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RAPAPORT... The statute of limitations was set to expire for filing civil action against CMKM Diamonds on February 19, 2007, said Gene Hurd, but as that date was a federal holiday in the United States, the date was extended to February 20.
Hurd, a shareholder in CMKM Diamonds, told Rapaport News he just made the deadline --by six hours in fact-- according to papers filed in United States District Court southern division for Nevada, where CMKM is registered.
Hurd is suing CMKM Diamonds for at least $57,151,950 in damages and cites 11 causes of action against CMKM Diamonds. "I believe I'm the only shareholder who filed action," he told Rapaport.
In court documents obtained by Rapaport, Hurd (plaintiff) names CMKM Diamonds Inc., Urban Casavant, Robert Maheu, David DeSormeau, Rupert Perrin, Caroly Casavant, Wesley Casavant, Cindy Casavant, and John Does 1-50 plus [Mary] Roes 51-200 "each a legal person."
The plaintiff is unaware of the "true names" and capacities of all defendants sued. The plaintiff purchased 200 million shares of CMKM (CMKX.PK) stock between June 4, 2004, and October 29, 2004.
Allegations in the complaint begin at the time Cyber Mark International Corporation acquired certain mineral claims owned by Urban Casavant and his family in November 2002. Upon the transaction the plaintiff claims Cyber Mark appointed the senior Casavant president and CEO, (wife) Carolyn Casavant was appointed vice president, (son) Wesley Casavant corporate treasurer, and (daughter) Cindy Casavant corporate secretary. In December the company changed its name to Casavant Mining Kimberlite International, which was then changed to CMKM Diamonds in February 2004. (See related links for the history of CMKM as followed by Rapaport News.)
The suit lists DeSormeau and Perrin as directors of CMKM beginning January 15, 2003, and Maheu for joining January 31, 2005.
"After Casavant was appointed president of CMKM, no periodic reports were filed with the Securities and Exchange Commission" as required, but on July 22, 2003, CMKM filed form 15-12G stating it was no longer required to file reports because it had fewer than 300 shareholders.
On February 17, 2005, CMKM amended the form stating it had 698 shareholders, at which time the company had issued 800 billion shares.
The plaintiff wrote that CMKM relocated offices to 5375 Procyon Street, Su. 101, Las Vegas, Nevada, on March 4, 2005, but "the subject property was in fact occupied by a 'hot rod' shop..." Corporate auditors at the time issued a statement in July 2005 that claimed CMKM "may have advanced $4 million for the benefit of CMKXtreme Inc., a drag racing enterprise owned and controlled by Casavant," which had not been approved by the board of directors. The plaintiff alleges too that the audit firm noticed "CMKM may have made loans to its officers and directors in violation of the Sarbanes-Oxley Act...that the books and records of CMKM were un-auditable, because they were incomplete, and that the books and records that did exist were not properly maintained."
In March 2003 the Securities and Exchange Commission suspended trading of CMKM securities, which was followed by a hearing on May 10, 2005, at which time Judge Brenda Murray ruled that "CMKM had neither and independent auditor nor financial statements to be audited," and that "the draft ledger for 2003 and 2004 reflected no business operations, that management 'deprived shareholders and investors of material information in official filings, but promoted the company to investors through informal news releases and public statements that contained false information.'"
To these charges, Urban Casavant took the Fifth Amendment and declined to answer questions except for the proper spelling of this legal name.
The ruling ultimately revoked CMKM's registration in October 2005.
Maheu testified to Murray that he was being paid $40,000 per month as a director of the company, but stated he did not know CMKM had any other directors other than Casavant, according to the court documents.
Opus Pointe, which was hired by CMKM to reconstruct financial records testified that 2.7 billion shares ($24.7 million) were issued to an unknown contract. Other transactions included $1.4 million in deposits and $116,000 in withdrawals were made in 2003, and that $35 million was deposited and $6 million was withdrawn in 2004. During these two years, CMKM had admitted to having no business operations.
In September 2006, the National Association of Securities Dealers (NASD) sought disciplinary action against Las Vegas-based NevWest Securities Corporation for having authorized 500 transactions between March 2003 and May 2005 for one customer referred to as "JE" in which 259 billion shares traded for $53 million.
For his cause of actions against CMKM, the plaintiff charges first that defendants failed to file financial reports, concealed the absence of business, understood the true number of shares outstanding and failed to report on board of directors meetings, thus leaving the plaintiff with false information for which to gauge investments.
In the second cause of action, "Maheu, DeSormeau, and Perrin failed to supervise the officers and to monitor the personal transactions between officers and CMKM, thereby breaching their fundamental duty to act in the best interest of shareholders."
The plaintiff states in a third cause of action that Maheu, in his capacity as board member, demonstrated "reckless disregard by allowing materially false and misleading information to be disseminated." Maheu admitted knowing of "problems" during the Murray hearing, "he made no independent effort to verify that management was cooperating with the accountants and professionals engaged to correct the filing deficiencies..."
Urban Casavant "together with one or more John Does, agreed and performed overt acts in furtherance of a conspiracy to convert CMKM funds to personal use through illegal loans or advances." In the fourth case of action, plaintiff charged that Casavant knew the NevWest customer identified as JE "was in fact the beneficial owner of significantly more than 5 percent of CMKM's securities and that Casavant conspired" with JE to conceal an 80-fold increase in authorized shares.
As officer of the company, Casavant is charged in the court filing with racketeering (in the fifth cause) for unlawfully, knowingly, and intentionally conducting and participating in CMKM's activities, which affected interstate and foreign commerce through a pattern of mail fraud, wire fraud, and securities fraud.
While the sixth and seventh causes of action involved securities documents, the eighth cause targets the $4 million loan to CMKXtreme, "an entity unrelated to the diamond exploration business, at a time the company had no exploration or other business activities whatsoever." The general ledger showed a $30 million deposit, on December 31, 2004, "yet CMKM announced less than 10 months later that it had defaulted on its obligations to United Carina for $500,000."
Corporate bylaws state that CMKM shareholders were entitled to annual meetings, which did not take place according to the ninth cause of action, and that "the term of each director shall expire on the day of the succeeding annual shareholder meeting." Casavant served continuously since 2002, without calling a shareholder meeting.
In a tenth cause of action, plaintiff alleged that Casavant "through his actions, including the loans, advances, and transfers to himself and CMKXtreme, maintenance of all records in his home, his appointment as sole director, officer, and employee at most times relevant to this action, and appointment of only immediate family members to corporate officer positions, is for all intents and purposes the alter ego of CMKM and is thus personally responsible for all debts of the corporation..."
The plaintiff determined that Casavant "enriched" himself at the expense of CMKM shareholders of at least $4 million, in the eleventh and final cause. As shown in stock ledgers, the plaintiff determined at least $53 million in transactions took place under Casavant's leadership and knowledge.
The plaintiff demanded a trial by jury, and seeks compensatory damages of at least $50,650, punitive damages of at least $101,300, and disgorgement of all gains by defendants of at least $57 million. He also seeks the appointment of receiver or trustee to manage CMKM, until such time an annual meeting of shareholders would convene to elect new directors.
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