Post by soonerlew on Dec 31, 2007 7:17:22 GMT -5
This is kinda long but worth a reread IMO..From what I gather here, Beckstead thought something fishy was going on........Wonder how many others read this letter and when....
___________________________________________________
oldepro
DIAMOND DIGGER
ALL THE WORLD IS A STAGE
« Thread Started on Today at 12:43am »
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Remember the Beckstead letter? Take some time and read it again.
July 29, 2005
Securities and Exchange Commission
100 F. Street
Washington, D.C. 20549-7010
Re: CMKM Diamonds, Inc.
Commission file no. 000-26919 and 333-53808
Ladies and Gentlemen:
Beckstead and Watts, LLP was previously engaged as principal accountant to audit the consolidated financial statements of CMKM Diamonds, Inc. (the Registrant) as of and for the years ended 2004 and 2003 and as of and for the three months ended 2002. On July 22, 2005, we were terminated prior to completion of the audits.
We are in receipt of Form 8K - Notice of Change of Auditors dated July 28, 2005 which was filed with the US Securities and Exchange Commission without the opportunity for our firm to review and provide a response letter.
This firm disagrees with the statements in the Form 8-K filed by CMKM Diamonds, Inc. for the reasons stated in the attached letter sent to CMKM Diamonds on July 28, 2005.
Sincerely,
/s/ Beckstead and Watts, LLP
Beckstead and Watts, LLP
Attachment
cc: CMKM Diamonds, Inc.
Beckstead and Watts, LLP
Certified Public Accountants
Board of Directors of CMKM Diamonds, Inc.
July 28, 2005
Mr. Urban Casavant
CEO and Director
CMKM Diamonds,
4760 S. Pecos Road, Ste. 211
Las Vegas, NV 89121
Mr. Robert Maheu
Chair of the Audit Committee and Director
CMKM Diamonds, Inc.
4760 S. Pecos Road, Ste. 211
Las Vegas, NV 89121
Gentlemen:
You are, to our knowledge, the directors of CMKM Diamonds, Inc, ("CMKM"), a company whose common stock is registered under the Securities Exchange Act of I934 (the 1934 Act") and is trading on the over-the-counter market (quoted on the pink sheets). This firm was appointed as auditors for CMKM on July 11, 2005 (announced in a Form 8-K filed by CMKM on July 15. 2005).
We received a letter from your counsel, Donald J. Stoecklein, Esq. of Stoecklein Law Group, dated July 28, 2005. That letter contains a number of misstatements and misunderstandings. It is our intention to resolve those matters in this letter and to provide you notification as required by Section 10A of the Securities Exchange Act of 1934, as amended (the "1934 Act").
First, and among the most important of all, is his statement that CMKM is not an issuer" as defined by Sarbanes-Oxley and therefore is not subject to the provisions of that act or the SEC reporting requirements following the initial Form 15 filing on July 22, 2003. On February 17, 2005, CMKM filed an amendment to that Form 15 which stated very clearly:
This Amendment No, 1 to Form 15 is being filed to amend the Form 15 initially filed on July 22, 2003 (the "Original Filing"), with the Securities and Exchange Commission In order to revoke the Original Filing. As of the date of the Original Filing Casavant Mining Kimberlite International, Inc. had approximately 698 stockholders of record, thereby making the use of Form 15 inapplicable.
CMKM Diamonds, Inc.
July 28, 2005
Page 2 of 5
The Original Filing is hereby superseded and revoked with respect to the information set forth in this Amendment No. 1. Casavant Mining Kimberlite International, Inc. will be required to submit filings under Section 12g of the Securities Exchange Act of 1934, as amended.
With the original Form 15 inapplicable, it is clear that CMKM was and remained an issuer for the purposes of Sarbanes-Oxley and the filing requirements of the 1934 Act notwithstanding the wrongful filing in 2003 of the Form 15. If Mr. Stoecklein will provide to us an unqualified legal opinion that CMKM was not an issuer" as defined by Sarbanes-Oxley and was not subject to the reporting requirements of the 1934 Act after July 22, 2003, we will be pleased to review his opinion letter and consider it.
Secondly, we disagree with his understanding of our letter of July 27, 2005 and our engagement letter. We understand the word "termination" and we will account for the funds on deposit once our statutorily required services are completed as stated in our earlier response. Mr. Stoecklein's efforts to imply to the contrary are disingenuous.
As auditors, we are subject to a number of rules and regulations, including
Section 10A of the 1934 Act. Under Section 10A(a)(1), in conducting our audit of CMKM, we are obligated to implement procedures designed to provide reasonable assurance of detecting illegal acts that would have a direct and material effect on the determination of financial statements amounts." Should we detect or otherwise become aware of information indicating that an illegal act has or may have occurred (whether or not perceived to have a material effect on the financial statements of the issuer), we have an obligation to report the information to management and, if management does not take what we consider to be appropriate remedial action, we have an obligation to report the act to the audit committee. See Section 10A(b)(1) and (2) of the 1934 Act and the rules thereunder.
In performing our audit procedures, we have become aware of information relating to possible illegal acts, including (without limitation) the following:
We have received information relating to the possible improper personal use of corporate assets. Information we have uncovered indicates that Mr. Casavant may have caused CMKM to advance approximately $4 Million to the benefit of CMKXtreme, Inc. in the name of promotion and advertising". Based on the information provided to us, it caused us to question whether the use of the funds truly advanced the best interest of CMKM. Additionally, it appears that Mr. Casavant owns CMKXtreme, and that this may have been a related party transaction that may not have been presented to or approved by the Board of Directors of CMKM. We fully understand marketing issues raised by Mr. Stoecklein in his letter, but we are unaware how any such transactions benefited CMKM.
We have received information that indicates that CMKM may have made loans to its officers and directors in violation of the requirements of Section 402 of the Sarbanes-Oxley Act of 2002 (codified at 13(k) of the 1934 Act). Our information indicates that Mr. Casavant and others related to CMKM may have advanced themselves undetermined amount of money without adequate explanation or documentation. Mr. Stoecklein makes the argument that, because of the Form 15 that was improperly filed, CMKM was not subject to the requirements of the Sarbanes-Oxley act at the time in question.
CMKM Diamonds, Inc.
July 28. 2005
Page 3 of 5
It is our understanding that Form 15 was not available to CMKM at the time and therefore was ineffective to relieve CMKM of any obligations. As noted above, we are willing to review an unqualified opinion letter from Mr. Stoecklein on that point.
The CMKM books and records are, at this point and time, unauditable because they are incomplete, and the records that exist have been improperly maintained. The volume of transactions via wire transfer and cashiers checks render the banking records inadequate for obtaining competent evidential matter necessary to render an audit opinion letter, in Mr. Stoecklein's letter, he admits that CMKM was able to provide us less than 25% of the information that we requested at the commencement of the audit "despite everyone's best efforts." The unavailability of corporate records appears to be a violation of the 1934 Act,
including Section 13(a)(2) of the 1934 Act (added in 1977). Mr. Stoecklein raises the disingenuous argument that if the records are unauditable, how can we be aware of any illegal acts. First of all, having records that are not auditable is itself an illegal act under Section 13(a)(2) and other provisions of the 1934 Act. Secondly, the other information set forth herein was obtained from the records that were available.
In addition to completing what appear to be related party transactions without proper authority to do so, it appears that CMKM management may also have failed to disclose related-party transactions as required under the 1934 Act. Among the possible related party transactions which we believe may have been inadequately disclosed are:
º Transactions with US Canadian Minerals, Inc.;
º The personal use of corporate assets discussed above;
º The loans to the officers and directors discussed above; and
º Significant monetary and stock transactions with individuals and entities who appear to be CMKM shareholders and/or prior officers and directors of the Company.
Mr. Stoecklein makes the argument that there was no need to disclose these related party transactions because (as a result of filing a Form 15 improperly in July 2003) CMKM was not subject to the reporting requirements of the 1934 Act and, therefore, not obligated to disclose related party transactions, While this is an interesting argument, that is not our understanding of the situation. Once again, however, we will review an unqualified legal opinion from Mr. Stoecklein to that effect.
We have notified management, including the president and chief executive officer, of our concerns, and we met with CMKM's counsel as management's representative on July 20, 2005 to discuss these matters. We received no information to alleviate our concerns, and in fact obtained further information that enhanced our concerns. In his letter, Mr. Stoecklein makes note of the fact that we were invited to a subsequent meeting at CMKM's offices and chose not to appear. That is correct, but we also asked CMKM to provide us a written response to our concerns. We believed that a written response was appropriate in the circumstances and would have been significantly more
CMKM Diamonds, Inc.
July 28, 2005
Page 4 of 5
valuable than an oral response at a meeting. We believe that Mr. Stoecklein's letter constitutes a written response, and this letter is our response to Mr. Stoecklein's letter.
In accordance with the requirements of Section 10A(b)(A) of the 1934 Act, we hereby advise you that the actions we have identified (including those set forth above) may have a material adverse impact on CMKM's financial statements for at least the following reasons, although we are not able to quantify the amounts at the present time:
1. The related party transactions may or may not be recoverable assets on CMKM's balance sheet and, to the extent they are not recoverable, the reserve for recoverability will impact CMKM's statement of operations and other financial statements;
2. The apparent loans to officers and directors may or may not be recoverable assets on CMKM's balance sheet and, to the extent they are not recoverable, the reserve for recoverability will impact CMKM's statement of operations and other financial statements;
3. We do not have sufficient information to determine whether the apparent improper use of corporate assets should be classified as an expense or an asset;
4. The apparent violations of the securities laws described above may result in SEC enforcement action against CMKM which could result in a significant expenditure of corporate assets in defense, and may result in fines, penalties, and damages;
5. The apparent violations may result in civil litigation or criminal enforcement, which may also result in fines, penalties, and damages.
We are unable to quantify the amounts involved because we have not been provided sufficient information to do so, and because CMKM's books and records are, in their current state, inadequate and unauditable.
You should consider this letter to be a report under Section 10A(b)(2) of the 1934 Act.
Your receipt of this letter requires that you consider the requirements of
Section 10A(b)(3) of the 1934 Act. For your convenience, Section 10A(b)(3) provides as follows:
Notice to commission; response to failure to notify, - An issuer whose board of directors receives a report under paragraph (2) shall inform the Commission by notice not later than 1 business day after the receipt of such report and shall furnish the registered public accounting firm making such report with a copy of the notice furnished to the Commission."
CMKM Diamonds, Inc.
July 28, 2005
Page 5 of 5
Section 10A(b)(3) (b) further states that If the registered public accounting firm falls to receive a copy of the notice before the expiration of the required 1-business day period, the registered public accounting firm shall;
a. Resign from the engagement; or
b. Furnish to the Commission a copy of its report (or the documentation of any oral report given) not later than one business day following such failure to receive notice."
We would also point out the requirements of Form 8-K - that CMKM is obligated to file, within four business days of our dismissal, a Form 8-K responding to the Information in item 304 of Regulation SB. We were dismissed on Friday, July
22. The Form 8-K was due to be filed with the SEC not later than 5:00 pm Washington time today - and it has not been filed. Consequently CMKM is delinquent in its reporting obligations and, therefore, appears to have committed further acts in violation of the 1934 Act.
Should CMKM determine to file a Form 8-K, this letter should be attached thereto unless CMKM can provide an acceptable explanation to any of the issues raised and the requested legal opinion on the effect of an improperly filed Form 15. In your response to item 304 of Regulation SB, we point out:
Item 304(a)(1)(iv): We believe that there are disagreements of the sort that
need to be mentioned in response to this item, as set forth in the foregoing.
We also point out to you that' Section 10A(b)(3) has a one business day requirement for notification to the Commission. Please let us know if you have any questions regarding the foregoing.
Sincerely,
/s/ Beckstead and Watts, LLP
Beckstead and Watts, LLP
co: Donald J. Stoecklein, Esq.
sec.edgar-online.com/2005/08/02/0001077048-05-000422/Section5.asp
Much of the ammunition our current management is using comes from or is similar to what is discussed in this letter.
Now Donald Stoecklein's letter to Beckstead.
Item 4.01 Changes in Registrant's Certifying Accountant
(a) On July 22, 2005, the Registrant terminated the engagement of Beckstead and Watts, LLP ("Beckstead), as the Registrant's independent accountants.
Beckstead did not perform an audit of the Registrant's financial statements nor perform any significant audit related functions from the time they were engaged (July 11, 2005) through the date of the termination of their engagement (July 22, 2005). However, Beckstead continued to charge the Registrant for services performed following their termination (from July 22, 2005 through July 29, 2005). Total fees billed for the 114 hours of services performed by Brad Beckstead, audit partner at Beckstead, over the 11 day period prior to their termination and the 7 day period following their termination was $51,300, which did not include $6,750 in legal fees incurred by Beckstead. The foregoing does not include a non-refundable due diligence fee of $25,000 previously paid to Beckstead before their engagement.
This is a change in accountants recommended by the Registrant's Executive Management and approved by the Registrant's Board of Directors. The Registrant is seeking a new independent accountant.
At the time Beckstead was dismissed by the Registrant; there were no disagreements between the Registrant and Beckstead on any matter of accounting principles or practices, or financial statement disclosure, or audit scope or procedure. However, the Registrant had received a draft letter from Beckstead outlining items having to do with Beckstead's ongoing audit procedures.
The Registrant attempted to meet with Beckstead to discuss its ongoing audit needs and the items mentioned in the draft letter, but Beckstead refused to meet with the Registrant. The Registrant's securities counsel issued a letter to Beckstead addressing all items raised by Beckstead's draft letter, a copy of which is attached hereto as Exhibit 99.1.
After business hours on July 28, 2005, Beckstead issued the Registrant a letter, attached hereto as Exhibit 99.2, outlining certain items Beckstead believed to be possible illegal acts. The items raised in this letter are essentially the same items raised in Beckstead's draft letter, which were fully addressed in the Exhibit 99.1 letter from Stoecklein Law Group.
Despite the contention of Beckstead, the firm never made an attempt to meet with management of the Registrant or Robert A. Maheu, acting as the Registrant's audit committee, to address the specific issues raised in either of its letters.
Beckstead refers to four possible items in need of addressing in this Current Report:
1. The possible improper personal use of corporate assets by Mr. Urban Casavant, the Registrant's sole officer and co-chairman of the board. Beckstead, based upon information provided by the Registrant, questioned whether the expenditure of approximately $4 Million, designated as "promotion and advertising expenses, to sponsor the CMKXtreme racing team "truly advanced the best interest of CMKM. In addition, Beckstead questions whether the expenditure was a related party transaction, because of Mr. Casavant's ownership position in CMKXtreme, Inc., that may not have been presented to or approved by the Board of Directors of CMKM.
In the Registrant's opinion, it was outside the scope of Beckstead's engagement, as the Registrant's independent public accountant, to determine what "truly advanced the best interest of CMKM, especially given Beckstead's lack of professional expertise in the promotion and advertising industry. Additionally, it is unclear to the Registrant what authority Beckstead has as an independent accountant to make judgments upon business decisions without jeopardizing its independence. Numerous private and public companies spend millions of dollars to sponsor racing and other professional sports teams. Further, at the time of the expenditures Mr. Casavant was acting in the capacity as the sole officer and director of the Registrant. It is unclear how Beckstead could question whether Mr. Casavant presented to the board or whether the board approved the expenditures, when Mr. Casavant was the sole acting board member.
2. The possible loans to officers and directors of the Registrant in violation of Section 402 of the Sarbanes-Oxley Act of 2002.
The Registrant filed a Form 15 on July 22, 2003, which the Registrant believed suspended its reporting obligations under the 34 Act. On February 17, 2005, the Registrant filed an amended Form 15, thereby reinstating its reporting obligations under the 34 Act. Assuming the Registrant's reporting status was suspended immediately upon filing the original Form 15 on July 22, 2003, loans made to officers and directors, if any, from July 22, 2003 through the reinstatement of the Registrant's reporting obligations under the 34 Act could not be in violation of the Sarbanes-Oxley Act of 2002, as the Registrant would not have been subject to the provisions of Sarbanes-Oxley. On several occasions, both before and after Beckstead's engagement, the Registrant discussed with Beckstead, and Beckstead was fully aware of the Registrant's willingness to address any possible reporting deficiencies and, the disclosure obligations related to those deficiencies, if any, that would be made once final determinations were made.
3. The Registrant's books and records are in Beckstead's opinion, at this point and time, unauditable because they are incomplete, and the records that exist have been improperly maintained. The unavailability of corporate records appears to be a violation of the 1934 Act.
Since the Registrant's initial meetings with Beckstead in June prior to their engagement and throughout Beckstead's due diligence period, the Registrant was entirely upfront and honest in disclosing to Beckstead not all documents required to commence an audit were in the possession of current management and the Registrant was using its best efforts to obtain records
from prior management. The Registrant's board of directors was forthcoming in stating it was currently unable to provide enough information to Beckstead for the purpose of performing general audit procedures. This information was fully disclosed to Beckstead prior to their choosing to accept an additional $75,000 and engage as the Registrant's auditor.
4. The completion and possible failure to disclose related party transactions between; the Registrant and US Canadian Minerals, Inc., the Registrant and its officers and directors, including Urban Casavant, and potential stockholders of the Registrant.
The Registrant, as discussed above, believed it did not have to file periodic reports from July 22, 2003 through February 17, 2005, therefore Beckstead's point over the disclosure of related party transactions is unfounded. It has always been the Registrant's intentions to fully and completely disclose all related party and other relevant transactions as part of its audited financial statements when they are completed, as was discussed with Beckstead on several occasions. Further, Urban Casavant, as the acting sole officer and director of the Registrant, had full authority to enter into transactions on behalf of the Registrant.
Beckstead's letter further advised the Registrant that the actions it identified may have a material adverse impact on the Registrant's financial statements for at least the following reasons, although Beckstead was not able to quantify the amounts at the present time:
1. The related party transactions may or may not be recoverable assets on CMKM's balance sheet and, to the extent they are not recoverable, the reserve for recoverability will impact CMKM's statement of operations and other financial statements;
2. The apparent loans to officers and directors may or may not be recoverable assets on CMKM's balance sheet and, to the extent they are not recoverable, the reserve for recoverability will impact CMKM's statement of operations and other financial statements;
3. We do not have sufficient information to determine whether the apparent improper use of corporate assets should be classified as an expense or an asset;
4. The apparent violations of the securities laws described above may result in SEC enforcement action against CMKM which could result in a significant expenditure of corporate assets in defense, and may result in fines, penalties, and damages;
5. The apparent violations may result in civil litigation or criminal enforcement, which may also result in fines, penalties, and damages.
Item 9.01 Exhibits
(c) Exhibit.
Exhibit Exhibit Title of Description
Number
99.1 Letter from Stoecklein Law Group to Beckstead and Watts, LLP dated July 28, 2005.
99.2 Letter from Beckstead and Watts, LLP dated July 28, 2005
sec.edgar-online.com/2005/08/02/0001077048-05-000422/Section2.asp
Now if you read those two letters, most would come away with the impression there was no love lost between the two. But love is blind, because a short two months later, The Players Network hired Mr. Beckstead as their auditor. The same Players Network who at the time and still to this day, is represented by, our hero Don Stoecklein. Anthony Demint is as involved here as well. Also Beckstead was working with Stoecklein's Petro Oil and Gas in 2002.
Section 4 – Matters Related to Accounts and Financial Statements
Item 4.01. Changes in Registrant’s Certifying Accountant
The Registrant has appointed Beckstead & Watts, LLP, as the Registrant's independent accountants for the year ending December 31, 2005. This is a change in accountants recommended by the Registrant's Executive Management and approved by the Registrant's Board of Directors. Beckstead & Watts, LLP was engaged by the Registrant on October 28, 2005. During the most recent two fiscal years and during the portion of 2005 preceding the Board's decision, neither the Company, nor anyone engaged on its behalf, has consulted with Beckstead & Watts, LLP regarding: (i) either the application of accounting principles to a specified transaction, either completed or proposed; or the type of audit opinion that might be rendered on the Company's financial statements; or (ii) any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K) or a reportable event (as described in Item 304(a)(1)(v) of Regulation S-K).
www.sec.gov/Archives/edgar/data/1037131/000107704805000588/players8k_102805.htm
My personal feeling is Maestro Maheu is and was doing his best Otto Preminger imitation and this production includes Beckstead, Stoecklein, Casavant, the Tyler twins, Faulkenheimer and a great supporting cast of almost ready for Prime Time Players.
WAIT, I hear a Fat Lady singing, almost time to
"ROLL CREDITS!!!!"
millionaires.proboards86.com/index.cgi?board=main&action=display&thread=1199079832
___________________________________________________
oldepro
DIAMOND DIGGER
ALL THE WORLD IS A STAGE
« Thread Started on Today at 12:43am »
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Remember the Beckstead letter? Take some time and read it again.
July 29, 2005
Securities and Exchange Commission
100 F. Street
Washington, D.C. 20549-7010
Re: CMKM Diamonds, Inc.
Commission file no. 000-26919 and 333-53808
Ladies and Gentlemen:
Beckstead and Watts, LLP was previously engaged as principal accountant to audit the consolidated financial statements of CMKM Diamonds, Inc. (the Registrant) as of and for the years ended 2004 and 2003 and as of and for the three months ended 2002. On July 22, 2005, we were terminated prior to completion of the audits.
We are in receipt of Form 8K - Notice of Change of Auditors dated July 28, 2005 which was filed with the US Securities and Exchange Commission without the opportunity for our firm to review and provide a response letter.
This firm disagrees with the statements in the Form 8-K filed by CMKM Diamonds, Inc. for the reasons stated in the attached letter sent to CMKM Diamonds on July 28, 2005.
Sincerely,
/s/ Beckstead and Watts, LLP
Beckstead and Watts, LLP
Attachment
cc: CMKM Diamonds, Inc.
Beckstead and Watts, LLP
Certified Public Accountants
Board of Directors of CMKM Diamonds, Inc.
July 28, 2005
Mr. Urban Casavant
CEO and Director
CMKM Diamonds,
4760 S. Pecos Road, Ste. 211
Las Vegas, NV 89121
Mr. Robert Maheu
Chair of the Audit Committee and Director
CMKM Diamonds, Inc.
4760 S. Pecos Road, Ste. 211
Las Vegas, NV 89121
Gentlemen:
You are, to our knowledge, the directors of CMKM Diamonds, Inc, ("CMKM"), a company whose common stock is registered under the Securities Exchange Act of I934 (the 1934 Act") and is trading on the over-the-counter market (quoted on the pink sheets). This firm was appointed as auditors for CMKM on July 11, 2005 (announced in a Form 8-K filed by CMKM on July 15. 2005).
We received a letter from your counsel, Donald J. Stoecklein, Esq. of Stoecklein Law Group, dated July 28, 2005. That letter contains a number of misstatements and misunderstandings. It is our intention to resolve those matters in this letter and to provide you notification as required by Section 10A of the Securities Exchange Act of 1934, as amended (the "1934 Act").
First, and among the most important of all, is his statement that CMKM is not an issuer" as defined by Sarbanes-Oxley and therefore is not subject to the provisions of that act or the SEC reporting requirements following the initial Form 15 filing on July 22, 2003. On February 17, 2005, CMKM filed an amendment to that Form 15 which stated very clearly:
This Amendment No, 1 to Form 15 is being filed to amend the Form 15 initially filed on July 22, 2003 (the "Original Filing"), with the Securities and Exchange Commission In order to revoke the Original Filing. As of the date of the Original Filing Casavant Mining Kimberlite International, Inc. had approximately 698 stockholders of record, thereby making the use of Form 15 inapplicable.
CMKM Diamonds, Inc.
July 28, 2005
Page 2 of 5
The Original Filing is hereby superseded and revoked with respect to the information set forth in this Amendment No. 1. Casavant Mining Kimberlite International, Inc. will be required to submit filings under Section 12g of the Securities Exchange Act of 1934, as amended.
With the original Form 15 inapplicable, it is clear that CMKM was and remained an issuer for the purposes of Sarbanes-Oxley and the filing requirements of the 1934 Act notwithstanding the wrongful filing in 2003 of the Form 15. If Mr. Stoecklein will provide to us an unqualified legal opinion that CMKM was not an issuer" as defined by Sarbanes-Oxley and was not subject to the reporting requirements of the 1934 Act after July 22, 2003, we will be pleased to review his opinion letter and consider it.
Secondly, we disagree with his understanding of our letter of July 27, 2005 and our engagement letter. We understand the word "termination" and we will account for the funds on deposit once our statutorily required services are completed as stated in our earlier response. Mr. Stoecklein's efforts to imply to the contrary are disingenuous.
As auditors, we are subject to a number of rules and regulations, including
Section 10A of the 1934 Act. Under Section 10A(a)(1), in conducting our audit of CMKM, we are obligated to implement procedures designed to provide reasonable assurance of detecting illegal acts that would have a direct and material effect on the determination of financial statements amounts." Should we detect or otherwise become aware of information indicating that an illegal act has or may have occurred (whether or not perceived to have a material effect on the financial statements of the issuer), we have an obligation to report the information to management and, if management does not take what we consider to be appropriate remedial action, we have an obligation to report the act to the audit committee. See Section 10A(b)(1) and (2) of the 1934 Act and the rules thereunder.
In performing our audit procedures, we have become aware of information relating to possible illegal acts, including (without limitation) the following:
We have received information relating to the possible improper personal use of corporate assets. Information we have uncovered indicates that Mr. Casavant may have caused CMKM to advance approximately $4 Million to the benefit of CMKXtreme, Inc. in the name of promotion and advertising". Based on the information provided to us, it caused us to question whether the use of the funds truly advanced the best interest of CMKM. Additionally, it appears that Mr. Casavant owns CMKXtreme, and that this may have been a related party transaction that may not have been presented to or approved by the Board of Directors of CMKM. We fully understand marketing issues raised by Mr. Stoecklein in his letter, but we are unaware how any such transactions benefited CMKM.
We have received information that indicates that CMKM may have made loans to its officers and directors in violation of the requirements of Section 402 of the Sarbanes-Oxley Act of 2002 (codified at 13(k) of the 1934 Act). Our information indicates that Mr. Casavant and others related to CMKM may have advanced themselves undetermined amount of money without adequate explanation or documentation. Mr. Stoecklein makes the argument that, because of the Form 15 that was improperly filed, CMKM was not subject to the requirements of the Sarbanes-Oxley act at the time in question.
CMKM Diamonds, Inc.
July 28. 2005
Page 3 of 5
It is our understanding that Form 15 was not available to CMKM at the time and therefore was ineffective to relieve CMKM of any obligations. As noted above, we are willing to review an unqualified opinion letter from Mr. Stoecklein on that point.
The CMKM books and records are, at this point and time, unauditable because they are incomplete, and the records that exist have been improperly maintained. The volume of transactions via wire transfer and cashiers checks render the banking records inadequate for obtaining competent evidential matter necessary to render an audit opinion letter, in Mr. Stoecklein's letter, he admits that CMKM was able to provide us less than 25% of the information that we requested at the commencement of the audit "despite everyone's best efforts." The unavailability of corporate records appears to be a violation of the 1934 Act,
including Section 13(a)(2) of the 1934 Act (added in 1977). Mr. Stoecklein raises the disingenuous argument that if the records are unauditable, how can we be aware of any illegal acts. First of all, having records that are not auditable is itself an illegal act under Section 13(a)(2) and other provisions of the 1934 Act. Secondly, the other information set forth herein was obtained from the records that were available.
In addition to completing what appear to be related party transactions without proper authority to do so, it appears that CMKM management may also have failed to disclose related-party transactions as required under the 1934 Act. Among the possible related party transactions which we believe may have been inadequately disclosed are:
º Transactions with US Canadian Minerals, Inc.;
º The personal use of corporate assets discussed above;
º The loans to the officers and directors discussed above; and
º Significant monetary and stock transactions with individuals and entities who appear to be CMKM shareholders and/or prior officers and directors of the Company.
Mr. Stoecklein makes the argument that there was no need to disclose these related party transactions because (as a result of filing a Form 15 improperly in July 2003) CMKM was not subject to the reporting requirements of the 1934 Act and, therefore, not obligated to disclose related party transactions, While this is an interesting argument, that is not our understanding of the situation. Once again, however, we will review an unqualified legal opinion from Mr. Stoecklein to that effect.
We have notified management, including the president and chief executive officer, of our concerns, and we met with CMKM's counsel as management's representative on July 20, 2005 to discuss these matters. We received no information to alleviate our concerns, and in fact obtained further information that enhanced our concerns. In his letter, Mr. Stoecklein makes note of the fact that we were invited to a subsequent meeting at CMKM's offices and chose not to appear. That is correct, but we also asked CMKM to provide us a written response to our concerns. We believed that a written response was appropriate in the circumstances and would have been significantly more
CMKM Diamonds, Inc.
July 28, 2005
Page 4 of 5
valuable than an oral response at a meeting. We believe that Mr. Stoecklein's letter constitutes a written response, and this letter is our response to Mr. Stoecklein's letter.
In accordance with the requirements of Section 10A(b)(A) of the 1934 Act, we hereby advise you that the actions we have identified (including those set forth above) may have a material adverse impact on CMKM's financial statements for at least the following reasons, although we are not able to quantify the amounts at the present time:
1. The related party transactions may or may not be recoverable assets on CMKM's balance sheet and, to the extent they are not recoverable, the reserve for recoverability will impact CMKM's statement of operations and other financial statements;
2. The apparent loans to officers and directors may or may not be recoverable assets on CMKM's balance sheet and, to the extent they are not recoverable, the reserve for recoverability will impact CMKM's statement of operations and other financial statements;
3. We do not have sufficient information to determine whether the apparent improper use of corporate assets should be classified as an expense or an asset;
4. The apparent violations of the securities laws described above may result in SEC enforcement action against CMKM which could result in a significant expenditure of corporate assets in defense, and may result in fines, penalties, and damages;
5. The apparent violations may result in civil litigation or criminal enforcement, which may also result in fines, penalties, and damages.
We are unable to quantify the amounts involved because we have not been provided sufficient information to do so, and because CMKM's books and records are, in their current state, inadequate and unauditable.
You should consider this letter to be a report under Section 10A(b)(2) of the 1934 Act.
Your receipt of this letter requires that you consider the requirements of
Section 10A(b)(3) of the 1934 Act. For your convenience, Section 10A(b)(3) provides as follows:
Notice to commission; response to failure to notify, - An issuer whose board of directors receives a report under paragraph (2) shall inform the Commission by notice not later than 1 business day after the receipt of such report and shall furnish the registered public accounting firm making such report with a copy of the notice furnished to the Commission."
CMKM Diamonds, Inc.
July 28, 2005
Page 5 of 5
Section 10A(b)(3) (b) further states that If the registered public accounting firm falls to receive a copy of the notice before the expiration of the required 1-business day period, the registered public accounting firm shall;
a. Resign from the engagement; or
b. Furnish to the Commission a copy of its report (or the documentation of any oral report given) not later than one business day following such failure to receive notice."
We would also point out the requirements of Form 8-K - that CMKM is obligated to file, within four business days of our dismissal, a Form 8-K responding to the Information in item 304 of Regulation SB. We were dismissed on Friday, July
22. The Form 8-K was due to be filed with the SEC not later than 5:00 pm Washington time today - and it has not been filed. Consequently CMKM is delinquent in its reporting obligations and, therefore, appears to have committed further acts in violation of the 1934 Act.
Should CMKM determine to file a Form 8-K, this letter should be attached thereto unless CMKM can provide an acceptable explanation to any of the issues raised and the requested legal opinion on the effect of an improperly filed Form 15. In your response to item 304 of Regulation SB, we point out:
Item 304(a)(1)(iv): We believe that there are disagreements of the sort that
need to be mentioned in response to this item, as set forth in the foregoing.
We also point out to you that' Section 10A(b)(3) has a one business day requirement for notification to the Commission. Please let us know if you have any questions regarding the foregoing.
Sincerely,
/s/ Beckstead and Watts, LLP
Beckstead and Watts, LLP
co: Donald J. Stoecklein, Esq.
sec.edgar-online.com/2005/08/02/0001077048-05-000422/Section5.asp
Much of the ammunition our current management is using comes from or is similar to what is discussed in this letter.
Now Donald Stoecklein's letter to Beckstead.
Item 4.01 Changes in Registrant's Certifying Accountant
(a) On July 22, 2005, the Registrant terminated the engagement of Beckstead and Watts, LLP ("Beckstead), as the Registrant's independent accountants.
Beckstead did not perform an audit of the Registrant's financial statements nor perform any significant audit related functions from the time they were engaged (July 11, 2005) through the date of the termination of their engagement (July 22, 2005). However, Beckstead continued to charge the Registrant for services performed following their termination (from July 22, 2005 through July 29, 2005). Total fees billed for the 114 hours of services performed by Brad Beckstead, audit partner at Beckstead, over the 11 day period prior to their termination and the 7 day period following their termination was $51,300, which did not include $6,750 in legal fees incurred by Beckstead. The foregoing does not include a non-refundable due diligence fee of $25,000 previously paid to Beckstead before their engagement.
This is a change in accountants recommended by the Registrant's Executive Management and approved by the Registrant's Board of Directors. The Registrant is seeking a new independent accountant.
At the time Beckstead was dismissed by the Registrant; there were no disagreements between the Registrant and Beckstead on any matter of accounting principles or practices, or financial statement disclosure, or audit scope or procedure. However, the Registrant had received a draft letter from Beckstead outlining items having to do with Beckstead's ongoing audit procedures.
The Registrant attempted to meet with Beckstead to discuss its ongoing audit needs and the items mentioned in the draft letter, but Beckstead refused to meet with the Registrant. The Registrant's securities counsel issued a letter to Beckstead addressing all items raised by Beckstead's draft letter, a copy of which is attached hereto as Exhibit 99.1.
After business hours on July 28, 2005, Beckstead issued the Registrant a letter, attached hereto as Exhibit 99.2, outlining certain items Beckstead believed to be possible illegal acts. The items raised in this letter are essentially the same items raised in Beckstead's draft letter, which were fully addressed in the Exhibit 99.1 letter from Stoecklein Law Group.
Despite the contention of Beckstead, the firm never made an attempt to meet with management of the Registrant or Robert A. Maheu, acting as the Registrant's audit committee, to address the specific issues raised in either of its letters.
Beckstead refers to four possible items in need of addressing in this Current Report:
1. The possible improper personal use of corporate assets by Mr. Urban Casavant, the Registrant's sole officer and co-chairman of the board. Beckstead, based upon information provided by the Registrant, questioned whether the expenditure of approximately $4 Million, designated as "promotion and advertising expenses, to sponsor the CMKXtreme racing team "truly advanced the best interest of CMKM. In addition, Beckstead questions whether the expenditure was a related party transaction, because of Mr. Casavant's ownership position in CMKXtreme, Inc., that may not have been presented to or approved by the Board of Directors of CMKM.
In the Registrant's opinion, it was outside the scope of Beckstead's engagement, as the Registrant's independent public accountant, to determine what "truly advanced the best interest of CMKM, especially given Beckstead's lack of professional expertise in the promotion and advertising industry. Additionally, it is unclear to the Registrant what authority Beckstead has as an independent accountant to make judgments upon business decisions without jeopardizing its independence. Numerous private and public companies spend millions of dollars to sponsor racing and other professional sports teams. Further, at the time of the expenditures Mr. Casavant was acting in the capacity as the sole officer and director of the Registrant. It is unclear how Beckstead could question whether Mr. Casavant presented to the board or whether the board approved the expenditures, when Mr. Casavant was the sole acting board member.
2. The possible loans to officers and directors of the Registrant in violation of Section 402 of the Sarbanes-Oxley Act of 2002.
The Registrant filed a Form 15 on July 22, 2003, which the Registrant believed suspended its reporting obligations under the 34 Act. On February 17, 2005, the Registrant filed an amended Form 15, thereby reinstating its reporting obligations under the 34 Act. Assuming the Registrant's reporting status was suspended immediately upon filing the original Form 15 on July 22, 2003, loans made to officers and directors, if any, from July 22, 2003 through the reinstatement of the Registrant's reporting obligations under the 34 Act could not be in violation of the Sarbanes-Oxley Act of 2002, as the Registrant would not have been subject to the provisions of Sarbanes-Oxley. On several occasions, both before and after Beckstead's engagement, the Registrant discussed with Beckstead, and Beckstead was fully aware of the Registrant's willingness to address any possible reporting deficiencies and, the disclosure obligations related to those deficiencies, if any, that would be made once final determinations were made.
3. The Registrant's books and records are in Beckstead's opinion, at this point and time, unauditable because they are incomplete, and the records that exist have been improperly maintained. The unavailability of corporate records appears to be a violation of the 1934 Act.
Since the Registrant's initial meetings with Beckstead in June prior to their engagement and throughout Beckstead's due diligence period, the Registrant was entirely upfront and honest in disclosing to Beckstead not all documents required to commence an audit were in the possession of current management and the Registrant was using its best efforts to obtain records
from prior management. The Registrant's board of directors was forthcoming in stating it was currently unable to provide enough information to Beckstead for the purpose of performing general audit procedures. This information was fully disclosed to Beckstead prior to their choosing to accept an additional $75,000 and engage as the Registrant's auditor.
4. The completion and possible failure to disclose related party transactions between; the Registrant and US Canadian Minerals, Inc., the Registrant and its officers and directors, including Urban Casavant, and potential stockholders of the Registrant.
The Registrant, as discussed above, believed it did not have to file periodic reports from July 22, 2003 through February 17, 2005, therefore Beckstead's point over the disclosure of related party transactions is unfounded. It has always been the Registrant's intentions to fully and completely disclose all related party and other relevant transactions as part of its audited financial statements when they are completed, as was discussed with Beckstead on several occasions. Further, Urban Casavant, as the acting sole officer and director of the Registrant, had full authority to enter into transactions on behalf of the Registrant.
Beckstead's letter further advised the Registrant that the actions it identified may have a material adverse impact on the Registrant's financial statements for at least the following reasons, although Beckstead was not able to quantify the amounts at the present time:
1. The related party transactions may or may not be recoverable assets on CMKM's balance sheet and, to the extent they are not recoverable, the reserve for recoverability will impact CMKM's statement of operations and other financial statements;
2. The apparent loans to officers and directors may or may not be recoverable assets on CMKM's balance sheet and, to the extent they are not recoverable, the reserve for recoverability will impact CMKM's statement of operations and other financial statements;
3. We do not have sufficient information to determine whether the apparent improper use of corporate assets should be classified as an expense or an asset;
4. The apparent violations of the securities laws described above may result in SEC enforcement action against CMKM which could result in a significant expenditure of corporate assets in defense, and may result in fines, penalties, and damages;
5. The apparent violations may result in civil litigation or criminal enforcement, which may also result in fines, penalties, and damages.
Item 9.01 Exhibits
(c) Exhibit.
Exhibit Exhibit Title of Description
Number
99.1 Letter from Stoecklein Law Group to Beckstead and Watts, LLP dated July 28, 2005.
99.2 Letter from Beckstead and Watts, LLP dated July 28, 2005
sec.edgar-online.com/2005/08/02/0001077048-05-000422/Section2.asp
Now if you read those two letters, most would come away with the impression there was no love lost between the two. But love is blind, because a short two months later, The Players Network hired Mr. Beckstead as their auditor. The same Players Network who at the time and still to this day, is represented by, our hero Don Stoecklein. Anthony Demint is as involved here as well. Also Beckstead was working with Stoecklein's Petro Oil and Gas in 2002.
Section 4 – Matters Related to Accounts and Financial Statements
Item 4.01. Changes in Registrant’s Certifying Accountant
The Registrant has appointed Beckstead & Watts, LLP, as the Registrant's independent accountants for the year ending December 31, 2005. This is a change in accountants recommended by the Registrant's Executive Management and approved by the Registrant's Board of Directors. Beckstead & Watts, LLP was engaged by the Registrant on October 28, 2005. During the most recent two fiscal years and during the portion of 2005 preceding the Board's decision, neither the Company, nor anyone engaged on its behalf, has consulted with Beckstead & Watts, LLP regarding: (i) either the application of accounting principles to a specified transaction, either completed or proposed; or the type of audit opinion that might be rendered on the Company's financial statements; or (ii) any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K) or a reportable event (as described in Item 304(a)(1)(v) of Regulation S-K).
www.sec.gov/Archives/edgar/data/1037131/000107704805000588/players8k_102805.htm
My personal feeling is Maestro Maheu is and was doing his best Otto Preminger imitation and this production includes Beckstead, Stoecklein, Casavant, the Tyler twins, Faulkenheimer and a great supporting cast of almost ready for Prime Time Players.
WAIT, I hear a Fat Lady singing, almost time to
"ROLL CREDITS!!!!"
millionaires.proboards86.com/index.cgi?board=main&action=display&thread=1199079832