shares of Stock

LAS VEGAS, Sep 30, 2003 /PRNewswire-FirstCall via COMTEX/ -- Urban Casavant, President of Casavant Mining Kimberlite International (Pink Sheets: CMKM) announced today that the company is Retiring Six Billion Shares of CMKM Stock to the Treasury. This stock is being retired from corporate insiders. All certificates retired will be announced later this week.

This decision to retire CMKM stock was made by the Board of Directors of Casavant Mining International in an effort to create greater value to its shareholders. "This retirement of shares in no way effects the 2 for 1 stock split of CMKM stock for shareholders of record as of September 12, 2003," stated Urban Casavant, President of CMKI.

Drilling Update

Durama Enterprises, Ltd. has made tremendous progress in its efforts to begin drilling for Diamonds in the Forte a la Corne, Saskatchewan diamond fields. They have narrowed their efforts down to two key targets that have the most potential for finding Diamondiferous Kimberlite, and have increased their crews to drill both sites simultaneously.

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posted September 30, 2003 15:12         

less shares means more equity per given share. This is a good thing.

quote:

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Originally posted by kevinbailey:
It WOULD be good news, if CMKM didn't already have more about 100 times that many outstanding shares.

Kevin

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posted September 30, 2003 15:29         

Kevin

quote:

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Originally posted by derek111c:
Argee, From what I heard they don't have a 100times that, 10bil before split 20bil after -6 bil(now) = 14 bil

less shares means more equity per given share. This is a good thing.

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posted September 30, 2003 16:21         

quote:

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Originally posted by rickpic:
bought 47000000 @.0001 just now
Go CMKM
Rick

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posted September 30, 2003 16:50         

quote:

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Originally posted by offshoretrader:
cmkm shares outstanding pre split 7,241,653,000
market cap pre split 2,172,000
float pre split 6,471,354,000
cmkm shares outstanding after split
14,483,310,000
market cap after split 1,448,000
float after split 6,471,354,000

14,483,310,000 - 6,000,000,000 =
8,483,310,000

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only 8 billion shares left look prety good.
I hope you are right.

posted September 30, 2003 16:53         

quote:

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Originally posted by kevinbailey:
I had heard figures from 100-400 bil. If that's incorrect, I apologize.

Kevin

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posted September 30, 2003 17:22         

quote:

---

Originally posted by offshoretrader:
cmkm shares outstanding pre split 7,241,653,000
market cap pre split 2,172,000
float pre split 6,471,354,000
cmkm shares outstanding after split
14,483,310,000
market cap after split 1,448,000
float after split 6,471,354,000

14,483,310,000 - 6,000,000,000 =
8,483,310,000

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posted September 30, 2003 23:03         

quote:

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Originally posted by rickpic:
microdaytrader
Sorry I got in befor you. You should have told me you were buying today. Thats a 271+ count. Ye Ha!!!
GO GO GO CMKM
Rick

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Hey U.C. Glad to see you on board what a bargin lololololololol

posted October 01, 2003 07:37         

The only real question you need to ask yourself is if he finds a large diamond strike. Will the price reach .01 if you think this is possible then realize that that would be 100x your investment @.0001.
Go CMKM
Rick

posted October 01, 2003 08:41         

Ca mon Urban, "show us the diamonds" !!!!

posted October 01, 2003 09:46         

quote:

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Originally posted by rickpic:
microdaytrader
Sorry I got in befor you. You should have told me you were buying today. Thats a 271+ count. Ye Ha!!!
GO GO GO CMKM
Rick

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