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Archive for July, 2009

Real M Leaf

Steve Kubby’s status on Facebook

10 July 2009

I just watched 6.5 million shares of my stock, which has traded as high as $1.50 a share, go up in smoke, as a result of my decision to tell the truth and resign from Cannabis Science. Our movement cannot allow itself to be discredited by public companies who are not squeaky clean. Even if it involves friends I’ve known and cherished for years, I have an obligation to expose what I believe are fraudulent activities.

He’s added a Note – I’ve reprinted the entire note here, because I can’t find it anywhere else, and Facebook is not easily accessible to everyone.

My Resignation from the Cannabis Science Board of Directors

Yesterday at 5:30pm

The challenges of launching our company, during the worst financial crisis since the Great Depression, forced us to move quickly and decisively, resulting in a lot of snap decisions and rushed actions that I felt needed to be reviewed. Hence, I recently asked our COO, Ray Carr, to perform an internal review, so we could determine what actually happened and where we are now.

In the course of his review, Ray Carr spoke by phone with Raymond Dabney, who had brought us the deal with Gulf Onshore to do a reverse merger. Our COO wanted to determine what stocks had been issued and to whom. When Mr. Carr attempted to get details about certain unusual consulting contracts, Dabney refused to provide answers and told our COO, “it’s none of your business.”

For Dabney to tell our COO what he did, was disturbing and unacceptable to Mr. Carr, and when I found out about it, disturbing to me, especially since I have been increasingly troubled by Dabney’s demands that we sign stock deals with consultants with vague responsibilities and identities. It was then that our COO advised me that he believed something might be going on that required an internal investigation of Raymond Dabney’s stock deals and the advice of our SEC attorney.

It was our Chief Science Officer, Dr. Robert Melamede, who brought Raymond Dabney to my attention and gave him a strong personal recommendation. Despite the recommendation, I did a search on Dabney and came up with this:

“In November 2005, for example, the commission suspended Ray Dabney, the president of Xraymedia, after he admitted sending out 22 false news releases about the company. Several Xraymedia directors serve on Goldmark’s board, and the two companies share the same Vancouver address, according to filings with the Pink Sheets. Xraymedia was the subject of a 2003 spam campaign, according tospamnation.info, a Web site that tracks penny-stock spam. Shares of Xraymedia are quoted on the Pink Sheets. Although barred from the Pink Sheets, Goldmark shares may still trade if a broker is willing to sell them to investors (few are).”

http://articles.moneycentral.msn.com/Investing/FindHotStocks/TheTruthBehindPennyStockSpam.aspx?page=2

Dr. Melamede and, in particular, Richard Cowan, our CFO, argued that this was only a civil infraction and had more to do with the Vancouver Exchange than any real wrongdoing on the part of Dabney.

However, before I agreed to work with Dabney, I sent our CFO to meet with him in Vancouver. Cowan reported that Dabney was perfect for us and we agreed to work with him.

Recently, I have become increasingly concerned about large blocks of S-8 free trading shares that Dabney insisted I immediately transfer to unknown individuals and companies. Due to the large amounts of stock involved and the lack of any information about the individuals and companies involved, I continually requested opinions by our Board of Directors. In each case, it was the opinion of Dr. Melamede and our CFO that these transactions were necessary and legal. Additionally, I was reassured by Dabney that his scrape with the SEC had been resolved and he had been cleared.

Despite these assurances, I became so concerned about what was happening, I refused to sign the most recent stock transfer he submitted, which awarded 850,000 shares, per year, to a company that had no clear duties and did not even have an address.

Then, when our COO told me about Dabney’s refusal to answer his questions, I decided to do a another search on Raymond C. Dabney. Within just a few minutes, I was shocked to find new information about him that is, on its own, troubling, but taken in the context of what Dabney has been doing in our company, it appears that immediate action is required.

One paragraph in an SEC report, dated August 8, 2008, on Dabney is especially disturbing:

“The Commission’s complaint further alleges that, from July 2005 to September 2006, Alliance, Richard Dabney, Raymond Dabney, Young, Smith, and O’Neal participated in an unregistered distribution of Alliance securities through a series of purported stock offerings by Alliance to North American Funding, Inc. (NAF), a Texas corporation controlled by Smith. According to the complaint, Raymond Dabney, Young, and Smith arranged for Alliance to issue stock to NAF in offerings that purportedly were exempt from registration. The complaint alleges that, in fact, the transactions between Alliance and NAF were not exempt from registration and were merely a device to evade the registration provisions of the federal securities laws. According to the Commission’s complaint, the stock was immediately distributed to third parties and sold into the market, without being paid for by NAF. Richard Dabney, an officer and director of Alliance, and O’Neal enabled Alliance to engage in those transactions by providing the necessary corporate resolutions and legal opinions, respectively. The Commission’s complaint also alleges that Young, Smith, and O’Neal received some of the Alliance stock through the unregistered distribution and sold it into the market without registration or a valid exemption from registration. According to the complaint, Lewis, Richard Dabney, and Raymond Dabney received a portion of the proceeds that Young obtained by selling the Alliance stock.”
<http://www.sec.gov/litigation/litreleases/2008/lr20676.htm&gt;

Frankly, this seems to be exactly what Dabney is doing now, with our company. I then advised our COO that we had a fiduciary responsibility to conduct an immediate, confidential internal investigation of Raymond Dabney, to determine the following:

1. Are the stock deals arranged by Dabney legal?

2, Is the stock issued to the consultants that Dabney has recommended being distributed to third parties and sold into the market, without being paid for or properly registered, or exempted by us, as happened in the previous stock offerings by Alliance to North American Funding, Inc. (NAF)?

3. Given that Dabney never disclosed his history of SEC complaints about his attempts to create phony schemes to evade federal securities laws, are we still bound by contracts he created and had us sign, such as the Control Shareholder’s Agreement? That agreement gives Dabney a major role in the operation and decision making of the company, a role he would never had been allowed to assume, had I known the truth about him.

4. What legal options and obligations do we have to deal with this situation?

The results of that investigation are in and it appears that the level of fraud and illegal activities, as well as bogus or incompetent filings, appears to be systemic.

Yesterday, the Dabney group took actions to remove me as a Director, that are clearly a violation of Nevada state law. Dabney and group then contacted the investors and vendors of CSI to tell them I had been removed. By these two actions, I believe this group has so damaged CSI and its reputation, that I have no choice but to resign and do what I can to protect future investors by ending any appearance of support for CSI.

Also, I’ve learned that Dabney et al have issued themselves preferred stock, without my knowledge, any proper authorization, placing themselves in a majority position. If the CEO and COO are being left out of such fundamental actions as the issuance of stock, then the Dabney group is acting so far out of the law that I am again compelled to remove myself.

Furthermore, based on what we learned from our internal investigation, I now believe that the two court cases against CSI are not bogus as we all believed, but are actually the fault of Dabney’s failure to provide proper contracts or safeguards to assure a legal closing of his deal.

Another major problem is S-8 stock issuance with I believe was based on a fraudulent attempt to circumvent SEC rules with bogus contracts and fraudulent misrepresentation of services rendered, in order to create the appearance of legal activity, that was really intended to channel money back to Dabney and to the company.

These is also the matter of the Dabney group directing one of our investors to deposit $200,000 into our company lawyer’s CDN Trust account. However, the account to which our investor was told to deposit the $200,000 was NOT our corporate attorney’s trust account, but was actually Mr. Dabney’s own private attorney’s trust account. Mr. Dabney had attempted the same illegal diversion of funds a few days prior and had been warned by me that he had no authority and to cease any further activities, yet he brazenly repeated his attempt to divert these funds with the assistance of two of our CSI Directors, Richard Cowan and Robert Melamede.

I spoke to Annie Chan, secretary to Jeffry Wing, a Vancouver lawyer about the attempted diversion of funds. She told me that although Wing is Mr. Dabney’s personal attorney, he has not done any work for my company, nor, to her best knowledge was such a transfer known or authorized by Jeffry Wing. Mr. Wing and Ms. Chan can be reached at 604 689-2828. believe Mr. Dabney committed bank fraud by representing the account our investor was supposed to send money to was a Cannabis Science trust account when that is clearly not the case. So from my point of view, this attempt to divert funds appears to tie Mr. Dabney and his group to bank fraud, stock fraud, violation of the BC SEC order against him and attempted embezzlement. Not just once, but twice.

Dabney and his group claim they are partners with me, under the terms of a Control Shareholders Agreement I signed. However Dabney’s name appears nowhere in the document. The legal opinion of our corporate attorney, Faiyaz Dean, is that Dabney has no authority to say or do anything under the Control Agreement. According to Mr. Dean, there are at least three clauses that in the Control Agreement that nullify Dabney’s claims. Yet, in fact, Dabney has installed himself as COO, refusing to release files to us, using his own phone number and email to answer all inquiries to Cannabis Science. Dabney has done this with the full support of Melamede and Cowan, who appear to have entered into an agreement to take over CSI through unauthorized and fraudulent activities.

As long as my name is associated with Cannabis Science, innocent investors who know me and my reputation, will be investing their hard earned dollars into a company that is deceptive and fraudulent. Given what I have learned about the activities of Dabney, Melamede and Cowan, I believe it is my duty to resign and call attention to what I believe is an criminal conspiracy to defraud our investors.

Steve Kubby
July 9, 2009

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