Lee Webb article - yes a non fiction one!!!
Conversion Solutions back in the hands of Harris
Conversion Solutions Holdings Corp (U:CSHD)
Shares Issued 103,135,657
Wednesday May 09 2007 - Street Wire
by Lee M. Webb
Conversion Solutions Holdings Corp.'s chief executive officer Rufus Paul Harris, back in the saddle as sole officer and director of the purported multibillion-dollar company wallowing on the grey market, has filed a sloppy and belated answer to a U.S. Securities and Exchange Commission (SEC) lawsuit filed last October.
The muddled filing, which bears no evidence of having passed through the hands of a lawyer, dismays some shareholders, but many of Conversion's cultish Internet followers who congregate on a chat forum opened by the semi-literate Georgia promoter are ecstatic over the development.
According to the assessment of the "true longs," as many naive Conversion shareholders who regularly profess their complete faith in the company's leader like to call themselves, the crafty Mr. Harris has led the SEC, along with nasty naked short sellers and other perceived market miscreants, into a clever trap and now has them right where he wants them.
The SEC, which wants Mr. Harris permanently banned from serving as an officer or director of any public company, has not yet responded to the confused and long past due answer filed on April 24.
Given that the U.S. regulator obtained orders of default against Conversion and Mr. Harris last November for failing to file timely answers to the complaint, the SEC may well simply file a motion to strike the Georgia promoter's belated answer.
In the first of a series of articles that will culminate in a closer examination of Mr. Harris's latest lawyerless court filing, Stockwatch will review some of the legal and corporate developments that form the backdrop to his sloppy response to the SEC suit.
The legal background
As previously reported by Stockwatch, the SEC suspended Conversion, then trading on the OTC Bulletin Board, and filed a lawsuit against the company and Mr. Harris in the U.S. District Court for the Northern District of Georgia on Oct. 24, 2006.
The SEC action came just eight days after Conversion filed a slipshod annual report "created" by Mr. Harris and followed up with a fluffy news release on the same day that pegged the company's "asset portfolio" consisting primarily of bonds at approximately $7.3-billion, purportedly giving the OTC-BB promotion a book value of $70.71 per share as of Oct. 16, 2006. (All amounts are in U.S. dollars.)
The market did not give much credence to Conversion's fantastic claims, even before the SEC took action.
While the stock price had briefly touched $4 per share on Sept. 28, 2006, it had already dipped below $2 per share by the time the SEC stepped in with its trading suspension and lawsuit levelling allegations of fraud against the company and Mr. Harris.
According to the SEC, which had been sniffing around the smelly promotion for a couple of months, Conversion did not own the billions of dollars worth of bonds claimed by Mr. Harris in airy news releases and regulatory filings.
Among other things, the U.S. regulator alleged that Conversion and Mr. Harris committed securities fraud by making a series of false or misleading statements through news releases and SEC filings with respect to owning billions of dollars worth of bonds, fraudulently inflating the company's stock price in the process.
At an Oct. 25, 2006, hearing before Judge Clarence Cooper, the SEC obtained a temporary restraining order essentially enjoining Conversion and Mr. Harris from committing fraud, making false claims or filing false reports. The order also allowed the U.S. regulator to take expedited discovery.
During the course of the 65-minute court hearing, Judge Cooper admonished Mr. Harris to hire a lawyer to represent the company inasmuch as the rules required that an attorney represent a corporation in court. That admonishment went unheeded.
On Nov. 7, 2006, the U.S. regulator obtained unopposed orders imposing preliminary injunctions and other relief against Conversion and Mr. Harris. The orders largely mirrored the earlier temporary restraining order against the defendants.
Mr. Harris personally consented to the order imposing the preliminary injunction and other relief against him, specifically admitting the court's personal and subject matter jurisdiction in the process.
With no attorney filing even so much as an appearance for either the company or its leader, the SEC obtained entries of default against Conversion and Mr. Harris on Nov. 17 and Nov. 29, respectively.
Apart from a Jan. 3, 2007, housekeeping entry regarding the transcript of the Oct. 25, 2006, hearing, there were no further court filings until Mr. Harris submitted his muddled answer to the SEC complaint on April 24.
While the court file collected dust from the end of last November until late April of this year, there were a number of other corporate developments.
Among other things, Conversion's slapstick carousel of chief executive officers continued, evidence of a criminal investigation emerged, Mr. Harris spent the better part of a month in jail and a schism developed in the company's cult-like Internet following.
Keystone CEO carousel
In earlier articles, Stockwatch reviewed three of Conversion's four chief executive officer switcheroos in the wake of the SEC action.
On Nov. 2, 2006, with the share price taking a nosedive and some belated bleating issuing from Conversion's flock of gullible Internet cheerleaders, Michael Alexander, the former head of the company's OTC-BB predecessor the FrontHaul Group Inc., ousted Mr. Harris and took over as chief executive officer.
Among other things, Mr. Alexander, the company's largest shareholder, claimed that Mr. Harris and his team of officers and directors triggered the SEC suspension and investigation by "filing erroneous financial statements."
On Nov. 14, just 12 days after giving the Georgia promoter the bum's rush, Mr. Alexander washed his hands of the mess and passed the reins back to Mr. Harris.
Semi-literate Mr. Harris was only back in the saddle for 13 days before he was rudely unhorsed again.
On Nov. 27, once again with the backing of Mr. Alexander and the support of a so-called shareholders committee headed by stockholder James Gee, Mr. Harris was dumped in favour of Vancouver promoter and Internet tout John Arlitt.
Mr. Harris was reportedly ousted for the second time because of his breach of fiduciary responsibility by not retaining proper legal counsel to represent Conversion in the SEC lawsuit, his failure to file a timely response to the complaint and his earlier failure to file the company's annual report on time.
Mr. Arlitt, familiar to many of Conversion's gullible Internet followers as the boosterish poster "tutankhamen" who feverishly pumped the stock and boasted of his massive share position, announced his intent to expeditiously move the company forward and settle the regulatory issues.
After being ensconced as chief executive officer, the Vancouver promoter was reportedly fronted $50,000 cash to get things rolling by Texas shareholder Dave Perley, an associate of Mr. Alexander.
On Jan. 24, 2007, Mr. Arlitt reported that he was off to Germany to negotiate a potential acquisition of a company with "new anti-terrorism technology" and to seek out some debt financing.
"It is my goal to clear up all regulatory concerns, bring the company into good standing with all regulatory authorities, bring the company filings up to date, and turn the company in a new and profitable direction with potentially profitable acquisitions and or mergers," the tout-turned-chief executive officer proclaimed.
Alas, nothing came of Mr. Arlitt's trip or his stated goal.
Interestingly, not only did Mr. Arlitt fail to clear up any of the regulatory concerns or bring the company filings up to date, he did not even bother to file the required insider disclosure regarding his purportedly massive holdings of Conversion shares.
On Feb. 28, Mr. Arlitt bailed out.
Citing an "untimely health condition" and "to avoid possible litigation for the manner in which the vote to instate him as CEO was conducted," the Vancouver promoter and Internet tout Mr. Arlitt resigned as Conversion's chief executive officer and chairman.
In a parting gesture, Mr. Arlitt announced that he had reappointed the previously ousted board of directors headed by Mr. Harris.
Well before Mr. Arlitt pulled the plug, some disturbing revelations emerged, including reports of a criminal investigation involving Conversion and some of its key players.
Criminal probe
On Jan. 16, major shareholder and former chief executive officer Mr. Alexander made a series of posts to HotStockMarket.com, an Internet chat site then frequented by many of Conversion's insular followers, suggesting that "somebody is going to jail" and none too subtly pointing the finger at Mr. Harris.
Among other things, Mr. Alexander claimed that the FBI had recently visited his Texas office looking for information about Mr. Harris, including files and e-mails.
"I think it was very positive that the FBI showed up looking for the goods on him (Mr. Harris)," Mr. Alexander remarked.
"People still believe in him ... and that he had the best interest of the company in mind when his friends and family sold stock while he told us to buy the crap outta it," Mr. Alexander wrote in another post.
"I am here to offer a glim hope so ppl (people) don't blow their brains out because some bastard ripped them off of their hard earned money while they sold stock," Mr. Alexander added in a later post.
It should be noted that Mr. Alexander did not provide any support for his claims regarding stock sales by Mr. Harris and his friends and family.
As will be discussed in a separate article, however, there is a public record disclosing that finger-pointing Mr. Alexander and his wife disposed of millions of dollars worth of shares.
Within days of Mr. Alexander's report of a visit from the FBI, fellow Texan Mr. Gee disclosed that he had been served with a grand jury subpoena on Jan. 17 to produce documents relating to Conversion.
Evidently Mr. Gee, who resigned as head of the purported shareholders committee following his participation in Mr. Harris's second ouster, had copied electronic records from Mr. Harris's hard drive during a visit to the Georgia promoter's home.
When challenged about his claims regarding the subpoena, Mr. Gee posted a copy of the extensive demand for document production on the Internet.
Among many other things, the grand jury subpoena ordered Mr. Gee to produce various Conversion financial records, documents showing compensation to Mr. Harris and other company officers and directors, as well as records regarding stock purchases and sales by Mr. Harris and other company insiders.
The subpoena also demanded production of all documents relating to Conversion's assets, including its purported billions of dollars worth of bonds.
It is not clear just how much documentation Mr. Alexander and Mr. Gee produced and the current status of the grand jury investigation is not known.
In a following article, Stockwatch will pick up its review of developments and shenanigans involving Conversion, including Mr. Harris's public resurfacing to press his claim to the title of chief executive officer of the floundering promotion after spending time in a Georgia jail.
Meanwhile, most investors continue to give Conversion a pass.
With 779,500 shares changing hands, Conversion dipped to a 52-week low of a penny before gaining some ground to close at a paltry 2.5 cents per share on May 8.
Comments regarding this article may be sent to lwebb@stockwatch.com.
(More information regarding Conversion Solutions Holdings Corp. is available in Stockwatch articles published on Oct. 13, 16, 18, 20, 24 and 26; Nov. 2, 3, 7, 10 and 16; and Dec. 5, 7 and 12, 2006.)
© 2007 Canjex Publishing Ltd.
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