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December 11, 2008

"U.S. Senators don't make [expletive deleted]": Kazeminy, Coleman, McKim, and Thomas

Dean Orrick of the Pioneer Press includes an interesting detail in his report on the FBI probe into allegations that Sen. Norm Coleman received undisclosed and possibly illegal gifts from his generous benefactor, Nasser Kazeminy....

A lawyer for the former CFO of Deep Marine Technology, B.F. Thomas, claims that his client was "misquoted" in a lawsuit filed against Kazeminy by DMT's former CEO, Paul McKim. In order to understand what's interesting about this claim, you have to understand that the CEO is the only named individual other than McKim who is alleged to have heard Kazeminy explain his intention to pay Coleman with DMT's money through Hays.

The evidence that Minnesota businessman Nasser Kazeminy funneled money to Norm Coleman through DMT comes from two lawsuits, filed within days of each other, in Texas and Delaware, respectively.

In order to understand this case, it's important to get clear on who's suing whom, and why. Let's start with the Texas lawsuit. I'll cover the details of the Delaware suit in a subsequent post. The two suits make virtually identical allegations and support them with the same or similar evidence.

In Texas, Paul McKim, the founder and former CEO of DMT, is suing Kazeminy, a second major DMT investor, and a group of DMT officers and directors for using the company as a personal piggy bank and forcing employees to break the law. In Delaware some minority shareholders are suing McKim and Kazeminy for screwing up the company through the same bad behavior detailed in the Texas suit.

What follows is a summary of McKim's lawsuit ("McKim"). All the factual claims come from that lawsuit itself. Remember that this is Paul McKim's side of the story, it's the version he paid his lawyers big bucks to write.

Also keep in mind that McKim is a defendant in the Delaware lawsuit. So, there's some disagreement about whether he cooperated with Kazeminy's scheme or not. McKim portrays the CEO as a principled opponent of Kazeminy. If the Delaware crew had and equally high opinion of McKim, they probably wouldn't be suing him.

Many observers suspected that the timing of McKim's suit was politically motivated, coming as it did so close to the election. The thing is, McKim is a self-described lifelong Republican from Texas with no obvious motive to sandbag Norm Coleman, a Republican senator from Minnesota.

If there was an ulterior motive for the timing, it may have been that McKim knew that he was about to get sued in Delaware and wanted to get his version out first. 

So here's McKim's version: It all started back in 2001 when CEO McKim needed capital to expand DMT. Wealthy Nasser Kazeminy invested a lot of amount of money in the company.

The deal turned out to be a Faustian bargain from McKim's perspective. Kazeminy ended up owning enough of DMT to run the company like a personal fiefdom, which he proceeded to do.

In 2005, Louisiana shipping magnate Otto Candies, Jr. acquired a large stake in DMT in exchange for a shipping vessel, the MV Diamond. Candies and Kazeminy became allies. Together, they had a stranglehold on DMT.
In November of 2007, Kazeminy and Candies agreed to give Candies almost 20% of DMT's stock in exchange for two more ships.

In June of 2006, Kazeminy forced DMT to sign an Oversight Services Agreement giving Kazeminy the power "designate advisory, consulting and other services in relation to the day-to-day operations of DMT."

Kazeminy also stacked DMT's board of directors and senior management with his own handpicked appointees, many of whom were his former employees or business partners in other ventures.

Kazeminy installed John Ellingboe, Daniel Erickson, and Eugene DePalma on the board of directors--all current or former employees of Kazeminy's other company, NJK Holdings. Kazeminy
would eventually appoint another person with NJK ties, John Hudgens, as Chief Financial Officer of DMT--but that's getting ahead of the story.

According to McKim, Kazeminy started funneling DMT's money to Norm Coleman in March of 2007. McKim alleges that Kazeminy telephoned DMT's then-CFO B.J. Thomas and ordered him to pay off Coleman with DMT's money.

"U.S. Senators don't make [expletive deleted]," Kazeminy reportedly said. The lawsuit goes on to paraphrase what Kazeminy allegedly ordered Thomas to do:"...he was going to find a way to get money to United States Senator Norm Coleman and wanted to use DMT in the process."

The lawsuit says that Thomas later approached CEO McKim to ask whether it would be appropriate to follow Kazeminy's orders.

McKim allegedly told Thomas that it wouldn't be appropriate and later confronted Kazeminy about the plan:

In his conversation with Kazeminy,  Mr. McKim was informed of the same purpose as was Mr. Thomas in his conversation with Kazeminy'. In this same conversation, Kazeminy told Mr. McKim that he [KazeminyJ would make sure there was paperwork to make it appear as though the payments were made in connection with legitimate transactions, explaining further that Senator Coleman's wife, Laurie; worked for the Hays Companies ("Hays"), an insurance broker in Minneapolis, and that the payments could be made to Hays for insurance.

McKim claims that the CEO refused to accede to Kazeminy's demands and Kazeminy threatened to fire him.

Undeterred, Kazeminy later produced a document called a Disclosure of Service Fee from the Hays Company, which he claimed legitimized the transfer, and forced McKim to sign it, the lawsuit alleges.

According to the suit, McKim was allegedly forced to approve the first $25,000 payment but that the CEO refused to make any further payments. Two additional payments of $25,000 each were allegedly made without McKim's approval. McKim claims that the CEO found out about the final $25,000 payment and killed it.

According to the lawsuit, Kazeminy disclosed the workings of the scheme to both McKim and Thomas:

Kazeminy informed Messrs. McKim and Thomas that Hays would funnel the money from DMT to Senator Coleman through the payment of compensation to his wife, Laurie, and that there was nothing to worry about.

At some point Thomas left the company and Kazeminy appointed the Minnesota-based John Hudgens as CFO. McKim describes Hudgens as "an affiliate of Kazeminy and NJK" and "essentially a puppet" of Kazeminy. Allegedly, Hudgens set about covering Kazeminy's tracks by ordering employees to purge records of the Hays transactions from DMT's books.

Here's where Orrick's story in the Pioneer Press becomes relevant. A lawyer for B.J. Thomas told the Press that he believed that his client was being "misquoted" in McKim's lawsuit.

According to McKim Kazeminy explained his plan to pay Coleman through Hays to at least two people: McKim and Thomas. Thomas isn't directly quoted in the lawsuit, but many of the claims in the lawsuit are based on what are presumably McKim's accounts of conversations with Thomas about Kazeminy.

Somebody allegedly heard Kazeminy say that "United States Senators don't make [expletive deleted]." Kazeminy purportedly said so in a phone call to Thomas. It's possible that Thomas told McKim's lawyers about it directly, or Thomas told McKim and McKim passed on the hearsay. But we don't know who else might have been on the call, or who might have overhead the conversation.

The Delaware lawsuit makes virtually identical allegations Kazeminy's transfer of funds to Coleman, but attributes that information to a "Confidential Source" who claims to have spoken to Kazeminy about the payoff: "Mr. Kazeminy stated to the Confidential Source: "We have to get some money to Senator Coleman" because the Senator "needs the money.""


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I'd like to know where Laurie Coleman did her work for Hays Companies of Minnesota.

Was it in an office building where people could see her regularly sitting at a desk for hours per day?

It's an important story, and the truth will come out. Norm's criminal liability here is virtually identical to Ted Stevens. Now that the FBI is onto him, he's not going to get out of this.

The bigger question is, how can these people (Stevens, Coleman, Blogojevich) be so stupid?

Aside: It's stupid to delete expletives in transcripts. The particular choice of expletive conveys potentially useful information. Also, the officers of the court are all presumably adults. If they can't handle reading the word "fuck" they should teach kindergarten.

Once again, there is a missing aspect. It does not look like Kazeminy was trying to influence anything. He seems like a rich guy who may have just been generous, according to what I have read
This McKim person should be investigated fully. Something is not right with that guy
I am neither for or against Coleman. But I do find Paul McKim worthy of a closer look.

Michael, are you suggesting that McKim wanted to curry favor with Coleman?

Michael, are you suggesting that McKim wanted to curry favor with Coleman?

Does anyone know that IRS is now selling John Hudgens $3,000,000 home at 6333 Carrington in Dallas, Texas? This house is listed on the tax rolls for $2,038,640, but CFO John Hudgens only makes $84,000 per year. Not only are these people crooks, but our own government allows these people homestead exemptions, tax rebates, and other freebies; but our Police, Kids Schools, and other City Services are being cut because these ultra rich THIEVES steal over and over and noone cares!

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