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Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 1 of 111

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1 SER G EY RU M Y A N TSEV ,pro se


1951N Jones#G202 rg 2Eg 28 A % 2:1
2 L
asV egas,N V 89 l08 ;
3 E-mail:chaotak@ embarqmail.com . ... %
4 Telephone:(702)647-7925 ..
. ?.( .
7' -...- ' ----'

5
U N ITED STA T ES D ISTR IC T C O U R T
6
D ISTR IC T O F N EV A D A
7

8
SECU RITIES A N D EX CH A N G E Case N o.2-08CV 00437-LRH -R JJ
9 C OM M ISSION '
Plaintiff, D E FEN D A N T SER G EY
10 u u tu v x x v sEv 's
11 vs. M EM O M N D U M IN
O PPO SITIO N T O PL A IN TIFF
12 CM K M D IA M ON D S,IN C.,etaI., SEC U R ITIES A N D EX CH A N G E
13 D efendants. C O M M ISSIO N 'S M O TIO N FO R
SU M M A R Y JU D G M EN T
14

15 Pursuantto Rule 56 ofthe FederalRules ofCivilProcedure, D efendant


16 Sergey Rum yantsev, appearingpro se,respectfully subm its thisM em orandtlm in
17 O pposition to the pending Plaintifc sM otion for Sum m ary Judgm ent, on file
18 herein,to dem onstrate to the Coul'tthatthere isa genuine issue ofm aterialfactin
19 thiscasethatprecludestheentry ofajudgmentasamatteroflaw.Thisopposition
20 is based upon and supported by the Statem entofFacts and A rgum entcontained
21 herein,the pleadings and papers on file,D efendant'sD eclaration and the exhibits
22 attached hereto, and D efendant's argum entthatthe Courtm ay allow atthe tim e of
23 hearing .

24 1.IN TR O D UC TIO N

25 PlaintiftltheSecuritiesandExchangeCommission ((iSEC''),movedfor
26 stzmmaryjudgmentagainstDefendantallegingthathewasSçboth ainecessaor

1
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 2 of 111

1 participant'and isubstantialfactor'''in the unregistered distribution of CM K M


2 stock,andthereforeliableforviolating Sections5(a)and 5(c)ofthe SecuritiesAct
3 of1933(RsecuritiesAct''),15U.S.C.
4 In thisM em orandum in Opposition to Plaintiff s M otion,D efendantargues
5 that
6 (a) therearematerialfacts,which Plaintiffassel'tsto beundisputed,
7 thatgenuinely rem ain atissue'
,
8 (b) in itsM otion,Plaintiffomitledmaterialfactsthat,whenviewed in
9 the lightm ostfavorable to D efendant,underm ine Plaintiff's claim
10 thatD efendantw as a Gnecessary participant'and dsubstantial
11 factor'in the unregistered distribution ofCM K M stock;and
12 (c) thePointsandAuthoritiesinvokedbyPlaintiffwithrespectto
13 Defendantin conjunction withremaining genuineissuesof
14 m aterialfad fail,in w hole orin part,to supportPlaintiff's claim
15 thatitisentitledtojudgmentin itsfavorasamatteroflaw.
16 Inthisresponse,theterm Sksubjectsecurities''referstothesharesofCM KM
l7 D iam onds sold by N evW estSecuritiesC ol-poration from accounts controlled by
l8 John Edw ards.
19 II.STA TEM EN T O F FA CT SI

20 A .Statem entofU ndisruted M aterialFacts Om itted in Plaintiffs M otion


21 l.Defendant neveraccepted delivery ofthesubjectsecurities.(See
22 Exhibit 1,(Clkum yantsev's R esponse to FirstSetoflntel-rogatories''
23 No.2).
24

25
26 1 AllExhibitsareappendedto theaccompanyingDeclarationofDefkndantSergey Rumyantsev,unless
otherwisenoted.

2
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1 2.D efendant never purchased,sold,or othem vise passed title to the


2 subjectsecurities(1d.,No.2).
3 3.Defendant neverowned thesubjectsecurities(1d.,No.2).
4 4.Defendant neversolicited thesaleorpurchaseofthesubject
5 securities(1d.,No.2).
6 5.Defendant neversoughtbuyersofthesubjectsecurities(1d.,No.2).
7 6.Defendant neverpromoted salesofthesubjectsecurities(1d.,No.2).
8 7.Defendant neveraccepted ordersto sellthesubjed securities(1d.,
9 N o.2).
l0 8.D efendant never served as a broker of record for the accounts of
11 D efendantEdw ards,through w hich D efendantEdw ardssold the
12 subjectsecurities(1dL,No.2).
l3 9.Defendant neverdirected salesofthesubjectsecurities(1dL,No.2).
14 1O.Defendantneversettheterm sand conditionsofsaleofthesubject
l5 securities(1d.,No.2).
16 11.D et-
endantdid notbenefitor gain financially in any director
l7 meaningfulmannerfrom thesaleofthesubjectsecurities(1d.,No.2).
18 12.Defendantneverpublished quotationsin thesubjectsecuritiesin
l9 anym edium (ld.,No.2).
20 l3.D efendantnever received instructions to transfer the proceeds of
21 salesofthesubjectsecurities(1d.,No.2).
22 14.D efendantnever instructed anyone to transfer the proceeds of
23 salesofthesubjectsecurities(fJ.,No.2).
24 1s.D efendant,in a supervisory capacity or othenvise,never signed off
25 on any new accountapplications for accounts,from w hich sales of
26

3
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 4 of 111

l thesubjectsecuritiestookplace(seeExhibit2,ttRumyantsev OTR,''
2 105:23-106:12).
3 l6.D efendant,in a supenisory capacity or otherw ise,never signed off
4 on any tradeticketsevidencing transactionsin thesubjectsecurities
5 (seeExhibit2,tçRumyantsev OTR,''92:5).
6 l7.D efendantrelied on A ntony Santos,a principalofN evW estSecurities
7 Corporation responsible for com pliance,to conductinquiries w ith
8 respecttothesalesofthesubjectsecurities(seeExhibit3,
9 StR um yantsev Testim ony,''20:22-21:3,35:9-35:13,37:20-38:11,40:6-
10 40:10,41:10-41:17,57:17-57:22,60:2-60:8,61:23-62:20,63:3-63:7,
11 64:17-65:22,75:11-76:1,93:8-93:9,108:17-109:24,130:22-132:22,
12 153:6-156:3,163:2-163:15,).
13 l8.lkaym ond D illon,SeniorR etailSupelw isor,directly supervised D aryl
14 Anderson (seeExhibit3,dsRumyantsev Testimony,''160:7-160:l1and
15 170:24-171:4).
16 lg.A ntony Santos supervised D arylA nderson w ith respectto com pliance
17 matters(seeExhibit3,RRumyantsev Testimony,''160:12-160:17 and
18 170:24-171:4).
19 zo.A ntony Santos and his fam ily ow ned and controlled approxim ately
20 the sam e percentage ofN evW estSecurities Corporation as D efendant:
21 approximately ninepercent(seeExhibit3,dtlkumyantsev Testimony,''
22 19:8-19:9 and 19:23-20:l).
23 21vG ingerG utierrez,Jam esK inney,and Part--fim e M anagem ent,lnc.
24 sold a totalofapproxim ately 88.4 billion shares ofunregistered
25 CM KM stock (seePlaintiffsExhibit1at19:21-20:1.
5).
26

4
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1 zz.D efendantisgainë lly em ployed outside ofthe securitiesprofession


2 and has absolutely no intention of ever re-entering the securities
3 profession (seetheaccompanyingDeclaration ofDefendantSergey
4 Rlzmyantsev).
5 z3.D efendantprovided Plaintiffw ith evidence thathe shared in a
6 com m issionspooltotaling $992,334.24 and earned during theperiod
7 from Januafy 2,2002 to M ay 30,2007. N one ofthose com m issions
8 derived from thesalesofCM K M stock by JohnEdwards(seethe
9 accompanyingDeclaration ofDefendantSergey Rumyantsev).
10 B .Statem entofD isputed Facts
11 1. D efendanttestitied thatN evW estSecurities Corporation retained
12 approximately $300,000 from thesalesofthesubjectsecurities,based
13 on the contractualobligation to pay D arylA nderson 85 to 90 percent
14 ofcommissionsgeneratedbythesales(seeExhibit3,tsRumyantsev
15 Testimony,''3l:3-31:11).Plaintiffestimatesthattheam ountretained
16 byNevW estSectzritiesCorporationwas$383,914.20 (Plaintift''s
17 Facts,No.98)in directcontradiction to itsown previousestimate
18 of$275,000(FinalJudgm ententeredby defaultagainstDefendant
19 NevW estSecuritiesCorporation on December4,2009,(DocketNo.
20 136)).
21 2.D efendant never received any portion ofthe proceeds ofsales of
22 thesubjectsecuritiesbased onhisshareofownership ofNevW est
23 Securities Corporation. D efendantprovided to Plaintiffevidence
24 docum enting a1lsources ofhis com pensation f'
rom N evW est
25 Securities Corporation during the relevanttim efram e,none ofw hich
26 com pensation w astied to his share ofow nership ofN evW est

5
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1 SecuritiesCorporation(seeExhibit4,çtltumyantsev'sResponseto
2 Firstand SecondRequestforProduction ofDocuments''No.8).
3 PlaintiffarguesthatDefendantderived $34,552,28 in alleged i1l-
4 gotten gainsfrom the salesofthesubjectsecurities(PlaintiffsFacts,
5 No.98).
6 3. N one ofD efendant's securities Iicenses are current,asm ore than
7 two yearslapsed sincethe tiling ofDefendant'sUniform Term ination
8 NoticeforSecuritiesIndustry Registration inOctober2007 (seethe
9 accom panying D eclaration ofD efendantSergey R um yantsev and
10 httn:/+rockercheck.inra.org).PlaintiffarguesthatRumyantsev holds
11 Series4 (registered optionsprincipal),7(generalsecurities
12 representative),24 (securitiesprincipal),27(tinancialandoperations
13 principal),53(municipalsecuritiesprincipal),sstequitiestrader)and
14 63 (state securities)licenses(Plaintiff'sFacts,No.9).
15 4.D efendant denied thathe nevertook steps to investigate w hy Jefferies
16 & Company(idlefferief')stoppedtradingthetlow ofCM KM stock
17 from NevW est(seeExhibit5,dslkumyantsev SecondRFA Response,''
18 No.49).PlaintiffassertsthatDefendantnevertookstepsto
19 investigate w hy Jefferies stopped trading the tlow of CM K M stock
20 from NevW est(Plaintift''sFacts,No.84).
21 5. Jefferiesnever acted as a clearing brokerforN evW estSecurities
22 Corporation;Jefferies w as only a counter-party in securitiestrades
23 (seeExhibit3,d'Rumyantsev Testimony,''45:8-57:9and 97:23-99:24).
24 PlaintiffassertsthatJefferies w asone ofthe tw o prim al'y clearing
25 brokersthrough w hich N evW estintroduced CM K M trades.
26

:
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1 6. NevW estSecuritiesCorporation w asobligated to pay per-ticket


2 clearing charged to its clearing tirm s. The am ountofclearing charges
3 derivedandpaid from thesalesofthesubjectsecuritieswas
4 approximately $66,360(seeDeclaration ofDefendantSergey
5 Rumyantsev andExhibit6).PlaintiffarguesthatNevW estSecurities
6 Corporation retained the fu11am ountofcom m issionsnotpaid to D aryl
7 A nderson.
8 111.A R GU M EN T

9 A .Standard for Sum m arv Judgm ent


10 Summaryjudgmentisappropriatewhenthepleadings,affidavits,andother
11 supporting papers perm itted by Rule 56 ofthe FederalR ules of CivilProcedure
12 dem onstrate thatthere is no genuine issue ofm aterialfact,and the m oving party is
13 entitled toprevailasam atleroflaw.Fed.R.Civ.P.56(c);CelotexCorp.v.
14 Catrett,477U.S.317,322 (1986).
15 A court'srole on summal'
yjudgmentisnottoweigh theevidence,make
16 credibility determ inations,ordecidew hich inferencesto draw from the facts,but
17 instead to determ inewhetherthere isagenuine issue oftriablefact.Anderson v.
18 Liberty Lobby,Inc.,477U.S.242,249(1986)at255.
,Washington v.Haupert,481
19 F.3d 543,550 (7th Cir.2007)'
,Paynev.Pauley,337F.3d 767,770 (7thCir.2003).
20 Thus,acourtinruling on asummaryjudgm entmotionconstruesallfactsinthe
21 lightm ostfavorable to the nom noving party and draw s allreasonable inferences in
22 thatparty'sfavor.WW Sales(fAssocs.v.Coni-seal,Inc.,550F.3d605,608-09(7th
23 Cir.2000).
24 A n issue is genuine ifevidence isproduced thatw ould allow a rationaltrier
25 offactto reach a verdictin favorofthe non-m oving party.A nderson,477 U .S.at
26

7
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1 248. The Coul4 m ustassum e the tnlth ofdirectevidence setforth by the opposing
2 party.SeeHanon v.DataproductsCorp.976F.2d497,507(9th Cir.1992).
3 B .Plaintiff s M otion Icnores Facts ThatA re M aterialin Establishina That
4 D efendantW asN either a t'
N ecessarv Participant'nora tsubstantialFactor'in the
5 U nrezistered D istribution ofCM K M Stock
6 In asserting its claim ,Plaintiffinvokes a num berof authorities. ln
7 particular,PlaintiffreferencesSEC v.Phan,500F.3d895(9th Cir.2007).ln
8 Phan,the courtfokm d Phan to be both a ''necessary participant''and a ''substantial
9 factorin''a resaleofsecurities,thussatisfying the ''sold oroffered to sell''elem ent
10 ofSection 5 ofthe SectlritiesA ct. Thespecitk facts,on which thatconclusion was
(
11 based,included such actsby Phan aschoosing a transaction date,directing the
12 seller to sellthe shares,providing a buyer,directing a Iawyer to drafta stock

13 salecontract,and instructing thesellerwhereto send theproceeds(seePhan,


14 500F.3dat906).
15 ThefactsthatDefendantdidnotdirectsalesofthesubjectsecttrities(Fact
16 A-9 in theStatementofFactsabove),didnotsetthetermsand conditionsofsaleof
17 thesubjectsecurities(Facts,A-10),didnotseek orsolicitbuyersofthesubject
18 securities(Facts,A-4 and A-5),didnotinstructanyonetotransfertheproceedsof
19 salesofthesubjectsecurities(Facts,A-14)arematerialbecausethey clearly
20 distinguish the actions ofD efendantfrom those thatsen 'ed as the basis for the
21 Phan decision.
22 Plaintiffalso invokestheauthority ofSEC v.M urphy,626F.2d633 (9th Cir.
23 1980).InM urphy,thecourtupheldtherulingthatfoundM tlrphy liableasa
24 participantin the offerand sale ofunregistered securitiesbecause M urphy w as ûtthe
25 architectofgtheltinancingscheme''as(dhedevised thecorporatefinancing
26 schem e ...,prepared and review ed offering m em oranda;he m et personally

s
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l w ith broker-dealers,investors and their representatives;and he spoke at

2 broker-dealersalessem inars''M urphy,626F.2d at637and652 (9th Cir.1980),


3 em phasis added.
4 ThefactsthatDefendantdidnotsolicitthesaleorpurchaseofthesubject
5 securities(Facts,A-4),didnotseek buyersofthesubjectsecurities(Facts,A-5),
6 did notpromotesalesofthesubjec,tsecurities(Facts,A-6),anddidnotsetthe
7 term sandconditionsofsaleofthesubjectsecurities(Facts,A-10)arematerial
8 because they clearly distinguish the actions of D efendantfrom those that
9 served as the basis for theM urphy decision.
10 The factthatG ingerG utierrez,Jam esK inney,and Part--l-im e M anagem ent,
l1 lnc.sold a totalof approxim ately 88.4 billion shares ofurtregistered CM K M stock
12 (Facts,A-21),ostensibly using broker-dealersotherthanNevW estSecurities
13 Corporation,ism aterialand raisesagenuineissuew ith respectto Plaintiffs
14 claim thatdefendantw as a lnecessary participant'in the unregistered distribution
15 of CM K M Stock.
16 C .There Are G enuine lssues ofM aterialFactw ith R espectto D efendant's
17 Role in the Searchina Incluirv into the SalesofCM KM Stock
18 Plaintiffargues thatD efendantacted dlw illfully''in violating Section 5,in
19 particular by failing to inquire suftk iently into the circum stances ofthe
20 transaction, citing Geigerv.SEC,363F.3d481(D.C.Cir.2004)and Wonsoverv.
,
21 SEC,205F.3d408 (D.C.Cir.2000),bothdrawing from Distribution byBroker-
22 DealersofunregisteredSecurities,SecuritiesActRel.No.4445,l962W L 69442
23 (Feb.2,1962),which establishedthe%isearchinginquiry''standard.
24 The facts thatD efendantdid not directly supelw ise any seller ofthe
25 subjectsecurities,andDarylAnderson inparticular(Facts,A-18and A-19),and
26 thatthe principalin charge ofcom pliance atN evW estSecurities Corporation

9
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l performed asearching inquiry (Facts,A-17)arem aterialbecausetheyclearly


2 distinguish the actions ofD efendantfrom those thatsenred asthe basis for both the
3 G eiger and W onsover decisions. D efendantnotes that,based on publicly disclosed
4 factsandcircumstances,in Geigerandinanotheractionbroughtby theSEC (see
5 John A .Carley,lnitialD ecision 6,lnitialD ecision R elease N o.292,A dm in.Proc.
6 FileNo.3-11626(July 18,2005)),severalpartiesfound tohaveviolatedSection 5
7 ofthe Securities A ctoperated underthe supelwision ofthe president,chief
8 executive officer,and chiefcom pliance officer ofa sm allbroker-dealer,w hom the
9 SEC never even charged w ith Section 5 violations.
10 Plaintiff also quotes G eiger out of contextthus m aking a m isleading
11 representation. PlaintiffarguesthatiçR um yantsev clearly gave Edw ards a Sblank
12 check'totradeCM KM stock''citing Geiger(Ttbygiving gsalesmanjGeigerablank
13 check,ghead traderlKirby abandoned even thepretenseofduediligence.'')
14 (M emorandum ofPointsand Authoritiesin SupportofM otion by Plaintiff
15 Securities and Exchange C om m ission for Sum m ary Judgm entA gainstD efendants
16 lStG lobalStock Transfer, LLC ,H elen B agley,Sergey Rum yantsev and B rian

17 Dvorak at14:23-14:26).Thefactsand circumstancesofGeigerwerematerially


18 differentfrom those of this action. The role ofK irby and the m eaning ofthe
19 term ttblank check''in G eiger provide no basis fordraw ing a parallelw ith this
20 action. The decision in G eiger clearly established thatK irby directly purchased
21 securities for the accountofan entity he controlled and paid for the purchase
,
22 by signinga blank check (seeGelgerv.SEC,363F.3d484 (D.C.Cir.2004)).
23 Defendant'srole inthisaction isin sharpcontrasttothatofKirby in Geiger(Facts,
24 A-1,A-2,and A-3).Giving Plaintiffthebenefitofthedoubtandassumingthatit
25 used the term tlblank check''m etaphorically,the am okm tofdue diligence
26

L0
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1 perform ed by D efendant,NevW estSecuritiesCorporation,and itsprincipalsstill


2 remainsamatterofgenuinedispute(seeFacts,A-l7,B-4,andB-5).
3 ltalso rem ains a m atter ofdispute w hetherD efendanttook stepsto
4 investigate w hy Jefferies stopped trading the tlow ofCM K M stock from N evW est
5 (Facts,B-4),which investigation couldbereasonably construed aspartofa
6 searching inquiry.
7 D .There A re G enuine lssues ofM aterialFactw ith R espectto ReliefSouaht
- - -

8 bv Plaintiff
9 N otwithstanding theDefendant'sassertion thathe did notviolate Section 5
10 ofthe Securities A ct,there rem ain genuine issues ofm aterialfactw ith respectto
11 relief soughtby Plaintiffw ere this Courtto rule in Plaintiff s favor.
12 N one ofD efendant's securities Iicenses are current,asm ore than tw o
13 years lapsed since the filing ofD efendant'sU niform Term ination N otice for
14 SecuritieslndustryRegistration in October2007(Facts,B-3).Thisfactismaterial,
15 because re-qualification requirem ents constitute a barrierto entry into the
1 16 securitiesprofession. A consideration ofsuch barrierto entl'
y ispertinentto the
I
17 discussion ofwhetherthere isreasonable likelihood offuture violationsby
18 Defendantand,hence,whetherapennanentinjunction orapenny stock barisan
19 appropriate sanction.
20 D efendantis gainfully em ployed outside ofthe securities profession and has
21 absolutelyno intention ofeverre-entering thesecuritiesprofession (Facts,A-
22 22).Based on thisfact,itisentirely tmlikely thatDefendantwilleverbein a
23 position to com m itfuture violations.
24 D efendantacted in good faith relying on A ntony Santos and R aym ond
25 D illon as they exercised their supervisory dutiesw ith respectto D arylA nderson
26 (Facts,A-l8andA-19).Defendant,in asupervisorycapacity orotherwise,never

1(
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 12 of 111

1 signed offon any new account applications for accounts,from w hich sales ofthe
2 subjectsecuritiestookplace(FactsA-15).Defendant,in asupeNisory capacityor
3 othem ise,never signed off on any trade tickets evidencing transactions in the
4 subjectsectzrities(Facts,A-16).Thesefactsm ake itamatterofdisputeofexactly
5 w hatalleged actions ofD efendantcould be constrtzed as iGknow ing,''lGrepeated,''
6 and tim ultiple.'' The claim thatD efendant's alleged violationsw ere ûdknow ing,''
7 içrepeatedy''and itm ultiple''is atthe heartofPlaintiff sassertion thatitis entitled to
8 injunctivereliefandimposition ofcivilpenaltiesagainstDefendant.
9 The am ountof disgorgem entsoughtby Plaintiffalso rem ains genuinely in
10 dispute. D isgorgem entisan equitable rem edy thatrequires a violatorto give up
11 w rongfully obtained protitscausally related to the proven w rongdoing.See SEC v.
12 FirstCj/&,Fin.Cory ,890F.
. 2d 1215,1230-32 (D.C.Cir.1989)*
,seealsoHateley v.
13 SEC,8F.3d653,655-56(9th Cir.1993).ltreturnstheviolatortowherehewould
14 have been absentthe violative activity. B ased on this standard and the evidence
l5 presentedby Defendant(Facts,A-11,B-1,andB-2),theam ountofdisgorgem ent
16 soughtappears excessive,unreasonable,and arguably punitive.
17 ln its m otion,PlaintiffarguesthatD efendant's alleged ill-gotten gains
18 derived from hisow nership stake in N evW est Securities C orporation. That
19 argum entrem ains in dispute because D efendantdid not benefitor gain
20 financially in any directorm eaningfulmannerfrom thesaleofthesubject
21 securities(Facts,A-11),asheneverreceived any portionoftheproceedsof
22 salesofthesubjectsecuritiesbased on hisshareofownership ofNevW est
23 SecuritiesCorporation (Facts,B-2).DefendantpreviouslyprovidedtoPlaintiff
24 evidence docum enting al1sources ofhis com pensation from N evW estSectzrities
25 C orporation,none ofw hich w as tied to his share ofow nership ofN evW est

26 SecuritiesCorporation (Facts,B-2).Thepresented evidenceclearlyestablished

12
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1 thatD efendant'sannualsalary of$36,000 rem ained unchanged during therelevant


2 timeframe(2002-2005).Neitherthesalarynorthecomm issions,whichDefendant
3 received from transactions neither directly norindirectly connected to the sales of
4 the subjectsecurities(Facts,A-22),had anybasisin Defendant'sownershipstake.
5 N evW estSecurities Corporation w as a corporation w ith approxim ately 80
6 shareholders(PlaintiffsFacts,No.10)and canied outno directorindirect
7 distributionsto itsshareholdersthrough dividends orotherw ise during the
8 relevanttim efram e.
9 Plaintiff also estim ates thatN evW estSecurities C orporation retained
10 $383,914.20 from theproceedsofthe salesofCM KM stock.Thatestim ate is
11 m aterially differentfrom D efendant's ow n estim ate,w hich is approxim ately
12 $300,000.00(Facts,B-1).Also,intheFinalJudgmententered by defaultagainst
13 DefendantNevW estSecuritiesCorporationon December4,2009,(DocketNo.
14 136),thisCourtordered NevW estSecuritiesCorporation todisgorge$275,000,
15 representing $2,575,000 in salescomm issionsless$2,300,000 N evW estSecurities
I 16 CorporationpaidtoDarylAnderson.Theamountof$275,000wasnotdetermined
17 by thisCourtbutbased on the SEC'Sestim ate. The Coul'
tfound that$275,000
18 w as (6a reasonable approxim ation ofN evW est'sprofits from itsviolations.''
19 Ofm aterialimportance isthe factthatNevW estSecuritiesCorporation was
20 undertheobligation topay per-ticketchargestoitsclearing firm s(Facts,B-6).It
21 w as nota m atterof choice buta contractualobligation to pay at leastthe
22 estim ated am ountof$66,360 to Com puterClearing Service,Inc.forclearing the
23 salesof CM K M stock. B uilding upon the argum entin H ateley v,SE C,8 F.3d 653,
24 655-56 (9th Cir.1993),Defendantarguesthattheamountofsalescomm issions
25 from the sales of CM K M stock deem ed retained by N evW estSecurities
26 C orporation should be reduced accordingly.

13
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1 The am ountofdisgorgem entsoughtis also in question in lightofthe Final


2 Judgm ententered by this C ourtagainstD efendantA nthony Santos ptlrsuantto his
3 Consenton February 9,2010.(DocketNo.140.) Santosand hisfam ily owned and
4 controlled approxim ately the sam e percentage ofN evW estSecurities Corporation
5 asDefendant:approxim ately ninepercent(Facts,A-20).TheCoul'torderedthat
6 Santos,w ho sim ilarly to D efendantdid notbenetitorgain tinancially in any direct
7 orindirectmannerfrom thesaleofthesubjectsecurities,wasliablefor
8 disgorgem entof$4,745.70.The disgorgem entthatPlaintiffseeksfrom Defendant
9 ism ore than seven tim es greaterthan thatam ount.
10 1v .C O N CL USIO N

11 Forthe reasons stated above,and for any otherreason thatthe Courtm ay


12 deem justandproper,DefendantSergey Rumyantsevrespectfully requeststhatthe
13 Courtdeny Plaintifcsm otion forsummaryjudgment.
14

15 D ated:D ecem ber 28,2010. R espectfully stlbm itted,


l6

17

18 Sergey Rum ya ev,D e ndantpro se


19

20
21

22

23

24

25

26

14
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 15 of 111

1 SEC v.CM K M D IA M O N D S,IN C .,etal.


2 U nited States D istrictC ourt- D istrict ofN evada
CaseNo.2:08-CV-00437-LRH-RJJ (LA-3028)
3
CERTIFICA TE O F SERV ICE
4
5 lcertify thatthis docum entw as served on the follow ing via electronic and U .S.
m ailon D ecem ber28,2010:
6
7 M olly M .W hite
K aren M atteson
8 Securities and Exchange Com m ission
9 5670 W ilshire B oulevard,11th Floor
Los A ngeles,C alifornia 90036-3648
10 E-mails:whitem@ sec.gov & mattesonk@ secagov
11 AttorneysfortheSEC
12 llw ing M .Einhorn,Esq.
Law O ffices oflrving M .Einhorn
13 17 l0 10th Street
14 M anhattan Beach,CA 90266
15 Em ail:ime@ eirlhornlaw.com
AttorneyforDefendantgohnEdwards
16
M ark S.D zarnoski,Esq.
17 G ordon & Silver, Ltd.
l8 3960 H ow ard H ughesParkw ay,N inth Floor
LasV egas,N V 89l69
19 Em ail:mdzarnoski@ gordonsilver.com
20 AttorneyforHelenBagley and 1stGlobalStockTransferlJ.c
21 U rban A .Casavant
RR 5 Site 16 B ox 29
22 Prince A lbert Saskatchew an S6V 5R 3
,
23 Canada
24 Email:ucasavant@ shaw .ca

25

26

15
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 16 of 111

1 John W esley H all,Jr.


1311 S.Broadw ay
2 Little R ock A rkansas 72202-4843
,

3 e-mail:Forl-lall@ aol.com
4 AttorneyforDefendantBrianflvtprtz/c
5 K athleen Tom asso
9580 Lake Serena D rive
6 B oca R aton, FL 33496
7 Email:t'tomasso@ ncfgcomm .com
8 A nthony Tom asso
9 9580 Lake Serena D rive
B oca Raton,FL 33496
i0 Email:ttomasso@ncfgcomm.com
11 A
nthony Santos
12 6965 N orth D urango D rive,Suite 11lf-381
Las V egas,N V 89149
13 Em ail:A m s.
!
nwst@ gmail.com
I 14
! N evW estSecurities C orporation
' l5 c/o A nthony Santos
j6 6965 N orth D urango D rive,Suite 1115-381
Las V egas,N V 89149
17 Em ail:A m snwst@ gmail.
.
com
18
D ouglas E.Griffith,Esq.
19 K esler & Rust
M clntyre Building,2ndFloor
20 68 S M ain Street
.

21 SaltLake City,U T 8410l


22 Email:dgriffith@ kesler-rust.com
AttorneyforDarylAnderson
23
Eric N .K lein,Esq.
24 Eric N K lein & A ssociates,P.A .
.

25 1200 N .FederalH ighw ay,Suite 200


B oca Raton,FL 33432
26 Email:enk@ kleinattorneys.com

16
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 17 of 111

1
M ichaelR .B akst
2 PM B 702
3 222 Lakeview A venue,#160
W estPalm B each,FL 33401
4 ichael
m bakst@ ruden.com
.

6
7 Se g R um ntsev

10

11

12

13
14

15

16

17

18

19

20
21

22

23

24

25

26

17
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 18 of 111

l SERG EY R U M Y AN TSEV ,pro se


1951 N Jones//G 202
2 L
asV egas,N V 89 108
3 E-mail:chaptak@ embammail.com
4 Telephone:(702)647-7925

5
U N IT ED ST A TES D ISTR IC T C O U R T
6
D ISTR IC T O F N EV A DA
7

8
SECU R ITIE S A N D EX CH A N G E C ase N o.2-08CV 00437-LRH -R JJ
9 co M M lsslo N '
Plaintiftl DECLARATION OF DEFENDANT
10 SER G EY R U M Y A N T SEV IN
11 vs. SU PPO R T O F M EM O R A N D U M
IN O PPO SITIO N TO PLA IN T IFF
12 CM K M D IA M O N D S,IN C .,etaI., SE C U R IT IE S A N D EX C H A N G E
13 D efendants. C O M M ISSIO N 'S M O TIO N FO R
SU M M A R Y JUD G M EN T
14

l5

16 1, SergeyRumyantsev,declarepursuantto28 U.S.
C.j 1746asfollows:
17 l. Iam one ofthe defendants in this action,appearing pro se. lhave
18 personalknow ledge ofthe follow ing facts and could and w ould testify com petently
19 thereto.
20 2. A ttached as Exhibit l is a true and correctcopy ofD efendantSergey
21 R um yantsev's Response to PlaintiffSecurities and Exchange Com m ission'sFirst
22 Setoflnterrogatories to Sergey Rum yantsev served on D ecem ber 24, 2008.
23 3. A ttached as Exhibit2 is a true and correctcopy ofrelevantpages of
24 the transcriptofinvestigative testim ony ofSergey Rum yantsev taken under oath

25 beforetheNationalAssociation ofSecuritiesDealers,Inc.fn theM attert?/-


26 N evW estSecurities Corporation taken on January 26,2005,a self-regulatory

I
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 19 of 111

1 organization proceeding based on m any ofthe sam e facts and circum stancesasthis
2 action.
3 4. A ttached asExhibit3 is a true and correctcopy ofrelevantpages of
4 the transcriptofinvestigative testim ony of Sergey R um yantsev taken underoath In
5 theMatterofcM KM Diamondstakenon April13,2006aspartofPlaintiffs
6 investigation preceding this action.
7 5. Attached asExhibit4 is a true and correctcopy ofD efendantSergey
8 Rum yantsev's A nsw erto SEC 'SFirstand Second R equestsfor Production of
9 DocumentsPursuantToRule34served on October12,2008(redactedtoprevent
10 disclosure ofpersonalidentifying infonnation such asD efendant's SocialSecurity
11 Number).
12 6. Contem poraneously w ith the service ofD efendantSergey
13 R um yantsev's A nsw erto SEC 'SFirstand Second R equestsforProduction of
14 Documents(Exhibit4),Defendant,pursuanttohisResponseNo.8,provided
15 Plaintiffw ith a detailed record ofN evW estSecuritiescom m issions,a share of
16 w hich he received in addition to his salary during the period from January 1,2002
17 though October12,2008(thedocumentconsistedof252 pagesand,becauseofits
18 size,isnotattached asanexhibithereto).The detailed record evidencedthat
19 D efendantshared in acomm issionspooltotaling $992,334.24 and earned during
20 the period from January 2,2002 to M ay 30,2007, N one ofthe colnm issions
.

21 derived from the salesofC M K M stock by John Edw ards.


22 7. A ttached as Exhibit5 is a true and correctcopy ofD efendantSergey
23 R um yantsev'sR esponse to Plaintit-f Securities A nd Exchange Com m ission's
24 Second SetofRequests forA dm issions served on D ecem ber5,2008.
25 8. A ttached as Exhibit6 is a true and correctcopy of Com puterC learing
26 Services,Inc.schedule ofProposed C orrespondentChargesforN evW est

2
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 20 of 111

1 Securities Corporation delivered via electronic m ailto D efendantSergey


2 Rum yantsev on or aboutFebrtlary 25,2004,w hich 1retrieved from thatpartof
3 electronic m ailarchive records ofN evW estSecurities Corporation thatis still
4 available to m e.
5 9. Plaintiffprovided evidence thatJolm Edw ards'sales ofCM K M stock
6 totaled 17,028,849,996 sharesbefore N evW estSecurities Corporation started to
7 clearhissalestlu-ough ComputerClearing Services,lnc.(seeExhibitlto
8 D eclaration ofEdw ard M .B rady in Suppol'tofM otion by Plaintiff Securitiesand
9 Exchange Com m ission forSum m aly Judgm entA gainstD efendants 1StG lobal

10 Stock TransferLLC,Helen Bagley,Sergey RumyantsevandBrian Dvorak).


11 Based on totalsalesof254,040,542,112 shares,the num ber of sharescleared
12 through Com puterClearing Services,Inc.w as 237,01l,692,116.
13 10. C om puter Clearing Services,lnc.charged N evW estSecurities
14 Corporation per-ticketclearing fees. Forex-clearing transactionsthe feew as$28
15 perticket(seeExhibit6).Tothebestofmy recollection thesystem limitationon
16 the clearing ticketsize w as 99,999,999 shares. B ased on thatlim itation,the
17 estim ated num ber ofclearing ticketsprocessed pursuantto the sale of
18 237,0l1,692,116 shareswasatleast2,370. Thus,at$28 perticket,theam ountof
19 clearing fees charged and collected by C om puter Clearing Servicesw asatleast
20 $66,360.
21 ll. D efendantis notpresently and has notforthe pastthirty-eightm onths
22 been associated w ith any securities broker-dealer. N one ofD efendant's securities
23 licensesare current,asm ore than tw o years lapsed since the tiling ofD efendant's
24 U niform Term ination N otice for Securities lndustry R egistration in O ctober2007.
i 25 Thisassertionisbasedon theknowledgeoffactand confinned by areportthatcan
!
: 26 b
e obtained from httpr//brockercheck.fnra.ora.

3
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 21 of 111

1 12. Lacking know ledge ofspecific rules thatm ay supportthisassertion,


2 D efendantfinnly believesthata1lofhis securities licenses and certitications have
3 expired.
4 13. Regardless ofthe factthatD efendanthas long since exited the
5 securitiesprofession,Defendantsincerely assuresthathew illneverengage in
6 conductthatm ay constitute a violation ofSection 5 ofthe SecuritiesA ct.
7 14. D efendantisgainfully em ployed outside ofthe securitiesprofession
8 and has absolutely no intention ofever re-entering the securities profession.
9 ldeclareunderpenaltyofperjury thattheforegoing istnleand correct.
10 Executed on D ecem ber 28,2010,in LasV egas,N evada.
11
12

13 Sergey R um ntsev, efendantpro se


14
15

l6

17

18
19

20

21
22

23

24

25
26

4
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 22 of 111

l SEC v.CM K M D IA M O N D S,IN C .,etal.


2 U nited States D istrictC ourt- D istrict ofN evada
CaseNo.2:08-CV-00437-LRH-RJJ (LA-3028)
3
IN D EX O F EX H IBITS
4
5 Exhibit D
N o. escription Page
6 1 D efendantSergey Rtzm yantsev's Response to Plaintiff 6
7 Securities and Exchange Com m ission'sFirst Setof
lnterrogatories to Sergey R um yantsev served on D ecem ber
8 24, 2008.
9 2. Relevantpages ofthe investigative testim ony transcriptof 57
Sergey R um yantsev before the N ationalA ssociation of
10 SecuritiesDealers,lnc.lntheMatterofNevWestSecurities
11 Cor oration taken on Janua 26,2005.
3. R elevantpagesofthe investigative testim ony transcriptof 65
12 Sergey Rumyantsevln theM atterofchiKM lliamondstaken
13 on A ril l3,2006.
4. D efendantSergey Rum yantsev,s A nsw erto SEC ,sFirstand 89
14 Second Requests for Production ofD ocum ents PursuantTo
15 Rule34 served on Octoberl2,2008 (redacted toprevent
disclosure ot-personalidentifying infonnation such as
16 D efendant's SocialSecurit N um ber .
5. D efendantSergey Rum yantsev's Response to Plaintiff 112
1-/ Securities And Exchange C om m ission's Second Setof
18 R e uests forA dm issions served on D ecem ber 5,2008.
6. Com puterC learing Services,lnc.schedule ofProposed l20
19 con-espondentCharges forN evW estSecuritiesC orporation
24) delivered via electronic m ailto D efendantSergey
Rum antsev on oraboutFebrua 25,2004.
21

22

23

24

25
26

5
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 23 of 111

E X H IB IT 1

Rum yantsev Declaration,Page 6


Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 24 of 111

1 SER GEY RU M Y A N TSEV ,pro se


1951 N Jones//G 202
2 L
asV egas,N V 89108
3 E-mail:chaptak@ embarçmail.com
4 Telephone:(702)647-7925
5
UN IT ED ST A TES D ISTR IC T C O U R T
6
D IST R ICT O F N EV A D A
7

8
SECIJR ITIE S Ar EX CH A N G E C ase N o.2-08CV 00437-LR H -R JJ
9 CO M M ISSIO N '
Plaintiff, D X FEN D A N T SER G E Y
10 R tiM v A x T sEv 's R ESPO N SE TO
11 vs. PLX IN TIFF SE CU R IT IE S A N D
E X C H A N G E C O M M ISSIO N 'S
12 CM K M D IA M O N D S,IN C .,etal., FIR ST SET O F
13 D efendants. IN TER R O G A T O R IE S T O
SE R G EY R UM Y A N T SE V
14

15 PR OPO U N D IN G PA R TY -
: PLA IN TIFF U N ITED STA I-ES SEC U RITIES A N D
16 EX CH A N GE CO M M ISSION
17 R ESPO N D IN G PA RTY
: D EFEN D A N T SERG EY RU M Y A N TSEV
18 SET N O
. : ONE
19
20

21

22

23

24

25

26
EXHIBIT 1

I
Rum yantsev Declaration,Page 7
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 25 of 111

1 Pursuantto Rule 33 ofthe FederalR ules ofC ivilProcedure,D efendant


2 SergeyRumyantsev (HDefendant''orGRumyantsev'')respondsto Plaintiff
3 SecuritiesandExchangeCommissionCplaintift''ortccomm ission'')FirstSetof
4 lnten-ogatoriesas follow s:
5 Defendantobjectsto PlaintiffsFirstSetoflnten-ogatoriesbecauseit
6 containstwenty-six(26)written interrogatories.PursuanttoRule33(a)(l),
7 tûlujnlessotherwisestipulated ororderedbythecourt,aparty may sen,eon any
8 otherpal'ty no m orethan 25 written interrogatories,including al1discrete
9 subparts.''
10 Defendantobjectstotheftdetinitions''in PlaintiffsFirstSetof
11 Inten-ogatories to Sergey Rum yantsev to the extentthey purportto im pose
12 obligations on D efendantbeyond the obligations im posed by the FederalR ules of
13 CivilProcedure. ln responding to Plaintiff sFirstSetoflnterrogatoriesto Sergey
14 R um yantsev,D efendantw illrespond in accordance w ith his obligations as set
15 forth in the FederalRules ofCivilProcedure.
16 Defendantobjectstothese contention interrogatoriesasprematurebecause
17 discovery is stillatan early stage. D efendanthas notyetcom pleted discovery and
I
I
1
18 m ay discoveradditionalfacts thatm ay be responsive to one orm ore interrogatory.
19 Pursuantto Rule26(e)oftheFederalRulesofCivilProcedure,Defendant
20 expressly reserveshisrightto am end or supplem entitsresponsesto the FirstSetof
21 Inten-ogatoriesto Sergey R um yantsev.
22

23 IN TER R O G A TO R Y N O .1:
24 Statea1lfactsthatsuppol'
tYOUR contention that''gtlhesecuritiesatissue
25 w ere in fact,exemptfrom registration and eligibleforsale underthegiven facts
26
EXHIBIT 1

2
Rum yantsev Declaration,Page 8
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 26 of 111

l and circum stances''on page 14 ofD efendantSergey Rum yantsev'sA nsw er,w hich
2 w as tiled on M ay 9,2008.
3

4 R ESPO N SE TO IN T ER R O G A TO R Y N O .1:
5 B ased on D efendant'sinform ation,belief,and understanding ofthe
6 Interrogatory,D efendantresponds as follow s'
.
7 The securities atissue w ere represented by certificatesw ithouta restrictive
8 legend. A restrictive legend is a statem entplaced upon a stock certiticate stating,
9 am ong otherthings,thatthe stock is notregistered w ith the Com m ission pursuant
10 to Seotion 5 ofthe SecuritiesA ctand thatan ow nership interestin the stock
11 represented by thatcertificate cannotbe sold ortransferred absentregistration or
12 the existence ofa valid exem ption from registration.
13 D efendantEdw ards controlled the accounts atN evW estthrough w hich the
14 securities atissue w ere sold. N evW est's searching inquiry established a beliefthat
15 D efendantEdw ardsw as notthe issuerofthe securitiesatissue. N evW est's
16 searching inquiry furtherestablished a beliefthatD efendantEdw ardsw as notan
17 affiliate ofthe issuer ofthe securities atissue.

18 DefendantNevW estSecuritiesCorporation ($çNevW est'')contacted


19 Defendant1StGlobalStock TransferLLC (4t1S'Global'')toverifythatthe
20 certificates representing the securitiesatissue w ere validly issued and unrestricted.
21 1S'G lobalvouched in w riting for al1certificates representing the securities atissue .

22 Upon inquil'y,lStG lobalalso stated thatnone ofthe securities atissue cam e into
23 D efendantEdw ards'controlas a resultot-transfers from aftsliatesofthe issuer. 1St
24 G lobalfurtherindicated thatitissued the certificatesrepresenting the securities at
25 issue on the basisofattorney opinion letters.
26
EXHIBIT 1

3
Rum yantsev Declaration,Page 9
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 27 of 111

1 N evW estprom ptly deposited a1lcertiticates representing the securities at


2 issue w ith its clearing firm s W ells Fargo lnvestm entsC orrespondentServices and,
3 later,C om puterC learing Services,Inc. W ellsFargo lnvestm ents Correspondent
4 Servicesand Com puterClearing Services,Inc.accepted the securities atissue for
5 depositand allow ed subsequentsalespresum ably in com pliance w ith theirow n
6 policies and procedures.
7 N evW est's clearing firm s deposited the securities atissue w ith The
8 D epositoorTrustC om pany. The D epository TrustC om pany accepted the
9 securities atissue for depositand allow ed subsequenttransferofow nership
10 presum ably in com pliance w ith its ow n policiesand procedures.
11

12 IN TE R R O G A TO R Y N O .2:
13 State allfactsthatsupportY O U R contention that''D EFEN D A N T
14 R UM Y A N TSEV w asN O T a necessary and substantialfactor in the sale or
15 distributionofthesubjectsecurities''on page 14 ofDefendantSergey
16 Rum yantsev's A nsw er,w hich w as filed on M ay 9,2008.
l7

18 R E SPO N SE TO IN T ER R O G A T O R Y N O .2:
19 B ased on D efendant's inform ation,belief,and understanding ofthe
20 lnterrogatoo,,D efendantresponds as follow s:
21 D efendantplayed neithernecessary nor substantialrole in facilitating the
i 22 saleofthesubjectsecurities.
23 Defendantdid nothaveanyrelationship with the issuerofthesubject
24 securities.
25 D efendantdid notintroduce D efendantEdw ardsto N evW est.
26 Defendantneveraccepteddelivery ofthesubjectsecurities.
EXH IBIT 1

4
Rum yantsev Declaration,Page 10
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 28 of 111

1 Defendantneverpurchased,sold,orothenvisepassed titletothesubject
2 securities.
3 Defendantneverownedthesubjectsecurities.
4 Defendantneversolicitedthesaleorpurchaseofthesubjectsecurities.
5 Defendantneversoughtbuyersofthesubjectsecurities.
6 Defendantneverpromoted salesofthesubjectsecurities.
7 Defendantneveraccepted ordersto sellthe subjectsecurities.
8 D efendantneverserved as a brokerofrecord forthe accountsofD efendant
9 Edwards,throughwhichDefendantEdwardssold thesubjectsecurities.
10 Defendantneverdirectedsalesofthesubjectsecurities.
1l Defendantneversetthetermsandconditionsofsaleofthesubjectsecurities.
12 D efendantdid notbenestorgain tinancially in any director m eaningful
13 mannerfrom thesaleofthesubjectsecurities.
14 Defendantneverpublishedquotationsinthesubjectsecuritiesin any
15 m edium .
16 D efendantneverreceived instructions to transferthe proceeds ofsalesofthe
17 subjectsecurities.
l8 D efendantneverinstructed anyone to transferthe proceedsofsalesofthe
19 subjectsecurities.
20

21 IN T ER R O G A T O R Y N O .3:
22 State a1lfactsthatsupportY O U R contention thatD EFEN D A N T
i 23 RUM YANTSEV ''wasnotan offerorwithrespecttothesubjectsecurities''onpage
i
I 24 15 ofDefendantSergey Rumyantsev'sAnswer, w hich w as filed on M ay 9,2008.
' 25

26
EXHIBIT 1

5
Rum yantsev Declaration,Page 11
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 29 of 111

1 R E SPO N SE TO IN TER R O G A T O R Y N O .3:


2 B ased on D efendant's inform ation,belief,and understanding ofthe
3 lnterrogatoly ,D efendantresponds as follow s:
4 D efendantincorporates by reference each and al1ofhisresponsesto
5 lnterrogatory N o.2.
6 D efendantneverentered into any contractofsale ordisposition ofthe
7 subjectsecurities,forvalueorotherwise.
8 D efendantneverdirectly orindirectly solicited orarranged for the
9 solicitation ofordersto buy in anticipation ofor in connection w ith the sale ofthe
10 subjectsecurities.
11

12 IN TER R O G A T O R Y N O .4: -
i 13 State allfactsthatsupportY O U R contention thatD EFEN D A N T
I
14 RUM YANTSEV ''did notsolicitthesaleorptlrchaseofthesubjectsecurities''on
15 page 15 ofD efendantSergey R um yantsev's A nsw er,w hich w as filed on M ay 9,
l6 2008.
l7

18 R E SPO N SE TO IN TER R O G A TO R Y N O .4:


19 B ased on D efendant'sinform ationnbelief,and understanding ofthe
20 lnterrogatory,D efendantresponds as follow s:

21 Defendantneversoughtbuyersofthesubjectsecurities.
22 Defendantneverpromoted salesofthesubjectsecurities.
23 Defendantneverdirectedsalesofthesubjectsecurities.
24 Defendantneverpublished quotationsin thesubjectsecuritiesinany
25 m edium .
26
EXHIBI
T1

6
Rum yantsev Declaration,Page 12
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 30 of 111

l IN T ER R O G A T O R Y N O .5:
2 State allfacts thatsupportY O U R contention thatD EFEN D A N T
3 RU M Y A N TSEV ''did notpersonally benefitorgain,tinancially,in any
4 meaningfulmannerfrom thesaleofthesubjectsecurities''onpage 15of
5 D efendantSergey Rum yantsev's A nsw er,w hich w as tiled on M ay 9,2008.
6

7 R ESPO N SE TO IN T ER R O G A T O R Y N O .5:
8 BasedonDefendant'sinform ation,belietlandtmderstandingofthe
9 Interrogatory,D efendantresponds as follow s:
10 D efendantpreviously provided Plaintiffw ith detailed inform ation aboutthe
l1 sources ofD efendant's incom e during a11relevanttim es. In particular,such
12 inform ation w asincluded in A nsw er ofSergey Rum yantsev to SEC 'SFirstand
13 Second R equests for Production ofD ocum entsPursuantto R ule 34 dated O ctober
14 12,2008 and in D efendantSergey Rum yantsev's Response to PlaintiffSecurities
15 and Exchange Com m ission's FirstSetofR equests for A dm issionsdated D ecem ber
16 1,2008.
. 17 D uring allrelevanttim es,D efendantw asan em ployee ofN evW est.
18 D efendant'sem ploym entand the term s thereofdid notdepend on the sale ofthe
19 subjectsecurities.
20 D uring allrelevanttim es,D efendantdid notreceive any paym ents or item s
21 ofvalue from otherD efendantsin thisaction otherthan the salary and
22 com m issions from N evW estpaid in the ordinary course ofbusiness unrelated to
23 thesaleofthesubjectsecurities.
24 D uring al1relevanttim es,D efendantdrew a salary from N evW estin the
25 am ountof$36,000 perannum . Theam ountofthatsalary did notdepend on the
26 saleofthesubjectsecurities.
EXHIBIT 1

7
Rum yantsev Declaration,Page 13
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 31 of 111

l D uring a1lrelevanttim es,N evW estpaid D efendantcom m issionsderived


2 from his ow n book ofbusiness in no w ay related orconnected to the sale ofthe
3 subjectsecurities.
4 Defendantneverreceivedany commissionson thesaleofthesubject
5 securities.
6 D efendantneverreceived any com m ission overrides on the sale ofthe
7 subjectsecuritiesotherthanapproximately $1,800 basedonasingletransactionin
8 A ugust2004. D efendantbelieves thatthatam ountw asno m ore than one percent
9 ofD efendant'stotalincom e during the relevanttim e period.
10 D uring allrelevanttim es,N evW estw as a privately held corporation,in
11 whichDefendantheldaminority stake.Transactionsinthesubjectsecurities
12 neverhad a m easurable,ifany,im pacton the value ofD efendant's share of
13 ow nership in N evW est.
14 D uring a1lrelevanttim es,N evW estdid notpay and D efendantdid not
15 receive from N evW estany dividends.
16

17 IN T ER R O G A T O R Y N O .6:
18 State a1lfactsthatsupportY O U R contention that''D EFEN D A N T
19 R U M Y A N TSEV w as notan undenvriterw ith respectto the relevantissuerand the
l ,, ,
I
I
20 subjectsecurities onpage 15ofDefendantSergeyRumyantsev sAnswer,which
21 w as tiled on M ay 9,2008.
!
i 22
!
!
i
23 R ESPO N SE T O IN TER R O G A TO R Y N O .6:
E
. 24 Based on D efendant, sinform ation,belief,and understanding ofthe
25 Interrogatory,D efendantresponds as follow s:
26
EXHIBI
T1

8
Rum yantsev Declaration,Page 14
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 32 of 111

1 D efendantincorporates by reference each and al1ofhisresponses to


2 lnterrogatories N os.2-6.
3 Defendantneverwasaffiliatedwiththeissuerofthesubjectsecurities.
4 Defendantneverpurchasedthesubjectsecuritiesfrom theissuerorits
5 aftiliateswith orwithoutaview to thedistribution ofthesubjectsecurities.
6 Defendantneverofferedorsoldthesubjectsecuritiesfortheissuerorits
7 affiliatesin connectionwith thedistribution ofthesubjectsecuritiesorotherwise.
8 Defendantneverhaddirectorindirectparticipation inthesaleofthesubject
9 securities.
l0 D efendantneverhad any m aterialinterestin the sale ordistribution ofthe
l1 subjectsecurities.
l2

13 IN TE R R O G A T O R Y N O .7:
14 Stateal1factsthatsupportYOUR contention that''lnlo sharescam etorest
15 w ith D EFEN D A N T R U M Y A N TSEV or any entity orindividualcontrolled by,or
l6 sharing com m on controlw ith,D EFEN D A N T RU M Y A N TSEV ''on page l5 of
17 D efendantSergey Rum yantsev's A nsw er,w hich w as tiled on M ay 9,2008.
l8

19 R ESPO N SE T O IN TER R O G A TO R Y N O .7:


20 Based on D efendant's inform ation,belief,and understanding ofthe
21 Interrogatory,D efendantresponds as follow s:
22 D efendantorany entity or individualcontrolled by,orsharing com m on

23 controlwithDefendantneverownedasingleshareofthesubjectsecurities.
24 D efendantorany entity or individualcontrolled by,orsharing com m on
25 controlwithDefendantneverheld asingleshareofthesubjectsecuritiesinany
26 accountunderD efendant's control.
EXHIBIT 1

9
Rum yantsev Declaration,Page 15
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 33 of 111

1 IN TER R O G A T O R Y N O .8:
2 State a1lfactsthatsupportY O UR contention that''D EFEN D A N T
3 RUM YANTSEV isentitledtorely on Section 4(4)oftheSecuritiesAct,
4 exem pting brokers'transactionsexecuted upon custom ers'orderson any exchange
5 orin theover-the-countermarket(absentsolicitation)suchthathecould notbe
6 held liable for the violation ofthe registration requirem ents ofSecuritiesA ct

7 Section 5with respecttothesubjectsecurities''onpage15ofDefendantSergey


8 Rum yantsev's A nsw er,w hich w as filed on M ay 9,2008.
9

10 RESPO NSE TO INTERR O GA TO RY NO .8:


1l Based on D efendant's infonnation,belief,and understanding ofthe
12 lnterrogatoly,D efendantresponds asfollow s:
13 D efendantincorporatesby reference each and al1ofhis responsesto
14 Interrogatories N os.2-7.
15 D efendantplayed neithernecessary nor substantialrole in facilitating the
16 saleofthesubjectsecurities.Nothing inDefendantsactionsconstituted
17 perform ance ofbroker'sfunctionsand,by extension,ofanything m ore than the
18 usualand customarybroker'sfunctionsin connectionwiththesaleofthesubject
!
19 securities.

20 Defendantdidnotexecuteorderstosellthesubjectsecurities.
21 Defendantdid notreceiveany com m issionsin connection with the saleof
22 the subjectsecurities.
23 Defendantdid notdirectly orindirectly solicitorarrangeforthe solicitation
24 oforderstobuy in anticipationoforin connectionwith thesaleofthesubject
25 securities.
26
EXHIBIT 1

10
Rum yantsev Declaration,Page 16
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 34 of 111

l D efendantneverm ade any paym ents in connection w ith the sale ofthe

2 subjectsecuritiestoany person.
3 A ta1lrelevanttim es,D efendantw as notaw are ofany circum stances in
4 connection withthesaleofthesubjectsecttritiesthatmadeprovisionsofSection
5 4(4)oftheSecuritiesAct,exempting brokers'transactionsexecutedupon
6 custom ers'orders on any exchange or in the over-the-counter m arket,unavailable
7 to him .
8

9 IN T ER R O G A T O R Y N O .9:
10 State al1factsthatsupportY O U R contention that ''D EFEN D A N T
l1 RU M Y A N TSEV caused to be conducted,a searching inquil'y in cooperation w ith
12 theNationalAssociation ofSecuritiesDealers(NASD now FINRAIwithrespect
13 tothesubjectsecurities,which inquil'y yielded legalopinionsfrom three(3)
14 separatelaw t'irm sastothefree-tradingstatusofthesubjectsecuritiesandsuch
15 otherfactsandcircumstancessupportingthecontentionthatthesubjectsecurities
16 wereindeed free-tradingand thatthesubjecttransactionswereconsistentwith state
17 and federalsecurities law s''on pages 15-16 ofD efendantSergey R um yantsev's
18 A nsw er,w hich w as filed on M ay 9,2008.
19

20 R E SPO N SE T O IN TER R O G A TO R Y N O .9:


21 B ased on D efendant'sinform ation,belief,and understanding ofthe
22 lnterrogatory,D efendantresponds as follow s:
23 D efendantincorporates by reference each and al1ofhisresponsesto
24 lnterrogatory N o.l.
25

26
EXHIBIT 1

11
Rum yantsev Declaration,Page 17
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 35 of 111

l D uring a11relevanttim es,D efendantw asPresidentand a registered principal


2 ofN evW est. In those capacities,D efendantputin place policiesand procedures
3 thatw ere the basisofthe searching inquiry referenced in this Interrogatoly.
4 N evW est's searching inquiry consisted ofa num berof steps,including
5 verbaland w ritten com m unication w ith a num ber ofparties as w ellasN evW est's
6 ow n research ofgovernm entfilings.
7 N evW estcontacted D efendant 1StG lobalto verify thatthe certificates

8 representingthesubjectsecuritieswerevalidly issuedandunrestricted. 1StGlobal


9 vouched inwritingforal1certificatesrepresentingthesubjectsecurities.
10 N evW estinterview ed D efendantEdw ards,w ho asserted thathe w as notan
11 aftiliateoftheissuer,thathedid notacquirethesubjectsecuritiesfrom theissuer
12 oritsaftiliates,andthatnoneoftheproceedsfrom thesaleofthesubjectsecurities
13 w ere returned to the issuerorits affiliates.
14 N evW estchecked corporate filings ofD efendantC M K M D iam onds,lnc.
15 (t1CM KM ''),theissuerofthesubjectsecurities,with theSecreta:'
y ofStateofthe
16 State ofN evada and found no evidence ofD efendantEdw ards'affiliation w ith
17 CM K M during allrelevanttim es.
18 NevW estchecked availabletilingsofCM KM withtheSEC (Plaintiffin this
19 action)and foundno evidenceofDefendantEdwards'affiliationwith CM KM
20 during allrelevanttim es.
21 N evW estreceived orobtained possession ofseveralattorney opinion letlers
22 issued in connection withtransactionsin thesubjectsecuritiesby law firm sof
23 K um m erK aem pfer Bonner & Renshaw ,Edw ards & A ngell,and D efendantB rian
24 D vorak. A 1lattorney opinion lettersreview ed by N evW estas partofits searching
25 inquiry supportedthecontentionthatthesubjectsecuritieswerefree-trading and
26 thatthesubjecttransactionswereconsistentwith stateandfederalsecuritieslaws.
l EXHIBI
T1
i 12
i Rum yantsev D eclaration
( , Page 18
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 36 of 111

1 Starting in August2004,NevW estshared a1linformation aboutthesubject


2 securitieswith theNASD (now FTNRAI,itsregulator.Defendantbelievesthat,
3 subsequentto August2004,theshareoftransactionsin thesubjectsecurities
4 comprisedno lessthan 60percentofthetotaltransactionsinthesubjectsecurities
5 atNevW estby volum eand no lessthan 40 percentofthetotalby the dollar
6 am ount. O n severaloccasions,N evW estinquired ifFIN .
R A w as in possession of
7 any inform ation thatw ould change the conclusions ofN evW est's ow n searching
8 inquiry withrespecttothesubjectsecurites.During allrelevanttimes,theNASD
9 did notprovide any specific inform ation thatw ould challenge N evW est's
10 contention thatthesubjectsecuritieswerefree-tradingandthatthe subject
11 transactionsw ere consistentw ith state and federalsecuritieslaw s.
12

13 IN TE R R O G A T O R Y N O .10:
14 State allfactsthatsupportYOUR contention that''DEFEN DANT
15 RU M Y A N TSEV relied on the nlles and regulations,advice and guidance as
16 prom ulgated by FIN RA including butnotlim ited to its D istrict2 oftices in Los
17 Angeles,California which abdicated itsduty to itsm embersand itsduty to protect
18 investors and preserve m arketintegrity by failing to establish reasonably sufficient
19 policies and procedures so asto apprise ornotify itsm em bership ofthe vel'y
20 standardts)PLAINTIFF now seeksin imposeonDEFENDANT RUM YANTSEV''
21 on page 16 ofD efendantSergey Rum yantsev'sA nsw er,w hich w as filed on M ay 9,
22 2008.
23
:
i 24 R ESPO N SE T O IN TER R O G A T O R Y N O . 10:

25 Based on D efendant's infonmation,belief,and understanding ofthe


26 lnterrogatory,D efendantrespondsas follow s:
EXHIBIT 1

13
Rum yantsev Declaration,Page 19
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 37 of 111

1 D uring allrelevanttim es,D efendantand its em ployerN evW estw ere


2 membersoftheNASD (now FINltAI,aself-regulatory organization.Asaself-
3 regulatory organization,the N A SD prom ulgated rules and regulations and issued
4 guidance foritsm em bers w ith respectto applicable nlles and regulations.
5 D uring allrelevanttim es,D efendantw asnotaw are ofany rule,regulation,
6 policy,procedure,guidance,interpretation,N otice to M em bers,or another
7 communication em anating from theNASD (CCNASD rulesand regulations'')that
8 established w ith any degree ofspeciticity the duties ofits m em bersand associated
9 persons in connection w ith unsolicited sales in brokertransactionsofsecurities
10 represented by cel-titk atesnotbearing a restrictive legend w hen such sales could
11 violatetheprovisionsofSection 5oftheSecuritiesActof1933 (%drelevantNASD
12 rulesandregulationsn).Inparticular,DefendantwasnotawareofanyNASD rules
13 and regulationsthatspecified the scope ofsearching inquiry sufficientto establish
14 thata brokerw asnotparticipating in a distribution ofunregistered securities.
15 Starting in A ugust2004,N evW estand D efendantshared w ith the N A SD
16 and,specifically,itsD istrict2 offices in Los A ngeles,California and Senior

17 ComplianceExaminerKeithLlorens(tr istrict2'')a11information aboutthe


18 securitiesandtransactionsthataresubjectofthislitigation (Rsubjectsecuritiesand
19 transactions'').ThatpresentedtheNASD with an opportunity toadviseNevW est
20 and D efkndantofany and alIrelevantN A SD rules and regulations ifsuch rules
21 and regulations existed. The N A SD and its staffdid notprovide such advice.
22 ln A ugust2004,the N A SD conducted a routine biennialauditofN evW est.
23 The auditincluded a close review ofN evW est's w ritten policiesand procedures.
24 A tno relevanttim e during and subsequentto the 2004 auditdid the N A SD suggest
25 thatN evW est'sw ritten policies and procedurescould be inadequate w ith respectto
26 the requirem ents ofSection 5 ofthe Securities A ctof 1933.
EXHIBIT 1

14
Rum yantsev Declaration,Page 20
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 38 of 111

1 Afterinitiallylearningaboutthesubjectsecuritiesand transactions,District
2 2 oftheNASD started monitoringthesubjectsecuritiesandtransactionsas
3 evidenced by num erousverbaland w ritten com m unications between N evW est,
4 DefendantandKeith Llorens(seeAttachments1and2forexamplesofsuch
5 communications).Defendantbelievesthat,subsequenttoAugust2004,theshare
6 oftransactionsinthesubjectsecuritiescomprisednolessthan 60percentofthe
7 totaltransactionsin thesubjectsecuritiesatNevW estby volumeandno lessthan
8 40 percentofthe totalby the dollar am ount.
9 W hile lim ited in itsresourcesand capabilities,D efendantunderstood thatthe
10 N A SD had m uch broaderinvestigative and su> eillance pow ers than D efendant
11 and N evW estthem selves. D efendantalso believed thatthe N A SD shared w ith its
12 m em bers a duty to protectinvestors and preserve m arketintegrity. B ased on that
13 understanding and belief,N evW estand D efendantinquired on m ultiple occasions
14 ifthe N A SD had inform ation or knew ofsom ething thatw ould challenge
15 N evW est's and D efendant'scontention thatN evW est'sand D efendant's activities
16 inconjunctionwiththesubjectsecuritiesandtransactionsdid notconstitutea
17 violation ofapplicable securitiesrules and regulations. The N A SD never
18 specifically responded to such inquiries advising N evW estand D efendantto m ake
19 theirow n detenmination on the m atter.
20

21 IN TER R O G A T O R Y N O .11:
22 State a1lfactsthatsupportY OU R contention that''D EFEN D AN T
23 RU M Y A N TSEV ,beginning in A ugust2004,explicitly shared any and all
24 inform ation relatedtothesubjecttransactionswithFINRA'SDistrict2 Ofticesona
25 daily orweekly basisand explicitly soughtFINRA'Sguidanceastothesubject
26
EXHIBIT 1

15
Rum yantsev Declaration,Page 21
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 39 of 111

1 m atterofthis C om plaint''on page 16 ofD efendantSergey Rum yantsev'sA nsw er,


2 w hich w as tsled on M ay 9,2008.
3

4 R ESPO N SE TO IN T ER R O G A T O R Y N O .11:
5 Based on Defendant'sinformation,belietland understanding ofthe
6 lnterrogatory,D efendantresponds as follow s:
7 D efendantincorporatesby reference each and allofhis responses to
8 lnterrogatory N o.10.

9 lnAugust2004,theNASD (now FINRAIconductedaroutinebiennialaudit


10 ofN evW est. D uring the course ofthe audit,the N A SD learned aboutand
ll collected extensiveinformation aboutthesubjecttransactions.
12 Subsequentto the audit,the N A SD and,specitically,K eith Llorens,Senior
13 Com pliance Exam iner w ith D istrict2,engaged in frequentverbaland w ritten
14 communicationswith NevW estandDefendantaboutthesubjecttransactions(see
15 Attachments land2 forexamplesofsuchcommunications).
16 D uring and subsequentto the audit,D efendantinquired ofK eith Llorens on
17 severaloccasions ifthe N A SD had inform ation or knew ofsom ething thatw ould
l8 challenge N evW est's and D efendant's contention thatN evW est'sand D efendant's
19 activitiesinconjunctionwiththesubjecttransactionsdid notconstituteaviolation
20 ofapplicable securitiesrulesand regulations. K eith L lorensnever specifically
21 responded to such inquiries advising N evW estand D efendantto m ake their ow n
22 determ ination on the m atter.
23

24 IN TER R O G A T O R Y N O .12:
25 State allfacts thatsupportY O UR contention thaton ''infonmation and belief,
26 FIN R A ,and particularly certain individuals atD istrict2,oversaw each and eveor
EXHIBIT 1

16
Rum yantsev Declaration,Page 22
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 40 of 111

1 transaction on a daily basis,yetnotw ithstanding m ultiple com m unications,FIN RA


2 failed to facilitate D EFEN D A N T RU M Y AN TSEV 'S efforts to the extentthat
3 PLA IN TIFF now alleges such effortsw ere inadequate''on page 16 ofD efendant
4 Sergey R um yantsev'sA nsw er,w hich w as filed on M ay 9,2008.
5

6 R E SPO N SE TO IN T ER R O G A T O R Y N O .12:
7 B ased on D efendant's infonnation,belief,and understanding ofthe
8 lnterrogatory,D efendantresponds as follow s:
9 D efendantincorporatesby reference each and al1ofhis responses to
10 lnterrogatory N os.10-l1.
11 Subsequentto the A ugust2004 audit,the N A SD and,specifically,K eith
12 Llorens,Senior Com pliance Exam iner w ith D istrict2,engaged in frequentverbal
13 and w ritten com m unicationsw ith N evW estand D efendantaboutthe transactions
14 referencedinthislnterrogatory (seeAttachments1and 2forexamplesofsuch
15 communications).
16 D uring and subsequentto the audit,D efendantand N evW estinquired of
17 K eith Llorens on severaloccasions ifthe N A SD had infonuation orknew of
18 som ething thatw ould challenge N evW est's and D efendant'scontention that
19 NevW est'sandDefendant'sactivitiesin conjunctionwith thetransactions
20 referenced in this Interrogatory did notconstitute a violation ofapplicable
21 secttritiesrules and regulations. K eith Llorens neverspecitically responded to
22 such inquiries advising N evW estand D efendantto m ake theirow n determ ination
23 on the m atter.
24

25
26
EXHIBIT 1

17
Rum yantsev Declaration,Page 23
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 41 of 111

l IN TER RO GA TO RY NO .13:
2 State a1lfactsthatsupportY O U R contention that''D EFEN D A N T
3 RUM YANTSEV relied on policiesand proceduresprom ulgated by DEFENDANT
4 NEV W EST SECURITIES CORPORATION,which policiesand procedures
5 em anated fonn num erouswritten and telephonic com municationswith
6 PLA INTIFF SECURITIES AN D EXCHAN GE COM M ISSION whose staffled
7 D EFEN DANT RUM YANTSEV to believehe could and m ustrely solely on the
8 issuer'stransferagent,attorney opinion letterls),thefirm 'sclearing tirm,and
9 D epositoly TrustCorporation for purposes ofsurm ising the validity ofany given
10 stock certificate and its free-trading status''on page 17 ofD efendantSergey
ll R um yantsev's A nsw er,w hich w as filed on M ay 9,2008.
12

13 R ESPO N SE T O INT ER R O G A T O R Y N O .13:


14 B ased on D efendant's infonnation,belief,recollection,and understanding of '
15 the lnten-ogatory,D efendantrespondsasfollow s:
.
;
16 D uring a1lrelevanttim es,D efendant'sem ployerN evW estw asa
17 broker/dealerengaged in securitiestransactions. M any ofthose transactions
18 involved delive:y and sales ofsecuritiesrepresented by certitk ates notbearing a
19 restrictive legend. A s required by applicable rules and regulations, N evW estand
20 D efendantdeveloped policiesand procedures covering every asped of its business,
21 including transactions in securitiesrepresented by such certificates. N evW estand
22 D efendantcontinually updated N evW est's policies and proceduresbased on
23 new ly-prom ulgated rulesand guidance from itsregulators,including the N A SD
24 (now FINRAIandPlaintiftltheU.S.SecuritiesandExchangeCommission.
25 In oraboutDecember2002,N evW estbecam e involved in a dispute with
26 GlobalReserveCorporation (û:GLBR''),anissuer,aboutthevalidityofsecurities
EXHIBIT 1

18
Rum yantsev Declaration,Page 24
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 42 of 111

1 represented by a certificate notbearing a restrictive legend previously delivered


2 and deposited by a retailclientofN evW est. D uring the course ofthe dispute
3 N evW estand D efendantsoughtadvice from Plaintiff s staffand,in particular,
4 Law rence Renbaum .
5 In 2003,in an incidentunrelated to the 2002 GLBR dispute,N evW est
6 becameinvolvedin adisputewith20/20Networks,Inc.(GET '')regardingthe
7 validity ofsecurities represented by a certificate notbearing a restrictive legend
8 previously delivered,deposited,and sold by a retailclientofN evW est. D uring the
9 course ofthe dispute N evW estsoughtadvice from Plaintiff s staffin W ashington,
10 D C and SaltLake City,U T.
11 Subsequentto the GLBR and TW N K disputes,N evW estand D efendant
12 substantially am ended N evW est'spolicies and procedures applicable to
13 transactions in securitiesrepresented by certificates notbearing a restrictive
14 legend. ln m aking those am endm ents N evW estsubstantially relied on guidance
15 received in com municationsw ith Plaintiffsstaffand theN ASD. Thatguidance
16 specifically suggested thatdeterm inations ofthe issuer,the issuer'stransfer agent,
17 N evW est's clearing firm s,and The D epository TrustCom pany superseded
18 NevW est'sown determinationastothevalidityandtransferability (commonly
19 referred to asGfree-trading status'')ofsecuritiesrepresentedbyacertificatenot
20 bearing arestrictive legend.The guidance also suggested that,ifan attorney
21 opinionletterispresented in conjunctionwith establishingthevalidity and
22 transferability of securities represented by a certificate,itis sufticientfora
23 broker/dealerto rely on such opinion letteron itsface.
i 24
i
25

26
EXHIBIT 1

19
Rum yantsev Declaration,Page 25
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 43 of 111

l IN TER R O G A TO R Y N O .14:
2 In Y O U R RFA R esponse N o.14,Y O U deny thatY O U ''nevertook steps to
3 investigate w hy Jolm Edw ards opened brokerage accounts in m ore than 30
4 differentnam es atN evW est.'' ldentify a1lstepsY O U took to investigate w hy John
5 Edw ardsopened brokerage accounts in m ore than 30 differentnam esatN evW est.
6

7 R ESPO N SE T O IN T ER R O G A T O R Y N O .14:
8 B ased on D efendant's infonmation,belief,and understanding ofthe
9 lnterrogatory,D efendantresponds as follow s:
10 D uring al1relevanttim es,D efendantw as Presidentand a registered principal
11 ofN evW est. ln those capacities,D efendantputin place policiesand procedures
12 thatw ere the basis ofN evW est's inquiries into w hy D efendantEdw ardsopened
13 brokerage accounts in m ore than 30 differentnam esatN evW est. A spartofthose
14 inquiries,D efendantSantos,N evW est'sV ice Presidentand G eneralC ounsel
15 during a1lrelevanttim es,interview ed D efendantEdw ards on m ultiple occasions
16 w ith respectto D efendantEdw ards'activities atN evW est,including the num berof
17 accountsD efendantEdw ards controlled. D efendantw aspresentduring atleast
l8 one such interview and discussed al1such interview sw ith D efendantSantos.
19 D efendantSantos also contacted D efendantEdw ards'attorney about
20 D efendantEdw ards'activities atN evW est. D efendantdiscussed w ith D efendant
21 Santosthose com m unications.

22 NevW estandDefendantshared with theNASD (now FINRAIand Plaintiff


23 a11infonnation aboutD et-endantEdw ards'activities atN evW est. A s early as
24 A ugust2004,the N A SD knew thatD efendantEdw ards opened brokerage accounts
25 in m ore than 30 differentnam es atN evW est. A s early asD ecem ber2004,Plaintiff
26 knew thatD efendantEdw ards opened brokerage accounts in m ore than 30
EXHIBIT 1

20
Rum yantsev Declaration,Page 26
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 44 of 111

1 differentnam esatN evW est. O n severaloccasions,D efendantand N evW estasked

2 theNASD (in particular,KeithLlorens)and Plaintiff(in particular,EdwardBrady)


3 ifthey knew som ething,in addition to infonmation already obtained by NevW est
4 and Defendantthem selves,with respectto DefendantEdwards'activitiesthat
5 would help NevW estcom ply w ith itsdutiesand obligationsunderapplicablerules
6 and regulations.
7

8 IN T ER R O G A T O R Y N O .15:
9 ln Y O U R RFA R esponse N o.16,Y O U deny that ''during the period of
10 January 1,2002 through O ctober 31,2005,Y O U did notknow the identity ofany
11 ofthe benetk iariesofthe accotmtsthatJohn Edwardscontrolled atNevW est''
12 ldentify al1benetk iaries ofthe accotm ts thatJohn Edw ards controlled atN evW est
13 thatYOU knew the identity ofduring the period ofJanuary l,2002 through
14 O ctober31,200.
5.
15

16 R ESPO N SE TO IN T ER R O G A TO R Y N O .15:
17 B ased on D efendant's inform ation,belief,and understanding ofthe
18 Interrogatoo,,D efkndantrespondsasfollow s:
19 The accounts thatJohn Edw ards controlled atN evW estincluded,am ong
20 others,the follow ing four:Jolm M ichaelEdw ardsR oth IRA ;D ebra A nn Edw ards
21 Roth IR A ;Eton Properties Corp;and ShareholderRelations U SA ,lnc. The first
22 tw o ofthe four accounts w ere individualretirem entaccounts in the nam es ofJohn
23 M ichaelEdw ards and D ebra A nn Edw ards,respectively. A ssuch,those tw o
! 24 accounts had clearly identitied beneficiaries The rem aining tw o accounts on the
.

i 25 listwereopened in the nam esofcorporate entities. Itism y beliefthatthe tw o

26 entitieswere respectivebeneficiariesofthe tw o corporate accounts.


EXHIBIT 1

21
Rum yantsev Declaration,Page 27
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 45 of 111

1 IN TER R O G A T O R Y N O .16:
2 In Y OU R R FA Response N o.21,Y O U deny that''before February 1,2005,
3 Y O U did notknow thatJohn Edw ards used the sam e address for severalofthe
4 accountsthrough w hich he w as selling CM K M D iam onds stock atN evW est''
5 W hen did Y O U learn thatJohn Edw ards used the sam e address forseveralofthe
6 accountsthrough w hich he w as selling CM K M D iam onds stock atN evW est?
7

8 R E SPO N SE T O IN T ER R O G A T O R Y N O .16;
9 Based on D efendant'sinform ation,belief,and understanding ofthe
10 Interrogatory,D efendantresponds as follow s:
11 D efendantdoes nothave a specific recollection w hen he learned that
12 D efendantEdw ardsused the sam e address for severalofthe accounts through
13 w hich he w as selling CM K M D iam ondsstock atN evW est. H ow ever,D efendant
14 believesthatitw aspriorto February 1,2005.
15

16 IN TER R O G A T O R Y N O .17:
17 ln Y O UR R FA Response N o.2 1,Y O U deny that''before Februaly 1,2005,
18 Y O U did notknow thatJohn Edw ards used the sam e address for severalofthe
19 accountsthrough w hich he w as selling CM K M D iam onds stock atN evW est.''
20 H ow did Y O U learn thatJohn Edw ards used the sam e address for severalofthe
21 accountsthrough w hich he w as selling CM K M D iam onds stock atN evW est?
22

j 23 R E SPO N SE T O IN T ER R O G A T O R Y N O .17:
!
24 Based on D efendant's inform ation,belief,and understanding ofthe
25 lnterrogatoly ,D efendantresponds asfollow s:
26
EXHIBIT 1

22
Rum yantsev Declaration,Page 28
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 46 of 111

1 Defendantbelievesthathe learned thatDefendantEdw ardsused the sam e


2 address for severalofthe accounts through w hich he w as selling CM K M
3 D iam onds stock atN evW estupon review ofinform ation and docum entscom piled
4 and provided to Plaintiffin response to Plaintiff srequestsw ith respectto
5 D efendantEdw ards'activities atN evW est.
6

7 IN TER R O G A T O R Y N O .18:
8 In Y O U R R FA Response N o.28,Y OU deny that''YO U never took stepsto
9 investigate w hy Jefferies stopped trading CM K M D iam onds stock.'' ldentify all
10 stepsthatY OU took to investigate w hy Jefferiesstopped trading the tlow oforders
ll ofCM K M D iam ond's stock from N evW est.
12

13 R E SPO N SE TO IN TER R O G A TO R Y N O .18:


14 Based on D efendant'sinfonnation,belief,and understanding ofthe
15 lnterrogatol'y,D efendantresponds as follow s:
16 Subsequentto the time when Jeft-
eriesstopped trading the tlow ofordersof
17 CM K M D iam ond's stock from N evW est,D efendantlearned ofthe existence ofa
18 letter ti'om C athleen ShinesD eputy G eneralCounselofJefferiesto A nne D ansard
19 GlowackiattheNASD datedM ay 6,2005 (ttlefferiesLetter''),acopy ofwhich is
20 included w ith this response as A ttachm ent3. U pon learning ofthe existence of
21 Jefferies Letter,D efendantconducted an inquiry and obtained a copy ofthe letter.
22 D efendanttirm ly believesthatthe facts and circum stances described in Jefferies
23 Letter w ere the prim ary reason w hy Jefferies stopped trading the flow of ordersof
24 CM K M D iam ond's stock from N evW est.
25

I 26
EXHIBIT 1

23
Rum yantsev Declaration,Page 29
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 47 of 111

l IN TER R O G A TO R Y N O .19:
2 ln Y O U R RFA R esponse N o.31,Y O U deny that''Y O U nevertook any
3 stepsto determ ine whetherJolm Edwardswasreturning the proceedsfrom his
4 salesofCM K M D iam ondsstock to CM KM Diam onds.'' Identify a11stepsthat
5 Y O U took to determ ine w hetherJohn Edw ards w asreturning the proceedsform
6 his sales ofCM K M D iam onds stock to C M K M D iam onds.
7

8 R E SPO N SE TO IN TER R O G A TO R Y N O .19:


9 Based on Defendant'sinform ation,belief,and understanding ofthe
10 lnterrogatoly ,D efendantresponds as follow s:
11 D cfendantincorporates by reference each and a1lofhisresponsesto
12 Interrogatories N os.1,9-l3.
13 D uring al1relevanttim es,D efendantw as Presidentand a registered principal
! 14
ofN evW est. ln those capacitics,D efendantputin place policies and procedures
15 thatw ere the basis ofN evW est's inquiriesinto D efendantEdw ards'activities at
16 N evW est. N evW estand D efendantinterview ed D efendantEdw ards,w ho asselled
17 thathewasnotan aft-
iliateoftheissuer,thathedid notacquirethesubject
18 securities from the issuerorits affiliates,and thatnone ofthe proceeds from the
19 saleofthesubjectsecuritieswerereturnedtotheissueroritsaftiliates.
20 B ased on itspoliciesand procedures,N evW estm ade and m aintained records
21 oftransfers offunds from the accountsthatD efendantEdw ards controlled at
22 N evW est. N evW estand D efendantreview ed such records. N one ofthe transfers
23 offunds from the accountsthatD efendantEdw ards controlled atN evW estw ere
24 directed to CM K M D iam onds.
25 A san introducing broker/dealer,N evW estnevertook custody orperform ed
26 transfers offundsor securities butrelied on its clearing firm s to perform those
EXHIBI
T1

24
Rum yantsev Declaration,Page 30
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 48 of 111

l functions. N evW est's clearing finns atallrelevanttim eshad in place their ow n


2 policiesand proceduresdesigned to ensure com pliance w ith applicable rulesand
3 regulations. Defendantreceived and reviewed exception reportsproduced by
4 N evW est's clearing firm s. N one ofexception reportsprovided by N evW est's
5 clearing firm s suggested thatany transfersoffundsfrom the accounts that
6 D efendantEdw ards controlled atN evW estw ere directed to CM K M D iam onds.
7 NevW estandDefendantsharedwith theNASD (now FINRAIandPlaintiff
8 a11inform ation aboutD efendantEdw ards'activities atN evW est. A s early as
9 A ugust2004,the N A SD knew thatD efendantEdw ards w as transferring outthe
10 proceeds from his salesofCM K M D iam onds. A searly asD ecem ber2004,
ll Plaintiffknew thatD efendantFdw ardsw as transferring outthe proceeds from his
12 sales ofCM K M D iam onds. O n severaloccasions,D efendantand N evW estasked
13 theNASD (inparticular,Keith Llorens)and Plaintiff(inparticular,EdwardBrady)
14 ifthey knew som ething,in addition to inform ation already obtained by N evW est
15 and D efendantthem selves,w ith respectto D efendantEdw ards'activitiesthat
16 w ould help N evW estcom ply w ith its duties and obligations underapplicable nales
17 and regulations. D uring a1lrelevanttim es,neither N A SD ,norPlaintiffprovided
18 N evW estand D efendantw ith any inform ation thatw ould help determ ine w hether
19 John Edw ards w asreturning the proceeds from his sales ofCM K M D iam onds
20 stock to CM K M D iam onds.
2l

22 IN T ER R O G A T O R Y N O .20:
23 ln YOUR RFA ResponseN o.36,Y OU deny that''in 2004,John Edw ards's
24 trading ofCM K M D iam onds stock accounted forabout80 percentofN evW est's
25 totaltrading com m issions.'' ln 2004,w hatpercentage ofN evW est'stotaltrading
26 com m issionscam e from John Edwards'strading ofCM KM D iam ond'sstock?
EXHIBIT 1

25
Rum yantsev Declaration,Page 31
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 49 of 111

l R ESPO N SE T O IN T ER R O G A TO R Y N O .20:
2 Based on D efendant's inform ation,belief,and understanding ofthe
3 lnterrogatory,D efendantresponds as follow s:
4 ln 2004,approxim ately sixtp five percentofN evW est's totaltrading
5 com m issions cam e from D efendantEdw ards'strading ofCM K M D iam ond's stock.
6

7 IN TER R O G A TO R Y N O .21:
: ln2003,whatwerethetotalcommissions(in dollars)thatNevW estearned
9 from John Edw ards'strading ofCM K M D iam ond's stock?
10

11 R ESPO N SE T O IN T ER R O G A T O R Y N O .21:
12 B ased on D efendant's inform ation,belief,and understanding ofthe
13 lnterrogatory,D efendantresponds as follow s:
14 The totalcom m issionsthatN evW estealmed from D efendantEdw ards's
15 trading ofCM KM D iam ond'sstock in 2003 were $20,240.
16

r 17 IN TE R R O G A TO R Y N O .22:
18 In2004,whatwerethetotalcommissions(indollars)thatNevW estearned
19 from John Edw ards'strading ofC M K M D iam ond's stock?
20
21 R E SPO N SE TO IN TE R R O G A TO R Y N O .22:
22 B ased on D efendant's inform ation,belief,and understanding ofthe
23 lnterrogatofy,D efendantresponds as follow s:
24 The totalcom m issions thatN evW estearned from D etkndantEdw ards's
25 trading ofCM KM Diam ond'sstock in 2004 were$2,371,289.
26
EXHIBIT 1

26
Rum yantsev Declaration,Page 32
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 50 of 111

1 IN TE R R O G A TO R Y N O .23:
2 In2005,whatwerethetotalcommissions(in dollars)thatNevW estearned
3 from John Edw ards'strading ofCM K M D iam ond's stock?
4

5 R E SPO N SE TO IN TE R RO G A TO R Y N O .23:
6 B ased on D efendant's inform ation,belief,and understanding ofthe
7 Interrogatory,D efendantresponds as follow s:
8 The totalcom m issionsthatN evW estearned from D efendantEdw ards's
9 trading ofCM KM Diam ond'sstock in 2005 were $183,977.
10

ll IN TE R R O G A TO R Y N O .24:
12 In Y O U R RFA R esponse N o.4l,Y O U deny that ''Y OU do notknow from
13 w hom John Edw ards obtained his shares ofCM K M D iam onds stock.'' ldentify
14 ti'om w hom John Edw ards obtained sharesofCM K M D iam onds stock.
15

16 R E SPO N SE TO IN TER R O G A TO R Y N O .24:


17 B ased on D efendant's inform ation,belief,and understanding ofthe
18 lnterrogatory,D efendantresponds as follow s:
19 D uring D efendant'stestim ony taken on April l3,2006,Plaintiffpresented
20 Exhibit 133 ''Certificates deposited into John Edw ards'accounts.'' The Exhibit
21 clearly identified a num ber ofindividualand entities,from w hom D efendant
22 Edw ards obtained sharesofCM K M D iam onds stock. In this response,D efendant
23 incorporatesby reference a1linform ation contained in said Exhibit.
24

25

26
EXHIBIT 1

27
i Rum yantsev Declaration,Page 33
i
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 51 of 111

l IN TERR O GA TO RY NO .25:
2 In Y O U R RFA R esponse N o.41,Y O U deny that''Y O U do notknow from
3 w hom John Edw ards obtained his shares ofCM K M D iam onds stock.'' D escribe
4 how Y OU leanled thatJohn Edw ardsobtained sharesofCM KM Diam ondsstock
5 from those w hom Y O U identify in Interrogatory R esponse N o.24.
6

7 R ESPO N SE T O IN TER R O G A TO R Y N O .25:


8 B ased on D efendant's inform ation,belief,and understanding ofthe
9 Interrogatory,D efendantrespondsasfollow s:
10 D uring D efendant's testim ony taken on A pril13,2006,Plaintiffpresented
11 Exhibit 133 ''Certificates deposited into John Edw ards'accounts.'' The Exhibit
12 clearly identified anum berofindividualand entities,from whom Defendant
13 Edw ardsobtained shares ofCM K M D iam onds stock.
14

15 IN TER R O G A TO R Y N O .26:
16 In YOUR RFA Response No.43,YOU deny that''YOU nevertook any
17 steps to contirm thatthe people from w hom John Edw ards acquired the CM K M
18 D iam onds stock w ere notaffiliated w ith C M K M D iam onds,otherthan to have
19 A nthony Santoscallthe transfer agent, lstG lobalStock Transfer.'' ldentify a1l
20 stepsthatY O U took to confrm thatthe people from w hom John Edw ards acquired
21 the CM K M D iam onds stock w ere notaffiliated w ith CM K M D iam onds.
22

23 R ESPO N SE T O IN TE R R O G A TO RY N O .26;
24 Based on D efendant'sinform ation,belief,and understanding ofthe
25 lnterrogatory,D et-
endantresponds as follow s:
26
EXHIBIT 1

28
Rum yantsev Declaration,Page 34
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 52 of 111

l D uring allrelevanttim es,D efendantw as Presidentand a registered principal


2 ofN evW est. ln those capacities,D efendantputin place policies and procedures
3 thatw ere the basis ofN evW est'sinquiries into w hetherthe people from w hom
4 D efendantEdw ards acquired the CM K M D iam onds stock deposited atN evW est
5 (tGsecuritiesatissue'')werenotaffiliatedwith CM KM Diamonds.Aspartofthose
6 inquiries,D efendantSantos,N evW est'sV ice Presidentand G eneralCounsel
7 during allrelevanttim es,interview ed D efendantEdw ards on m ultiple occasions
8 w ith respectto D efendantEdw ards'activities atN evW est,including the source of
9 DefendantEdwards'CM KM Diam ondsstock. Defendantwaspresentduring at
10 leastone such interview and discussed al1suc,
h intelwiew sw ith D efendantSantos.
l1 D efendant Santos contacted 1StG lobalto verifjrthatthe certificates
12 representing the securities atissue w ere validly issued and unrestricted. 1S'G lobal
13 vouched in w riting for allcertiticates representing the securities atissue. U pon
14 inquiry,1StG lobalalso stated thatnone ofthe securities atissue cam e into
15 D efendantEdw ards'controlas a resultoftransfers from affiliatesofthe issuer. lSt
16 G lobalalso stated thatitissued the certit-icatesrepresenting the securities atissue
17 on the basis ofattolm ey opinion letters.
18 D efendant Santos also contacted D efendantEdw ards'attorney about
19 DefendantEdwards'activitiesatN evW est. Defendantdiscussed with Defendant
20 Santos those com m unications.
21 NevW estandDefendantshared with theNASD (now FINRA)andPlaintiff
22 a11inform ation aboutD efendantEdw ards'activities atN evW est O n several
.

23 occasions,Defendantand NevW estaskedtheNASD (in particular,Keith Llorens)


24 and Plaintiff(inparticular,EdwardBrady)ifthey knew something,in additionto
25 inform ation already obtained by N evW estand D efendantthem selves,w ith respect
!
26 to D efendantEdw ards'activitiesthatw ould help N evW estcom ply w ith its duties
EXHIBI
T1

29
Rum yantsev Declaration,Page 35
ii Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 53 of 111
!
'
1
I

1 and obligationsunderapplicablerules and regulations. D uring allrelevanttim es,


2 neitherNA SD ,norPlaintiffprovided N evW estand Defendantw ith any
3 inform ation thatw ould help determ ine w hetherthe people from w hom John
4 Edw ardsacquired the CM K M D imnondsstock w ere aftlliated w ith CM KM
5 Diam onds.
6
7

8 SW ORN tounderthepenaltyofperjtu'ythis23Mday ofDecember,2008.


9
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EXHIBIT 1

Rum yantsev Declaration,Page 36


'

Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 54 of 111

1 VERIFICATIO N
2

3 STATE OFNEVADA )
4 COIJNW OF CLARK )
5

6 SERGEY RIJM YAN TSEV ,being firstduly sworn according to law,


7 deposesand says:Thathe is aDefendantin the above-entitled m atter;thathehas
8 read the foregoing Responsesto lnterrogatoriesand know sthe contentthereof;that
9 the sam e istrue ofhis ow n know ledge,exceptthose m atters stated on inform ation
10 and belief,and asto thosem atters,he believesthem to betrue.
11

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16 SUBSCRIBED AN D SW ORN to before m e


17 this c
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EXHIBIT 1
3l

Rum yantsev Declaration,Page 37


Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 55 of 111

SEC v.CM K M D iam onds,Inc.,etal.


2:08-cv-00437 -LRH -IU J

A TA CH M EN T 1

!
i
!

(
EXHIBIT 1

32
Rum yantsev Declaration,Page 38
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 56 of 111

Sergey Rum yane ev

From : ''Llorens,Kei
th'<Kei
th.l-lorens@ nasd.com>
To: <sergey@ nevwest.netp
Sent: Fri
day,December10.2004 9:46 AM
Subject: CMKX
Sergey,

Y esterday'stotaltrading volum e forCM KX w as approxim ately 40 billion


shares.M r.John Edwardssold over 14 billion sharesyesterday.Edwards'
activity represented approxim atellr1/3 ofthe totaltrading volum e for
CM K X .D id Edw ards give N evW estany differentinstructionsyesterday? W as
there any new s? W hathappened yesterday thatw ould cause this extrem e
increase in Edw ards'selling activity?

Thank you,

K eith A .Llorens
Senior Com pliance Exam iner
D istrict2 -Los Angeles
N A SD
300 S.G rand A venue,Suite 1600
Los Angeles,CA 90071-3126
tel213.613.2633
fax 213.617.3299
keith.llorens@ naid-sçom
ww w ,nasd.com
j
I

Thise-mail,including attachments,may include confidentialand/orproprietal'y inform ation,and may be


used only by the person orentity to which itis addressed. lfthe readeroi
-thise-m ailis notthe intended
recipientorhis orherauthorized agent,the readerishereby notified thatany dissem ination, distribution
orcopying ofthisc-m ailisprohibited.Ifyou have received thise-m ailin error,please notify the sender
by replying tothism essageand delete thise-mailimm ediately.

EXHIBIT 1

33
Rum yantsev Declaration,Page 39
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 57 of 111

SEC v.CM K M D iam onds,Inc.,eta1.


2:08-cv-00437 -LR H -RJJ

A TA CH M EN T 2

EXHIBIT 1

34
Rum yantsev Declaration,Page 40
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 58 of 111

From :''
Llorens Keith''KKeith.lwlorensrt-
tnasd.com>
To:''Sergey Rumyantsev'''
ctseruev/ nevwest.net>
Sent:Tuesday,Janum'y04,2005 2:l6PM
Subject:RE:CMK.X
CM KX VOLUM E

D ATE TO TAL M A RKET VO LUM E SHARES EDW A RDS SO LD % OF M ARKET VOLU M E


EDW A RD S REPRESEN TED
12/9/2004 44,437,521,354 14,470,000,000 32.56%
12/8/2004 1,147,615,978 150,000,000 13.07%

12/772004 2,159,179,408 I65,000,000 7.64%

12/6/2004 1,610,529,919 I00,000,000 6.21%

1273/2004 1.
471,165,710 400,000,000 27.l9%
12/2/2004 1v413,130,666 l00,000,000 7.08%

12/1/2004 1,699,619,157 100,000,000 5,88%

l1/30/2004 1,743,463,464 400,000,000 22.94%

11/29/2004 1,652,386,998 l00,000,000 6.05%

l1/26/2004 1,316,764,048 300,000.000 22.78%

11/24/2004 1,188,389,231 200,000,000 16.83%

K eith A .Llorens
SeniorComplianceExam iner
tel213.613.2633
f-
ax 213.6l7.3299

originalM essage-----
- -- --

From:Sergey'Rumyantsev(lnailto:serge/'anevvvest.net)
Sent:Tuesday,Decem ber14,20042:56 PM
To:LlorensaKeith
Cc:santost
o
a/nevwest.
net
Subject:Re:CMKX
Keith,

Thefollow ingresponsesaretothe bcstofmy know ledge asIhaven't


com lntlnicated w ith John Edwardsdirectly:

l.A Tim esalequeryonNW IIindicatcsthatthe volum ein CM KX on


D ecem ber9,2004 was996.357,5l7shares.Iknow fora factthatN W ST traded m ore
than 14 billion sharesforJohn Edwardson thatdate,and al1ofthetrades
werereportedtotape(1haveAC'
rprintouts).Consideringthediscrepancy
betweenw hatw eactually reportandwhatshowsupin historic
StatisticalSum m arics,IHAV E NO W AY O F KN OW IN C whatpercentageofthevolum einan
issuew ctradedona givenday.
EXHIBIT 1

35
Rum yantsev Declaration,Page 41
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 59 of 111

2.A requestin responsetoa question:asyou havebettersourcesthan


ldo,please,providemewith information onwhatpercentageofthedaily
volum ein CM KX NevW esttraded on each of10tradingdayspreceding
December9,2004.
3.A syou are likelyto see,w ehadnotbeenselling muchCM K.X priorto
Decelnber9,2004.Thestockpricew asgetting weakerevery day and we
weren'tgettingthelimitpricesestablishedby M r.Edwards'orders.On
December9,2004,eventhe$0.0001biddisapgearedforaperiodoftime.
Itism yunderstanding,thatcontinualdeclinesln thestockpriceprom pted
M r.Edwardsto lowerhisIimitpriceto$0.00009.W eliquidatedalICLEARED
CM K.
X positionsfrom M r.Edwards'accountson Decem ber9-10 2004.

4.Therewasno newson CM KX onoraround December9 2004.


******************+*************************
Sergey Rum yantsev
President& CEO
N evW estSecuritiesCorporation
5440 W estSaharaAvenue,Suite202
LasV egas,N V 89146
jhone:(702)938-06lI
tax: (702)257-4651
email:sereevrznevwest.net
+++*>******###**#++#+++++++*+******+#*+++***

DISCLAIM ER

Thise-mailandanyattachm entsthereto isintended only forusebythe


addresseets)namedhereinandmaycontain legallyprivilegedand/or
contidentialinformation.lfyouarenottheintendedrecipientofthis
e-m ail,you areherebynotitiedthatanydissem ination,distributionor
copyinjofthise-mailandanyattachmentsthereto isstrictly
prohiblted.

Ifyou havereceivedthise-mailinerror please ilnm ediately notifythe


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ThesenderthereforedoesnotacceptIiability forany errorsorom issions
inthecontentsofthism essagewhich ariseasaresultofe-m ail
transm ission.

NOTICE REGA RDIN G PRIV ACY AN D CONFID ENTIALITY

NevW estSecuritiesCorporation may atitsdiscretion Inonitorand


review thecontentofaIle-lnailcom lnunications.
-- --- OriginalM essage-----

From:''Llorens,Keith''<lkeith.lwlorensr
z nasd.coml>
To:<serzevl nevwest.net>
Sent:Friday,D ecem berl0,2004 9:46 AM
Subject:CMK.X
EXHIBiT 1

36
Rum yantsev Declaration,Page 42
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 60 of 111

Sergey.
Y esterday'stotaltradingvolum eforCM KX w asapproxim ately 40billion
shares.Mr,Jolm Edwardssold over14billionsharesyesterday.Edwards'
activityreqresentedapproximately1/3ofthetotaltradingvolumefor
CM KX .Dld EdwardsgiveNevW estany differentinstructionsyesterday?W as
thereany new s? W hathappenedyesterdaythatwouldcausethisextrem e
increaseinEdwards'sellingactivity?

Thank you,

KeithA .Llorens
SeniorCom plianceExam iner
District2 -LosAngeles
N ASD
300 S.GrandAvenue,Suite 1600
LosAngeles,CA 90071-3126
tel213.613.2633
f-
ax 213.617.3299
keith.llorensa nasd.com
www ,nasd.com

Thise-m ail,includingattachm ents,m ay includeconfidentialand/or


progrietaryinformation andmaybeusedonlybythepersonorentityto
whlch itisaddressed.lfthereaderofthise-m ailisnottheintended
recipientorhisorherauthorized agent,thereaderisherebynotified
thatanydissem ination,distribution orcopyingofthise-m ailisprohibited.
lfyou havereceived thise-m ailin error,pleasenotif.ythesenderby
replyingtothism essageand deletethise-m ailimm ediately.

Thise-m ailincludingattachm ents m ay includeconfidentialand/orproprietary infonnation and m aybe


used onlybytheperson orentity towhich itisaddressed.Ifthereaderofthise-mailisnotthe intended
recipientorhisorherauthorized agent,thereaderisherebynotifiedthatanydissem ination distributionor
copying ofthise-mailisprohibited.lfyouhavereceivedthise-m ailin error.pleasenotif' y thesenderby
replyingtothism essageand deletethise-m ailimm ediately.

EXHIBI
T1

37
R um yantsev Declaration,Page 43
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 61 of 111

SEC v.CM K M D iam onds,Inc.,eta1.


2:08-cv-00437 -LRH -RJJ

ATA CH M EN T 3

EXHIBIT 1

38
Rum yantsev Declaration,Page 44
95/06/211l 1Case
7:55 F2:08-cv-00437-LRH-RJJ
AZ JDocument
EFFERIES & 163
COKPANY 2 002
Filed 12/28/10 Page 62 of 111

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40
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Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 71 of 111

1 CERTIFICA TE O F SERV ICE


2 I
certify thatthisdocum entw as served on the follow ing by e-m ailon D ecem ber
3 23,2008:

4 M Olly M . W hite
5 Leslie A .H akala
Securities and Exchange Com m ission
6 5670 W ilshire Boulevard, l1th Floor
7 LosA ngeles,California 90036-3648
E-mails:whitem@ sec.gov& hakalal@ secxgov
8 Attorneysforthe5'
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9
lrving M .Einhorn,E sq.
10 Law O ffices ofIlwing M .Einhorn
11 l7l0 10th Street
M arthattan Beach,CA 90266
12 Email:ime@einhornlaw.com
13 AttorneyforDep ndantJohnEdwards
14 M ark S.D zarnoski,Esq.
G ordon & Silver,Ltd.
15 3960 H ow ard H ughes Parkw ay, N inth Floor
16 Las V egas,'
N V 89169
Email:m dzarnoski@ gordonsilver.com
17 AttorneyforHelenBagley and lstGlobalStock Transp rLLC
18
U rban A .C asavant
19 R R 5 Site 16 B ox 29
20 Prince A lbert,Saskatchew an S6V 5R 3
Canada
21 Email:ucasavant@ shaw.ca
22 K athleen Tom asso
2,3 9580 Lake Serena D rive
B oca Raton,FL 33496
24 Email:ttomasso@ ncfgcomm.com
25
26
EXHIBIT 1
48
Rum yantsev Declaration,Page 54
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 72 of 111

1 A nthony Tom asso


9580 Lake Serena D rive
2 B
oca R aton,FL 33496
3 Email:ttomasso@ncfgcomm.com
4 A nthony Santos
5 6965 N orth D urango D rive,Suite 1115-381
Las V egas,N V 89149
6 Em ail:A m s.nwst@gmai
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7
N evW estSecuritiesC orporation
8 c/o A nthony Santos
9 6965 N orth Durango D rive,Suite 1l15-381
Las V egas,N V 89149
10 Email:Ams.nwst@gmail.com
11 D
ouglasE.G riffith,Esq.
12 K esler& R ust
M clntyre B uilding 2ndy'loor
l3 SM ,
68 . ain Street
14 SaltLake C ity,U T 84101
Email:dzriffith@ kesler-rust.com
15 Attorneyybrp arylAnaerson
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17 Eric N K lein & A ssociates,P.A .
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l8 1200 N .FederalH ighw ay,Suite 200


B oca R aton,FL 33432
19 Email:enk@kleinattorneys.com
20 S
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21 6801 Lake W orth R oad,Suite 2 14
Lake W orth,FL 33467
22 Email:seankoplow@ gmailcom .

23
M ichaelR .B akst
24 pxjs .r()2,
a5 222 Lakeview A venue,#160
W estPalm Beach,FL 33401
26 m ichaelbakst@ ruden.
.
com
EXHIBIT 1

49
Rum yantsev Declaration,Page 55
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 73 of 111

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John W esley H all,Jr.
2 1311 S. Broadw ay
3 Little Rock,A rkansas 72202-4843
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EXHIBIT 1

Rum yantsev Declaration,Page 56


Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 74 of 111

E X H IB IT 2

Rum yantsev Declaration,Page 57


Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 75 of 111

Page l

l BE FOR E THE NA T ION A L A S SO CIA T IO N


2 OF SECURITIES DEALERS , INC .
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5 in the Matter o f ) No . E02040112
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6 NEVWEST SECURITIES )
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12 Los ANGELES , CALIFORN IA i
13 WEDNESDAY, JANUARY 26, 2005 q
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A T K IN SO N -BA KE R , IN C .
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24 REPORTED BY : ANGELAH HUNTER , CSR NO . 12574
25 FILE NO .: 9FOOACD

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EXHIBI
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Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 76 of 111

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6 NEVW EST SECURI.FIES ) 8 ByMsJablownow 3l,59,66,77,ll9,L33,149,
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CORPORATION ) 9
7 10 STAFF'S
8 NUMBER EXHIBITS PAOE
1l
9 l EkwumtntdatedJanuary21st.2005onNASD 8
10 12 letterheadtoSergeyRunlyantsev
i3 2 CRD extraction rorMr.Rumyantsev l7
lI 14 3 DxumentdatedAugust26 2004onNevwest 6l
12 InvestigativttestimonyofSERGEY RUM YANTSEV,a SecuriticslettcrheadtoKeitlLl
orens
l3 witnessherein, taken on behalf.oftheNASD at300 South I5 4 LetterdatedNovember1#2004toMr .
.
'
. Santos l48
l4 GrandAvenuel6thFloor,LosAngelesCaliforniaon :6 from shcrwinCook ' 1
15 Wednesday,January26,2005,beforeAngelahHunter,CSR No. 1-3 5 Two-pajedocumentent
ltltd'Stalementof I64 1
16 posi
tion. l
l2574. y8 J
l7 6 Ten-pagedxumcntenti tlcd 'Noti cclomembers l87
jg (9 022lInformalionalonanti-moneylaunderi ng'
I9 20 7 MNcwlaacetoauuu
nlsd
tucume
edn1t
dat a
2/tion
27 FirstColony
/200 209 '
erc an ,
20 21 8 New aucountdocumentatlon datt,dJanuary 210 '
f
2I
22 22 ll 2005forlnnovuteMoblle'.(
.rust (
23 9 Ne
'
waccountdocumentatlont
bJBT!Trust, 214 t
23 dated4/3/2093 '
24 24 )
10 Two-pqgewlrelnstructions dated l0?
,1/03 215 .
25 25 toWebInvestmentScarchEn 'ginc '

Page3 Pagej .1
.
1
.
1 A PP E A R A N C ES 1 W ITNESS'S ;
1
2 NUM BER EXHIBITS PAGE .
3 Forthc NASD: 2 .
4 BY :JOHN E.W EBBER,CornplianceExaminer 1 Unidcntifieddocument 227 /
KEITH A.LLORENS,SeniorComplianceOflicer 3 )
5 JILI.I-.JABI.ONOW ,SeniorregionalAttoruey (Exhibitsretained) L
300 South Grand Avenue.Suite I600 4
6 LosAngetes.Calilbrnia 90071 5
213-613-2650 6 QCyES'I'I()NSW ITNESS INSTRUCTED NOTTO ANSW ER
7 (NONE)
8 Forthe W itness; 7
9 l
kIC.DER.M O' I'I'
,W ILL & EM ERY INICORM ATION TO BE SUPPLIED
BY;JAMESL.SANDERS,ATTORNEY AT LAW 8 (NONE)
10 2049 Century Park East.Suite 3400 9
LosAngeles,California 90067 10
ll 310-551-9397 ll
12 12
13 l3
14 14
15 l5
16 l6
17 l7
18 18
19 l9
20 2()
2I 2I
22 22
23 23 r
24 24
25 25

EXHIBIT 2 Page2 of7 2 (Pages2to 5)


Rum yantsev Declaration,Page 59
'

Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 77 of 111

Page6 Page8
I LOSANGELES,CALIFORNIA;WEDNESDAY,FEBRUARY26.2005 1 Q. Didyoudiscussanythingelse?
2 -o0e- 2 A No.
3 SERGEYRUMYANTSEV. 3 (Exhibit1markedforidentifcation.)
havingt
irstbeendulysworn,was 4 () staffisgoing tohand you what'sbeen marked as
4 examincdandtestifiedasfOllow5: 5 stafpsExhibit1 one-pagedocumentdatedJanuary21st
5 .
6 2005' on xAs:lletterheadtosergey Rum yantsev.
6 EXAMINAI'ION 7 A. (ReviewingExhjtljtj.
)
7 BYMR.WEBBER: 8 Q. Please1keamom entto review thedocum ent.
8 Q. W careontherecordatapproximately8:35on 9 Do yourecognizethedocum ent?
9 Januazy26th,2005. 10 A. Yes.
10 Svillthen'itaesspleasestateandspellhisfull 1l Q. Andwhatdo yourecognizethedocum enttobe?
ll namefortNerecord.
l2 A. Sergey Rumyantsev.Fifstname-S-e-r-g-e-y,and 12 A. Thatisthelettercontirm ingm yappointment.
13 thelastnarncisTt-u-nx-y-a-n-t-s-e-v. 13 Q. Okay.Asstated inExhibitlsyourtestimony
14 (2. A11right.M ynameisJohn W ebber I,m a 14 hasbeen requested inthismatterpursuanttoNASD
l5 complianceexaminerwithDistrict2. Alsopresentis 15 ProceduralRule 8210. Rule 82l0 requiresany person
l6 KeithLl
otens' ascni
orcompliancccxami
ncr- and l6 subjecttoNAsD'
sjurisdictiontoprovideaIlinformation
I7 JillJablownow afegi onalcounselbothalsowiththcNASD l7 requestedbythestaff.Therefore,please beadvisedthat
18 oi strict2. 18 failureto answ eranyofourquestions failuretoprovide
19 '
rhisisan investigationbyNASD todctcrminc l9 any inform ation requested by thestaffduring this
20 whethertherehavebeenanyviolationsoftheassoci ation'
s 20 interview '
,orfailure to com pletethe interview befbre the '
)
.

2l rul
esorfederalsecuritieslaws. 21 staffdeemsittobecompletecouldbeviewedasactivity 1
22 Mr.Rumyantsev,youareentitledtobe 22 inconsistentwithRule82l0 andNA SD ConductRule2l10. '
23 rcprcscntcdbycounselofyourownchoosing.Willyoube 23 ltcouldbethebasisfortheinitiation ofa 1
1 !
24 sorepresentedtoday? 24 disciplinary proceedingthatcould leadto the imposition
25 A. I'm representedbyJirnSanders. 25 ofsanctionsincluding abar censure suspel lsionand/or

Eyage7 Page9 1
1 M R.SAN DERS'
. That'sm e. 1 Gne. l
2 Q. And doesyourcounselrepresentyou individually 2 M r.Rumyantsev,youweresworn in underoath )
3 oronbehalfofathirdparty? 3 today.Thus,yourfailureto trutbfutly answerquestion #
4 MR.SANDERS:lndividually. 4 couldexposeyoutoprosecutionforperjuozunderboththe f
5 THEWl'I'NESS:lndividually,yes. 5 federalandStateofCaliforniaperjury'statutes.Also 1
6 M R.W EBBER. .M r.Sanders,areyourepresenting 6 NASD ProceduralRule82l0requiresthatyouanswcrallthe l
7 anyoneelsein connectionwith the exam ination in the 7 staff'squestionstruthfully, !
8 m atterofNevW estSectlritiesCorporationAExam ination s Iwanttorelnind youthatgivingfàlsetestim ony 1
1
9 E-02040ll2? 9 heretodaycould resultintheinitiation ofadisciplinary .
'
10 M R.SAN DERS:Right. Atthispoint,I'm l0 actionagainstyotlw hoseend resultcould betheim position t
11 .1
representingN evW estSecurities,thewitness.M r.Santos, ll ofsuch sanctionsasabark- rom thesectkritiesindustry, '
I2 M r. Anderson Mr.I-aub and M r.Dillon. l2 suspension,censureand/orfine.
.
4
I3 BY MR.WEBBER: I3 Doyouunderstandallthat1iavejtlst .
l4 Q M r.Rumyantsev.didyouhave anyprior
.
.
l4 representedtoyou..
) 2
15 conversationsw ithanyoneregarding yourappearancehere 15 A . Y es'Ido. '
!
'
16 today? 16 Q. NASD isconduclingthisinterview aspartofa 4
2
l7 A. Welljustinthegeneralsense Idiscussedthe 17 fact-findingprocesstodeterminewhethertherehavebeen '
18 need toappearanddiscussaIlthelnatterstothe fùllyou 18 anyviolationsoftheassociation'
srules.Atthispoint
19 know whateverlrem em beranddeliverthew holetruth. 19 theN ASD hasnotm adeany determ inationthatanysuch
20 Q. Okay.W hodid youhavethoseconversations 20 violationshaveoccurred.Thisinterview isnonpublicand
2l with? 21 confidential.Itisnotintendedtobeanadversarial t
22 A . Basically wegottogetherwithAntony Santos, 22 proceeding. .
23 thegeneralcounsel.SohesaidsHey,bethereontime, 23 Thestaffcontrolsthcrecord.Andassuch,the j
24 answeralIthequestions betruthfulyouknow everything 24 courtrcportcrwillgoofftherecordonlyatour t
25 you rem em ber. 25 instruction.Shouldanyonewishtogo offtherecord for E
;
.

EXHIBIT2 Page 3 of7 3(Pages6to9)


Rum yantsev Declaration,Page 60
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 78 of 111

Page90 Page92
assets. 1 Q. Andwhatarethemanualprocedures?
A. Uh-huh. 2 A. Manualproceduresvely muchfocusonajudgment
Q. W hichwould includethetirm'sbankaccount. 3 calland checksandbalancesthatwehavewiththetinn
4 A. Uh-huh. 4 because--justlikelreview tradingblottersonadaily
5 Q. Thetirm'sclearingdeposit. 5 basis Mr.Dillon reviewsevery singletradeticket
6 A. Uh-buh. 6 virtuallyon adaily basis.So wehavehvo peoplew orking
7 Q. Thefirm's- any ofthc'
lirm'spositionsin 7 independently ofeneanother.
8 theirtradingaccount. 8 Andlhavean extrem elycautioustrader Jim
9 A. Uh-huh. 9 Correia w ho'sthesecondtraderonm y desk. Hew ould
10 Q. Thosedocnments suchasthebankstatements 10 rarely run atradewithoutactuallyshowingmetheticket
l1 theshtementsfrom CCSshowingthose,doesMr.Cowentake 11 justtoverifythat,youknow,Hey,wouldthisbeconstrued
12 thosedocum entsandenterthem intotheNYOB? 12 assom ething thatisofinterest.
13 A. Yes.Allofthosedocum entsarriveatNevW est 13 So Iwouldputm yselfand M r.D illon atthe
14 inhardcopyform .S0wefaxa11ofthem toM r.Cowen,and 14 forefrontofthisfront-lineeffort.And 1havea asl
15 heistheonewhoishandlingthem. 15 m entioned verydiligentstaffontrading desk thathelps
16 Q. Okay. 16 meout,you know,tomakesurethatldon'toverlook
)7 A. Asam atteroffactyoumightrecallthat 17 som ethingthatm ightattractfurtherreview .
18 duringthecourseoftheauditwehadthediscussionabout l8 Q. AretheSARSfilingsreportedtotheboardof
19 valuingpositionsinourtrading account.Thatparticular 19 directors? 1
20 schedulcisvcrymuchm ymaking,becauseyrememberythere 20 A. N o,notreportedtotheboard ofdirectors. 2
2I isadiscrepancy inwhatthevalueaclearingt-11711might 2l Q. W hoaretheyreported to? t
22 assigntoapositionversuswhatIwouldconsidertobea 22 A Essentially top m anagem ent,M r.Santos
23 fairmarketvaluebasedonthebidtcst whichistie 23 M r.Dillon DaveLaub andm yselfaretheonesthatare
24 metiodprescribedbySEC rulestovaluepennystocks.I 24 involvedinthatchain. 1
25 makeallofthosecorfections,andlprovidethatschedule 25 Q. How oftenhastheGrm filedSARSreports?

Page9l Page93
to M r.Cow en. A. W eli thert isno setfrequency. It'snotthat
&1R.LLORENS:Okay. we'reonanykindofschedule.ButIbelievetw' oorthree
reportstiatwe have on file.
FUR'l'l'
iER EXAM INATION Q, W henisthelitsttirneyouaSARSreport,the 1
BY M R.W EBBER: 5 tirm? j
:
!
Q. W hatisyourroleinthefirm'
santi-money 6 A. lwouldn'
twanttobeguessing,btltitwouldbe
laundering supervision? 7 aboutayearto ayearand ahalfago. c
8 A. W ell,IbelieveIansweredthisquestionearlier 8 Q. Didthatinvolveacustomerofthefirm? '
i
9 loday.Onthetradingdesk,l'm justoneofthepeopleon 9 A. Yeah.Asllnentionedearlier thereportsthat E
;
10 the frontlines,essentially being a brokerand being 10 we filed so for,they focusprimarlly on trading acîivity. .
'
11 solnebodywhoseesevety tradethatgoesthroughNevW est.I 11 Thevel 'y firslreportthatwefiledwaspriorto theformal ;
.

12 w ould considermyselfsomebody who is involved in early l2 requirement and thatwas--thatinvolved an accountfrom .


<
l3 detection ofany kind ofpatternsthatmightattract l3 an inzaginary countly,theDominion ofM elchizedek.You '
14 ftlrtberrevivw. I4 mightrememberthisbecausewedid-- 1
15 Q. Andwhatarethefirm'sresponsibilitiesfor l5 THE REPORTER:W ait.
16 anti-m oney latlndering? 16 TH E W ITNESS: --provide you with copies.
17 A. The requirementisto iave proceduresand 17 THE REPORTER: i'm sorry. An imaginary com pany? .
l8 policiesinplacereasonablyexpectedtodetectareportto l8 Ididn'
t-- 1
l9 properauthoritiessuspiciousactivities.And inour 19 THE W ITNESS:Countl'
y. 1
20 earlierdiscussion today.Ioutlined the fourcategoriesof 20 TH E REPORTER: Okay. Thank you. 1
'
21 whatwould generally be consideredactivitivswarranting 2I THE W'ITNESS: Yeah! 'there are a few imaginary .
22 filing ()fa suspiciousactivity report. 22 countriesoutthere'and therearealvrtsfrom various law '
23 Q. Doesthefirm haveany automated proceduresto 23 enforcementagencies'primarilytheFBI.Butthe t
)
24 cletectsuspiciousactivity'
? 24 DepartmentoftheTreasurylsalsointerestedwiththem (
25 A. No. 25 because,inparticular.theDominionofMelchizedekinthe j
'

EXHIBIT 2 Page 4 of7 24(Pages90to93)


R um yantsev Declaration,Page 61
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 79 of 111

Page 102 Page104


1 agentthatnoneofthosepositions-- 1 thisclient,andwehavebeen abletobehelpfultoa
2 THE REPO RTER:I'm sorry',couldyou slow down 2 shareholdtr,
3 justalittlebit,please. 3 BY MR.WEBBER'
.
4 THE W ITNESS:Sure. 4 Q. Yousaidthat''
w e'determinednotto filea SARS
5 THE REPORTER:Thankyou. 5 reportin thetirstinstancebeforetheaudit.
6 THE W ITNESS:Soweconfirmcd w iththetransfer 6 A . Uh-huh.
7 agentthatnoneofthosepositionsrosetothethresholdof 7 Q. Whowereyoureferringtoas''
we''?
8 controlledpositions,sotheyweredetinitely lessthan 8 A . Antony Santosandm yself.
9 ten.Andiflremembercorrectly,lessthantivepercent 9 Q. How didthat--couldyoudescribethe
10 oftheoutstanding shares. SoataI1times,Mr.Edwards l0 decision-making processbetween tbetwoofyou?
11 wouldbetrading thosestocks,sellsidemostly.Andthe ll A. We sitdown with atwo-pagernoticetomembers,
12 onlyreasonthatthosetradeswenttothemillionsof 12 andwejustmarkedoffeverysingleredflagandconcluded
13 dollarsisthat,you know,inan unexpectedspike inthe l3 thatthatparticularred flag didnotapply.And there's
14 priceofthestock on oneposition.Thisisnottheonly 14 twonoticesto memberthatoneactuallyhasto leok at
15 positionthatheevertraded.Hetradedotherissues. So 15 becausethelonglistofred flagsprim adlyappliesto
16 nothing Iooked outoftheordinary. l6 what1referto ascategory No.3 businesspracticesnot
17 BY M R.W EBBER: l7 consistentw ith theusualpattern,a1lbusinessespractices
18 Q. W hatabouttheoccasion whenthecustomer's l8 thatdonotmakeanysense. Sored tlagssquarely apply to
19 trading issuspiciousfrom tbeday onethathearrivesat l9 thiscategoly No.3.
20 thetinn and becomesapattem thatisnorm aiforthe 20 Butwe also reviewed the otherthreecategories.
21 custom erbutyetstillsuspicious? 21 the firstonebeinga suspicitm ofsom ebody usingillegal
22 A . W ell,Iwould filearepcd .Butîn thiscase, 22 funds,thesecond category beingstructuring,andthe
23 what'ssuspiciousaboutsomebody depositing stockand 23 fourth categoly ofsomebody that--using abrokerdealer
24 selling itandtaking themoney out? 24 to facilitatecriminalactivity. Sowewentdown allof
25 M R.LLORENS: Didanyotbercustomerthatthe 25 thoselists,wesimplycheck --checkmarked them and

page 1f)5 pagel05


l 5rm had havetradingpatternsthatweresim iiarto 1 concludedthatwedon'thavetofile.
2 M r.Edwards? 2 Q. How many accountsdoesJohn Edwardshaveatthe
3 THE W ITNESS: Im entionedearliertoday whenwe 3 firm ?
4 weredisctlssingthebusinessofN evW estthatthisisour 4 A . W ithoutbeing absolutely accurate atthis y
5 specialty.Sow ehaveantlm berofclientsthatwouldhave 5 point,it'snorthof30.l.lecontrolsabout30--between 1
6 largeaccountswithsubstantialamountsofpennystocks, 6 30and35,1wouldsay. )
7 andtheywouLdbeInostlysellers.W henlmentionedmy 7 Q. And how ishisaccountsettlp? 7
8 m arketm akingactivityin2003,whenIwasaleading markct 8 A. He bringsin an accountform .atrustdocument. .
'
9 m akerinseveraljssues,Ihadacoupleofsubstantial 9 Hefult illsevery requirem entofw hatispartofthe f
10 accountstrading m illionsand lniliionsofshares. And l0 custom eridentification program . So we follow thatto the
1l those were notthe sam e issue. There are anum berof ll ''T''and setup an accountfbrhim .
12 issues. 12 Idon'tknow ifyou'vebeen ableto confirm that
13 Andthatactivity ver.ym uchslow ed dow nright l3 in yourview ofhisactivity,butm ostofhisaccountsare 2
14 now m ostly becausewecan' ttrade1you know,largevolum es 14 very m uch inactive.Thereareacoupleoftradesina l
l5 sl
anym ore.lactuallyIostacouplcofclients.IIosta l5 year so.ThereareOnlythreeaccountsthatare k
16 significantamountofbusinessbecauseofthelimitarions. I6 substantiallyactive.Heactsasanattorney,infact,for t
17 Butfortunatety. youknow inthisparticularcasc l7 anumberofentities.andhe is--accordingtohis t
':
13 MrEdwardsisIoyaltousandsyouknow,hestuckwithus l8 statementtousheisanaccountant.He'sworkingwitha j
19 andhehasnoproblem with,youknow,doingtiosetrades 19 numberofprojects.Sothosetrustaccountssimplify #
1
20 ex-clearing. 20 recordkeepingand bookkeepingforhim.Andoutofthe30 1
2I See Ican'
treallyevenrepresenthim inmyown 2I piusaccountsthatIjustmentioned mostofthem arejust
22 quotebecause ifsomebody frorn the streetcallsm e up and 22 notactive accounts. ,
23 says,Hey,Iwanttobuyacertain amountofshares,I 23 Q. W hatinvolvementdoyouhaveintheopeningof 1
24 cannotanswerthatquestion sayingaW ell Ican only do 24 M r.Edwards'accounts? l
L
i
25 this tradeex-clearing. So unfortunately we havenotlost 25 A None. $

EXHIBIT2 Page 5 of7 27(Pagesl02to l05)


Rum yantsev Declaration,Page 62
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 80 of 111

Page l06 f'ageI08


l Q. Who handlesthat? l ofreference,wemovedofficesinJulyof2003,sol
2 A. Primarily thebroker DarylAnderson. He 2 definitelyrem emberknowinghim priortothem ove so.
3 reviewstheaccountpaperwork,reviewstheaccount 3 Q. Andwhatwasthecircumstancesofyourmeeting?
4 application signsit.Thesecondpersonwhoreviewsitis 4 A. Hewasjust--youknow,camebytheoffice.He
5 M r.Dillon,astheprincipal.H esignsitasaprincipal 5 wastalkingtothebroker.That'sall.
6 approvingtheaccount.ThenwepackageaIltheaccount 6 Q. Anddoyouknow anyoneM r.Edwardsassociates
7 papenvork anddeliverittotheclearing tirm sbecatlse 7 with?
8 obviouslyw iththestrictrequirem entsofthePatriotAct, 8 A. Not--nobody inparticular. Youknow,he' sa
9 theclearing firm sharestheburden andresponsibilitywith 9 localgentleman,so obviously--Ionceran intohim utthe
10 ussothattheydotheirown review .Sothey wouldn' t 10 bar.Hewas--andwesaid,'Hi'buthewaswithalady.
1i actually openanaccountunlesswem eetaIlthe 1l Tbat'sallcanlsay.l'veneverseenhim inasocial
12 requirem ents. 12 environment so Idon'tknow who he can behanging outwith
l3 Q. Yousaidthatthree--orapproximatelythreeof 13 or...
14 M r.Edwards'accountsare active? 14 Q. WhichbarsdoesM r.Edwardsfrequent?
l5 A. M ostactive.Youknow,therestofthem like l5 A . Idon'tknow .LikeI--Imethim atthe
16 reallydo nothing incom parison to thethreeaccounts. 16 W hiskeySkyatGreenValleyRanch.Heapparentlyhadan
17 Q. W hatdoyoumeanby 'active''? l7 officeinthatpartoftownatsomepoint.
18 A. Active meaning trading practicallyonamonthly 18 Q. Allright.Anyotherinteractionswith
19 basis. Som eoftheaccounts you won'teven seea lnonthly l9 M r.Edwardsoutside oftheoffice?
20 statementforthem.TherewouldbetwotradesinJulyand 20 A. No'just--never.Thatwasliketheonlytime h
'
21 nothingsincethen.Therecould beanotheraccountw ith 21 Isaw him outsidetheoffice.
22 twotradesinNovember,andthatwould beal1for2004.So 22 Q. l4ow oftenhaveyoumetwithM r.Edwardssince
23 mostofhisaccountsareIikethis,justtradesfew and far 23 thatinitialmevting?
24 between oneandtwo transactions.Theactiveaccountsare 24 A. W ellformepersonally.lsvehim inthe
25 theonesthathavetransactionsvirtually everym onth, 25 office.M eeting,asin aconversation withM r.Edwards,1

Pagc 107 Page l09 1


)
1 Iarge volum e large frequency of
-transactions. t
l
l probablyhadtwoorthreeconversationswithhim inthe l
2 Q. Andwhatdoyoumeanby'''largevolurne'? 2 lasttwomonths.Butapartfrom that,hejustwalksbymy i
3 A. Largevolume thenumberofshares.Youknow 3 oflsceatthetinn andhewouldjustwaveandsay j
4 you'k
5 llnboewta
,l
tkin
ra gsbh'i
de ll
sei
onrsao
ve lf
trs
ahar
dese
so
a mf
taphar
mt at
icoppos
s ularissue
cd ,
to 4
5 '
'Hppe
haellons.''prEjuttt
ac h
ca
i t'
als
y-
l yoru
eve kin
yt mo
whe,thcoatm'sein
e st
eract
by. iontas
And hat
lsaid' i
'
)
6 severaltradesayear,so. l'm aware ofonly three such 6 ifthat'snotever.yday,he'
sprobably theretwo three j
'
7 accountsthatwould squarely'classify asactive. 7 tim esa week. s
o. (
8 Q. Anything suspiciousaboutMr.Edwards? 8 M S.JABLONOW : W hat'sI1eusually therefortwo '
i
9 A. No.H e' sintheofticealm ostevery dayand -- 9 ortirectimesaweek ordaily intheoffice?
10 vel
'yrespectablegentlem anand--inparticular,afterwe l0 THE W I-FN ESS:W ell,hem ightcom eby todrop off ''
l1 justkeptgettingrepeatedrequestsfrom theNASD why 1l astockcertificateforone()fhisaccounts. You know 1;
12 didn!tyou do this why didn1tyou do that actually went 12 thatrstypically whathappens. He --he participated in j5
13 beyond what'srequired fiom us andwegotawritten 13 oneofourprivateplacementsinthepast. He'sjust-- E
14 statementfrom hisattorney. And asitturns otlt,his 14 you know he' s a- he'sagood client.Sohecom esin,we i
!
l5 attorney,Sherwood Cook.isa formefSEC com rnissionerfor l5 m ighthave likea discussion --Iike notrecently, butI '
J
l6 thestateofNevada.Soheissomebody,asrepresented to l6 know thatlikeIastyearhelikeparticipated inoneofour 7
t7 us.Mr.Edwards.somebodywithlotsofexperienceinthis l7 privateplacementdeals.He'
sjustinteractingIikea i
18 area.Thisisfinnly in Iinewith histypicalbusiness l8 typicalbroker-clientrelationship. '
19 practices and we have written representatitm f'
rom cotlnsel I9 BY M R . W EBBER: .
20 thatwejustarcnotinthepositiontoquestion. 20 Q. Yousayhe'
sagoodclient.WhatdoesI
1e t
'
21 Q. W hendidyoufirstbecomeawareofMr,Edwards? 21 produccfbrcommissionsferthefirm? (
22 A . AsImentioned in early 2003. 22 A . Lastyear,the com m ission number the grossw as
23 Q. WhenyOufirStm ethim? 23 i11them illionsof'dollars. Iwould say itwasnorthof 1
,

24 A. Shortlythereafter,so Iwouldsay it'slikein 24 $2million. '


t
25 thelqrsthalfof2003.Becausewhathelpsmeasaframe 25 Q. And how muchmoneydidthatmeantothefirm? é
4
.

EXHIBIT2 Page6 of7 28(Pages106to 109)


Rum yantsev Declaration,Page 63
'

Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 81 of 111

Page242
l much moreimportant,but,youknow,lwouldn' tbe
2 dedicating asmuch timeto thetradingdesk.
3 Sotomakemypointshorter lwouldjust--l
4 would liketoputthew ord in forJeffer.yPucket't. lwould
5 liketoperhapsdraw yourattention tothesanction
6 guidelinesthatareapplicable to thosescenmios.A nd
7 thosesanctionguidelinesgiveyou arangeofpotential
8 finesinthatcase. Butthe statem enton the
9 suspension/barsideexplicitly m entionsegregious
10 violations.Iflcould saythat,ifyoutind thatwe
11 violated something.ifyou findthatJeffreyPucketthas
12 violated som ething,lw ouldsuggestthatthatviolation was
13 notegregious.So that'saIllhavetosayonthe record.
14 M R .W EBBER:Okay.Thankyouforyour
15 appearance here.
16 A ndw e'regoing to go offtherecordat
17 approxim ately4207.
18
19 (Proceedingsconcludedat4:07p.m.) ?
20 -000- !
21 4
22
23
24
25

Pagc243 i
$
I REPORTER'SCERTIFICATE j
2 l
$
3 1,A NG ELA H HU NTER.CSR No.12574,Certified
4 ShorthandReporter,certify; !
5 Thattheforegoing proceedingsweretaken beforem e t
6 atthetimeandplacethereinsctfot'
th atwhichtime 1
.
,

7 thewitnesswas12utunderoathbyme,
'
8 Thatthetestlm onyofthew itness'thequestions 6
.

9 propounded,andal1theobjectionsandstatementsmade :
l0 atthetim eoftheexam ination w ere recorded '
11 stenographically bym eand werethereaftertranscribed;
l2 Thattheforegoing isatrueandcorrecttranscript
l3 ol-m yshorthand notesso taken. '
:
14 1ftlnhercertify thatIam nota relative or
l5 employeeofanyattorneyoftheparties nortinancially 1
16 interestedintheaction. j
l7 Ideclareunderpenaltyofperjul'
yunderthelawsof '
1
l8 theStateofCalifornia thatthcfbregoing istrue and 1
l9 correct. .
20 Datedthis7th day of'lanuary,2005. i
2! d
22 )
1
..

)
23 :
ANGELAH HUNTER CSR N o.12574 j
'
,
24
25

EXHIBI
T2 Page 7cf7 62(Pages242to243)
R um yantsev Declaration,Page 64
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 82 of 111

E X H IB IT 3

R um yantsev Declaration,Page 65
'
CM KM D iCase
xvnonds M uld-pagenf
2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10Sergey R=
Page 83 :
- 111
of 1x.v. 4:13/:6
Page 3
1 THEIJM TED STATF-Ssscum' np.sANo EXCHANGECOMMI% ION 1 C O N TEN T S
a 2 m 'Iwsss EXAM m ATION
3 h tlxMatvvof: ) 3 SGgey Rmnyana v 4
4 ) Fi1eNo.tA.o3n2:.A 4 EXIIIBITS
5 cvK.wfD> oNos ) 5 EM IIBITS DESCRIPTION IDENTIH ED
6 wnwass:sermyRwnyaatx.v 6 130 Subp= a '. 4
7 M GBS: l11u*+ 2:4 7 131 M r.Edwartls'Accotmls Sprexqdqhv!
t 43
8 ptxcE: sxnuiti es- Excaaam commission 8 132 11/18/04 Iaeu 61
9 567:wilsbireBoulevard 9 133 CerdficateIkw sitqSproadsheet 78
10 ll* Floor 10 l34 W ireTransfcrsS œt 88
11 LosAnm- ,ce ornia 11 135 222/05Ixttcr ll1
12 12 136 2/22/05lzeH l12
13 DATE: ' Ibnvuy,Aplil13,24106 13 137 IX'U'
gG CM KX Shareholdn Sprradshed 146
14 14 138 6/15/04 W W Confirmadœ 167
15 .
11x above-enutledmzttfcase onforIe np 15 139 6/l7/04 W H Conflrmadon I68
16 pursuanttopouœaat10:120 . 16 140 TotalSalesand W ircsSpreadshœ t 188
17 17 141 A11CM KM TradcsSpreadshœt 191
18 18 142 LargtstlndividuqlCM KX
19 19 lnvestorsSpreadshœt 193
20 20
21 21
22 22
23 23
24 Diveained Reporingserdoes Inc. 24
25 (z02)457-92:0 25
Page 2 Page 4
1 APPM R AN CES: l P R O C E E D IN G S
2 2 (sBC Exhibit130wasmarkv for
3 On W halfoftlle Secuzitiesand Exchange Com m ission: 3 idmtificauon)
4 LESLIE HAKALA,ESQ. 4 MS.HAKALA!Onlhev ordat10:12a.m,on
5 OLIVJA CARNEGIE,ESQ. 5 n ursday,April13tb,2û06.
6 Securides and Exchange Com mission 6 Wbmvulxm,
7 5670 W ilshire Boulevard 7 SERGEY RUMYANTSEV,
8 11th Floor 8 wascalle asawimcssand,lxavingtuzlf-
lrstduly sworn:
9 LosAngeles,California 9 wasexaminclandtostifiedasfollows: 1
10 10 EXAM INATION I
11 On te alfoftlx W itncss: 11 BY M S. HAKALA: i
12 M ARK J.Gltllv lhlsESQ. 12 Q Pioax slaœ aadS-IIyourfullnx-ofnrtbo
13 W oodbury & Kesler 13 = ml.
14 265 East 100 South 14 A Selw y Rumyantsev;ft '
rstnnrnaS-o-r-g-e-y,las!
15 Suite 300 15 nnmeR-u-m-y-a-n-t-sv v.
16 SaltLake City,Utah 16 Q Iaw IaoslioHakala,1am aa offico ortbe
17 17 Comutission forpurpo= ofthisprrmM ing. n is is an
18 l8 invostigationby thoUniv StatesSœ tuiticsandExchav
19 19 fx
.runm lssien in tlm m alu ofCM KM Diamondw M -3028, lo
20 20 M errrnlzm whetller11)= havoh xn violationsofr- oln
21 21 provisionsoftllo fexlerrxlsc uritios laws. Howx . tllo
22 22 facts dovolom d in tlzis inw m igationm igl!tconstilulo
23 23 violationsof otborfal- lor slae civil(yrrrn-m inallaws.
24 24 Priorto11. oe ngoftle rccorlk youw=
25 25 m ovidod w itb a copy oftbo form alarrlnrofinvu tigation in
EXHIBIT3Page1of23 Pago 2 -Page 4
Divorsified Reportins Servicesvlnc. 202-467-9200 R um yantsev Declaration,Page 66
CM KM m Case
- onds M IO -PM
2:08-cv-00437-LRH-RJJ Document W Filed 12/28/10SePage
163 e ey Rnmyant ax 4/13/06
84 of 111
Page 17 Page 19
1 AnotH issw wastk manIn%nw learDc Jeffroy l Securities?
2 Puckotintlm paslhqd anNASD sarmuonatenrdlngtowhich 1r 2 A Antony SR Q)R who ispresently thcexœutivevice
3 wassuppoe topayafinoof$3,
* 0pliortorœssxiasng 3 prGidentswenttoUnivero ofConnecticutyandwewerein
4 witb anNASD mv e .Nov West wlrnwohr 'rt
vlhim,Jeffroy 4 Severalclam in thec nemicspror am . W emetthere@ and
5 Puckotrasanacceuntingclck,m mlie on11= definition 5 hewastheonewho invited:
me to comeoutto1.% Vcgasand
6 tlhatirapersonistznploye inackzicalcapacily,lhaî 6 joinNevW G in 1999. '.
7 dœ sno!rkx R)1llelevelofIZI/ associaulO tIItlr 7 Q W llo owpsio
8 brokœ dœH .SoJeffroy worke forNov Westforacouplo 8 A Nev W esti:acorporatien+1t1:approximntely 80
9 ycarspriortopayngtbatfix n atwastbosecondissue. 9 sbareholdu and1pcrsenallyownaboutninepcrcent.
10 A liird issuewa:tim fact*ataftcrourpx'vioms 10 Q Ninc?
l1 amv
' 'lorof(w auonsTom Cbavtzloh in2002:lowasin 11 A Ninem rcentayeAybutit's80 shareholdG tlx
12 cbarr oftlr oloctronicfilingN sontoNASD Rulo3070 12 way m disburad owncrship.
13 whichisaquarulyxportoawrittoncomplaints.Andsincv 13 Q D= anyox c1x own--wlm arotbeotlmrtop iive
14 Mn Glzaw Ie. R ourrzrm abruptly,lx)novG dolœatodtbat 14 qhnreholœ rs?
15 task,soforsrvcalmontbsjIbçETvoforaboutayearanda 15 A 'flr largcstshareholdw to thelxstofany
16 ihalf,m faikdtoprovidelheseflnngsinah'melynuanner. 16 knowledge igOneCap,which isattllispointthe private
17 W egotcaughtupsincetlxzz,buttbatwastbtthirdbsue. 17 entitycontrollrd by VincentHesser. the Cap isa xa1
18 Andtlv fourtblssuq wHchIbelioveisconrc ted 18 es'tatc company in 1.
- Vegmqengaged in realçs'
tate brokœal ,
19 totbispaxticularinvtsugauon,asanumbcroftzansactions 19 mortgagr brokerage,and realestate developmentinvestment.
20 inswvcralaccmmtstranspe intlr sœtuitiosorcMn f 20 An individualDonald M iner,whoisaretired gcntleman in his
21 Diamondsytlr NASD dœmedllzatwemighthaveikadtofilea 21 latc60s,heperscm lly,w101hisfamily includinghiswire
22 suspiciousactivitymportundertlxrPalziotAcl.Sotbat 22 and Itvliovehisbrother,acoupleofotherKlatives,
23 wastlv fourtbissuotlzattbrywcreinvœtigating. 23 controls,IY lievr,in excer'
sof20percent.Antony Santos
24 Q m 1. :1istllomn'eantstatasoftlv NASD inqmr 'y? 24 andhisfamily control,1believq approximately thesame
25 A It's3nsulmnak.' nry actually novœ previde us 25 percentageasm yrlf,so itw ouldbearound nine,ten
Page l8 Page 20
1 w1111any writtencnmmunicationasq)wba!tiw'irinknded 1 percentaandalsoagentlcman from SaltLakeCity axo ,Lleyd
2 coursc ofaction is. 2 M ccuwen and hiswife--M r.M ccuwcn igalso - Ithink bo's
3 M R.GRIFH N: By ''stalc ako''you mm nyou don't 3 in hisearly 80sattllispoinl. He controls,lwould say
4 know? 4 about5ve h)srvcn prrcenl.
5 THE W ITNESS:Wodon'tlmow what'sgoingonwitlt 5 Q D= John Fadwanlslmvo anyownem hlp ineex qtin 1
6 tb i
at,contm . 6 Nov W ost* rnritira?
7 BY M S.HAKALA : 7 A No.
8 Q t)t1v lhzntlm u timoniesyou'vedosCrile zbave 8 Q W bohadm licymakingauthority atNcvW est
9 you proviH u timoay % faro? 9 A urities?
10 A No. 10 A n e board ofdirœ lorswhich atpmsentlinw
11 Q Havoyou ovor1v 11adofondantîn any lawsuil? 11 includesmysclf,Anlony Santos,DonMinorandDavid Laub.
12 A No. 12 Q Slnce2œ 2 hasanyozm else saton1hoboard ofNOV '
13 Q A= you now orhavoyouovc 1= affiliakxlwith 13 W estSecurkiu ?
14 SaintGoorge M e s,Inc.? 14 A No.
15 A No. 15 Q How ofe t1= tlm btnrdmœt?
16 Q Aa you now orhav:youeve:r1- afllliatod witb l6 A NvvW %tisacloselyixldcompanyandmossoftbo
17 CM KM Diamonds Inc.? 17 dœ isionm akingtakesplace in daily inu action am ongA ntony
18 A No. 18 Santos,myself,and David Laub. M r.M intr dropsin m aye
19 Q AR younow orhavoyouovc h=1afliliatod w1111 19 onceawee.
k lalclymaylv onceeverytweweeks.SoQIOSeare
20 CasavantM ining Kimlv liglltIntornatiomql? 20 no1rormalboard mœ tings,butwe t
ypically keep him
21 A No. 21 inform e .
22 Q Andarcyou now orbavoyouevm'lv nafliliakxl 22 Q W hal--how doyou and Mr.SanlosandM n Laub
23 w 1111U .S.fonldian M inerrnls? 23 divie m sponsibilitiesalNcv W eest?
24 A No. 24 A M r. Sanlos graduatGlfz'
om law school Univc sityof
25 Q How didyou ondupgottinginvolm lw1111NevW esl 25 Connecticutzsoby vi
m m ofhisbackground,lr handlr.sall
EXHIBIT 3Rage2of23 Pgge l7 -Page 20
Diversifiod koportiw sorvic s-lno. 2:2..467-92* Rum yantsev Declaratlon,Page 67
Case
goy Rum yazlta' 2:08-cv-00437-LRH-RJJ
w 4/13/06 M ulDocument
ti-pageœ 163 Filed 12/28/10 Page 85 of
EM KM p i111
xm oztds
Page 21 Page 23
contractualmatters,alloompiiancematters,and typically l A That'sbeforepayinganyexmns> . n at'stbT
z
nostofthenegotiwtionswith calx ntandprospedive 2 grou rovenuœ .
ulitnts. Ihandlethe tinanccs,becauseI'
m thefmancial 3 Q And 2005? '
.

a
r
pcrationsprincipal,and 'ngi ntmdi
ngincl udi
ng 4 A2005,ourt
ecord keeping:complimm supxvision.And lxingthetop 5 14 millios.
otalrtvenueswezvapproximat
.
el
y1.
3, )
lxmutive,the CEO.Iam in r,1)- ofessentiatly setting 6 Q W hy wœ t01a1= e,- :<,muclïlil> iq2G14tlx
Ioals,targe? andfollowingthrougb withNev W estplans. 7 in2* 5?
Mr.Laub isthedirectorofoperationsysohe ' sall 8 A In2004,weu d anlmntq'nlyoarwith a signiscant
vcord keepino mnlntenmm and e- tially qv ation ofthe 9 amonhtofwvqnuccomiagfrom u-adisp andwe(lid, Ile 'ove,
àffice. 10 two se ificantprivatoplaev entswhich lwululin
Q W hatarç Nov W est'ssource,s ofrovo œ ? l1 significantcnmmlssions. So2004badtwoG tranrdlnary
A n eprednminantseku' ce,sofrevcaue forNev W G is 12 circumm tw tkats+ ificantlyimprove tlo !opEx for
lommissionsfrom exœ uting unM licitedorderson dientq' 13 tle fmn.
nstructions. Twoyearsagotlzatsourcewaq80pertzntof 14 Q Ixt'sahmltbox lwocimumstancos. Fiatyou
11etop line;lastyearitwasabout70lxrcentoftiketop 15 saitlthe- wassipuficaxktlvxrllng?
ine. 16 A T&m wassi gnificanttcadinp
Q So 20M and 2005? 17 Q Plow= olabaratmon lat.
A 2005 was70perlxnt;2004,about80N = twms !8 A Mostoftluatwastrallingontbeday sœtwitya:
'nmmissionsfrom tradingbased on unsolicitcd custozner 19 issuc1m .
lrdtrs. Thesecond largestsourceofrevenueiscommissions 20 Q CM KM Diamonds?
zld otherfœsfrom iavestrnm tbnnkingactivities.'Ihat 21 A CMKM INAIIXIlXK wNioh wtso= pointtradu undtrtlv
vould prim arily involve privateplacementstypically tmder 22 symbolCMKM ,cvenm ally CM LX . Corv t And Ibeliç'vethat
tcgulation D exemptions. And thethird sourçe,and I'm 23 rrsulto sommvberemoundtwoto$3million intopline
lasingthison2005 numbers,issalesofpackaged produots; 24 rev ue.
nutualfunds,variableannuities,and similarfinancial 25 Q Aadwbatwv 1% m ivatoplacmnontayou mentionod
Page 22 Page 24
lanning vcbiclts. ) oavlior?
Q In2œ 3.whatwoa Nov W est'stOL'U mvona's? 2 A '1'hopzivateplaccmcntswodid in2004, m
A Idon'lremmnbertlm numbm'
. 3 definitcly didaprivatoplaccmcntforAim siTœlmologios,
Q Doyouknow appreximaely wllatitwaw 2* ,% 4 tbat*sA-i-m's'i. And l'm notcxactly sure itwas2004,but
rrwu, 2* million? 5 Ibesevewe did tlr privatephc- entfor E-Linnic tbat
A W cE,itdefiniœly wasnot200 million. M y 6 year. 'n atmighthavrbecn 2003,though. And we did tbe
Jucaulconjœturewcf
uldbeslwould putitsomowbmr 7 privateplacmnentforOakridgeMicroBnergy. lbonove
ewtrnono milion and two m illion probably closc to one. 8 tbat'stbe name oftlr issuer.
'
Q Andin 2002.wox rnmmlssionstlm primary sourceof 9 Q W a:Jobn Edwardsinvolved inaay way Y IIIanyof
wvomx? 10 tbo privat/ plaoem onts?
A To tlv bestofmy rrcollc tion,tkougbouttbe l1 A IbeliovethatJolm EdwartjsinvestGlin tiloAimsi
istory ofNt'v W < with 11w exception,N haps, oftlx 12 private plagcmenl.
rst.maybesocosdyear,sM ingin20:1 mostofour 13 Q How'm= h dil1loiuvre
st?
rvcnues camefrom commissions. 14 A n atwould lx,a guessIv ause ldonptreancnlmrtie
Q In2003,w:atwereNovW ost'stotalmvwnura? 15 speciscnumber,butsevoral$100,000. Ibelievo in tlla!
A Jjustanswm'
ed tilatqueslion.Ibclieveithvas 16 pxivateplacmnent,m raised aboulfivomillionalltogetbm..
lmcwimm iïltlr neighborboodofoneznillion. 17 Sohozriightbavoaccounulforaboutjustunderaboutseven,
Q 1'zn - .Itbou@ t1askodyou for2* 2. I 18 eightpzrcontoftbctotalthatm raisclintlmtpHvate
Lean:to ask youfor2* 2. 19 placement.
A Yoab,2002,ldon'trememlmr. 20 Q Andlmw muc.
h did Nev W > tge1fortllatprivaR
Q How about2004:? 21 placcmfmt?
A 2004 ourtotalrcvtnutswme closerto Iive 22 A W ecozœ !Gla commissjon often percem so all
illion. 23 togcthertbatwouldbe$500,000 in cash. And tbrrr was
Q Andjuslso I'm cloarai:tbatlmfozrpayiag 24 commissionintlr form ofrestzicu lstock whichisnextto
mraling cxlo sees? 25 impossible to valuoattllatpointip tim c.
gj.Page;# EXHIBI
T3Page3of23 Rum yantsev Declaration Page 68
Diversified RCPOX'
O R Serviccss Inç. 202-467-9200
1
Case
gey R- yantzavy 2:08-cv-00437-LRH-RJJ
4/13/06 M ulDocument
ti-page 163 Filed 12/28/10 Page
C 86 of
Iji111
am onds
Page 29 Page 31
Q IsM r.Anrkx m 'sconerxe stillthe ruqme ox ? 1 A IlxlevethatJolm Edwardsaçcounu lforabout80
A No,itisnot. 2 mrrm tofourtola1tradingcommissionstbatyoar.

QC
AWh
urr
ae
tni
t
s
lyi
tmner
w?
educedpayoukqiFniflcantly on any 3 QHHow
4 gOZ- byz
n
Ju
ocho
lm ftàort
Edwa wo
ds m
'+ illion
..a- plmttoiaDacnrmylmM'
wœ l
ud=ionl
on? ''%)
znsolicite,d trndesin whatwould lx considerr,dpenny stocks. 5 A Considcingtlm payoulstructtm somowe around
rotmlessanequityisliqted onNASDAQ aranexchange,the 6 85to90N centconm inghispayoutstnzhur.
Jayoutson allthox cxamml>ionsare at45perccnt. '
lYe 7 Q How muçlddid NovW estgotfrtwnJohaEawards.
xayouts()nallothertraœ sh'eM ;NASDAQ,Gxedincome 8 e aing?
yroducts,znutualftmds,payoutson thoseprodudsarest111 9 A Considevingthosepercenta- , sonwwberebdween
ligb starting at72 perlrntand prv ssing toyIld ievc,90 10 t= , 15lxrccnqsomy guesstim ateoInv'vwrsv incally
ltthispoint. lI calculae tir numbm;Ibolioveh wasaround$300,000.
Q W hen did thatchange 'xkn place? 12 Q llasN> W esto'vorgnHenany mvonuo- aay-
A n atcbangt took pl= in panuary ofthisyear,is 13 sorry.
vhen wedid -- 14 HasNevW es,ovcrgottonanylhizl g ofvalueFrrun
Q 2006? 15 John Ellwardsotllorthnnr- missionsforsellingMsstœk?
A 2006,mostre= t> otiation. 16 A W ou!tllbatincludogifts?
Q Are tbe,x tbeonly two payoutenmturesthattook 17 Q Yos.
:1= ? W asthcre a m iddleonelvtwccn tlw two? 18 A IbrliovctbataroundChristmastime2004 Jclm
,
A 'fhere wcre may% oneortwo rev odationssbecause 19 Klwardsbroultacoupleofbottlesofcbampagaeto!lm
kqImentioned earlicr,M r.Anderson'scontractisrenewable 20 ofjke,soesscniallyjugtinsiptilican!gif'
ts:notbingof
rveryyear.And forbusinessrexw ms,wealwaysthoughtthat 21 significantvalue .

qcv W rmsthad to changethe structum sothatwewould 1!e 22 Q HasJohnEdwardsevcrgivcnany giftsto anyone


lrtakingeven,orthe Fm n actually,isin tbebmsinessof 23 afliliatedM tIINR W ests'tmh msDarylAndorsoa?
nakingmoney.So xxveraltimesm ro egotiated thepayouts. 24 A Notlo tbolvstofmy knowledge .

3utin the past,rcx m tiationsconcœnr'd thetiersmoretban 25 Q HasJohnEdwm' dsovcrloancd any monoytoanyox


Page 30 Page 32 '
bepayouts. And when lsay 1l= tim'
s, intboexampll11m1I 1 am llatedwitbNovW ostsuchasD arylAndomon?
Irovidrd earlier,wotalkedabout$10,000 tkrs.Fkst 2 A Nottotbebeslofm yknowkdgr.
:10,000,72;seconfl10,000,80;tNrd 10.000,90. 3 Q HasJolm Fxlwards> mrloaxxxlany mo- di= tly to
So in my m cmory,tlr mastreccntpayoutstnwmre 4 Nev W est?
rior1o 1l)e çimngooffœ uvein Jqnuazy ofthisyear,m
i 5 A No.
imply cbange thv écrsto$39,000 A s. F' lrst30,
000
6 Q Hasanw noatNov W estovv'rbad anyfinaaçial
2;sœ ond$30,000,80,tlzird 30.000,90. Sothat'san 7 M lingswitN Jehu Edw ardsotlw tbansollinghissu k?
xampk ofpmviousnœ otiations. 8 A I'm awareonly ofacsentrelaéonshipwitblohn
Q 1:% % 241G4,kow muob mcqmydklNw'vW est= non -- 9 Rdwattls,aslzne onedearlier, Joim Edwardsparticipau lin
ow mucllxrvonno wasgeex ratod from çnmm issions? 10 tle privak piacementtbatNov W estconduce . Som ostof
A Talkingabou!revenueornetincoml,tlx NovW est 11 tlw revenueandmostoftiledc sngsaretrading, butJohn
Nare of-- 12 Edwards did participatein l1m private phcemtm tbatwe
Q Fintx'trevçnuo 10ta1zevtne . 13 conducted
A Grossrevenue,totalrrvonue. 14 Q Any otlw zrlatieaship lmtwœ nJohnEdwao andNov
Q '
fhat':Hglll. Grossrovenm . 15 W est?
A Omossxwenue,lbelievctbatwasintxccssof$2 16 A No.
ûllion. 17 Q hnyot.lw M ationship lvtu n John Bdward:antl
Q How much oftbatcamefrœ ztraA dox iu 18 anyox associatodwitb NevW cst? '
annœ tion witb John Fxlwards? 19 A Nottbat1know er.
A lbex vo tbatwastlr question. 20 Q You said tllalJohn Edwavdslladsm ntsomolimo in
Q 1'm sozzy.Itwasallfœ Jolm Edwanls? 21 South Africa?
A Yoah,lbotohalcomm issjonsfrom trading in 2004.1 22 A n at'swlla!1beli vx 'fbe Im son thatcame up in
zlieve wem ovc $3 million, 23 the past, during rm eralyearswcbad a rctailsuptzvigor
Q And Jolm PQIwNIISIImIIOoutinexcmssoflwomillion 24 Ram ond DillonwhoisBzitishy and he did s> d sometime as
rtkat? 25 araflioN sonalë .axat
lioannouncerinSoulbM zica And .

ip.Pago32 EXHIBIT3Page4of23 Rum yaptsev Doclaration Pago 69


Iàiversified ReportinR Scm ccsa Inc. 2:2-467-9200
1
CM KM m Case
xm onds M ulti-pagc'
2:08-cv-00437-LRH-RJJ Document 163 M Filed 12/28/10S-Page
oy Rum yant
87 of awvs 4/13/06
111
Page 33 page 35
l con&x
'lm'
m
'glbatbackground,atsomepointitcamouptbat l Soasaconm ptncoof0 1,ta relationshiptbat
2 JobnEdwardshadasim ilarbackground.Somy conclm ionis 2 N> W oslhadw1:1M r.Edwardstook azw'w turzllv alzx
3 notbase on any(lirœtconvcrsa6on:w1t
1!IOIm Rdwards,but 3 allbough pzrviously priartoourNASD audh wodid
4 asan infx ce oftir similarity brtwcen tlm oxpciencesof 4 pœsonazy know Fxlwe ,zret5v11 hhn on srveraloccasiens.
5 JohnEdwardsandRam ondIXEO . 5 and N haps- notmyselfm rsonally,but1bclirveotlv
6 Q Pl= H n'lm fœ zneya:le yoacan.11m 6 offlcersofNov W >tmigbthavohadconvtrsationsw1t1:Mr. '

7 M staryof#oh lEdwxvvlexflev1. *----0aclm ' tofNov W mst 7 F-dwardsaboul11. nahurofhistransactions. W e - in ordc


8 Socuriti- . 8 lomnkosurotbatwodidtE ngsinacce ncew11 tir rula
9 A AsImentione earliœ,Icannotsay anytsingahmt 9 wcintnsificd lboset,ypcs ofinquiriœ . So woobtained
10'how tborelationslzipsenrlexl.Howovc,startinginM arch of 10 assurancc from M r.Edwe 'attrx'y,Ibeligvotv M r. .
11 2003,I'veb= pay;ngaœ nlionlotraA . Aslmtntione 11 Sanu ,SgV= Itimos,ilzttrviowe Mr. ,and atno
12 I'm tlr soniortradingsum rvisor,soIrrviow trades,tfado 12 pointintime414m baveasensetlltunlawfulact' l
vr'k
y was
13 blotw s on adaily basis. And Inoticed in alohn Edwards 13 transpiring.
14 wasconducting a si& iticantam ountofbtlsinœ s. 14 So altbougb wrkcptalltlx autle tiesinfom e
15 Forznany m ontbs starung in M arch 2003,Joim 15 wecommunicae witlltlv NM D primanl 'y attlr tl
m e,latcrin
16 Edwardsestablisv aconsisa tpato ofe ositing, 16 lat 2005,carly- 1'm sorry.I-ae 2004,oarly2005,wo
17 ta icallyince ficak fozm chnnw inavano 'tyofsm all 17 starte cf
wnmunkatingm lhNASD,Ibelio'vetbat1recdvcl
18 issucs,typically 1ow pricoc uritiœ . Ovc time M r. 18 % fzrs!zm uestforinformation from yeu personally in -
19 Edwardswouldgivehisbrokc Mr..AndersonscEorders,and 19 Q '
I'
lm SEC staff'
?
20 ovc timcm wouldlx:liquidatingtll
osopositions,andM r. 20 A Yes,tlr SEC zm uestclaroundChristmastknein
21 Edwartlswould bctaking tbcmo- oul. n atactivity 21 2004. So startingin IMcunber2004,m werecnmmunicati ng
22 incro sd signifkanîlyinm rly 2004,andin pardcularin 22 perie callywitbtlm staffoftbeSEC.W e1md avisitfrom
23 connectionwitblzistradingactivityandshn,u ofCM KM 23 x'v= lSEC officcs,IIXZrVG in Febm aryof2005. So
24 Diamonds.AltV ugllM r.Edwarl didanUTIIIX: roflradesin 24 althougllalloftboselincsofcornmunicationessc ti
ally
25 CM KM Diamontlsa:oarly asM arcb 2003,tbe dollar amounland 25 covertd allasv tsofM r,Edwards'activity,he sull
Pagc 34 Page 36
1 shareamountofthosetradesnovercaugbtmyattention,tbo'y 1 remaine aclient.AndduringthattimeIlvliovolm (IPCIIeII
2 weroalwaysrelativelyinsignificantcompav totim broad 2 acouplemoreaccountg.provide someupdateddocumcntqfor
3 spectrtun efNev W estclients. 3 some ofth)r .q and rmnaine a clientcontinuing histrading
4 Howw eq in M arcb of2004 and m ozr so in Jmw of 4 acuvity.
5 2004,1lm hvasa significantspikro and wlo Isay 5 Atpresenttlm e hehasnoposition in CMK M Diam onds
6 'significant,''itwasaboutkn-fold spiko in tlv priceof 6 in hisaccomm exco tforsomtvestrictclstock wbich I
7 tlx stock.Andallofasuddœ someoftbopositi onstbat ? beliovew asspunefffrom CM KM Diamonds. Butatalltimes-
8 M r.Edwardshad in tbe accountswitb Nev W cststlvy also 8 Iikave lo say lNs: Atalltimes Mr.Edwards did notlimit
9 inclm se invaluut
omfold.M dconsie ngsignz
'ficant 9 hisactivityjusttosharesofCMKM Diamonds;lm alwayswas
10 voltuneinCM KX,allofasuddon notonly thosopositienswcm 10 involvedwitlzsovm'alotlv issutn .And atprc cnttimelx)
11 valuablc,m wcrcalsoabletoliquidatcl1xznforM r.Edw ards l) hasstweralaccomm ,andIbeliovethatasv ently asmaybe
12 wilb significantreturn apparentlylo him,and considering 12 b'ventbismonA boransometradesinotberissu>.
13 otlrcommission ourtop lineincrease açcordingly. 13 Q W llatotberismwem ?
14 Towardstbezniddleofthes'tmmerof2004,Mr. 14 A Mostroccntly bosoldapositioninIM o Mining
15 Edwardsopezi ed soveralmorcaccountqinwhich he de osie 15 and Exploration,DM XP. 1IME> OtbatMr.SanlosmigbtM ve
16 morestœ k intlr CM KM Diamonds,andIbelievetlrlargest 16 badadiscussionregardingtbatparticularpesitionw1t11tbe
17 volume ofeading in tbosoaccountqand tbe largestdollar 17 slaffoftbeSBC Iwould say abouta ycarago,lv auscwhe, n
18 amountin procaxlsoccux lsomowlm behveen Septcmberand 18 tbatposition appexe in M r.Edwards'account,wehave a
19 EMccmtmrof2004. In Augustof2004,webad ourBNL NASD 19 babit notnecessarily awriœ n procedure,1beliem buta
20 audil. 1did nolmendfm lir dat: earlierloday,bm I(lid 20 habitofclrcking on cwvn large position titatcomcs to Nov
21 mention tiwataudit. And çertain issuœ came up s- ificazy 21 W esl. And accordlnglo information thatwo bad altlv A G
22 in cennœ tion * t11tbattrading. TbeNA SD skqre lœ king at 22 M r. Edwardsdem sie tbosectrtificates,wlzi oh1II:IA wero
23 tbatadivity,but2ry nrvc indicae lo ustbattbcrcwas 23 in Novembc of2004,itappoarclthatseveralaccountsthal
24 any spœificproblcm oxpccltbattbereweresknificant 24 Mr EdwarclscontrellM inaggw atebad mox tbanknN ccnt
25 amountsofm orey involved. 25 ofoutstanding shartsoftbatissuc.
EXHIBIT3Page5of23 page33 -Page36
pivexsified ROPOI'A R Scrvicesslno.202-467-9200 Rum yantsev Declaration,Page 70
Case
gey R- yaxlta' 2:08-cv-00437-LRH-RJJ
vp 4/13/06 Document
ti-pageTM 163
M ul Filed 12/28/10 Page 88 of
CM KM D i111
am onds '
Page 37 Page 39
Asaresultofthatobm ation,weinforme,d M r. 1 A I'm notawarooftbat.
Fzhvardsthatitappearstlmthcisthe control1x1.m ortbat 2 Q W ho dœ sMr.Bdwawh wcrk far?
Esslv and we cffectively plztahaltywewould notlethim 3 A lbelievelr wIX'
H forhl
m Mlf.
Lradethosepositions. W econtacted the SEQ wediscuRe it 4 worllsforanybody.
Idon'ttldnklr '*'1
r
withsevcraln'znlatory am ncies,andasamattrroffacq we 5 Q How d= ll@get- 11ow (1= JobnEdwnwlmlv omo11m
abtained an atterney opinion letterfrom an attorney thatM r. 6 truse oftlv trusts11-4lo'struse for? '
Edwards,ornzaylx the issuerhired forthatpurpox. AM tbe 7 A 1don'tknow.
zttorney opinion 1* indicalcd thatMr.Bdwardswould not 8 Q Didyouovcrask Mm?
% considered theczmtrollingmvson. W efoundthat 9 A No.
i
nsufficio tforoklrpurpo= ,andthatpositienwmsdormant 10 Q Doyouknow wllo wonld u ew lmw lohu F-dwarttsFm t
r
ormore than ayear. 11 ca!noto1m acmuom atNovW em? W llewoall 1ask abmzt
However,rœm tly in anotheroontext welmd an 12 tlwat?
Dpportunitylo verify anupdated numberofoutstaning sbares 13 A SinceMr. Bdwardsis aclimztofD arylAndcson,1
qn thisparticulariRqner,andasofr= ntly,M r,Edwards' 14 wouldconsidorhim tolv agocd source. Obvimwlymanyyears
xosltion wasnolongeroverten Iv cent,itwaslessth% 15 IZaVepasq buttlr > onwhowcmldpocesstbepapelwork at
5vepercent.And allothcrfactorsoonsidered and the ract 16 tbetimeMr. EdwardsON :M Nsrlrstaccountznigbyhavebœ n
luathe'sheld 1110% Rluqresformorethan ayearand auumber 17 Tom Cbavu wiloal= dylefl. AM M r.Cimxez loftarountl
>fotlv factors th% wentintoconsidtvation,weallowed 11M 18 Christznastimeof2002, and ssnce Ididn'trtznembe exacqy
o liquidatcthosepositions. 19 ifM r.Edwazdscamoto NcvW estin hte2002 oready 2003,I
Q 'Whatd= M r.Edwardsdo? W hatishis1. * of 20 cannotbeco inofthat. ButMr.Cbavez mightknow
>usiness? 21 somltltingabouttlk
al. Orin early 2003 David Laub took ovc
A M y interpretation and my understanding ofhis 22 Mr. Chavez'sduties,bullbelitvelr wasjlm ovcwlrlmrd at
'eprescntations,as Imcntioned earlier,mostofthox 23 tlr time,and Iwculd notputtbatburderlonlum oftryinsto
liscussionstzanspired bethvern Mr.Santosand M r. Fxlwards, 24 - * wbathapprned tlrœ yearsago.
le'sinvolvedw101anumberefissucrsofstock,low price, 25 Q 'WI- tl= JohnPdwardsmaintainom ce's? .
Page 38 Page 40
isu lontbepinksieetesstmtially,quinu senlialpenny 1 A Duringtl x timetbatJ'voknown JohnEdwards,I
:tock a= ,be's invelve with a numburoffresh issuers. 2 bmlievotbatho--likol'veneversœ n hisoffice,number
tndlm repxsonulk,us,sv ifically intbccontoxtefCM KM 3 one;numbœ two, Ibclicvcthathedx swork outofhis
Namonds,hcisinthcbusinosofacqukinglargepesitions 4 house,and aswelaterdiscove , ir maintaire amai!drop
yrsœ k from non-affiliae issners,somelimesrestricted 5 in ImsVegas. AndG at'sallIImow attlzispoint.
tockthatlK)Iostto age.Obviously intbatcasc,my 6 Q W lvrcisMn Edwards':t) s1* ,c0?
onjœturewouldbelr wouldbebuyingitatadiscountand 7 A Idon'llxzneznbm'spœifically,buttbat'son
ventuany liquidatingtbezn forllisewn accounsorfor- in 8 v ord. M d wehavehisdriver'sliccnsoon 5lew1111tbe
i
r cax ofhisaccountwi1 Nev W ct,heestlr control 9 corzw thomead- s, IbeliovetbatM r.Sanloshas VQE I'
Z GI
crson ofseveraltrusls,so 1beliow hc mightboN forming 10 itwitb M r. Edwardstiu
atthatiscxactbrwlwbx lrrœidos.
àosotypoofactivhie.sasatrustœ forotlv indivgdmqls. l1 Q How many timo-shavoyoum rsonallymetMn Edwards?
Q Jm ttoclat'ify soumthingyou saidaminua ago.lm 12 A Aslsai; Mr.Edwazdscnmextovish ourofficu
cquie stx k f1.
I 0m uxzaffiliatod -- 13 hm uently,so Iwouldputtbatnum bcratovœ 50. ltcould
A Non-affiliae individuals. 14 be a hundred.
Q Imlivide s. OH y.. 15 Q Whonwastlm lasttimeyou saw ldnl?
A Notaff-zliae witllllr issuœ,Tàat'swhatI 16 A Twoortllrœ wœksago.
leant. 17 Q W hy didyov r.
œ him two er'h> we ago?
Q Okay. 1:Mr.Edwardsan accountant? 18 A Hecamebytbroffice.
A Herepmsrnkd toustbalhisprofessional 19 Q W llatfor?
ualifkations includeaccounting and law . 20 A Hewasmeeting witllM r.Andcson briefly,belikr.s
Q Did1ioovc provideanytM donc.
ooftlkil? 21 to sznileandsayhellotoevorybedy intlm ofsce. lden't
A IN sonallyhavenotseonanydocumcntaryevidence 22 Q;I'JItberewasanyspœ ilicbusinesstbat1m discusscd witb
ftbat. 23 anybody, notwitlzm erorcA in and lcannotspeak forM r.
Q Aroyou awaa ofhim previdingany supporting 24 Andcrson.Iknow thoyhadabriefmœting.
ocumcntationofhisqwalifioationsto anyolm? 25 Q HasJolm Edwartkqoverdiscuse wilhyoutllcSIIC
'
37 -Page40 EXHISIT3Page6of23 R um yaotsev Declaration,Page 71
.
D iversified ROPOH InR Sorm ces.Inc. 202-467-9200
TIM KM DiCase 2:08-cv-00437-LRH-RJJ Document
am onds M ulu-z163
aguw Filed 12/28/10sœge
Page 89 of
y Rum ya111
nta v> 4;ju #6
Page41 Page 43
l invostkatioa? ) %5ew.
2 A Ncverwitbme. 2 (SEC Bxlibit131wasmarkedfor
3 Q HasJolm Edwztrdh totie 1% ofyollrknowledm , 3 ideauEca*on)
4- discussod tboSEC'Siam œ gationM tIIanytxm atNov 4 BY M s.HAKALA:
5 Wmqt? 5 Q I'= lowingyx wl-thaqY aznawHda Rxhibi:
6 A 1don'tknow. 6 131. M ibit131isaY IV '' . Attlo lottom
7 Q M fara;yollkn- .i:JA Fzwardsaw= Gattle 7 ifuy% * bySF.C staff/ apdisdakdMay lltk
8 SF,
C bas* intoucb w1t11N> W c t? 8 2* 5.'
1'
lm h- aingia, wlohnFadwaye eNev w est- 's-aml
9 A Ilmlirvobeis. 9 1% ih- 'sazkM ibk 3op1% 1opzim -hau 0ozx r.
10 ' Q W bat':yor basi:fertlhqtIGie,
D 10 Icawzqzresenttoy- * tlvda- iwRxhibit;31
11 A lINV O tdming tlf timowlm tlr SEC conduce 11 waamq- by111.se asalislofJohmalu nts'xrwwxkts
12 anautjitofNevW estineatly 2005,itisentixly h'kely 12 &om anz-n- tlm ovitkxlbyNR w estSxnzrilix Ih.w >@
13 tbatoaon?oftlzosedays,M r.F-dwardscameby,visie tir 13 w'
xqs
anlodonle 89wewm xe . 11mayIx oat'' wasa
14 officq and Ialso boliovotbatMr.Edware :111r p= onally 14 'calrzroxorM- hing. butto11- 1- of=1y
15 orhisatt orx yprovide somecorzo pondencethatmighthave 15 une stu dinya il'sooznplefg. So Ic.asxnyz- :toyou thaf
16 1m 1cnmmunicae to11r SEC byM r.Sanlos. Sotlzat'stbe 16 Ihav.every.- qnwlolhiakit':ooznplete.
17 basisofmy bea f. 17 A Okay.
18 Q A:fara:youH ow,hmlMn EdwaxdsIO WO Iany 18 Q I'm gxe ngyou'vex'v:zrseenW hibil131lfoxi
19 u lim tmy lo tlm SFr l 19 istNa,oorzecl?
2Q A I'm no$awax oftlmtfaût. 2G A Ihm x verseentlussm djk dotunwms,* 1ï
21 Q Andhaslm v'vc mo tioned toyou any inquit'
y byazly 21 lxtieveImrseaanyconkibuf
edquileabitofinfozmadon
22 governmtmtaglncy ZrF/aTIEV RM KM Diaoone ? 22 that'suxd inpreparaionofthis.
23 A Henevœ did. I'm awareofinquiric thatcame 23 Q Okay. Pleax wouldyoutakealookalFhhlbil13I
24 dirœ tlyto Nev W < bm I'm notaware ofany inqulriœ tbat 24 an:1otxx Hlow ifyoa = any olzviomqmîux- ox itor
25 nzil thavegonetoMr.E> ards. 25 thingstbatyophavem stionsalxl
utoea= rwyof.I
Page 42 Page 44
1 Q Haxaayonoo'vorrm nJohnEdwardson - tbat.you l unrlezrxtnnd tbatyou can'tgothrougbandverify tle nmnH on
2 know ofresr sœ'
n John Edwards'= itk'n= ? 2 tbo chartas wo sitH .
3 A NottbatIknow of. 3 A Yœ ,1'm notlooking atnumbers. I'm parucular
4 Q Axkdllmsanyoneyouknow ofevc sœnbisofficç? 4 concmmM wilhtlm sm llingofaccountnnmexbœatwel've
5 A lbavmlw'versœ nhîsofiice. 5 sc nsomespellingGTCrSintir recordstbatIsince
'
6 Q Rim .Butdo youhlow ofanyox atN> W =twllo': 6 corrœtclonNev West'sside.SoIwante tomakesurelhat
7 aerfnxlly s= Ms 01'
11= * 7 thisdocumenlisup totlate.
8 A No,Idon't. 8 Q Plea .
9 Q How many accountsdidJohaEdware I-VOwitbNcv 9 A Yes.mycursorymvimvsindicau tbattlx:reareno
10 W estduring 2004 and tlr Fn 'tpartof2* 5? 10 obvious sland-outs. ltappearsto boaccuratc.
I1 A Towarx tbecndof2004 andtlv cndof2005.1lr 11 Q 0* thipg Inolice ist1-1Mn Edwards--'-gto
12 lolalnambc ofaccountq11m1M r.EdwardscontroEcd was 12 InVObadanumlvrofaccountsV tIIthesam enamebu!
13 bctwecn 30 and 35. Idon'yn'X= II= tlv sv isc numbc. 13 diffx tacçoxm tnumu . Forcxamplex'hex s to lv
14 Q M y did&)baw somany accounts? 14 twoFaza Cyœ lndlutrialIx .Trus'taccounts,twoFase n
15 A '1'lv accountstbatM r.Edwardshad includd his 15 accountsand so on. W hy istbat?
16 personalIRA and IbvliovvanIRA forikisu -wife.M r. 16 A LG mepoinlyom atkntion totlm columnentitltda
17 Edwardsalsohadtrustaccomm sotupfor,Ibelieve, 17 ''clcaringbreken''NR W cstSœ uritiœ isan introducing
18 difrmrntbeneficiaries.Andlbaveneverhadaclionttbat l8 brokerdealcr,wecarrycustomeraccountsonafally
19 had 30 accoun? undc a cnmm on conkol,butNev W csthas 19 disclose basisw11 clearing srms. And dming tlv years
20 worked witb attorneysthatcontrol le ,say,tea accoantsfor 20 2002,2003,and 2004.m wenttbrocghQzree(IiSm=I!
21 diff= ntpurposes,fordiffcrcntenthies. Tllatsim plifiG 21 cl= ing fm' ns, And asanintroducingbrokerdealer.Nov
22 accotming,allow sC.P.A.'Sorattorneys involvi w1t1, 22 W c'stdœesn'thaveauthority to create accotmtnumbers. Tbo
23 differcntclientsto avoid cemzningling ftmds,providing 23 accountnum bcrs com efrom tlr clearing fu ''m . Evezy tim ewe
24 betterreports,clœr statmnonls. Solhese aremy 24 switçM clcaring f-lrms we weuld gota x-w accountnumber.
25 conjœtmu ,butthat'swbatMr.Edwm'
dshaslGIusto 25 Soanaccountwitbtlc samenmnewouldhaveadifrmvnt
EXHIBIT3Page7of23 Page # j .,page 44
Diversitld RoportinzSexvicosoInc- 282-467-9282 Rum vantsev Declaration,Paqe -/2
w *
gey lbxmyantzCase 2:08-cv-00437-LRH-RJJ
zv,4/13/:6 Document
ti-page 163 Filed 12/28/10 Page
M ul 90 of
CM KM Di111
xm onds
Page 45 Page 47
accountnumH ifm w elookingattivodifferentclearing l A lfImay atea littlebit,the more thnehas
f'
ums. 2 passed sincethen,ladually believeznoreand morethatthat
Q ox oftla tungsIshouldmeouonaboutu timony 3 wasthe reason becaua tbatravtmntobetlm dixrcEon in tbe X
ttxlay isIwillefton a,kyouql
v tionst1m1web0t11know tlv 4 industry thatcertificatespreœ ntalzighcrtllan avtrageXir,
IC 7
anF- :0,andoal'ssoY tsamebtxly lau '''Aingtlm 5 and highertIIM av- eworkload and typically not
transcriplhasaclearuutuxs- alng. 6 significantly llighe reward. Howeveq 'b'e- waqan issue
A Iundcrstand. 7 w101RBC Danc thatJO'UItGIin a lawsuitthatm evenhxally
Q w hatisaclearinabmu e? 8 settled with thon. Andconsi ' thetiming ofb0th
A A cle ngbrokœ isarmancialinstituuonwhick 9 events,thcy may ormay notlxlrelated.n eycoincidcd in
fw anmmnsand purpm ,wouldhavetlr samolitensœ asa 10 time too olosely forrnetobeteetw tnin ixcauœ they might
rtgularbrokc tloalrrG coptinaddiuontotypicalbrokœ l1 havernnd.et1x decision totx inatcNev W eatnl- ay when
(IYI= setvices.thcy weuldofrœ e- v 'nclwtcdialsrœord Ia certain thingshappened tlzatm..$
m 1% in thclawstzit.
kœping,andtrnaingsrrvica tosmxlw brokœ de- qlem .A 13 n elawsuitconcerned astock (= 1150 2, and our
clearing f'
xm wouldactuallycarzy alltlr ags- ofcustomer 14 position,and to our% stknowledgeorunderstanding of
accomm whicbmeansthattlm custtxlyofruntls,sœuriues, 15 applicablerulesand reps,indicated thatm wcre dealing .
anyotlmrass- thatnugbt1m inacltqtom accoun:tbat 16 * t.11aca'tsewhen - oh,wow. I'm tryingto t111111cifI'm
clezm'ngrn'm would assux msponsibility rorproducing 17 talking aboutthe RBC DancorW ellsFargo incident. Yeahy
accm atorœ oris,distzibuuonalsta- entq,producuonof 18 thatw msRBC Dane. So m w m' cdealingw itlla stock
eadeconflrmati ons,andotlvrrrcortqasrcpu',wlbynges 19 certificatethatan issuercanceled many monthsaftcrthat
applicablek)tbmnorasrequesulord>ignae bythe 20 ccrtilicateentzred thestrearn orcommerceahas1.
ileoduciuxbrokc CIRIC aspartofafully(lisclosu 21 transfn d ia strœtaame,sold,many wcekland monthshave
relauonship mrson teaclcaring agrœmenl. 22 past,and theissuercanceled tilectrtificateand itno
Q 14o- wm um throup thocloaringfsrrnstlzatNev 23 longerexists. Butaccordingtotheway thesystem opelates,
westhatlandton mowlmatbatrvm wastlm cloazingrzrm for 24 th= arecertain proceduralm les,Ilxlieve, and there are
Nev westaad wlzyyou . 25 ceztain agency rulesin particularconceming thedepository
Page 46 Page 48
A Ub-bub.In 1999whe,nNevw - bœ amuafunctioning 1 trustcorporationthalresultintbeHabiliw ofaclearins
brokcrdcalc ourbrokerdealerlicenr
,u btcamçdfœ tivein 2 bouse. Andfrom lat,tbebrokerdœ ler,Eabio fora
Octoberef1999.Ourcleaxing fmn wagRPR Correspondent 3 skck ccrtilk atetilatm igbthavobeencanceM .
Scrvices,wlzichasaresultofanwrgerbocameDano 4 Soifaclientdcw sitsastock cctificatew itb
Oor= pondenceSmviccs,and tvmztuallypursuanttoano- 5 NcvW est,weXIIit,but12montbslatorfcrsomeroasontbe '
:
mtrgcritlv amo RBC DaneCormsplmdtnlS> ices. RBC is 6 issuc comu back and decidesto cancd tbatcc tifkate,
RoyalBank ofCanafla. 7 tlm ispm tlikelihood thatdepository trustcorperation (
Thatzdati onshiplerm inatd offkiallybase on 8 wolzldimpeseashortpositionasiftbatposition tbe
k
vritten correspondenc.eiïlhto2002,butbœ ausoofa imical 9 cctificatothatwe,forexamplr,sold,mqifitnt' ver
r
lifficulties tlm acm azy switcb to a diffemntcloaring 10 exisltxl. So tbatwastlr casewitb Dano. Eventuany -
Fi= didnottaktplaceuntil= ly2003.Inmy Glucatcd 1l Q Wllo wastbatissusr?
xtimae ilwould besomowhc in M archorAprilof2003that 12 A Tbatissuc wasG lobalReserve Corporation,GLBR
.be s
witcb took place rrom Danc,RBC DaneCorzu pondeal l3 wastbe symbolattbotime. Ibolio c h'sstillan active
k rvicesto W rz
lls Fargo inv> tnentsCorrespondentSel'vices. 14 sym bol butsecuzily isderm anland ossentiallynon-existcnt
Dano H minated arelati onship w1t11Nev W ost 15 forpurposesofapublic marketplaco,
V tzritiesofficiallybasedonthcircorrespondc cewitbus 16 Q Okay.
lased on tikefacltbatllx'
irse luitiesproccssing pœ ple 17 A W llalbapm ne ovcntually, Nov W estSœ urities
louldnothandletbevolum eofphysicalcerdficau . tbatNev 18 contacu ltboissuc,tbctransfc agenla and Gsmi ally
Wzy wassubm itting forprocœ sing. So thatwastlw official 19 dealtouttbe case,dc onstrated the10t10.oftbelaw, and
pcrsionofwhy tlv relalionsbipterm inated.Andin oarly 20 tll
eissucrwithdrmvtbecanccllation. Everyfhingwas
!003wes'nrt zvlclearingwitbW ellsFargolnvestment 21 rctorGl,nobodygothurtcxcrptweeadedup intlv law suh
x
- or
respondectSmvices. 22 with RBC Dant and sbortly tlv'm-aflerlostlhecleazing f-
zrm .
Q C,an1ask you fœ asocond? Doyoutlkink tllattbe 23 In2003inMarch,westartclwerkingwitbWells
m son D ax telrminate,
d V G Nov W estwmq- tbatthatwas tlke 24 Fargo Cozw spondenlSezvices.Asa Inatu offact tibatwas
za m qson,ordo you tM IA tbem w agslmm otlzorroason7 25 nota complotely new mlauonship because wben RBC acqlzltvvl
l4, .pagg4g EXUIIBI
T3Page8of23 Rum yantsev Declaration, Page 73
D iversifieed k eportilm Sezvices. Inc. 202-467-9200
CM KM Di
nm onds
Case M uld-pageW
2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10SePage
rgoy Rum
91 ofyant
111a'w 4/13/06
Page 49 Page 51
1 DanoRomclv cloarilv armvtlryclose downtlr offiœ in 1 capitalprobl= s,soitwould notbomsyto> znonçyoulof
2 St.Lmzis,M issouriyandthat'swlv ourclearingpeoplo 2 tlw noninatimdy fasbkm.Sointlr m iddloefour
3 w11 RBC DanoRouscH were.Sothatwbolex m tbaîworke 3 kansiuontoth' m uevtsberoremovlngany acco% ts,we
4 inSt.Louisand llœ klodnottomevotoM innm polis 4 dœided to1* foranotH clam'ngrrm .Som stopped
5 G sentiallyA blisiedyin mytmtlerslanding,tle clezm'ng 5 doinganybm inGswithAdvanlageandsignedan agm rlent
6 arm forW ellsFargoInvestmrnts. 6 w1111Em mittLarkin& Company'inSanFrancisco.
7 W oknow alotof1110= pcopleom c tablisle all 7 ' Emm lttLarkin& Companyat% tinx hadtir
8 tlv pm rr..- oftirirrehuonship,wostnrlerlworkingw ith 8 repuotion orlxing frimzdly totY tym ofbusinœ sm were
# 1% toavoid sctnazioslilœ tlhatse>nnn'owilhcanceld 9 doing.W oluzew srvœalsmallbrokœ dea1tystbatwere
10 slock certiscates,bm eventuallyabou!ayearlalerW eltq 10 ckaringtlzroul tbo andbeingontlm westcoasttbatwas
11 Fargoran in> simihrmobl= s.Brli- h ()rnotywtil ada 11 aconvenientlœ ationforus.NovW ostW ba* ipLeas
12 similarincidcntwitbanotH clieatwhich oncoagain,was 12 Vqas. So westnre buildingarelauonshipwitbRmmltt
13 msolve zbut- 13 Larkin.Howov witàintwewœksofsigningO tagrœmœ ly
14 Q W howastllatclionl? 14 EmmlttLarkînindicatedtousthattlvyne k)gezoutofan
15 A lntbatcascwmwtretalkingaboutTW NK wastbe 15 agreemenlw1t11NrvW estassoonaspossible.
16 sm bol.T- ityTw tyNetworkswastbcnnmooftbeissuc. 16 Q W hy?
17 Soin aslmz 'lnrscœ mio,m hadapolenualsbM .M das 17 A M yinterprctationisthatinlate2003,and I
18 youmil tbeawareoashortposiNonQxcrttically has 18 besrveitwasNovember.tlm SCC ch'
nlwlamlechange.an
19 tmlirnited risk. So clcming t-
zrmsand brokcsdon'tlike 19 inkrnalnzlochangeofNaEonalSecuriticsCle ng
20 tboseoand tbatnug 'bt= ultin poe lialnetçapital 20 Corporation,wlzich isa sistercompany oftim DTC ,depository
21 problems.Som fougbtitfmiously,andasarcsultoftbat 21 trustcorporati
on.ltwasatrtwtcompaay. And SCC istlp
22 incidentzW ellsFargotermlnae tlwirmlationship witbNcv 22 mainclearingbotweform uity transactionsintiicUnie
23 W >tSecuriti es. Butwhat'sinkresting and completely 23 States. W ben a lradehappens,typically tlv ollmr:ide of
24 fascinau melfImay usetllishnguagq witllinafmvmontls 24 rvczytradeintheU.S.m arketisNadonalSecuritio
25 afler- '
lnatingNevWestaW ezsFargocœnplttelye tedte 25 Cloaling Corporauon.lfNovW at,asamarkelmakçr,sells
Page 50 Page 52
J businessofproviding cora sponding clearing selvice's. n ey 1 100sbawsofM icrosofttoSchwab,l1m actualsotllcmentat
2 decidcd nottotakethatHSItanm orc. 2 tbev'
ndoftlr daywouldboasfollowszNn'W est.solls100
3 So onœ we lostW ellsFargo asaclearing f' m n,A' e 3 shnn'xofMicrosoR toNationalSœuriti
œ Clmring
4 wmr desm rate to find anotherclearinghouse thatwould 4 Cxxpocation.and Schwab,tbatsamoday,m ysmoncyfortlmt
5 acoeptap0,111brokc dr'alerwithoutprofile. Ihaveto 5 amountofslmr..qand= eivostbesoshnn'x from National
6m
7busct iosnst
ine ih
na
t
loa
ws
m
pra
il
cl
eb
rr
okœitd
ur ea
it le
s,srthatid
omt, fœs
neta 1
ottoof
znos ftrndl
whi'
ng 6
ch 7Sœntuid
qo ti
eus
nuosCnl
r
ua
rin
s g
et Cor
tlcnop
no
tr
a
sti
yso
on
..ni
siswhati
sknownas (
8 entcrtbesystem incertificated fora that'shiglllyrislty 8 Sotborulecbane applicabk toconlinuousnet I
9 from thepointofview from the indtwstry. Being amarkd 9 setqemrntsystom atNauonalSecuritiesClearing Corporation I
10 maker,that'sllighly risk'y,so it'snoteasy to find a 10 Qzatlookplacein2003pladeitarbitrary tlm way National :
'
11 clearing f-
lrm thatwould acct'ptanew corrcspondenœ with 11 Securitic ClearingCorperationhantllesrisk.'rlvr issuch !
12 thisprosle. 12 conceptastlm cloazing flmd drposit. Ifyou are ammnberof !
r
13 Soon aftergtttingnoticethatW ellsFargo 13 DTC and NationalSxuliticsCloaringC' orporation,wlm you '
14 term inated NevW est,weostablishod acloaringrelationship, 14 cxœuteatradeforacertainamotmtorsbm , let'sgayy
15 and wben lsay ''establishedr'lmean thatwesigned a 15 tir same100 shxw' xofMicrosoft,National5œ1114t1%
l6 contractwithwhatattbeti. m ewasknown aqAdvantage 16 CleaùngComorationassumœ tl x risk llmtatimewait
I7 Clearing.Currently theirf'lt.
m operateskmderthenameNorth 17 sotllc rntofthattradowillnottakeplact. Ejtbc tbe '
18 American Clémn'ng outofSouth Florida,Ibelicve. However, 18 sollerwillfa2todelivc tir secuzityormaybctbobuyer
19 oncewçtstartediznplementingthetransition from W ellsFargo 19 would failtodeliyertlm cashfersrttlemom inatimely
20 to Advantage.weddected severalthingsthatpromptedusto 20 fashion,sothat'sconsidered arisk.
21 look foranotherclearing film .W e didnotliketheir 21 Now,wirnm talkaboutasquidsœurity,
22 trading interface.wecould notgetaccerssto a1otof 22 crvnmonly,1wouldsaytvmrybodywould agrœ tlmt100shm' es
23 infonnation using any kind ofelectronicplatfonn,soit 23 erMicrosoh isahighlylkuidasstqand tlr rksk of
24 signiticantly slowr,
d usdown. 24 sellingatradelikctbisismlativelysmall. Howovw',if
25 W e alsoheard rum orsthatAdvantagehad certain 25 som ebtxlytzadcsonemillionshnn'
xofastocktbattrad> in
EXHIBIT3Page9of23 Page49 -Page52
DivcsificdR- TGOR Sow iccs.Inc- 202-467-9200 Rum yantsev Declaration,Page 74
Case
v.4/2:08-cv-00437-LRH-RJJ
goy Rum yantax 13/06 Document
M ulti-pageW 163 Filed 12/28/10 Page
. 92 of
CM KM Di111
nm onds
Page 53 Page 55
tlr pink s- maybooncoawœ kandittradesat m rhaps, I znadeanapu znentwith Compuu Cloaring Servkes,itwasnot
very- 11prkq butpricem igbtbeirmkvantin thiscases 2 tbcwrittenagm nentbutvcbal,tlntinnoissuowouldwo
tlwroisamuchgreaterHSkQlatafailumtodrlivc or 3trademoretbanaccrtainnumberof*nn'xonanygvcnday. ' Mj
(ItIKTV Se10 sM ethattym ofaH msaction incro sœ 4 Ilvlirvotlr nambœ initgallywas5vomillion, cventually /
dm mnti cally. 5 h bœ amotcnm illi6n.SoîfIbave20clienls,œ ch of'Yern
PziortchNOVD W of2003.NationalSecurities 6 wantstotradeamiKonsharesof. x'W ,ten'oYthnrncantradu
f7lemHngCe oratkm wouldux aformulatbatwouldrrqltirea 7 i:y0u know ,tlr 111 cannotV gusewecanonly tradoton
certaiadepositinhkuidft
mds.caA toensureagainsttllat 8 milzononagivenday.FirstinFjrotout.
1- ofHsk. So ifacW dngNm GœutesalradG say, 9 W enrvœ rqallyranintothatproblc aczoss
ox m illlnn onwtqofXYZ fortlne days- tlzrerdaysistlr 10 numlm ofcliœ ts.Typicallyifoneclic tweuldhavea
typicale lementcycloin tlm sœ uritiosinduseyte y- ll positionthatrxceetlsaparticulartH hold,andm would
for111rœ daystbecleaxingf'
lrm tbatK ldtbox sb> would 12 Kay,''Ttxlay youcan s02tenmilEon. Ifyou wantto sdl
putup are '
lnnmrulntjusttoouhmreNationalSrCUHGeS 13 more,youcando ittomorrom ' AndComputrClcaring,to t
be
O1earingCorporati
onagainsttlrrisktbattllistradeV 11 14 1.41ofmyknowledgeasan ultofQlat,novœ raninto1l=
aotsotde in a timely fasMon. 15 problm n ofckadng fund doposits. Now,tlm vasa shcrt
SinceNovembc 2003 tlv fnranzlRdisap;m e and 16 çutfor1a< positionsthatdidnl)tbœ omoobviotlstous
hladonalSw urilia Clam'ngCozporaion,inmy . 17 originally,butasweprogresxtltbrougb ourrelati
onship
znderslanding,randomly comosup witb t
ir amotmttbattbo 18 witb ComputerCleazing Services,becameagrtzdm y of
ll
earing f-
lrm weuldlm etoe osit.Sowhenm were 19 cxœutinglarm txades.
lleMing w1t11W dlsFargo,Iwa: active in tlr numberof 20 '
Fbereisa notion ofX clearing. X cle ng means
iecurities,low pzico scurities,being am arkv'tmakc ,I 21 a kade settled oueideoftbeconunlzing netsetlltzncny
vould be tradingsometimœ millionsofsbn. - aday. One day 22 system . Aslsaid,wlrn som cbodytradtsusingcontinuousret
(xtcoivetlophonocallfrom W ellsFaq owieretlpy saidt1%$ 23 settltmentsyslmn,tlm otlv sideoftlr trallewouldalways
MSCC aske W dlsFargoloputup $l0millionfortbrœ days 24 beNalionalR CUIiEeSTradingCe orati on. lfyou sold lo
ustlo x ttl:thv lrada . ForW ellsFargo,h wasnot 25 Schwab,attboend oftlm day you don'tdeliveranytbing xo
Page 54 Page 56
mch abig dealbecausetlleylrcaffiliatred w11.
11ahugebank 1 Schwab.you ddiversomething toNationalSecuriticsCloaring
md111% justhadtopm upacoupleofthonmqnddollarsin 2 Corporatîon,andNationalA curitiesCleadngCorporation
nterestcosts,which forttmately theycould notpa'tstoNev 3 delivtrssometllingto Schwab. ' .

Wv.stbecausethatwasnotpartofthe costoutlined in our 4 X clearing dœ sm'twork tbatway. IfItradeX 1


rlearing t.Buttimx fœswerepartofthereason 5 clcaringwith Schwab. thetzadr sellgnottlirough N ational ë
hatW dlsFargo terminated tbcrcladonship withNev W est. 6 SecuritiesClearing Corporation butdirœ tly againstthe !
Sowhenwe cameto Emmittlmrkin aod m started 7 participant'saccountW S.IIDTC.SoifIfailtodelivm
hressing theissueoftrym
'gto tellthemm''Gentlemen,you 8 certain sccuritiesattlw end oftlm day intotheaccotmtof
lœ dtol>eaware,thisisarecentrulechange,wewantto 9 my clearing ru'm w1t1:DTC thcywillknow exactly whe to go
nake sureyou tmderstand.''Andthey signed the t 10 after. So in thisparticular(n% thercisno nœ d for
vit.
h tks,butIbelievethcy did nothavea clearideaofwhat l1 additionalclearing fund deposits. Everybody know scxactly
vasgoing en with that. So they signed theagrœ mentwith 12 who'sinvolvedin t.hetrade,they'restdcterbuy-in
1s,butapparently within acouple ofweeks they 13 procedm es so X clearing tradeswerea grcatway ofm aking
econsideredthe issueand oalled usback quickly,trcaux 14 large tradeshappcn whilewtworked with ComputerClearing
lmmittLarkin isnotWellsFargosthat'smyconjtctum butI 15 Services.
Nink it'saccurats,thcyjustrealizcàthattlveisnoway 16 Howcver,cveryindividualparticipantofX clearing
bcy could c,01.
1,
1e.up w1t.
1:amillion dollarshere,amillion 17 trade istakinga HSICnow . lnstead ofNationalSecurities
lollarsthere.'rhey could notmaintain a rdationship with l8 Clearing Corporation bearingtheHF, k ofnotbeingableto
ny FIZ'm thatdœ slargevolumeofbttsinessin loW price 19 settleon atimcly basis, now every individualbrokerwho
tcurities. 20 dœ sX clearingtradeshasto worfy aboutit Sovery fcw
.

So thenextm ove wasto Com putcrClearingServices. 21 ftrms,very fww m arketm akersthatIknow ofwould allow X
a
-ompute,rClearing Service,sforrefcrence,on Exhibit13lit 22 clearingtrades.and thatntunlxrhasdropped sincethetime
;identified asCCS. CCS weloomcd us,and whatreally was 23 wewercactually executing alotofthose trades.
reatfrom the btwn
'ning,thcy exhibited clearundcrstanding 24 In 2004lbelievewehad ardationshipwithm aybe
'falltllefœsinvolved in trading largevolumes.And wc 25 two orthreemarkd makcswho would execute X clearing
:53-Page56 EXHIBI3Page10o2 R um vaptsev Declaration, Page 75
Divc sified Reporline S-
em ces.Inc. 202-467-920:
CM KM D isa onf
Case ls
2:08-cv-00437-LRH-RJJ M UIH-PV
Document 163eTM Filed 12/28/10 Page
ey Remyu lzxv. 4/13/06
93 of 111
Page 57 Page 59
1 t:adoswitbNevW œ t.Sotbatflezerrnlnd tlwirdirccuonof 1 lv e iciariesoftboso1= 1 wœ ?
2 ourbtlsinœsinalotoflow price sœ misœ .Com pue 2 A Idonotknow.
3 CH n'ng Strviccsdidbusinosswitbusforaboutaytar 3 Q D9dyouru askMn Edwauly'h-?
4 lvforebdngacqne
' by IYnsonFinancialScvicœ,which Lq 4 A No,Inrvcrdid.
5 ourpresensclœring,so tlm circtunstancœ oftbattransilion 5 Q Didye = inqr
lnmsaayœ atNOV W Y > fiad
6 arreasytodcscribc.M ezgtr,so we'vebœ nce ngwitb 6 oqtw:o1% *''-11c1a* = 7 '.
7 Pœ sonsinc,ethate kplaçe.W estnr'e transfcrring 7 A No,Idkln't.
8 accountqandexecuti
ngtradesw1t11Penson,Ibelit'veoin 8 Q W hyno'?
9 Augustof2005. So it'sa longanswc. 9 A Cunrnoy uodc tlr provigions eftlv PahiotA ct,
10 Q YR = tofane tlzisbcf- butItlidn't 10 tlmreax cvtninnzl% andrtgulati
onstllatapplyto
11 m ally un-----xna D id you - ask anyox atN> W > twhy 11 ctutomc idoatificafonpre urœ .And tlrrg isazule
12 Jolm FA- ?had egtablimhtvl> many diff= taccouna? 12 tbat'sckarly statclt11a1tlm duty ofa brokc doalerin tie
13 A 1n- askc bm IdiscussedtNisissx Wirn 13 caseofalrustaccountexkndstotlv owrlc oftlv agcoun:
14 tlrNASD brougbtuptlr que onofwlutherorno1NovW % t 14 in thiscasesomœ nwwhocontrolsit.Sotlmreislanguagw
15 wouldInVetofzlesuspiciousactivityrvw rtinconjlmcion 15 inblackandwhitotbatintlicau tbatabrokerdealerdœs
16 witb tlr speciik transaction:in CM KM onooftlr factors to 16 notne toknow wlzolbebeneficiariosofa trustaremqlong
17 consideriswle bercertain activitym a1:% sense.Sointlr 17 asm know ourçustomertv coneoh tlm account.' rir
18 gontexld lbisanalysis.NevW >tbadtoaddv stlr issueo 18 persolwho( IIX'nGItim accountwhotzadcs!l= accouh: h's
19 and Antony Santos,who istbevke pmsidtmtand gx al 19 csscnlially tlm basis.
20 counstlofN> W es:lm isllr N sonwboinkrvimvGlMr. 20 Q So did you virw 1atJohnEdwv lmwastle owzerof
21 Bdwardsand M r.Edwards'alkrney on severaloccasionstrying 21 allofo œ e accounts?
22 to identify tlàatbusin% spurpose. So M r.Santosand myself 22 A Ferpurposef oftbectlstonw'ride licaéon rule,
23 would discusstbatissuo. 23 M r.Edwardswastlleownc oftllosmaccounts.
24 Q And whatdid Mn Edware orMsattarzmy say was 24 Q W = you overcariousofwhotbol=e ciario'sof
25 tbo bm ix u pux'
pv ofall'1u'
.
e se aralo acr- nts? 25 tboso trustsw c ?
Page 58 Page60
1 A lbelieve tlxatM r.Edwards'atlorncy did notgo l A Not- notparticularly,no.
2 s- ificallyin* tljatAscussion.'
I'
Y answerwomcdved 2 Q Didanyox ovt:r- th*1youknow efç'vera:k M n
3 from tle attorney wastbatovczytkingwas in com plianco w1,11 3 Hdwanklwho tbo a lloficiariw'sof111
0 trus:sw= ?
4 applicablorules. 'I'
ir answœ wogotfrom M r.Edwardswas 4 A I' m notawam oftbat. I'm aw= oftlzofacttlhat
5 tlmtir wasaçting asattorney-in-fatlforsoveral 5 in ourdisoussionsw1t11M r.Edwardsand in particular
. 6 individuals,and tilosetrusls thatwobad tbo accountsfor, 6 convcsati ons tbatMr.Sanu had w1t1)M r.Edwards,itwas
7 tboy obviously rcpresented intmpsts ofdiffercnt 7 absolutely cloartbatMr.Fwdwardswas concerned witb tl)c
8 bendiciarics.Sodiffm m açgountsworenœessarylo 8 privacy oftlv beneficiaries,ButasIjustindicatcd intlx
9 mainuin oleam raccountingv ords,cloartrrvw rting,And 9 pxviousanswer,ir indicatcd tllatiftlrrcwas a formal
10 so csœ tially O t'smy interpretation oftlr answo'
rwt 10 m jueslforthatinformation,be would provide tbenamea of
11 received from M r.Edwards. 11 tllcbcneticiaries. Soaslong as1r could proteu tlxir
12 Q W llo wœ tbodiffomnti- liciariosoftbo 12 privacy,ir wouldnotput- notbingwouldstophim from
13 (Iifrmvntaccouna? 13 doing tbatifformally tm uesled.
14 A Idonotknow whotlloscbeneficiariesare. 14 Q W hat(1oyou R obycone- ahmt'lœn
-tpzivacr
15 Q M o would Iasktofindom wbotlxseaR? 15 A We1l,essentiey ifyou havoatrustwitba
16 A M r.Edwardsatsomepoint,Ibeliove,indiçae to l6 btnetk iary,hismyunderslndingofwhataclientprivacy
17 usthatifa regulattzrformally m jtlcstcd tbatinf= ation, 17 is. So ifM r.Edwardshasacccs to a beneficiary fora
l8 ht would provide it. 18 tnzst,1bclitvetbattlr berwficiariesbave tlr rightnotto
19 Q Towbam? 19 bcdisclosedtoanybody wheasks.
20 A Tewbcevœ would asktlmt. 20 Q Cauyouhavoatrustwitlmutabenoficiary?
21 Q Didlm ovorIOIIyeutbathohad asserkxlhis5111 21 A Idon'tknow.
22 Amondmwnlprivilegesnotloproviœ iztformationtotlm 22 Q W asilyourlmaet rqnnalngthat'lœ.
- ac-xllyweze
23 goverrnm ontagoncics? 23 lv mticiaries ofalloftbotnlsts?
24 A 1'm notawareofthat. 24 A W G Ibavexvimm lso= oftlletrustpapm vork
25 Q DidanyonoatNovW esto'verask Mn Edwaro whotlm 25 that'sgubmie w1t13nmvacgounts,andaltboughtbat
EXHIBIT3Page 11of23 page 57 - Page 60
Diversificd Repoe 'nR Sarvices.Inc. 202-467-9200 R um vantsev Declaration Paae 76 .
Case
gwy R um yantzav 2:08-cv-00437-LRH-RJJ
p 4/13/06 M ulDocument
ti-pagow 163 Filed 12/28/10 Page 94 Di
CM KM of 111
am onds '
Page 61 Page 63
lapergrork never spœ ificany idrntifiod tlm lvneliciaries, 1 ustbatM r. Bdwards'acuvitks weren'tcrossing any legalor '
)ul1besm?eitstqtGltbatbmwsciariesn istcl. 2 reguhtoty 11 *.
Q 11itpessible.bm lontv iafermatioayoq'w 3 Q Whydidyoupxthatas= xu'
Rfenmtkislotte '')
;aG - =aboutM r.Fz wardsand1% trustqytkas11- am in 4 A Prim arily l= alss/ofM r. Cm k'sreputaûon,and '
.
'
actxm rral''-'ficiariostotlm trastsandte 'm just
. 5 tbis1* resultcdinmyun* standing&om anumbœ of
lccountslàatJobn Fxlwardscontrols? 6 tdopbonic convcsauonstbatM r. Santosand M r.Clmk luad so
MR.GIUFFIN: You'm askinsaboutpossibiliti
>? 7 âtwasjustac'Almination ofsovm'
alvcbalGcbanges.ahnd
M S.HAKALA:I'm askitv ifV *sr. alydotumtlls B tàiswasNov> W 2* 4,approximatolytlu montbsafw tlm
batzulooutthatpossibiEty,oranyevidencetbatntles 9 flrsttimctlr NASD indicae toustbatwenœdtxltopay
mttbatpossibiöty. 10 cklxraœ ntiontoM r.Edwards'acGvity. So a 1- 11u
M R.GRIFFIN:You can answ that 11 tbkqreassuredust1n1itwasnotjustNovW>l11m1looke
THE W ITNF-SS: Ibavonotsœ nanydoctmw tstbat 12 atM r.Fxlwards'acti
vityandconçluded Qlatnotbingapmam i
vouldrtlotiïatout,bm ldon'tknow ifIcanmakotlmt 13 tobewronp SoMn Cook,wiè hisapulation,wastio namo
l
onjecturm 14 tbatgavetlscomfort.
(SEC Bxlu3it132wasmarkH for 15 Q DidNA W eesxpayMr.Cœ ktomviow lohn FxlwarA '
idmnufication.
) 16 luTh'nemactic-?
BY M s.HAKAI.A: 17 A No.
Q l'm yhowie yoxkwhat's*''-matked asExhibit132. 1% Q W lm paidM T.Ctmk fm hiswork?
lxhibit132jsa10* dau N ov= H 18t1,toNovW Y * 19 A Ihavonoinformadonorknowlcdgeoftbat
iborw4xxlCm ks''Ro:lolm M .Edwards.''Doyou= (e zo 20 Q 11saylbormin tlm sœ ondparagraph or% letlerx
lxhibit 1327 21 ''Ihavo roviowed tlm lzatling pzacticcsofM r. Edwards.H W hat
A Yos,Ido. 22 trading practica i:11%1s- ifically mf- ing to?
Q W hatisit? 23 A Ita notmlk'
e.anycondusionsbastdonthis.
A n at'stbeletterfrom Mr.ShmwoodCookwhe,to 24 Q m katwaKyourundozstandingofwhatlIowas
bebo tofmyknowlodgc,reprosenti Mr.Edwardsatthe 25 zrforringt0?
Page 62 Page 64
im e.W e havethedate, Novemlv 18th 2004. 1mentioned l A Myundcstandingisthisxfm edtotransactions
arlic today thatM r.Santosconununicated with M r.Edward 2 oxecuulatortiroughNovWestSecurltiesCorporation.
nd hisattonxy,thatattorney wasM r. Cook.And thisisan 3 Q How did Mn Cœ k roview Mr.Edwarda'trading
xamplrofcorrespondencethatM r.Santosreceived t hisin 4 pzacticosatNo'vW est?
kovmnbcrof2004 and maintnlnazlitwith the recordsthatwe 5 A Idonotknow, butmyeducatedconjectt ur wouldbc
ad.from Mr.Edwards'accotmts. 6 everyaccounthasdctailcdrœordsandt110% rœordsalv
Q ls thisthe only lctkrtkatNev W estreceived 1()m 7 cnmmunicau totl
zcaccountholderbywayoftrado
& .Cook regarding John Edwartks? 8 conrlrmnuonsandslaa ene. Andtotbelxstofmy
A Thisisthe only lctterthatIlçnow of. 9 knowle m ,M r.Edwardsmainuine good rrcordsofcvmyl hing
Q Do you havoany rcason totbink tbcre were any 10 tbattranspirv inaccountsir controne . So itismy
o erletters? 11 Glucated conjœturetbatMr, Edwardsmighthaveprovide .
A ldon'thave any otherreason. 12 conrzrm ationsand stau nentsto Mr.Cook forroviow.
Q W lm isSherw' oed Cook? 13 Q n ismay - nd a- osutivo, and Idon'tm cau it
A Ipersonally do notltzmw M r.Sherweod Cook,butM r. 14 tebo.I'm tryie loundozwtand. W axityeurunH m nding
antosdidrv archandlbelievq$atMr.Cookatsomepoint 15 tbattltislottornometFrnm JohnFxlwards'lawyor,right?
Athcpmstwmsan officerofaregulàtory orgM ization. 1 16 A Yes.
on'trcmembersw cifîcally ifitwasthesta1 securitics 17 Q Inox scntcnc.
eJohnEdwartks'Iawycrsaysthat '
lgulatorin Ncvadaorifitwasafederal,but1believe 18 gsxntially my clicnthmsn'ldox anytNing wlxmg. W le did
1atMr.Cookwasahighlyrankedofficerinasecurities 19 that#voyoucatnrozltbatMx.Edwardsacnmllylladn'Adono
o latorin thestate ofNevada. 20 anytltingwrong?
Q Did Exhibitl32 play any rolein Nev W est's 21 A Ia- dy sutcd0 1aonmsentenccletl
ercomes
ecision regardie Jobn Edwartls? 22 onthebackof, Ibelieve,sevcaltelephonic conversations
A Ican say withconlidcnc,ethatthe letterfrom M r. 23 tbatM r.Sanosbad w111.M r. Coek. Al
ld my backvound dces
'
.ookgavet tsquite abitofconfidencein the factthatwc 24 notallow meo makeany lcgalconclusions,butM r.Santos is
l
eren'tdoing anythingw rong in particular. butitreassured 25 anattoruoyandagencalcounsolforNcv W est. so based on
l
D iversm ed Row TtinR Servicesxlno. 202-467-9200
'
CM KM DiCase 2:08-cv-00437-LRH-RJJ Document
xm onds 163 Filed 12/28/10S PageRuv
M ulti-pageW 95 nyaat
of 111w'v 4/13/06
.
Page 65 eage 67
l Msreproxntauons,hwasmyunderstandingthata1* l A Okay.
2 liketbiswassufficlntgroundsfûratlœstthatsonseef 2 Q Sewocanmqotbatwardwithom le ng cone '
3 comrorttbatIroferzrd te,x ttlm vmy soid tcmzbut- 3 aboxzttllat.W hatwastlm n-* ofMr.Edwe 'xdatianolp
4 Q Hew oftendidM r.Santosand Mn Cm k sw ak? 4 w11: CyW M ark?
5 A Ido notknow,butIIXZ- atlo sttwice. 5 A Idon'tzomcznbœ sN v cally,bm a1:a11)0Ian
5 Q Did Mn Sane x'ptu O youA*ezreacltoflho= 6 Macontirecamoup. '.
7 çonv= atiozuq? 7 Q Ian?
8 A 1cannotsay itwasafterœ choftbosç 8 A Ye ,IanM acentirecamoup intlw cone of
9 conversauons,butbytlm timotbis1* arrie ,1m s 9 M r.-'onoofticcl ti
ti
est ik
atM g.Edwardscontrolle also
10 wellawarroftlr factthattboseconm sationstook placo. 10 badM r.M acentireon itand-
l1 Q W u twu dirprm me,lH ing'hr- çonv= ationW 11 Q YR mex oxm oftlm trtuls'
12 A IwasnotpartofIIXISG Idon'tknow. 12 A Notono oftlm trustq,but- 1don'tzmneznlmr
13 Q W llatdid Mn Sane tollyoulm '.
xlkGlabeutw11 13 sv ifkaHy,bm tlm wasacorpomti
ontbatwolœkcd up
14 M r.o mkde lg111- conv- zvhn 'n&? 14 ontlv NevadaSecrete ofStak site,pnmethlngalongth0x
15 A ' 11e factt1m1M r.Edwardshadanumltrofaçcounts, 15 snes.
16 tmstaccomm .and tlmrmwmrlransaçlionsin1- amounts 16 Q FirslColonyM orchant? .
17 ofCMKM,CMKX shn- . Ibelieve11. fœm wassm cifica:y 17 A FkslColony Mcchantmost111* .AndIdon't
18 on+a1particularissr ,andIbe19ovetbeconversae ns 18 remernbc why tlr theughtisinmy * d,butItllink Mr.
19 involvodadiscttssionofwlehsrtlr shaM wmv ll timakly 19 Macentirewastle principalofCy* M ark.Idon'thm a
20 issue andlœ itim aklyh= trading.So tbatwouldl)omy 20 s- iliczœ ollection,bu1forsomero sontbat'stlv memory
21 conjœture,tbatwastlm natux oftlv discx ion,andtbat 21 tbatcomestomerighînow.
22 wouldl)emyrecollœtionofwhatMr.Santosrrpore tomc. 22 Q WM n didyogdiscovor11-1JohnEdwardslladx e
23 Q Wkatdid - wàalObeantivoly - itsoundslik- 23 priorafliliationwith C''
ylx:rMark?
24 tàoso wom tbo topics tlhqtworodiscusm l. 24 A Iwould eslimate itasbeing sœ ondhaifof2004
25 A Corrœ t 25 se probably towardsthemld oftbe yoarwhcn we sinrteH
Page 66 Page 68
1 Q W lhqtRbstantivelywaseaid a:towhy tbolares l lookingg1o5eratthosotransactions.
2 wc isse and fzroH'
nalngandsofoe ? 2 Q Didyou ovt:rask Jolm Fzlwards- ordid anyonoat
3 A Considering 11m:discussionsoftllisparicular 3 N*v W estrvw'rask Jobn.m lw ards whattbe natm r ofM s
4 subjœ tIœ kplacewilhanumbc ofindividuals,Icannotsay 4 rclationship w1t11CyH M ark kad *'---?
5 tbatwhatl'm goingto say now wasdiscusse betwœnM r.Cook 5 A Iam notawam ofany spccific5r1/ofquel ons
6 and Mr.Santos,buth wasmy belid alalltimo tbata 6 along these lines.
7 substantialnumbœ ofqhn,v'
xlhaîMr.Edwardsdepositedand 7 Q Didanw neo-vc ask JohnF-dwardswhatlli:
8 sold through Ncv W estcanw to him througb private 8 rd alionship witb C-axavantM ining KlmH lightInev nntienal
9 transactions,privatr p'zmbnsesfrom individualsnot 9 or CM KM Diam ondsw as?
10 arjiliatmlw;G tir issuc , And alse M r.Edwardshad somo 10 A Ibelieve tbalon severaloccasionsvm asked M r.
1l early deposhsearly in 2003,somoof1l= sharesin CM KM 11 Fdwardsin tbenegatim wllich mc nswe asked bim to verify
12 Diamonds itismy lvlid tl zasM r.Edwardswas in oneway or l2 to uslbalbeisnotan affiliale ofCM KM Diamondsand no
13 anoe afflliau lwith tlv prcdocessorcompany ofCM KM 13 sharestballm deposite M IIINev W >tcammfrom affiliatea
14 Diam onds,andtlx: rewasacontolpesitientbatwasnolonm 14 ofCM KM Diamonds.
15 zestrictctlunderRule144. Sosomeoftlr sbamstbatMr. 15 Q Whatdoyou moanby ''affiliau ?''
16 Edwardshad wce oldcrslua'
req datingback to the predœ essor 16 A Affiliates,in m y undc slanding,am officœs and
17 issuc .I'm tty'ngtormnember.CylmrM arkwas1lr nameof 17 de tors,andI'm not100N contcerlainbutma bersof
18 11)eissue,1IXE- .Andthemajorityoftbesbarescamein l8 irnmcdiatefamd
'y of(l
ffir,
ersand directors,andcontrol
19 tlv privatctransacuons. 19 shareholdœston pm'
cgntormore. So that'smy tmdrrslnding
20 Q lwanttoprobralittlebiton somooftbothing: 20 ofwhatçonstitutesanaffiliak.
21 youjlm said andtrytogeta1* unH - ding. '
rlm 21 Q AndM r.Edwardxwasaske toconfm
' nt:alnoseof
22 flrstisyou znmzlioned a surcempany CyborM ark. I 22 hisshaa s caum from affiliau ?
23 canxrpu ntloyouthatCylmrM ark was1heprtdocmssernanm 23 A Yes. I
24 IxtroroG sam tMining Kz
'mlmrlightIna ationaltœ kovor. 24 Q W asbeaskcd'ocoxdirm tbath;wasnotan !
25 You're cxm tly zvmvmlxr
rjng tllatnam c. 25 affiliatc? ;
EXHIBIT3Page13of23 page 65 - Page 68
Divmxified RoportinE sow ices.Inc. 202-467-* 00 Rum yantsev D eclaration,Page 78
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CM KM D i 2:08-cv-00437-LRH-RJJ Document
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M UIW-PV 96un
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y
Page 73 Page75
l A Ibavenorosontodoubtit,and oncoagains1can 1 Q Including alloftlm trustaccountsand sefe ?
2 say lll
atlwaspartofctxnpiEng allthedata tbatweatiœ 2 A Yœ ac= t.
3 thepe arafonoft%isdamment. 3 Q Mr.Edwards- wlo dgdM n Fxlwe qgotalloftlx
4 Q &)John e ositod O rtificau - m) 4 sllares1atlm ' intotbovaxiousaccounte?
5 somobmlywho youkx w lzml1= fœ mally asstviatGlw111,tlm 5 A AsImee nGloarH , we IXIG tbatmostof
6 c- pany (kPO?tGI261billion thx.w- ofs- k D idthi:o'vœ 6 thosepesifonsim acqe' frem '
privateinéviduals.
7 giveyouany= sonA)wonœ rFIXIwastxyie to Iiquidato 7 Q R o?
8 se k fortle com- y? 8 A Ibave no know- geofthat.
9 A H= 'smy lix oftbinking.Unfozluna lyQmreis 9 Q Didw u evorask hlm?
10 nol.
muchby way ofdau onthisdocttmentzExbèit131,but 1Q A Wllal?
ll Mr.Edwardsstare drpositingand melllngslwq- fnCMKM as 1J Q Didyouo'
vc ask hlm?
12 early asM arch ef2003.AndbyJtmeof2004 wlrna1- 12 A Iv onally ncvc aske * . Edwards,bu1basGlon
13 spikein pricchappenc ItI;nIIttmtotalamountofsh= 13 my knowkdm ofMr.Edwards'convcsationswit: Mr.Santos,
14 dvw sie antlsquîdatodwasintlr neigbborhocd of60 14 M n Edwardsindicao tbatlrweuldprovidetbeinfonnaEon
15 billion.Andasyouzmntznber,IjustdiscmrsGlour 15 ifnœeaary.AndIte rvoMr.Santoscontacu lF'
ust
16 convcsation witbW eltqFazgoandsubsmuonldiscussionsw111, 16 GlobalStockTransfc anda* dtlmnztovcrifytiu atallQr
17 tbotransfc agent,in m rly 2004.late2003,w:brlix that 17 transfm'sin tlm namo oftir lrust,tlx position tbaîM r.
18 CM KM had in cxcessof600billion issuesoutsunding. So 18 Edwardscontrollcl,none ofth! m cam efrom affiliaa . 1
19 SeIIi/Kabout60billionovcraIXHIXIofmoa tbanayoar 19 bcErvetlrkassfœ agentissubjœ ttocerl
ainprivacy
20 clid notpru entany spœ ific lm son forconrm to us. 20 provisions, butatleastM r.Sanloswasabloto obuin a 'ne''
21 And this number,263billion sbaro ,m ostoftboso 21 astbeanswerto tbatquestion.
22 dopositsbappencd inlat:2005,early 2006,likelyator 22 Q FH GlobaltoldM r.Santos?
23 around tbotimem'subsequentlo tlr lwmz'tbaîm 23 A Thatnonloftboseposifons - tbatallofthose
24 discmsc Exlll
-bit132,wccks.ifnot,.
montik
qaftc tlr NASD 24 transfm'swerecovc dbyaltorneyopinion I
cttersand tbat
25 st'm rd taking aclose look atM r.Edwards'eansacfons,and 25 none oftbox transferscamefrom affiliaa . n at'smy
Page 74 Page 76
1 ebviouslyinmy tmdcstandigg,yoarsaft
c CyW M ark lxcame I interpree onofwhatFirstGloballoldM r. Santos.
2 CMKM Diamond .So alloftbox factorscombinedusentially 2 Q DoyolihaveaxtynotesorH umontation conf-
uming
3 lGlmc to beliovothatatnopartigularpointin timodid M r. 3 l at?
4 Edwardscontrolmoretban *'nm rcenl. So ovc a pcziod of 4 A Idon't.
5 twoyears,itwagprobably--Idon'twantto sound like1'm 5 Q D= NcvW estllaw aay businem
s:Rlationshipw1111
6 producing animplausibk scenazio,butwccantl zink ofa 6 FH GlobalSe k Trangfo otlv tbantbattl>oy'rwtu
7 tcadcrwbo over11. com seoftwo ycarson 1bomonthly 7 lzansfo-ran tthatyou coalau to clv k on stlxk
8 basis,lot'ssay,buysatbousandsbaresofMicrosoftand 8 = rlilicakl s?
9 stllsatbousand sharescf M icrosoft. 9 A Yoab, tbey'rea localtransferam nt,one ofmany
10 Icanrun thisskaight12 tim esa year,ev opt 10 in LeasVœ as,soit'sjus!- yoab tbcre'snobusinGs
i1 lct'spretend I'
m buying itin oncphce and solling itin 11 relationship.
12 anotber. So ono f-
zrm would sœ owncship of 12,000shnna ,q 12 Q Nootberties? i
13 wllileatnopointintiuw did tlm parlicularindivldual 13 A No. I
14 controlm oretban aiousand shares. So in Mr i
. Ed wards' 14 Q AR you awam ofanyp= onaltiesl- œ nanyox !
15 çaso,œpecially considœipg hisrepresenlations tbatfrom 15 atNev W estand anyox atFirslGlobal?
16 timc to timoixlwould purchâse largepositionsfrom l6 A W dl we know oach ote 's facc .
17 nen-affiliaulindivîduals so ovcr!lx)couzseoflwoyears. 17 Q Butnopersonalbusiness?
18 thatnumberaddsup to263 billion shares. Bu1atno point 18 A No N sonalbusinœs,no N sonaltl> .
19 illtimedidwehaveanytllingneartotenpcrcrntconsidering 19 Q W hala!v tllonaxneseftM lmopleatFizstGlobal?
20 ourunderstanding ofwhatth:numbcrofissued and 20 A W eknow tbeplincipalHokn Baglcy and m v ently
21 outœ nllingsbn,oewasinCM KM . 21 md agentlmnannamd JeffatFirstGlobal. 1don'trmnmnber
22 Q Forcalculatingtbetonm rcontnumbcr,didyou 22 hislastnamo.
23 agpu atoallofM n Fzdwards'accounts? 23 Q M itcbom .
24 A At> cy pointin tim yes,wewould aggrœ ale M r. 24 A JeffM ilchell, çorrect.
25 Edwards'accomm . . 25 Q W âat11% d= Jolm EIIwaTILSIlavotoFirslGlobal?
(
Di EXHIBIT3Page14of23 (p,V e 73 -Pagc 76
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'attarnoy-in-fact7'? 1 BY M S.HAKAI.A'
A We2,tbat'sau m t1>11. lksGlinmyprx ceat 2 Q And M n Sc geypdo you tm&e nndtbatyou remain
%stonce,so1'm rqo lingitaactlyasIIX'
J.M hfrom 3 undcreatll? Xj
kim, 4 A Yes,Idounderstand. ''
Q + 11a1tlœ a9:moan? 5 Q And can you conlinœ g1v1e your% sttgeimony?
A Idon'tknow.Butonclagain,tbatterm cameupon 6 A Yes,1(;an. '' '
10v= 1(v asionw andnobody atNrvw estovc quesuonu it. 7 Q W lzo isJM Corrcia?
5oIalwayszrlimlonthet'xperGsoofotlmrm oploinvolvM 8 A Jim Correiaisan equity tradcratNev W est.
includingMn sanos.soI(lon'tknow wbattbatm ns. 9 Q W hatdx s11e do forN> W es'ts- ifically?
Q How mnnyt'ustamerrqcanyoabaw ie'
oreyou aœ dto 10 A Hisp!imary duty ispru ssingexecution ofagency
% - r.aa ox havolmr- opo'w vlqtolm rrgisteaxlasas 11 traaex.Heoriginally startedasmya istantonthetrading
i
svestmontadvisorforpxovidie invosa cntadvicoand 12 dcsk,and atthispointin time hehandlesmostofthe agcncy
undung mw w forpooplo? 13 volmneand he helpsme witlloriginalentry inpreparation of
A Idon'lknow. 14 ourtrade blotters.Sohe startsat6in themorninw takes
Q Di;you ow rask Mn Fzwardsif1. wasxcgist- 15 phonecalls,receivestickets.ordersfrom brokcs,
Asaniavostmontadwxr? 16 commm icatesthoseorderseledronically orovc the
x Ne. 17 telephonoto aclearing rlrm tmaing desk orotherm arket
Q Didyou ovv'rwoae if11 0n--*-=lolm regiseenwl 18 makcs,and es= tially completestheordcrs.
u aa inveglznontadviscrl= aux howmqV dling1- 1e.:* 19 Q W ashetl,etradertlmthandled John Edwards'sales
iRmks? 20 of CM KM Diamondsstx k?
A No. 21 A Hchandledthemajodtyefthosetrades.
Q D9dMr.Fzwaukqevm'give any --tbatyou'a aw= 22 Q W lle elsllx dled thorest?
)t anyindicationofwhohepurçbav tlv CMKM Diamends 23 A SinceIlm a1s0 traderonthe desk,occasionally I
a k f'rfwn? 24 mightbe theonewhotake.
sthosetickea.
A Henevergavoany s- ificindication. 25 Q Did John fdwartLqevercommtm icats '
Page 94 Page 96
Q Didhmovergivoany- 1indication? 1 instruclionstoJM Cm eia? i
'
A Hisgenm' alindkation washisrosponsoto our 2 A Iwould say t1a1on extrmnely rare occassons bu1
nquirieswhellrrtbepuzchase camefrem affiliau ,and 1lr 3 tlm w= 6111% whcn M r.Andcson would bc ou1oflown,so 1
mswerwasno. 4 probablywouldsay lc stlzantrntimœ M r.Edwm'
dswouldcaE
Q W hytlidyouask tlkal? 5 into thetadingdcskdiv tlyandcommunicatemosllikely to
. A Bœ aus:aspartofouroperatingproceduro wlm 6 M r.Conda.
ve'rede ngw1f11alargeposition wlm tbcrearoqueslions, 7 Q Andtbat'sloss'hnn tcntimo ovtr% wbole
vmwouldEketogetadditionalinsurancetbatwc'renot 8 m'
HGIthatM n Edwards:ad accoual atNey W es't?
nvolved in an tmregiste distribution. 9 A n at'stbebestofmy rtcollœ tion,bœ ause thoso
Q Didilovrroccurtoyou thatJobn F-dwartkqmil t 10 wcrovmy infzm uentinsunces.
usllv liquidaungsharcsfrom tbocompany and nxrnlngtbo 11 Q otW tllan 1t:$ )einstaaoeg.aveyou aw= ofany
hnxcods around to tbo back tailcom pany? 12 occasien wben M n Corm ia spoko dirrctly w1t11Jobn Fxlwae ?
A Cm sidering allinformation availabletom ,tbat 13 A W itb almostcomplœ tertaînty,thatwould be in my
kcveroccurrcd to us. 14 prucnce in tlx trading room wirn Mr.Edwarllswould com eand
Q Didtbatovm'(xcurlo anyonpatNovW csl? 15 Gsittbeofficesandirwouldsimplypopinandsayhelloto
A Idon'tlmlieve so. 16 M r.Correia and myself.
MS.HAKALA: It'sabout12:30.W ilydon'tm take 17 Q W asanything e ond sx ialgrœ tings?
'
urlungb brcak now? 18 A Noxnotto tbe bestofmy knowltxlge.
MR.GRIFFIN:Grwat. 19 Q On thoseœ casionx?
M S,HAKALA: Offtbezw ord at12:30 p= . 20 A No.
t'
Rœesskaken.
l 21 Q How didNevW Y can'
y outitstrading forJohn
M S.HAKALA: We'reback on tte record at!:47 p.m. 22 Edwartlsin CM KM Diam onds stockssm cilically?
Cotmsel,do you agrcc we had no subsmntivo 23 A Asthe pcriodduzing which sfr.EdwardstradM CM KX
onvcrsationsduring tbobrcak? 24 CM KM spansovœ,Iwould say,m orethanlwo years ifmy
51R.GRIFR N: Yes. 25 mmnory dœ sn'tfailme,m bad tll
rœ differentclearing f'
lrm s
:ju .jug;j)6 EXHIBIT3Page15of23 R Um yarltsev Declaration, Page 80
D ivm 'sified X eportinM Sc vicesplnc. 202-467-9200
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CM KM Di 2:08-cv-00437-LRH-RJJ Document
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1 dmingtbatPY IKIoftime.SotirwayweexecutGltradœ l* ?
2 diff= ldw dingontlr procedu!w inphcealtlm time. 2 A No.lfwc'm narrowingthisdow nlotlr timewlm
3 Soorignallyearly onin2003,Iwould saytlmtmo:toftlr 3 wehad tonm X clenrlngtrades,tbemajeritywcnttkougb
4 mdarssimplywcntlnto tbetradingroutmg
' syse oftlr 4 Jeffreysand EmpireFinancialasdavcrysmallamountthough
5 ckaringrzrm .Iaau in 2003 early2K 4 Idon't ''''''''ber 5 wbat'snow Hudson Sœ urities.Attlx timetlrymight% ve
6 speciscally,butm miglltbavecommtmicae de tly w1t11 6 10 W ern. '
7 otlr markd makcrsbœ a ewirnyouexecuteo (losin a 7 Q Hew waKtlm A ision ma* ofwhatsbalo wo'nl
8 parucularissuerm luœ uy,you * 11notko whicb 1a+ 8 tlœougllJoffx'ys.w:atshn- went Fx pia , aud what
9 whelœalcmarku makcshandlehrgervohxmm soyou IMVOa 9 m1:--'-went Hvdson?
10 tmtlrrclhanx ofa ecutingifyou godl
'recllyloaparticuhr 10 A Thatwasmœ tly base on,numH 011e,willinp l
œs
11 markd makc. 11 ofacompany ta,you know,acce tatIUIIOofa 1- sizo X
12 Andoventually --Ibad tlr prolone discussien 12 clearing.And witbMr.Edwards'kansacuong,m would
13 earliertoday abeut11Y*a
' tionsrtsulting from cle ng fund 13 typically havc avn L'V position t1m1lypically could not
14 dopositsrw uirementgatM SCC.Sincem coulddoonlyX 14 getfillcdina singleday,sowewouldcrwnmunicateto
15 clcazingtzadesin tbcamountconsisa tw1t11M r.Edwards' 15 JeffrcysandEmpim on11, sameday tllatm weuldlmvestock
l6 ordcs,duringmostoftlm 2004tlr majority ofvolumowcnt 16 forsalein sucb andsuch aquantity,andtlziswouldlm our
17 tlzrougb Jeffx'ys & Company in Now York and EmpireFinancfal 17 limiîprice. And dependingon how m ucb œ ch oftlv housrs
18 Group in Rorida bœ ausctbosowczrtboonly two heusosm 18 would bo ableto 511us,tbatwould bctbealtocati
on. And
19 km w tlzatwould accxpth1. ordcsforX cl ez
m 'ng 19 voxy Ettle weatto Hudsen becaurs
e iludxm t!- felt
20 processinp Sotlv choicewasbare G clusivelyon tlr fact 20 comfortablew1Q1lazgesizcsandtbcyevenluallycouldn'tdo
21 thatwocould nottradetbatkindofvolumewithanybody 21 tradesX cloaring.SoGsentiallytheallc ationofsales
22 olse. 22 wa&demanddriven;ifJdfrryscouldSIk say,20million,a
23 Q PloaseYIImomom ahmttlm relationqhlp e twcon 13 hundredmillionon agivcnday,iftllatmetourlimitpricc
24 Nov W estand Joffm'
ys. How did tbatdovolop? 24 pnmmœ rs,weweuld fillthatorder.
25 A n atrelauonship,1beliom (lau backto 2002 at 25 Q W hoatJoffx'
yswasNov W estintoucbwitl,?
Page 98 Page l00
l least. Evcry wholcsalekadinghouse,to tbcbcstofmy l A Chrprimazy conlactisAlfonsotm tini.Ibeliove
2 lmowledgc,alwaystriçsto sr.cure agencybusix ssfrom small 2 howastbeprincipalguy tba!ledtl!etmm from Hamt 'egovc
3 marketmakers,smallbrokerdealerslikgNcv W res 't,and m 3 toMcrillLynck Ncw lersc'y and finallyto leffreys. Bul
4 frcquently getphonrcallsfrom cssentially --Icannotsay 4 tborraremultipk traders.n cy'rcOTC deskaIthink,
5 everym arkd m akc,butIprobably havememoly ofatleast 5 consistqofatlcasttenpeoplq sowecommunicau w11 a
6 20,30 phonecallsfrom differcntmarkctmakcrstryingto 6 numberoftbem.
7 secur/business. Butitmakessenseto directblzsincssonly 7 Q Arc'1<m any jm onalrdalionshipslvtwccn Mn
8 to 1a1> houxslvcausethat'swhereyou do gd quality of 8 LontiniandanyoneatNevW :+ 7
9 cxecudon. 9 A No,nopersonalmlationship.
10 Jeffreys& Company isalargebrokeragehouse,and 10 Q W hoalJeffmyskx-w ldow Nov W ostwmsgelting11m
l) tbeirOTC desk hastremendousamotmtofexperiencc in tbc lI CM KM Dia ondscmrtificatcs?
12 over-the-countrbulletin board and pink sheetstocksbecause 12 A Totbobrstofmyknowkdgc,nobody.
13 Ibelievemostoftheirstaffcameovcrfrom whatuxd to be 13 Q W agJohn Edwanks'namosevm'mantione lo Joffreys? I
14 Hairtog,which wasone ofthe largcstmarketmakers. Before 14 A l'm notawareofanysuchinslance. i
15 tlxy wentoatofbusiness,they becameM errillLynoltaNt'
w 15 Q DidanyonoatJoffrcysovcrask Novw osq oraayox
16 Jersey,andth% finallyVerrillLynchshutth= down,sethc 16 atNov'
Wosthow itcamotollavosomanythn-qofCMKM
17 teazn came overto Jeffreys& Company. 17 Diamondsstek?
!B So Jeffro s& Company tradedlargevoîmnes,l i: A I(lon'llhiak se.
19 believethatoriginally startrd in convcsationslxtwœn 19 Q Isitu111z:1hq1forox brokc doalc tollavos'Ilcha
20 th:irtradersand M r.Correiaashe handlesmostoftlle 20 higllvolumoinaparucularoertificae?
21 agency tradingbusîness,he'stheoncwho'son thephonew 11.
11 21 A ln my experienceit'snotmmsual.
22 otàermarketmakersthemost,And oncc Jcffreysindicated to 22 Q Did Mn IxntiniOVO'Toxpmssasy opinion#o you
23 lzsthatthey do nothave aproblem withX clearing trades,a 23 ahmttle issuorCM KM Diamonds?
24 lotofCM KM tradeswentthrough tht' m. 24 A Canyou lm m orrspecific? W batdoyoumeanby
25 Q Are tlley tbe only N son tbatNev W estdid CM KM 25 '' opinion?''
age o Page 97 -Page jx
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l Q W H e alngi-- 'o- did Jobn Edwards#v@ 1 Q W hydidn'tyou z- odak tlm contractatthl
2 xrgarding M saccolma ? 2 lxgilmill
g of2(K)4?
3 A Irm crspœiscallyztredm lany instnzcuonsfmrn 3 A Badbusinasjudgmentymaybe. ' flrrewasnotbingin
4 Mr.Edwx
vds,semyknowhlgeoftlè Lqba* ontrade 4 Mr,Andœson'scontracttbatwouldhavejustificlacbano of
5 tkkotsandtbocrvnrnunicauonfzom M r.M derson.Typicallya 5 tlr payoutstructux in favorot!lr rtrm ,bccatlseatall
6 position intlv accountwouldlx)availableforliquidation 6 h'
mexm consv!
'envlMr.Edwm'dsasagrtatlar& clientbuî
7 subjœttoalimitprix Myundœsandingis,lv would not 7 tbeapvement11m1wasin pl= wastlr ag= mcnttbalm hatl
8 cnmmunicatoittomerbutMr.Andcsonwould relaytotir 8 inplace.
9 lrading desk tbattbisistlr taro pricestbisiswlmre 9 Q And you don'tH ow Eow Mr.Anœ---''cax tohave
10 wo'rctrgngto x11 soace in11* pricoorbottcr, 1() Mn Edwnedmasacuslomor?
11 om tbecourse- 11 A Idon't.
12 Q W erelobn nlward:'* Mnvolitited? 12 Q Did DarylAarkx m know John le alrDaryl
13 A Yœ . 13 Ani
u S'nHZ',IworkiogatNovW ost?
14 Q W batdid DarxlA''*''''ndatooarnhisonomént 14 A 1alreadyanswe tbisque on.Idon'thlow.I
15 = 1cth1e milliondollam thatiheenx''ee *''''John Fzlw m lM' 15 bavenoreasontobdievotbatlr did. '
16 accouals? 16 Q Hm you ovmr:adany roasostolmliovotbatDaryl
17 A W en,iflmay say so,tlzisisnotam atkrof 17 Ate rxonlla:aay mlbennceab> pzoblmns? .
18 m onoy buta znatlerofparticularG ecution. A lotoftraclœ 18 A No.
19 inCMKM Diamondsw edoneinmarkswitbsignificantsp= ds, 19 Q Hax you :adanyztasonlodoubtM n Ane en's
20 and a spread isthediffezrnce bdwccn tlx bid and tlm ask 20 inkgrity?
21 prico. And mostoftbo cœ uGonsfor Mr.Edwardswere at 21 A No.
22 tbetlffm'
,And forerxnrnpleyirastock tradosat6/1001 of 22 Q Haveyoucvc hadaoy reasontolhlnt'llo':
23 a m nny on thcbid and 7/10* ofam nny on tlv offc,tbat 23 (Iishox st?
24 spread isaboul12,13,14 N cent. So tl
x diffcm wolbat 24 A No.
25 tbecustomc gainsby sdBngatlziplozcosixasopposed 25 Q Haveyourvor--whats% sdid you 'nlettofind
Page 106 Page 108
1 to kiple zero scwen ismore Qzan sufficic tto compensate l out:ow mue. h Joha Fzwxva.hadpidfpr* CKR M Diauxmo
2 forany additionalcostoflrading. 2 xloçko atlIeIlad acquie ?
3 So Gvc N centcomm lssion alwaysfactored in tll e 3 A w eneverlook aay se sto es
xabsshsw cifically
4 1- amotmtoftrading,lhis wasmm sual,1- volume 4 wbathepaid.
5 transactîonstbatwcredoncclosc totheoffc. Sotbe 5 Q Ditlyoaevertakeaaystem lorfndoutrmxvally
. 6 çustomc wasrxoivingsignirxantbenelitoft11a%and in 6 what1= paid?
7 everybody'sopinion wbo looke atitzto tbe bestofmy 7 A No.
8 kmowledge,tba!justificdlhefivomrcentcommission. 8 Q Didyouqr
v- axkMn Fxlwavdswhll1zelle midfor !
9 Q M aye 1em --lotmotryto mskyoutlv quostion in 9 theMock?
10 a diff= ntway. h solmtls11W Dal'
ylAndmxon m rsonally 10 A Ne. '
11 didn'tdovcry muç: lm qur
.oalltlm tr'
atloswc unsolicitGl 11 Q D14Mr.FXI- o evcre- muaicatetoyouwlla:be
12 and itwas M n Conv'is whe was achmlly haut lling lho trading 12 - 14 foxtlxrMx k?
l3 and M n F-dwardswas bzinging in alltlm K rtificalos and so 13 A No.
14 forth. HutitsonnamlikoDarylAxldorsopew.''re wollovG a 14 Q Istlmroanywxyfhaîyouknow oftoriadoulbow
15 m illion doBars from Jolm Fxlwards'lxados. 15 mucbMn FXI- A paid roglEes:oe.k7
16 A n atiscorrec and tbat'san tmforhmate 16 A No.
17 consm uenceofthecnmmivsionstrucmre.It'ssometkingtbat 17 Q Haveyouever= aMn Fulwards'taxzvqt% s?
18 IN sonally do nots
.œ llow tlr amountitselfwould be tlm 18 A Ihave nol,butMn santosrepzqsented to= tbat
19 basisalonetoadjusttbal. Sotir arrangGnœt,tbecontract 19 lppresentedhistaxzeturnstohim inanoffix And
20 tbatMr.A nderson bad in placo atlllotimewarrante that 20 accoydingtowlxatIrenxm-r,tljosetaxzemmsmflectefl1he
21 payouttohim .Soifilwore$10, 000$100,000 or$2m illion, 21 proceedsorsalesofCMKX.
22 11* wastlx commission slructum lhatapplied,and - 22 Q DidMn Saatoskeepacopyoftlkox tu wtuas?
23 Q W mv M r.And> on'scontraclsdnM onayoarly 23 A Idou'
tkaow.
24 baqis? 24 Q DidyourvrraxkMy.rianlostosbow yeum rxaally.
25 A Ycq. 25 aoopy oflhox tu zvturns?
EXHIBI
T 3Page17of23 pa e j05 - Page 108
Divc sified Reportixm Scrvicesalnc. 202-467-9200 R um vantsev Declaration. Paae 82
Case
vp4/2:08-cv-00437-LRH-RJJ
gey Rum yanta' 13/06 Document
M ulti-pago 163 Filed 12/28/10 Page
w 100 Di
CM KM ofam
111
onds
'

Page 109 Page 111


A No. 1 totusitappeared thatconsideringM r. Fxlwards'relationship
Q W lyca did M r.Edwards * ow M r.Santosltistax 2 toœchofllrtrusl,hewould% consi- in ag- te
retmns? 3 tilocontrolshnmhnlH .Sotkatroululinnzvtm'n '%l
A Idon'tknow. 4 inquiriœ andcfmm umv!
'ationwit:11. SEC and1beliovemaybo .'

Q W hcn did M r.SantosIIIyou thatho ltad r.ernM r. 5 ollrrregulatorsandtlv effœti


vehaltonMn Edwards'
Bdwards'tax rcturns? 6 tradingintbatposition. ButLauraAntbon#*astlr autior
A Ido notntrnemlmrspecifically,butIwould say no 7 oftlntatlorneyepinion.
iaterthan tlo mlm mcrof2095. 8 (SEC Exhibit)35 wasmarke for
Q Did M n SantoskIIyeu anytlling else aboutthe tax 9 identificauon.)
returns? . 10 BY M S.HAKAI.A'
A No. 11 Q I'm showingyopwu lbas1- mzerledas
Q W hy did M n Edware sbow M r.Santosbislax 12 Govcrnmc t'sExMbit135. R'xhibit135iga
relw ns? 13 dtmumont,akm a'toMn Antony rmntosdated Fobzuary22<
A Ibelirvo thatwasthems'ultofcondnual 14 2005. r Laxma Anl ony. Islltistbe letleryou w c
nquiziesthatM r.Santoskeptm akingto M r.Edwnrdn and1 15 rororringtoamomo tago?
xliev:thatM r.Edwardsvollmtœred to slmw thox tax 16 A ThisisGaçtlytbelotter.
rttunsto Mr.Santos. I'm notcv nin,butlbelievethat 17 Q And didyou rcccivothi:lotlorxmnndFobrmary
stheoase. 18 22n(1,2K 57
Q HmsM n Bdwards,asfarasyou know .lvershew ed 19 A n atiscor= t.Welhwefax marksonthisExhibit
Wr.Santosany otherdoctzmentsin R sponsete inquiries? 20 135.
A NG to tbcbestofmy knowledgc. 21 Q Uh-huh.
Q W = you surprise,d to lM en tbathq bad shewn M r. 22 A And actuazy tlr fax stamp isAum t31st, 2005,
iantostbe tax renarns? 23 so ''
A No,Iwasnot. 24 Q Thigmay 1v wlvnitwasfaxetllo nw. n atfax
Q W asityouruatkrstandmg
' tEatM r.Edwardswms 25 stampznaylx$wbontbolote wasfaxtxltemo mqopposod to
Page 110 Pagc 112
naking m onoy on tlm sala orlosing mox y on tlm salosof 1 wben Stwasprovie to Ncv W osl. I don'tknow .butI'm
ZM KM Diamone stœ k? 2 just--
A 1dun'tknow. IcannotYIIontway oranotlv . 3 A Idon'tknow myself bu1--
Q Dldyoueve:rask Mr.Edwards? 4 Q ItMZA Ixmztomborthat.butIdon'twantto
A No.Ididn't. 5 sm culatc.
.
Q Did'
youeK rask Mn Andorson? 6 A lV IInotquestion1lr facttbatwereceived tlr
A No. 71
e* shortlyafterithvasissucd A ausetbeincidcntwith
Q W by nol? 8 EkltaMiningandExplorauon,in myxnmnory,datesbackmoa
A Bœ ause in alow pricestock environmen: what 9 tban a yearfrom today'stlate. So February soundsaccurak.
œ plearetryingloachioveislnaximum proce sfrom scllins 10 Q '1Yefomtblinooftboletœrroforstotbotrading
beirposiuon,bœ ause a 1otoftbese su ksmigbtlose ll entities. Do you H ow whatthex trading entitie,
s are?
'aluoovc nigbqand h'snothow muchyou makcbutbow 12 A Fourthline?
i
ttloyou loseinliquidatingaposition. Sodifferenl l3 Q Oftho1011%.11rvays.ecolloclivcly tlv a ding
licntsll
avodiffcrentgoals and it'snota custom forsucb 14 ontitios-''
nsolicie liquidationstobesubjœtofinquirieswhetirr 15 A 01 z,''collœtivelythekadingcntities.''
:
keclicntis makingorlosingmox y on'tbat. 16 Q Butildœ sn'lsm cifywhicb particulartrmœ and
Q W ho's1-ama Antlmny? 17 corpomîions.M atwasyom'untkrstandizlg?
A LauraAnthonyisan atlarney,Ibelicvq wh0 18 A Attlm timelreceivedtbisldtcr, Ihad spœ ific
rovide Nov W e' stwith an att
ornry opinion on DM XP. I 19 know ledgewhicb atcomm hdd slh'kresin IMlu M ining and
arlicr mcntioned tbat. 20 Exploration. Soin my mind tbatreferred sv ifically to
Q '
1YrIxltaMining? 21 tboseacceune,
A Dulu Mining,corrœt.Thatwas1l= attorncy 22 Q Ifyou oould holdonlo tbat,1'11show you anooer
pinion thatIreferred to carlierwirre Mr. Edwardç 23 tlœ ument.
epositrd whatappoaredtobeapositionexccdi
ngten 24 (SEC Exhibit136wasmarke fer
(
xcentofissuM and outstanding sharu in œ lka M ining,and 25 idontificatiou.)
Rumyantsev Declaraton, g
piversificd kopouins services.lnc. 2:2-467-9200
Case
ixvnox2:08-cv-00437-LRH-RJJ
CM KM Il lds Document 163
M uld-pageW Filed 12/28/10 Page 101 of
ey Ro 111
yant a'v, 4/13/06
Page 129 Page 131
l trust? 1 M r.Sane hadwithM r.Edwartls,tlxlque onwas. . 1,
2 A lt'snotacorporation.''
Inc.
''i:A tparsoftbe 2 'm atistlm busin>spurmsroflhavingdiffx taccotmtqr
3 trustnam e. 3 And1ie rvetï answ was,'
Thoseaccountsstand for
4 Q W satd= 11m1--WhywmlldyouKqw i't:atway? 4 trustsw1t1:diffemntbe ciaùœ.''Sotbatwas,I
5 And wll
y w tmlda1n1s1havmaa Ixm.1= 17 W àatdtv that 5 beliom tlv onlya plare ongivc toNcv W est.
6 IROR? 6 Q IlidM r.S= tOSkIIyou'lat?
7 A Idon'tknow. 7 A Iitlieve se.
8 Q Didyop ovG askMr.Fzwards? 8 Q Okay. I'm aHltlocnnfne :lv amqeaminuk ago
9 A No. 9 Iaskedyouifyouie conczœ knowle oftkatariftbat
10 Q DidyoucvéraskMnEdwaKdsalxmttbopm- 10 wasjmstyouras- ption.andyoujmtsaiditwasyour
11 e IUIapyof'lw- ent;ly --any ortbecntitjosthatho 11 asm= ptioa. N ow it'sa dinglikoM n Sane ac- lly teld
12 tontrollod? 12 yœzlbat.
13 A W onovoraskedM r.Edwardsspœ itkallyaboutany 13 A Nq myassumpuon,IbolirvoitwasinasEghtly
14 oftir e * . 14 diffx tcontext.I'm trying* remmnbcrcxacdywhath
I5 Q Azldmylastquostionilifyou ma mallydid - 15 was.Idon'ttbink it';inconflict. Itis my assumpuon
16 aroyoaawazvofaayox atNovW e,st> > nqklng M T.Edwards 16 ,1n1tbisbusin> spurpœ ofM vingdifferenttrust
17 sm cillcally aboutany oftboçntili> tbatlm controlle ? 17 accounts,andmyagsumptionisbasedon someirlfnzvnnuontllat
18 A No. 18 1reccived inmyconvc saùon 5v1,1:M r. Sanlos. So 1don't
19 Q You*vomqidtbattbeb- ix's:purpox le indhaving 19 sœ acontradicuontl= .
2: alltllosoKaIHIimSwasW aux oftliWereern:l- fiçiarims. 2û Q + 1-1I#m lzying Ioligïlreoutisifyouikavo--if
21 A n atwasthc businG spurposeapparvmttem t. 21 tllore's any ovitkncm supporting thalmqsum plion or iftbatks
22 M R.GRIFFIN:IQ;IIIQthequestionyouaqked ls 22 jxlslyou lx king alitandyoutlkie ng.mO11xthatznust1=
23 couldlr oxplaini:andhesaidtlmtheth)
:1g,11tthattbat's 23 why lv didits-vx suvnobtxlytoldm u thaq you saw
24 1% casc 24 dœ umexltssaying lllaq arllnmctking liketbas.
25 M S.HAKALA: Ol(ay. Tbatesfair. 25 A Ihave neversœn adtxpAmen: butençe again,
Page l30 Page 132
l M R.GRJFFIN: W llotlrrhehasact
ualknowh lr is 1 apparenqy M r. Santoshad aconvtrsationwitb M r.Edwardson
2 anot> m atu . 2 onr,maybem orc occasions. Appamnqy tbore wcrc
3 BY M S.HAKALA; 3 repz= c tationstotlr effwxtbattlrsetrustsl
m e
4 Q '
lYatwasactually mym yx xtqo tjonwa:to 4 diffx tivneliciaries.AndhavingthisinformaKon, I

.
5
6clarifye.Wa
Edwar evcst
baa
rsyt
anm
tbatq
ts
lumpwœ
mx uononfy
di fo
trm 'pa
rentlm
- o
rici
f di
adriM
esn
? 5
6c
tlou
sl
li d
col
oo
dk
ul atkt
ma b
oi
s
sea
nn
sd
cm akemyowni nferncetlxa:'Well
''Sotbisisapersonalassumption
.
, )
i
7 A Timt,sanassumptiononmypartlv auseasIsaid$ 7 lbattozrm m a1= scnse.Ybuth alsohassupporling--itls !
!
8 1ncverN sonally discm sGlwitb M r.Edwardshisbusi= s 8 notdoclxmentary evidence, butrepresentationsofM r.Edwards i
9 purposœ ,butthatwasmy undc standing ofrepresenl
ations 9 sœmsto suppon tbatassumption. ;
i
10 made. ' 10 Q W bat1G1Mn SaaYstoaskMn Edwae aboyttlkiv?
1i Q Ditlanyox atNovW ostovœ ask Mn Edwardswhy lm 11 A AspartofNov Wrst'scompliancewithntw
12 lmd 40 diffc ntaccountnamta? 12 anti-money laundming zulesundc lhe PattiotAct every time
13 A I'm sorzy.C-an you rcpeattbat? 13 tllcrc is atransaction ora pattern oftransacticmstbal
l4 Q According toIwhlbitl3l ifyou'll14x)kon tbo 14 slandsoutiutbebusiriesspracticeofabrekerdœler,tbat
15 socondpago,Mn Edwardshadaccountsin40 tliffcronlnamos. 15 mim rmuixradditionalscludny.Andbased upontl!e
16 n at'scounting as* u mowY naccountsgw ilclxxlovorfm m 16 conclusionofreview andtbatadditionalscrutiny, tbat
17 W cllstoCCS.tl- werr40diffcrrntaccezm tnxm cs. Did l7 brokœ doalcrbastomaketir callwhetbcrtorrport
18 anyoe atNov W cstovcrask Jolm F-dwanh why lm v epexl 18 particulartransactionorpattcrn oftfansaclionsto tbe
19 accountsin 40 diffcrrntnnmcs? 19 EkpartmrntofTrc sury. So thisiswil atNev W estwasJoing.
20 A 1don'tbeliev: anybcdy evtrasked 11m spœ isc 20 And in tir cotlrseofcomplyingw ith thatparticttlar
21 quœtion. 21 reqnirt
vnentj M r.SantoswasinterviY ne M r.Edwards :nd his
22 Q Did anyox overask- frnm NovW esteVG ask M r. 22 aRornoySlv woodCm k.
23 EIIwW %gonozaHyw:ylm omntxlsomanydifforenlaccountl? 23 Q M atdidyouknow aboutCMKM Diamonds?
24 A I'
m gcing to try and answerthisas spœijkally as 24 A Atwlmtpointia ti
m o?
25 possibye.lntlv coursooftbeconvcrsationsthat1I
XEt'CO 25 Q ln 2X 3alzd 2004.
EXHIBIT3Page19of23 pagC j;p .yage 132
m versifiedReportinM ScrviccssInc-202-467-9200 R um vantsev Declaration Paae 84 .
K M mCase
CM ' 2:08-cv-00437-LRH-RJJ Document
xm onds 163
M ulti-pageW Filed 12/28/10 Su
Page 102
ey Rltm of
ya111
ntzev. 4/13/06
Page 153 page 155
1 ()ranylbing ofthatsort. So -- l M n ffzmk to = bslantiate M svi- :w1t1:11= reasonsho rmvno
2 Q Did youbave any- I'm = y. 2 te tllosoconolw iozw?
3 A T1xrew asa combinationoffac- tbatœ &entially 3 A Bœ ause1tnkstM n Santos. He ismy par- and
4 drtw substantialscrutinytoMr.Edwards'adivity butnrvor 4 gmlrralcounsesandifbertporlsR)metbatinformati
on
5 pase tlm tlzreslxlld Ijustdescribed. 5 providd byMr.CookissufficimA Ileavtîtattbat.
6 Q DidMnff
.re ec givoyouanyagx/monr,o otber 6 Q Now,in'zvenmeftalkinhtotlmlransfœ agont
7 tbantbe1,41- thatI- you m rlicrltxlay? 7 wkatv x llywmqasked oftboh'
A- foragont?
8 A Jnevœ N sonallyspokew1:1Mr.(7 œ k soI'mjust 8 A ldonetknow.
9 judgingontlm basisofrepresene onsxnadetomeby Mr. 9 Q *11a1oxactly didtllotransfcragontcnmmunicae
10 Santes. 10 back te N> W - t;
11 Q n atelsodid Mn Santossay tllatM n fx
.re said 11 A 1don'tknow.
12 lvyondthislm e? 12 Q Solow didyouzr,
ly on tlm trxnsferagv'nt?
13 A My enemoây 1l= bestofmyv onY tion,Mr.Santos 13 A 1reBed onM r.Santoswhocommnnicae w1,11tlr
14 juslbrlfly qummarizcltbatMr.Cxx)kindicaultoMr.Santos 14 lransfœ ae t.
15 that 'ngwasincomplianco11Q1tY applicablerttlo, 15 Q Andwlzatdid Mn Santosxw rtbek loyou?
16 mgulations,and M r.Edwardsbadclearedjt. 16 A Mr.Santosmportodback tonze11m11. askodtlle
17 Q Did M n Sanu overcnmmunicateA)w a tkatM n 17 lransfc < :andIbrliovc1lespokewitbHrlenBagley,be
18 Cœ kbad gex ino aay M >11of1llefactorstllat:ad1m1hlm 18 askulifslrcansaywithce intythatM r.Edwards'
19 to t:atçoncl- ion? 19 certilicau didn'tcomofrom tlr issuororaflisatesoftbo
20 A Ihad no'vœ hard any dotails,so M r.Santosnt'
vc 20 issuc. And tlv answer11m1l1er= ived accordingto wlmtir
21 çemmunicae any deails,and zvitirrlm indicae tbatH . 21 x'pmsonted to mowasabsolutely not,tbey did notcome from
22 Cook did. 22 tlr issuerorafj-
zliatcs.
23 Q Soyourue%zlerrvvnndingi,tba:Mn Cm kx'
vc 23 Q How didHol= Bagloy H ow whatM n SanesInoantby
24 provie any * *11:substaatiatingbise izon? 24 ''afliliate '' '
25 A No.Al1Iknow igtbatM r.Santosdidnotprovidm 25 A Oncearain,Ibeli- thatswitboutknowingwith
Page 154 Page 156
l mowithinformationonewayoranodm l certainty,slrhadjustlikoanytransferagcntwou!dhave,
2 Q Didyou askM n Sanu ? 2 attorncyopinionletlerssubstantiatingtransfm'sofslock.
3 A No. 3 AnllIbelicvetllatwasthebasisofberconclusion.
4 Q W= you conv- ? 4 Q DidMr.- t0$,asfarasyou know,askHelon
5 A No. 5 Bagloyif11- wereallorneylctlorssuppmlingtlm transror 1
6 Q (Xlmr'hnntlm facttbasM r. Cœkhadaprier 6 oftbestœktoJoim F-dwards? !
!
7 apm înlmcu:- m iormnployma tposition tbalyou viowtxlaa 7 A Ido notrem> ber. ;
8 pzrsligiou .wasfhe- anyv son togiw Mr.Cœ k'sviçw any 8 Q W asityourundorstandingtbal#herraworcattonmy !
9 m om weighl111= a guy on tlm st- 7 9 10- supportillg làesm transf= tœ ? i
10 A WG tlm wasanotW tkirigtbalMr.Santos 10 A 1.41m:pu1thisintimemrspœtivc.Itismy '
11 indiqate tome,notjusthispriorposidonw1t17a 1l understandingpresently.ln2004,Idon'tthinklhad any
12 ngtdator,apparently M r.Cook pv ently is employcd witb a l2 knewlGlge oropinien oncway oranotH .
13 prestigiouslaw f'
mn andltllink repu&alionisabigtiling 13 Q % 41what':tlm basisforyouruntlerstanling now?
14 intlr 1* 1com munity. So thatwasthcword tlkatIreceived 14 A Bœ ause Ibcliovcweeve askM thatquee
slion a
15 from M r.Santos. 15 couplemore times since2004.
16 Q Sotbefacttl'allm werkM forage 1aw fvm aod 16 Q Towhom?
l7 uRdtoikave age jobwasonough tomlyonMsviows? 17 A FirstGlobalStock Transferand spœilscally Htltm
18 M R.GRO Fm : Itllink thatznischaracterizeshis 18 Bagley.
19 a timony. HesaidpmstigiousIaw fmn. 19 Q W1* did sbosay?
20 M S.HAK ALA : Okay, Prestigiouslaw r'
zrm .which 20 A Onceagain,Idldn'tspeak to herdiv tly,bu!
21 acmally maybeadiffx tthing. 21 prcenllyIbelio e111 % areattorneyopinionletters
22 '
IH E W ITNESS; Honestly,Ido notknow whatelscto 22 substanliaung transferofcm4ain shmrzsinlo 1l= nazne or
23 lzseas areferenceforalawycr. 23 beneficialom mrship oftrustscontrolled by Jolm Edwards.
24 BY M S.HAKALA: 24 Q I'm IIIK quilosua llow tophrar.ethis. Hastbo
25 Q W lly didn'tyou arkkM n fY
.zmk orMr.Santostoask 25 Johnm lwardsiss- and tbosubsm uentrcgulatory scrutiny

DivcsifiedRoo
EXHr
I
BtI
Tn3RPS
i ager2dc
0ofe
2s
3Inc.202-467-9200
.
pa
ah
Rum yantsev Declar çIOn,
153p
-P
aa
gge1
a5j
gey Rum yantCase 2:08-cv-00437-LRH-RJJ Document
ti-page 163 Filed 12/28/10 Page 103 D
ofi-
111onds
.jy( '
zew 4/13/06 M ul CM KM
Page 157 Page 159
*'
'-asignificanli- forNo'vW est? My follow-up que on 1 (R= staken.l
is to 1= w hy are you baving M r.SaatosTnoW alltlm çalls 2 M S. ' Okay. Back ontlv rœord at3:32p= .

in-a
AOon
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a
u
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o ge
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to .MSantos? 3
va 4 indicale(
7
.
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ow
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ou. ''
%) .

tlm responm buton onel0velithash tz!asiN ificant 5 than tlmt,did we havoany substanïve conversauons?
problc bccaux it'snotgoing away;on tlm otH handp 6 M R.GRIFR N: No. ''
nobodysafu a2Abexemonlbs,almostycars,afe alltlr 7 BY MS.HAKAI.K
talkstlmtwe'vebadwitkNM D inparticuhr.haqm?er 8 Q Mn - whatwonld yol 14
% todarify;
spœ ifiedyputdownonllam rwhatm m iglïthavedonem ' ong. 9 A Iindicae thattheNASD novœ putanyf hingin
Bœ amsototlrbotofourknowkdgesandx 'zrabsolutezy 10 wridng. W ihal1needtosay andmeantto sayistlrynevœ
confidtnttllatm'Gy applicablezuleintlzi:partkularoasw 11 chqrged uswith anytbinginwriting,V austQxrris
andIdon'tt hinkwe'm missinganytbing,bm wedidnet 12 cono pondencelhatindkae A'm qofconc= oftla last
break any rulotbatm know of.A ndm 'm lakenskp:going 13 audit Andvczy early in tlm u timonytoday1outline
wellbom nd cfwbatwould beqxpectclfrom an averagebroker 14 lbosofourm s,so obviously tbarsbased on written
do lerin tbiscoantry,oaco aFainyto tlw botoflmr 15 cormspondencc. So inslead ofnothing in wri*ng Im cntto
knowledge,soitisourbelir,ftbatm havedonewhatm had 16 saytbryhavenotchargtxlusinwriting.
tofloand1- 1m mom. 17 Q Haveyou ser.
na copy oftllotraascriptofytmr
So tba:rrgtllaklry scam iny forushasmostly bœ n 18 u tim ony witb tbeNA SD?
apm zloinourlrallsjllstintbesenseofwhatcould 19 A No.
possiblyhavebeen- likewbatcouklwobavodonowrong? 20 Q Doyourtanomlx)
rytmrtestimonyw1t11tlr NASD?
Bœ ausototbisdaywehavenoovie cetbatM r.Edwards 21 A Thatwasabout15monl sago, bm Imo n,it'sll1e
lkimselfhas denosonwthing wrong.bœ allsewo've sœ n all 22 tzutb,so --
kinclsofactiens,asImenti
onc againstUrban C-asavant, 23 Q l.clme--whatI'm wondering.I'vohad tho
CMKM hadtbeire strationrevoke .So wo'vescenallkinds 24 oppnennity toreviow thattraascript,antl1'm thinking tbat
ofactions taken againsttlr issucr m 'Me nvwc sœn 25 tmlay wo can savo a lolortimo thatifI can assm no that
Page l58 Pagt 160
anyt
hingdon:toM r.Edwardsv onally.Tatlzisdaywchave 1 youransworsto tlzo quostionsposodby tlv N ASD arot:osame
notbad any documcnted evidmwepztw nu ltoany ofus 2 msyou w ould answ ortbose qu tionskxlay, jdon'tnexvlto go
indicatinp juslcbatl
engingtbatopinkm.Evenlookingat 3 througb a1otofthobackground stuffofinform aliom h
LI. transfc she ,bœ ausmIsœ tlzisfor11r fzrsttime 4 tbat--
('m still--ldon'tknow wbo Dalo antlM ax Casavantareobut 5 A n atisa goqxlassumption . Y>.
iustreadingthesenamesdonotyetasccrtaintometlhat 6 Q Okay. Justsa= a1otoftimotnxlgingthrough
L
lry'm in facl.affiliau oftbeissuer. So to tllis day 7 tho tnm o stuffovorand overagaim W ho svm rvisGlDaryl
i
vt'rejusyinO dark andwondœing. 8 Anlkfson?
Q HastboNASD indicated toyouorh)Nov Wosttbat 9 A DarylAndrrson,lmingaretailbrokerduringtlm
il'sconsidezing suie Nov W Y ? 10 thneundtrreview , wassubjectt
osupervk&ion by Ram ond
A 'nry indicae toustlry'm censidcringAnklng ' )1 Dillon supmwisor anduhimately subjcttomy sujm ision
lisciglinary action,butnoverindicatcd th% were suing. I 12 astlv pru identoftir fzrm . ADIIobvieusly tbat's you
lon'ttIIiIICtbal'san optien initially. Arbitration istlr 13 knew,a vertical5ne ofcomm and,butirwc IIICabout
>rocclure llmtwould havcto follow. l4 functionalareas obviously wehad M r. Santoswbo,asa
Q '
l'll
oy'x indicakxltkattilcyintçodlopursœ 15 gencralcounsel,isin charl ofgenrralcomplianceissuesin
Nsciplinazy action? l6 tbalrespect and M r. Andcsonwassubjem lo Nfr.Santos's
A n cy intlicaled they intend to pursuedisciplina!y 17 supn ision. Iam tlr seniortrading supn isor,so in
Iction,buttlry noverputanything in writing aftermontbs 18 cmlain alm s oftrading, 1wottld bavediv tautboHty in
m dmonthsofindicatingtbal.Ticy indicae thatteus 19 supefvisorym atu s.
ïboutl5mopl
lm agooriginazy. 20 Q W lm --llow did NovW Y sqlporvix DarylAntH sonto
M R.GRIFH N:Couldwetakeashon blm k? 21 makoxm otbathowasaccurately convoyingtrading
M S.HAKALA: Oh,sure. 22 instructiens to the trading * k?
M R.ORIFFIN;lftbat'sall:111. 23 A n atwasmyv ponsibility.Andsinccwe'
resucha
M S.HAKALAZ n at's fino. OfftlleTecord at3:25 24 sm allf-
lrm ,tbereisno chain ofdelivm'
y, so tlle only way
).
m. 25 M r.Aadcson communicated trading instructionsto m wasby
)157-Pagel60 EXHIBIT3PKe21of23 Rum yantsev Declaration, Page 86 '
!
D iversified R eportinM Servicem Inc. 202-467-9200 i
C Case
Di 2:08-cv-00437-LRH-RJJ Document
am onds 163 Filed 12/28/10 Se
M uld-pageW Page
rgey 104
kumof 111
yan- , 4713/06
Page 161 ' page 163
1 doli
vmingaF:N e kttm'callingasm cifk irism xtion l (11f1notknow itwasam aildrop. And esxnlially now wedo.
2 1.Now,wenovc sm cificallyverifid thevalidity or 2 Q How doyollhlgw wbatJo% F.rlwe I'hamoaddressis?
3 wM herinstrucuonswerecorrœ tly convom lgoingbackto 3 A Bœ ausewovcrificlitfrom hisdrivc 'slicensc.
4 tllec5< butasM r.Fxlwardswasanactivoclientw1t11a 4 .*rXIIbolkveM r. SantosmiFhthavo'A enadditionalsttps,
5 1- ntunlmroflradlngjandbcwottl d receivlstalem enlsand 5 but--
6 confuznauonsatalltkncs,D'VH l1xzn.andlr wasa 6 Q Doyouknow whœtly- 'n'
aaltionalvtop:= 1
7 faquentvisitortotbeoflicq M r.Fzwardsncveryovm' 7 A No.
8 que onclwhe.hv hisinsmwtionswc relayed inan 8 Q How doyoa t'n- tlm oaa- sonM gdzivo 'slirwe-
9 inaccurat mannc ,Sosinceiv ncvc raisedtbeque on 9 isM shnmnaaa- e?
10 likethat,tlx:
fewasnovc a need frem m yperspectiveto 19 A 1(lon'lknow,andI'm notawareoftlr spœ ific
11 verz'
ry any instrucions sv ifically. 11 stepstbatwemigbtorm igbfnclhavc lnlren lo vtzify tbat.
12 Q Did DarylAnœ---'-mevAlvoanycomlvnsatien 12 n erevionvofMr.Santog inmyundersunding,e k - tlr
13 ot- - fnwn Nev W ostotbrrtbln cnmm lsxion:on hisM aez
q? 13 çonclmqion wasy% , thatwasM r.Fzlwards'hmnead- s and
14 Didllohavoasalaryoranylhing? 14 tbatwmqsufscienttosatisfyourclulomeridentlficadon
15 A No. 15 rm ltilunontq.
16 Q W asllemimbursmlferhiglxm nsos? 16 Q Did mœ tof* .Bdwards'acr.romW ux MsSœ ial
17 A Idon'tboli
evele v'vc wasforanyœ ng. 17 recurily nm zthx'
?
18 Q Ax you awareofanyotH Rlationshiple w= 18 A Idonotknow tlxat.
19 DarylAne onandJoha BdwardsotH tàanactie ashi& 19 Q Didyou= 1W e!any so sto cW k and = what
20 brnkev? 20 K mialSocurity num lmrwas*:jw lontv accounts?
21 A No. 21 A No.
22 Q lfyou11> toExhibil131,whic.
b istboacrnnnt 22 Q Didyou - haveyoq o'vordiscm e w1111anyox whal
23 lisq you'llnolc tàatznany ofJohn Edwards'accmm tsàave 23 SocialSooUlity numlvrwmln=xlos tboaccountq?
24 tbeu mnaddregsal75* W eslLakeM = d Boukvard. 24 A No.
25 A Ycs. 25 Q W oulditmlrpriseyouk>1= AatJohn Fxlware
Page 162 ' Page 164
1 Q Wox youaw= ofthatin2003and2(K)4? 1 uralMs> ialSocurilynxlmbcronmanyoftlmaccounts? l
2 A lbœ ame fam iliarwith an igsuewitb tlkisaddress. 2 A No. Acmally thisis slandard praclic:in many !
3 W@taroundtheIime- 3 caseswithtrusts. IbelirvoI'vestrntbatY fore. ;
4 Mlt,GRIFFm :Answc tbequestiontbatsl
x asked. 4 Q W I- tboenzqrle- ux'sMlown Se ialSKUIY
5 W 1m1wastbequestion? 5 numbm' ?
. 6 THF,W JTNESS: n eanswc isno. 6 A 1belioveIil avw. I'm no1lK percentcA in,but
7 BY M S.HAKALA: 7 itdoesnotstrike moassnm-bing untksmql.
8 Q You Y dyouW ameawareofan issœ w1111œis 8 Q DœwsNovW osthaw an outsidolaw Ftrm thalitu=
9 adG ss. W llatwas tbatissuo? 9 to Gonsuls< t11on zrgulatory issx ?
l0 A ln Februazy 2005 wlx'
n tlm SEC was in olzrofficœ, 10 A From timelo times y> ,m de,soveralFzrms.
ll tllw'
yindicae to ustlmlthataddresswasamaildrop,soa 1i Q M atFzrmsam tllosl?
12 PO Box wimre M r.Edwardswould collœ ta largcvolume ef 12 A M r. Griffin 11= mpresene W oodbury & Kesler,w c
l3 confulnation stalemenlstbat1mtnéonod. So ir wasusing a I3 çonsule witb tbmn inrœeatmontllssrvcaltinv , But1lr
14 mailbox asa location to rœ eive thoso documcnts. 14 lengestrdatiensbip tba!we'vehad iswitila fu'
m McEtrmotq
i5 Q Andwlryisthat.anissuo? 15 W ill& Bmeryin'
W ashingtonDC.Andweknow acoupleof
16 A W e.II our- tbepœ ple who brougbti!to our 16 lawjrcrsin tlr I7C officq Irœ ently nxtsomopeople io tbo
17 attention said tbatit'simportant* velify lmdertbe 17 L .A.office,andasamattœ offact,MclMrmott,W ill& Emcfy
18 cllstomœ identilication $.11% we Qrre'sa physical 18 rtprtsented usduring ouru timony attM NASD lastycar.
19 localion wlm an accountholdcrisdoing business. Butotlr 19 Q 1wantlotreadvcry carrfully bozolecausc
20 v earcb indicatod tbatin acaseofan entity such as 20 obviom ly convmsationsyou've had w1,11yourlawm azr
21 trasts,tir residoncéoftlm trastœ issufficienttox'
rvc 21 privilœ c andIdon'twantlogee1- . Se l tM IA wo all
22 astlv m ainplaccofbusiness,SoforM r.Edwards,atall 22 wanttotzm dveryca fully. I'm surc yov counselfœ ls
23 îimesweknmvwbathishom:addzvsswas,and tlr facttbat1x: 23 tbo mame way.
24 bad a maildrop atfu'
stapprared an issueto an SEE ofi
k er 24 lWR . GRIFIRXN: W o'llld you know ifyou crosstbo
25 whowa:inouroffices butitjust--tousapmaredlikewe 25 lino.
EXHIBIT3Page22Of23 page 161 -Page l64
Divc sified Reportinz Sexviccsplnc. 202-467-9200 R um vantsev Declaration Paae 87 .
'

TIM KM DCase 2:08-cv-00437-LRH-RJJ Document


ixm onds 163
M ulti-pagew Filed 12/28/10 Se
Page 105 of 111
rgey Rumyant zzw 4/13/06
Pagc 169 Page 171
1 A YM.MZ.Leauoilo Mz.Corzeiaindicakdthat 1 case did notca2 forany discm sion with M r.Anderwon. 'J'
%
2 Jem v'ysconsiH dtbesetraasadions- forsoznezeasonI 2 lmme alesupN sing--tlm sum rvisorchainrequirizlgtlm
3 tbinkznaylx itwascompnance,rnayh auotlm'rdv rhwmtat 3 reviow oftllosotvanu ctionsinvolvd M r.SantosandM r.
4 Jelrx'yw tlpy esxnuall
y chox todiscone ueN tbusiness 4 Dillon,and astie chiefexecutiveofscc oftil ef'
lrm , Iwas
5 axdingaa cMKX. 5 ultimalely v ponsibk fortlmse tMngs. Somy discussions
6 regardmg anynzate sofPMKM'oiCMK.X învolved pzrdfwninnnuy
'
6 Q n y?
7 A Wenmw gotanyexpl
anadom 7 Mr.Santosand migbthaveinvolve M r.Dinen. So --but
8 Q Didyq>e xffmyswhylbeyte tkdto 8 n- asA ilicdiscm sion* 1hMr.Ane on.
9 discopMpx tu lmsixss? 9 Q Azryou aw= ofanyonoatNOVW osl x0l% Daryl
10 A Ne.Butiryoumr nem> lzrvnfoncdthatvezyfew 10 A nœ---'a formre infnrm- ion ahm lJoll
n FAqm.uvI*7
11 rlrznsforavmietyofz= onswouldenkrlain1- volunr 11 A Ican'tKaywjthanysv iscity.I'm notawax of
12 busi= sdoingX clearingin low pziœ securities. So iî 12 til
at.
13 coul
dhaveY nsomethingzelae m ificanytotll
at 13 Q A1>you awv ofany- atNovW ostdisc- sing
14 znat< ilcouldi
x sozl
ethic:else bulIdonltwantlo 14 coae- mahyutRMKM Diamondsw1t111:
* 1And= olj?
15 sm culak onthat I5 A No.
16 Q Diëlle fu tbalJeffxw quile1,'>l'
.pgwilhCMKM 16 Q Aa you awe ofaayox ovcrzaixing concornsabout
17 Diamonds= > ux ypufohav.aayooncerxsa uto eru 17 John Edwnnlmw itllDarylA uaerrvnn?
18 tbatyou w '
zm O R doipg busix u wilh CM KM Diaxnono s'qmk? 18 A No.
19 A Onlyme nilyin11. senx N tilwasenemom 19 Q ItI;A we naamqstxlthi: butIjusywant
20 mason forush)pay a- tion lowhat'scoming in. So 11n1 20 to cozkf'
m n 1 atIn'laezrvtrxvl Are yol aw a ofanyox - did
21 wasonemom mmsea forustodoublqclrckwifhtbetraasfer 21 you orare you aw= ofanyone atN> W çstovorasking Jolm
22 agentthattbeMockthatwe'zem ivingisgood,asd ilwas 22 Edw ards sv ifically ifllohad any rolo in CM KM D iamends?
23 onemorereasoaforusM apstoobtainassuraaœ sfrom Mn 23 A No.
24 Edwards.soIteli
eve11-1JeffxeysMopmddojngbusiness 24 Q Didyou oraxlyonoatNOVW ostovG contactCM KM
25 wi+ CMKX sonwti
zneintlw fanof2004,sotlp 1* we're 25 Diam ondstofind outifJolm Edwarttshad anyro107
Page 170 Page 172
) lookingMyExhibil132,znilll
x contemmraneousillinx. l A No. ' I'irses= ltobesimilarqo tionstbatwe
2 So asIsaid,thatdecisiony onlyrnaînalinfluenceand 2 addmssv carlicr. '
3 esseaNanypartorwhatpromptedustoscruunizethox 3 Q Iknow.Ij> twanttomako surooatI-
4 tr
ansaçqonsmorethaa lraasacNonsinotl
wvaccounlst
hatwe 4 A Yrab,so we bad zrpv entatian from M r. Edwards
5 earrkxl. 5 tbat)x;wasnotaffiliae ,notconnœ tedtoCM KX,andtlrro
6 Q 1)1:1yopevergetanywrittencozd-
m nationfxom Mr. 6 wasno fartirrinquiry.
7 Fzwaro ofanyofMsxv= ntauons? 7 Q 0* t11= Gingswm*vtreolWsrlaboulxdidyou er
8 A No. 8 anyox olx atN ov W es:lako any additionalskpsto 1= 1
9 Q Whyxot? 9 mozcaboutCMKM Diamondgpotbertkqnwhatwo'vonl= #
10 A 'Ihat'snotourbusinesspracticm 10 '5klt'e.
dabout?
l1 Q Didy:m >ercopsie gellingwzillo conf- xlion 11 A Shlrtansw isno.
12 fxom Mn Bdwayds? l2 Q 0* t:anwhatwo'voal= # 'xlà'
alabom didyou
13 A IN sonkly neverconsideredthat 13 eranyox atN> W œ tako an'
y additionalltepqto gatlkc'
r
14 Q Didyougverh-vuyox elx alNrvWesldiscuss, 14 furtbcrinformalion aboulJohn Edwards?
15 *M aylx w.e ouldge4writleaconfinnxtioafrom Mn FA- :Sof 15 A (7t1r tbanwlhatm 'Mtdiscugx sofar no.
16 tks 1hi, antllMs?* 16 Q Ijxzstwaxlllomnk'
etsutt tlmre'snootllorissueout
17 A No,Iden'ttMIA so. 17 tlmrc tbatwohavcn'tdîx mse . De you know stxx hxly nv
18 Q IlidyouevcraskDarylAatlerxnyoobt'
xiamoze 18 M ic:aelKing?
19 ipfom œ ioa aboulJou Fxlwards? 19 A Y> .
20 A No. 20 Q W hoisMichxlKing?
21 Q Didyouovvv discusayom concerasv aydingCMKM 21 A MichaelKingisagctlmnan,Ibclieve)r migbtbo
22 Diamondaw111111- 1Ax- son? 22 in lzislalo 60s,maybe early 70s,onc oftbrearliestclienls
23 A No. 23 ofNev W cst,activdy involved with sm allc issucs. I
24 Q Wllynot? 24 bclievemy veryf'
xrstmmnory ofMichad Kingistllatof
25 A m cause% chainorsu- isioninY spaAcular 25 attending a prewntation ofsomecompany. Helikesto inviv
E age o Page 169 - Page 172
Diversified Reportixm SmvicesaInc. 202-467-9200 R um vantsev Declaratinn Pace 88 .
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 106 of 111

E X H IB IT 4

Rum yantsev Declaration,Page 89


Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 107 of 111

1 SERG EY RU M YA N TSEV ,pro se


1951N Jones#6202
2 LasV egas,N V 89108
E-m ail:chaptako embarqm ail.com
3 Telephone:(702)647-7925
4
UN ITED STA TES DISTR ICT C O URT
5
D ISTR ICT O F N EV A DA
6

7
sEc tnkl-rlEs A N D Ex clovx t)s case N o.2-O8cv O()437-LRH -R JJ
8 CO M M ISSION '
9 Pa
1 intiff, A N SW ER O F SE R G EY ,
R U M Y A N T SEV TO SE C s FIR ST
10 vs. and SECOND REQUESTS FOR
PR O D U C TIO N O F D O C U M EN TS
11 CM K M D IA M O N D S, IN C.,etal., PU R SUA N T T O R U LE 34
12 D efendants.

13

14 PR O POU N D IN G PA RTY : PLA IN TIFF,SECU R ITIES AN D EX CH A N G E


15 CO M M ISSIO N
16 R ESPO N D IN G PA RTY : SER G EY RU M Y A N TSEV
17 SET N O .: ONE
1: i
i
19 !

20 i

21

22

23

24

25

26

EXHIBIT 4 Page 1 of22 l


Rum yantsev Declaration,Page 90
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 108 of 111

1 D efendantRum yantsev respondsto the Securities and Exchange


2 Com m ission'sFirstand Second R equestsforProduction ofD ocum entsunderRule
3 34 ofthe FederalRules of CivilProcedure asfollow s:
4 FIRST REQUEST FOR PRODUCTION OF DOCUM ENTS TO SERGEY
5 R U M Y A N T SE V
6 REO UEST FOR PR O DUCTION NO .1:
7 A lldocum ents concerning any com m unicationsbetw een Santosand any of
8 the follow ing individuals orentities:
9 a. CM K M D iam onds,lnc.;
10 b. U rban C asavant;
11 c. John Edw ards'
,
12 d. A nthony Santos;
l3 e. D arylA nderson;
14 f. lan M clntyre'
,
15 g. Bruce H arlan;
16 h. Todd Sm ith;
17 i. Tim othy Cam m ell;
18 j. JeffM itchell;
19 k. V ictorCasavant;
20 1. Jam esK inney'
,
21 m . G ingerG utierrez;
22 n. N evW estSecurities,lnc.;
23 o. 1StG lobalStock TransferLLC ;
24 p. H elen Bagley; !
25 q. A nthony Tom asso; $
26 r. K athleen Tom asso;

EX HIBIT 4 Page 2 of22 a


Rum yantsev Declaration,Page 91
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 109 of 111

l s. JeffTurino;
2 t. Edw ards & A ngellLLP;
3 u. D .R ogerG lenn;
4 v. Em erson K och;
5 w . Shaw n H ackm an;
6 x. D avid D esorm eau;
7 y. ChristopherJensen;
8 z. Ed Thom pson'
,
9 aa. V incentLo C astro;
10 bb. D on Y arter;
l1 cc. P.A .H oldings;
12 dd. Part--l-im e M anagem ent,lnc.,
'
13 ee. A ny entity for w hich JeffTurino served or serves as a director,ofticer,
14 ow ner,trustee,orbeneficiary;
15 ff. A ny entity forw hich K athleen Tom asso served orserves as a director,
16 officer,ow ner,trustee,or beneficiary;
17 gg. A ny entity forw hich A nthony Tom asso served orserves as a director,
18 oftscer,ow nertrustee,orbenetqciary;
19 hh. A ny entity forw hich Bruce H arlan served or serves as a director,
20 officer,ow ner,trustee,or beneficiary;
21 ii. A ny entity forw hich U rban Casavantsen'ed orserves as a director,
22 officer,ow ner,trustee,orbeneficiary.

23 RESPONSE TO REQUEST FOR PRODUCTION NO.1: !


i
24 lobjecttotherequestforproduction ofalldoctlmentsconcerning any :
'
25 com m unicationsbetw een Santos and the listed individuals and entities based on :
26 thestipulation in Rule34(a)(1)thattherequested itemsmustbeisin theresponding

EXH IBIT 4 Page 3 of22 3


Rum yantsev Declaration,Page 92
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 110 of 111

l party'spossession,custody,orcontrol.'' lam nota custodian of Santos'


2 documents.W ithoutwaivingtheobjection,theresponsetoRequestNo.9covers
3 al1docum entsconcerning any com m unicationsbetw een Santos and R um yantsev
4 within thescopeestablishedbyRule26(b).
5

6 R EO U EST FO R PR O DU CTIO N N O .2:


7 A 1ldocum ents retlecting orconcerning any paym entsor item sw orth m ore
8 than $100 received by Rum yantsev from ,oron behalfof,any ofthe individualsor
9 entities listed in RequestN o.1.

10 RESPONSE TO REQUEST FOR PRODUCTION NO.2:


11 A s an em ployee,lreceived com pensation from N evW estSecurities
12 Corporation. The response to RequestN o.8 coversdocum ents reflecting or
13 concerning any paym entsreceived by m e from N evW estSecurities Corporation.
14 N evW estSecurities Corporation carried securities accounts forseveralnam ed
15 individuals and received com m issions in the ordinal'y course ofbusiness. W ithin

16 thescopeestablished by Rule26(b),information and documentswithrespectto


17 such com m issions are equally available to the Plaintiffasthey w ere previously
18 providedto theSecuritiesandExchangeComm ission (thetdcommissionn).See,in
19 particular,ddM aterials from N evW estSecurities Corporation,obtained February
20 2005-September200555asdisclosed in Attachment2toRule26(A)(1)lnitial
21 D isclosuresby Plaintiff Securities and Exchange C om m ission dated June 18,2008.
22

23 REO UEST FO R PR OD UC TIO N N O .3:


24 A lldocum entsreflecting or concerning any paym ents oritem sw orth m ore
25 than $100 paid by Rum yantsev to,orforthebenetitof,any ofthe individualsor
26 entities listed in RequestN o.1.
I
EXHIBIT4Page4of22 4 i
Rum yantsev Declaration,Page 93
Case 2:08-cv-00437-LRH-RJJ Document 163 Filed 12/28/10 Page 111 of 111

1 RESPONSE TO REQUEST FOR PRODUCTION NO.3:


2 IobjecttothisRequeston groundsthatitisunduly burdensome in that
3 responding to thisRequestw ould require m eto review alldocum entsreflecting
4 or concerning any paym ents from N evW estSecuritiesC orporation to its associated
5 persons A nderson,Rum yantsev,and Santosm ade in the ordinary course of
6 business.W ithoutwaivingtheobjection,documentsreflecting orconcerning such
7 paym entsto m e either w ere previously provided to the Colnm ission or are those
8 provided in response to R equestN o.8.
9

10 R EO U EST FO R PR O D U CTIO N N O .4:


l1 A 11docum entsreflecting assetswol'th m orethan $1,000 thatRumyantsev
12 directly orindirectly ow nsorcontrols,including butnotlim ited to realestate,bank
13 accounts,brokerage accounts,personalproperty,partnership and other investm ent
14 interests,cars,and boats.

15 RESPONSE TO REQUEST FOR PRODUCTION NO.4:


16 The requested item s are equally available to the Plaintiffasthey w ere
17 previously provided aspartofdûstatem entofFinancialCondition ofSergey
18 R um yantsev''dated N ovem ber l6,20075'and Ststatem entofFinancialCondition of
19 Sergey Rum yantsev''dated June 9,2008. There are no additionalitem s relevant
20 withinthescopeestablishedbyRule26(b).
21

22 R EO UEST FO R PRO D UC TIO N N O .5:


23 A lldocum ents related to the securities ofCM K M D iam onds during the
24 period from January 1,2002 through O ctober 31,2005.
i
25 RESPONSE TO REQUEST FOR PRODUCTION NO.5:
26 The requested item sare equally available to the Plaintiff asthey w ere

EXHIBIT 4 Page 5 of22 5


Rum yantsev Declaration,Page 94
Case 2:08-cv-00437-LRH-RJJ Document 163-1 Filed 12/28/10 Page 1 of 30

1 previously provided to the Com m ission. See,in particular,EtM aterials from


2 N evW estSecuritiesC orporation,obtained February 2005 -Septem ber200595as
3 disclosed in Attachment2toRule26(A)(l)InitialDisclosuresby Plaintiff
4 Securities and Exchange C om m ission dated June 18,2008. N o otherdocum ents
5 related to the securities ofCM KM D iam onds during the period from January 1,
6 2002 through O ctober3 1,2005 are in m y possession,custody,orcontrol.
7

8 R EOU EST FO R PR O D UCTIO N NO .6:


9 A l1docum ents concerning brokerage accounts held by Rum yantsev or
10 subjecttoRumyantsev'scontrolfortheperiod from January l,2002 through the
11 present.
12 RESPONSE TO REQUEST FOR PRODUCTION NO.6:
l3 The requested item s are equally available to the Plaintiffas they w ere
14 previously provided aspartofRstatem entofFinancialCondition ofSergey
15 R um yantsev''dated N ovem ber l6,2007 and Gstatem entofFinancialC ondition of
16 Sergey Rum yantsev''dated June 9,2008. There are no additionalitem s relevant
17 within thescopeestablished by Rule26(b).
18

19 REOUEST FO R PRO DU CTIO N N O.7:


20 A l1accountstatem ents for al1bank accounts held in Rum yantsev'snam e or
21 subjecttoRumyantsev'scontrolfortheperiod from Janualy l,2002throughthe
22 present. .

23 RESPONSE TO REQUEST FOR PRODUCTION NO.7:


24 The requested item s are equally available to the Plaintit-fas they w ere
25 previously provided aspartofûtstatem entofFinancialC ondition ofSergey
26 Rum yantsev''dated N ovem ber 16,2007''and SGstatem entofFinancialC ondition of

EX H IBIT 4 Page 6 of22 6


Rum yantsev Declaration,Page 95
'

Case 2:08-cv-00437-LRH-RJJ Document 163-1 Filed 12/28/10 Page 2 of 30

1 Sergey R um yantsev''dated June 9,2008. There are no additionalitem s relevant


2 withinthescopeestablished byRule26(b).
3

4 REO UEST FO R PRO DU CTION NO .8:


5 A 1ldocum ents retlecting R um yantsev's incom e from N evW estSecurities,
6 including a1lW -2 form s,from January 1,2002 though the present.
7 RESPONSE TO REQUEST FOR PRODUCTION NO.8:
8 A ttachm ent 1to this response contains copies ofallW -2 form s retlecting m y
9 incom e from N evW estSecurities from January 1,2002 though the present.
10 A ttachm ent2 to this response contains copies ofyear-end pay stubsreflecting m y
1l incom e from N evW estSecurities from January 1,2002 though O ctober 31,2007.
12 lreceived incom e from N evW estSecurities Corporation through D ecem ber 31,
13 2007,butno pay stubspastO ctober 31,2007 are in m y possession. To supplem ent
14 the Attachm ents 1and 2,1w illalso provide the Com m ission by O ctober 27,2008
15 w ith a detailed record ofN evW estSecurities com m issions,a share ofw hich l
16 received in addition to m y salary during the period from Januar.y 1,2002 though
17 the present.
18

19 SECOND REQUEST FOR PRODUCTION OF DOCUM ENTS TO SERGEY


20 R U M Y A N T SEV
21 R EO UEST FOR PR OD UCTION NO .9:
22 A l1docum ents concerning any com m unicationsbetw een Rum yantsev and
23 any ofthe follow ing individuals orentities:
24 a. CM K M D iam onds,Inc.;
I
25 b . U rban Casavant; !
!
26 c. John Edw ards;
(

EXH IBIT 4 Page 7 of22 1 !


R um yantsev Declaration,Page 96
Case 2:08-cv-00437-LRH-RJJ Document 163-1 Filed 12/28/10 Page 3 of 30

d. A nthony Santos'
,
2 D arylA nderson'
,
3 Ian M clntyre'
,
4 g. Bruce H arlan;
5 h. Todd Sm ith'
,
6 Tim othy C am m ell'
,
7 JeffM itchell;
8 k. V ictorCasavant'
,
9 Jam esK irm ey;
10 m. G ingerG utierrez;
11 n. N evW estSecurities,Inc.;
12 1S'G lobalStock TransferLLC;
13 p. H elen B agley;
14 q. A nthony Tom asso;
15 K athleen Tom asso'
,
16 s. JeffTurino;
17 Edw ards & A ngellLLP;
18 u. D .R ogerG lenn'
,
19 Em erson K och;
20 w. Shaw n H ackm an;
21 D avid D esonmeau;
22 C hristopherJensen'
,
23 z. Ed Thom pson'
,
24 aa. V incentLo Castro'
,
25 bb. D on Y arter;
26 cc. P.A .H oldings;

EXH IBIT 4 Page 8 of22 s


R um yantsev Declaration,Page 97
Case 2:08-cv-00437-LRH-RJJ Document 163-1 Filed 12/28/10 Page 4 of 30

1 dd. Part-Tim e M anagem entaInc.;


2 ee. A ny entity forw hich JeffTurino served orservesasa director,
3 officer,ow ner,tnzstee,orbeneficiary;
4 ff. A rly entity forw hich K athleen Tom asso served orservesmsa director,
5 oflicer,ow ner,tnzstee,orbeneliciary;
6 gg. A ny entity forw hich Anthony Tom asso served orselwesasa director,
7 officer,ow nertrustee,orbeneficiary;
8 hh. A ny cntity forw hich Bruce Harlan scn'ed orserves asa director,
9 officer,owner,tnzstee,orbeneficiary; 1
10 ii. Any entity forwhich Urban C% avantservedorservesasadirector, I
ll ()fficer,Ow ner,tnlsteeyOrbeneficiary. l
i
12 RESPON SE TO REQUEST FO R PRODUCTION NO.9: :
l3 W ithinthescopeestablishedbyRule26(b)andunderthestipulationofRule i
14 34(a)(1)thattherequesteditemsmustbeQçintheresm ndingparty'spossession,
15 custody,orcontrol,''inform ation and docum ents concem ing any com m unications
16 behveen Rumyantsev and any ofthenam ed individuals orentitiesare equally
17 available to the Plaintiffasthey w ere previously provided to the Com m ission. See,
18 in particular,RM aterials from N evW estSecurities Corporation,obtaincd February
19 2005 -Septem ber2005''asdisclosed inAttachment2to Rule26(A)(1)Initial
20 D isclosuresby PlaintiffSecuritiesand Exchange Com m ission dated June 18,2008.
2l

22 SW O.
RN tounderthepenaltyofperjurythis12thdayofOctober,2008.
23 .

24 c l
r
-
'
,
-
k
25 Sergey um ya v
26

XHIBIT 4 Page 9 of22


Rum yantsev Declaration,Page 98
Case 2:08-cv-00437-LRH-RJJ Document 163-1 Filed 12/28/10 Page 5 of 30

SEC v.CM KM D iam onds,lnc.,etal.


C ase N o.2:08-cv-00437-LRH -R JJ
A TTA CH M EN T 1
O ctober l2,2008

EXHIBIT 4 Page 10 of22 Rum yantsev Declaration, Page 99


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EXHIBIT 4 Page 12 of22 Rum yantsev Declaration Page 101


,
Page 3of10
Case 2:08-cv-00437-LRH-RJJ Document 163-1 Filed 12/28/10 Page 8 of 30

SEC v.CM K M D iam onds,lnc.,eta1.


Case N o.2:08-cv-00437-LR H -RJJ
A TTA CH M EN T 2
O ctober 12,2008

EXHIBIT 4 Page 13 of22 R


um yantsev D eclaration,Page 102
Page4 of10
'

Case 2:08-cv-00437-LRH-RJJ Document 163-1 Filed 12/28/10 Page 9 of 30


(ocos )sE2GEyRUMyANTSE/ Nuywusysncuj
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EARNINGS TAXES DEDUCTIO NS YEAR T2
0 DATE .
ûEMHIG- Houqs . RATE Auoou sg'rqFeov AIOBNT DGtCR/'AN AGûuvr M SPTrN *B01N1
SALARY 1500.00 FICA 91.19 HE2 125 27.02 GRQSS 50603.71
HEDFICA 21.33 AFLACNT 2.19 FICA 3094.83
FED %T8 220.01 MEZFICA 723.79
FED KT8 8110.82
HE2 125 634.50
AFLACST 52.56

1r()IC/SL $ 1500.00 T()1r/kL $ 332.53 T()TA L $ 29,21 0070126 ******1128.25


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EXHIBIT 4 Page 14 of22 Rum yantsev Declaration, Page 103


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EXHIBIT 4 Page 15 of22 Rum yantsev Declaration, Page 1O4


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EXHIBIT 4 Page 16 of22 Rum yantsev Declaration Page 105


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EXHIBIT 4 Page 17 of22 R


um yantsev Declaration,Page 106
Page8 of10
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EXHIBIT 4 Page 18 of22 R


um yantsev Declaration,Page 1O7
Page9 of10
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97172:08-cv-00437-LRH-RJJ
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FiledEs.
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EX H IBIT 4 Page 19 of22 R


um yantsev Declaration,Page 108
. page 10of10
Case 2:08-cv-00437-LRH-RJJ Document 163-1 Filed 12/28/10 Page 15 of 30

1 CERTIFICA TE O F SERV ICE


2 I certify thatthis docum entw as served on the follow ing by e-m ailon O ctober 12,
3 2008:
4
5 M olly M .W hite
Leslie A .H akala
6 Sectzrities and Exchange C om m ission
5670 W ilshire Boulevard,1lth Floor
7 LosA ngeles California 90036-3648
,

8 E-mails:whitem@ sec.gov & hakalal@ sec.gov


9
Attorneysforthe5'
.E'C'
10 lrving M .Einhorn,E sq.
Law O ffices ofInring M .Einhorn
11 1710 10th Street
12 M anhattan Beach,CA 90266
Email:ime@ einhornlaw.com
13 AttorneyforDefendantJohnEdwards
14 M
ark S.D zarnoski,Esq.
15 G ordon & Silver,Ltd.
3960 H ow ard H ughesParkw ay,N inth Floor
l6 LasV egas N V 89169
,

17 Email:mdzarnoski@ gordonsilver.com
l8 AttorneyforHelenBagley and 1stGlobalStock TranqferLLC
19 U rban A .Casavant
R R 5 Site 16 Box 29
20 Prince A lbert, Saskatchew an S6V 5R 3
21 C anada
Email:ucasavant@ shaw.ca
22
23 KathleenTomasso I
9580LakeSerenaDrive j
24 B oca Raton,FL 33496 j
25 Email:ttomasso@ ncfgcomm.com '
E
26
;

EXHIBIT 4 Page 20 of22 1


Rum yantsev Declaration,Page 109
Case 2:08-cv-00437-LRH-RJJ Document 163-1 Filed 12/28/10 Page 16 of 30

l A nthony Tom asso


9580 Lake Serena D rive
2 B
oca Raton,FL 33496
3 Email:ttomasso@ncfgcomm.com
4 A nthony Santos
5 6965 N orth D urango D rive,Suite 1115-381
LasV egas,' N V 89149
6 Em ail:A m s.nwst@gmail.com
7
N evW estSecurities Corporation
8 c/o A nthony Santos
9 6965 N orth D urango D rive,Suite 1115-38l
LasV egas,( N V 89149
10 Em ail:Ams.nwst@ gmail.com
11 B
rentR .B aker,Esq.
12 ParsonsB ehle & Latim er
201 S.M ain Street,Suite 1800
13 saltLake C ity, U T 84111
14 Email:bbaker@ parsonsbehle.com
15
AttorneyforDarylAnderson
16 Eric N .K lein,Esq.
Eric N .K lein & A ssociates,P.A .
17 1200 N . FederalH ighw ay,Suite 200
18 B oca Raton,FL 33432
Email:enk@ kleinattorneys.com
19
20 Sean 1.K oplow ,Esq
6801 Lake W orth Road,Suite 2l4
21 Lake W orth,FL 33467
22 Email:seankoplow@ gmail.com
23 M ichaelR .B akst
PM B 702
24 222 Lakeview A venue, //160
aj W estPalm B each,FL 33401
michael.bakst@ ruden.com
26

EXH IBIT 4 Page 21 of22


Rum yantsev Declaration,Page 110
Case 2:08-cv-00437-LRH-RJJ Document 163-1 Filed 12/28/10 Page 17 of 30

1 John W esley Hall,Jr.


1311 S.Broadw ay
2 Little Rock,A rkansms7220:,.4843
3 c-rrlail:1.k)flIutii(-
$@
a::
,i.t't.1?)
4
AttorneyforDefendantBrianfhrrtzk '

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6 jerge myantl
7
8
9
10

11
12
13
14
15
16

18

19
20
21
22

23
24
25
26

X H IBIT 4 Page 22 of22


Rum yantsev Declaration,Page 111
Case 2:08-cv-00437-LRH-RJJ Document 163-1 Filed 12/28/10 Page 18 of 30

E X H IB IT 5

Rum yantsev Declaration,Page 112


Case 2:08-cv-00437-LRH-RJJ Document 163-1 Filed 12/28/10 Page 19 of 30

l SERG EY RU M Y AN T SEV ,pro se


1951N Jones#6 202
2 L
as V egas,N V 89108
3 E-mail:chaotak@embarumail.com
4 Telephone:(702)647-7925
5
U N ITED STA T ES D ISTR IC T C O U R T
6
D ISTR IC T O F N EV A D A
7
8
SECU R ITIES A N D EX CH A N GE C ase N o.2-08CV 00437-LR Ll-R JJ
9 COM M ISSION
,Plaintiff, D E FEN D A N T SE R G EY
10 R IJM V A N T SEV ,s R E SPO N SE TO
ll vs. PLA IN TIFF SE C U R IT IE S A N D
EX C H A N G E C O M M ISSIO N 'S
12 CM KM DIAM ONDS,INC.,etal., SECOND SET OF REQUESTS
13 D efendants. F(m A D M ISSIO N S

14

15 PR OPO U N D IN G PA R TY : PLA IN TIFF U N ITED STA TES SEC UR ITIES A N D


16 EX C H A N G E CO M M ISSIO N
17 RESPO N D IN G PAR TY : D EFEN D A N T SER GEY RU M Y A N TSEV
18 SET N O .: TW O
19

20

21

22

23

24

25

26

EXHIBIT 5 Page 1 of7 l


Rum yantsev Declaration,Page 113
Case 2:08-cv-00437-LRH-RJJ Document 163-1 Filed 12/28/10 Page 20 of 30

1 Ptzrsuantto Rule 36 ofthe FederalRulesofCivilProcedure,Defendant


2 SergeyRumyantsev (TtDefendant''ortûlkumyantsev'')respondsto Plaintiff
3 SecuritiesandExchangeCommission (Ctplaintiff'orttcomm ission'')SecondSetof
4 Requests forA dm issions as follow s:

5 Defendantobjectstothettdefinitions''inPlaintiff'sSecond SetofRequests
6 forAdm issionsto SergeyRumyantsev(ttplaintiffsRFA's'')totheextentthey
7 purportto im pose obligations on D efendantbeyond the obligations im posed by the
: FederalRulesofCivilProeedure. ln respondlng to PlaintiffsRFA 's, D efendant
9 willrespond in accordance with hisobligationsassetforth in the FederalRulesof
10 CivilProcedure.

11 Thepartiesareatan early stageofdiscovel'y.Pursuantto Rule26(e)ofthe


12 FederalRules ofCivilProcedure,D efendantexpressly reserveshisrightto
13 supplem entoram end hisresponsesto Plaintiffs R FA 's .

l4

15 R EO U EST FOR ADM ISSION NO .47:


16 A DM IT thatby N ovem berof2004 YOU knew thatJefferieshad stopped
17 trading the flow of CM K M D iam ondsstock from N evW est .

18

19 RESPONSE TO REQUEST FOR ADM ISSION NO.47:


20 B ased on D efendant'sunderstanding ofthe R equest, Defendantrespondsas
21 follow s:
22 A D M IT
23

24 REOUEST FO R A DM ISSION NO .48:


25 ADM IT thatYOU neverasked Jeffkrieswhy itstopped trading the flow of
26 CM K M D iam onds stock from N evW est.

EXH IBIT 5 Page 2 of7 a


Rum yantsev Declaration,Page 114
1 Case 2:08-cv-00437-LRH-RJJ Document 163-1 Filed 12/28/10 Page 21 of 30
I

l RESPONSE TO REQUEST FOR ADM ISSION NO.48:


2 Based on D efendant's understanding ofthe Request,D efendantresponds as
3 follow s:
4 A D M IT
5

6 REO UEST FO R ADM ISSIO N NO .49:


7 ADM IT thatYOU nevertook stepsto investigatewhyJefferieswhy (sic)
8 stopped trading the tlow ofCM K M D iam onds stock from N evW est.
9

10 RESPONSE TO REQUEST FOR ADM ISSION NO.49:


l1 Based on D efendant's understanding ofthe Request,D efendantresponds as
12 follow s:
13 D EN Y
14

15 REO UEST FO R ADM ISSION NO .50:


16 A D M IT thatafterY O U learned thatJefferiesstopped trading the tlow of
17 CM K M D iam onds stock from N evW est,N evW estcontinued to trade in C M K M
18 D iam onds stock.
19

20 RESPONSE TO REQUEST FOR ADM ISSION NO.50:


21 B ased on D efendant'sunderstanding ofthe R equest,D efendantrespondsas
22 follow s:
23 A D M IT
24

25
1
i 26

i
ë
EXHIBIT 5 Page 3 of7 3
Rum yantsev Declaration,Page 115
Case 2:08-cv-00437-LRH-RJJ Document 163-1 Filed 12/28/10 Page 22 of 30

l SW ORN tounderthepenaltyofperjurythis5thday ofD ecem ber, 2008.


2 '
'
.

4
.

jerge
.
(ytan sv..
5 '

6
7
8

9
l0
11

12

13

14

15

16
17

18
19
20
21

22

23

24

25

26

EXH IBIT 5 Page 4 of7 4


Rum yantsev Declaration,Page 116
Case 2:08-cv-00437-LRH-RJJ Document 163-1 Filed 12/28/10 Page 23 of 30

1 CERTIFICA TE O F SER V ICE


2 I
certify thatthis docum entw as served on the follow ing by e-m ailon D ecem ber5,
3 2008:
4
5 M olly M .W hite
Leslie A .H akala
6 Securities and Exchange Com m ission
5670 W ilshire Boulevard,11th Floor
7 Los A ngeles, California 90036-3648
8 E-mails:whitem@ sec.gov& hakalal@ sec.gov
9 AttorneysfortheSEC
10 Irving M .Einhorn,Esq.
Law O ffices ofInring M .Einhorn
11 l710 l0th Street
12 M anhattan Beach,CA 90266
Email:ime@einhornlaw.com
13 AttorneyforDejkndantJohnEdwards
14 M
ark S.D zarnoski,Esq.
15 G ordon & Silver,Ltd.
3960 H ow ard H ughes Parkw ay,N inth Floor
l6 Las V egas
, N V 89169
17 Email:m dzarnoski@ gordonsilver.com
18 AttorneyforHelenBagley and /. s/GlobalStock TransferLLC
19 U rban A .C asavant
R R 5 Site 16 B ox 29
20 Prince A lbert, Saskatchew an S6V 5R3
21 Canada
Email:ucasavant@ shaw.ca
22
23 K athleen Tom asso
9580 Lake Serena D rive
24 Boca Raton,FL 33496
25 Email:ttomasso@ncfgcomm.com
26

EX H IB IT 5 Page 5 of7 5
R um yantsev D eclaration,Page 117
Case 2:08-cv-00437-LRH-RJJ Document 163-1 Filed 12/28/10 Page 24 of 30

1 A nthony Tom asso


9580 Lake Serena D rive
2 B
oca Raton,FL 33496
3 Email:ttomasso@ ncfgcomm.com
4 A nthony Santos
5 6965 N orth D urango D rive,Suite 1115-381
Las V egas,N V 89149
6 Em ail:A m s.
nwst@gmail.com
7
N evW estSecurities Corporation
8 c/o A nthony Santos
9 6965 N orth D urango D rive,Suite l115-381
Las V egas,N V 89l49
10 Email:Ams.nwst@gmail.com
11 B rentR .B aker,Esq.
12 Parsons Behle & Latim er
201 S.M ain Street,Suite 1800
13 SaltLake C ity, U T 8411l
14 Email:bbaker@ parsonsbehle.com
l5
AttorneyforDarylAnderson
l6 Eric N .K lein,Esq.
Eric N .K lein & A ssociates,P.A .
17 1200 N FederalH ighw ay,Suite 200
.

18 Boca Raton,FL 33432


Email:enk@ kleinattorneys.com
19
20 Sean 1.K oplow ,Esq
6801 Lake W orth Road,Suite 2l4
21 Lake W orth,FL 33467
22 Email:seankoplow@gmail.com
23 M ichaelR .Bakst
PM B 702
24 222 Lakeview A venue, //160
a5 W estPalm Beach,FL 33401
michael.bakst@ ruden.com
26

EX HIBIT 5 Page 6 of7 6


Rum yantsev Declaration,Page 118
d
'

Case 2:08-cv-00437-LRH-RJJ Document 163-1 Filed 12/28/10 Page 25 of 30

l Jolm W esley H all,Jr.


131l S.B roadw ay
2 Little Rock A rkansas 72202-4843
,
3 e-m ail:
4 AttorneyforDefendantBrianDvtprtz/c
.... .-

5
s.m x..
p . jy
j
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.

6 jerj:ï umy: tsev


,
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26

EXH IBIT 5 Page 7 of7 7


R um yantsev D eclaration,Page 119
Case 2:08-cv-00437-LRH-RJJ Document 163-1 Filed 12/28/10 Page 26 of 30

E X H IB IT 6

Rum yantsev Declaration,Page 120


Case 2:08-cv-00437-LRH-RJJ Document 163-1 Filed 12/28/10 Page 27 of 30

Sergey Rum yantsev

From: ''DavidAlsup''<davi
d@ ccls.com>
To: <sergey@ nevwest.net>
Sent: W ednesdaylFebruary25,2004 2:48 PM
Attach: NevW est.doc
Subject: again,amended.

EXHIBIT 6 Page 1 of4


Rumyantsev Declaration,Page 121
Case 2:08-cv-00437-LRH-RJJ Document 163-1 Filed 12/28/10 Page 28 of 30

((S

k lxlllderklu riq lelvites,Iqt.

Proposed CorrespondentC harges


For
NevW estSecurities Corporation

EX H IBIT A G ood for30 days February 25,2004

H RetailAqencv & PrincinalTransactions (BrokerEntered Trades):


*LISTED EQ UITIES ,OTC & OPTIONS

$9.00 perticket. (Executed By CCS approved Software)


$10.00 perticket Otherm ethods.
$14.00 perticket. Trades using CCS trading desk.

*options: Above related ticketcharges plus $1.35 perContract.

Forretailelectronic orderentry using CCS approved softw are,orfortrades executed by using


ccsTrader, $.75 perticketexecution fee.Please referto Schedule .'B''formore inform ation
reqardinq ccsTrader.

Electronic Online Trading ticketcharges do notinclude exchange,ECN,& software execution fees.


**AdditionalNASDAQ,ACT,DTC,& NSCC fees,and any otherRegulatory and/orextraneous
charges willbe passed on to the Correspondent.
Alltrades subm itted to CCS forClearing & Settlementm ustbe in the orderthey w ere
executed.This includes aIIpartialfills and brokerallocated orders.

Tradesover2 millionshares (sellj mustnotifyCCS and purchases musthave priorapproval.


Block Trade lim itation:Trades of100,000 shares orm ore willincura fee of$0.000&share up to a
m axim um of1% ofthe principalamountofthe trade.
This fee w illbe charged to the customerand w illshow as a miscellaneous fee on the trade
confirm ation

Stocks thattrade forIess than $0.01 and willrequire CCS to depositw ith NSCC an am ount greater
than $500,000 in aggregate,mustbe doneX-clearing.Thesetrades willbesubjected to aIl
applicable fees,including interestcharges on funds thatare required to be deposited to NSCC for
al1trades.

Initials

EX H IBIT 6 Page 2 of4 1


Rum yantsev Declaration,Page 122
Case 2:08-cv-00437-LRH-RJJ Document 163-1 Filed 12/28/10 Page 29 of 30

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Page 2
O THER TRANSA CTIO NS'
.
*Bonds $25.perticket
*U.S.Govt/Agencies $50.perticket
*zero Coupon $50.perticket
*syndicate $12.perticket
*MutualFunds/ulT's $25.perticket
wBrokerto BrokertRiskless principaltrades) $10.perticket
*x-clearing Trades $28.perticket
*DTC,NSCC,& NASDAQ fees apply w hereapplicable.
NOTE:Canceland Rebilldue to Correspondenterrorwillbe charged to the Correspondentbased
on the above schedule

O PERATIO NS A CTIVITY:
AccountTransfertoutgoingACATS) $ 50.00 peraccount
Back up W ithholding directcost
Deliveryvs.Payment(NOn-CNS eligible) $ 35.00 plus any directcost
DTC Fee $ 10.00 peroutgoing delivery
lnactivity Fee $ 30.00 sem i-annually (IRA'sExempted)
Option Exercise/Assignment $ 30.00 perexercise/assignm ent
Records Research $ 50.00 perhour (1/2hourmin.)
Safekeeping Charge $ 50.00 peraccount,annually
Tenders,Exchange,Reorg $ 10.00 percustom er,perissue
Transfers/custom ers $ 15.00 Apercedificate
Transfers/courtesy $ 25.00 epercertificate
Transfers/Foreign $ 15.00 eperdelivery w ithin U.S.
$100.00 Aperdelivery outside country
$250.00 perissue directto customer
* PIus any directcosts
PO STA G E
OvernightMail(by Requestj $ 25.00 perenvelope
Postage & Handing $ 3.00 perretailtrade.
Returned Mail $ 1.00 peritem

BA NKING ACTIVITY '


.
W ired Funds $ 25.00 perw ire
Custom erReturn Check $ 25.00 percheck
Stop PaymentRequest $ 25.00 perrequest
Foreign W ire Outgoing Directcost Such as wire fees,sw iftcharges

Initials

EXHIB IT 6 Page 3 of4 2


R um yantsev D eclaration,Page 123
Case 2:08-cv-00437-LRH-RJJ Document 163-1 Filed 12/28/10 Page 30 of 30

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Page 3
**CUR RENT REG ULATO RY FEES:
NASD TRADING ACTIVITY FEE -EQUITIES:
No Min.Fee $0.0001perShareSellSide Listed and OTC (Share< 100,000)
Max$10.00 $10 perTrade SellSide Listedand OTC (Share>= 100,000)
NASD Fee-Options No Min/Max $0.002perContract
NSCC TRADE RECORDING FEE:
Mjn.$0.009&rade $0.009 perTrade Listed and OTC (Share<= 300)
Max.$0.18/Trade $0.18perTrade Listed and OTC (Share>= 6000)
$0.00003 perShare $0.00003 perShareListed and OTC (300< Share<6000)
NASDAQ MANAGEMENT FEE: $0.029 perExecution
e'rhesecurrentfeesaresubjecttochangewitboutnoticefrom theRegulatorybodies.
R EG ULA TO RY REQ UIREM ENTS'
.
Reg.T Extension $ 10.00 perextension
Rule 144 Filing com pleted by CCS $100.00 plus directcost
Blue SheetRepoding $150.00 perrequestby NASD & S.E.C.

M ISCELLANEO US CHA RG ES:


Form s directcost
Mailings and Stuffers directcost
Photo orMicrofiche copies $ .50 percopy
Accessto CCS webAites $ 95.00 permonth perB/D
Accessto Phase3(1>tuserfree) $ 20.00 peruserpermonth
New AccountOFAC Inquiry $ 2.00 pernew account
(Please seeccs correspondentwebsite forclarification)
M INIM U M CLEA RING C HA RG E: $2000.00 perm onth in tickets.

CLEARING DEPOSIT:$100,000.00 ($30,000initialuntilmovedfrom currentclearing


firm). Additionalfunds may be required astrading volume increases.
C om puter Clearing Services,Inc: Correspondent A cknow ledgm ent:

By: By:

N am e: N am e:
(Pri
ntName) (Pri
ntName)

Title: - Title:

D ate D ate
EXHIBIT 6 Page 4 of4 3
R um yantsev Declaration,Page 124