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[QUOTE]Originally posted by new2stocks: [QB] [URL=http://www.**********.com/swnet/newsit/newsit_newsit.aspx?bid=U-s0126805-U:CSHD-20080728&symbol=CSHD&news_region=U]http://www.**********.com/swnet/newsit/newsit_newsit.aspx?bid=U-s0126805-U:CSHD- 20080728&symbol=CSHD&news_region=U[/URL] CONVERSION SOLUTNS HLDGS Symbol CSHD Conversion Solutions and CEO hit with fraud judgment 2008-07-28 12:47 ET - Street Wire Also Street Wire (U-*SEC) U.S. Securities and Exchange Commission by Lee M. Webb Conversion Solutions Holdings Corp. and its founder Rufus Paul Harris, a semi-literate promoter with a criminal record and a history of promotional debacles, have been hit with a default judgment in connection with a U.S. Securities and Exchange Commission (SEC) fraud lawsuit filed on Oct. 24, 2006. Judge Clarence Cooper of the U.S. District Court for the Northern District of Georgia issued the order granting the SEC's motion for default judgment on July 21. The appropriate sanctions, including any civil penalties, will be determined following a hearing scheduled for Sept. 10. Judge Cooper also dealt with two muddled motions filed by Mr. Harris, denying each of them. The background As previously reported by Stock Watch, the SEC's 2006 complaint alleged that Conversion and Mr. Harris filed fraudulent regulatory reports and, among other things, issued false and misleading press releases claiming that the company owned billions of dollars worth of bonds, fraudulently boosting the share price in the process. Before the SEC filed its lawsuit and, on the same day, issued a 10-day trading suspension against the OTC Bulletin Board promotion, Conversion was busily touting an asset portfolio consisting primarily of bonds purportedly worth $7.3-billion. (All amounts are in U.S. dollars.) As detailed in earlier Stock Watch articles, Conversion's bond claims were bogus. In fact, the company had no significant assets at all and its shares were virtually worthless. In the wake of the SEC suspension, Conversion was booted from the OTC-BB to the grey market and the stock price, which had rocketed from pennies to $4 per share as a result of the fraudulent promotion, subsequently collapsed. The imaginative Mr. Harris, who apparently has a rich fantasy life, assured the surprisingly large number of gullible investors prepared to give credence to his blathering that he would deal successfully with the SEC lawsuit. Indeed, according to Mr. Harris, he had the U.S. regulators right where he wanted them: in court. Evidently Mr. Harris's clever gambit did not include paying any attention to Judge Cooper's admonishment that Conversion had to be represented by counsel, nor did it involve following the rules with respect to certain time constraints. Neither defendant filed a timely response to the SEC complaint and defaults were entered against the company and Mr. Harris in November of 2006. The self-proclaimed brilliant market and legal strategist spent most of January of 2007 in jail after being arrested on a probation violation and he did not get around to filing a sloppy, belated answer to the SEC lawsuit until April. He followed up with a moderately less garbled answer and a motion to set aside the default in May of last year. On Oct. 30, 2007, however, Judge Cooper struck Mr. Harris's late answer and denied his motion to set aside the entry of default. Mr. Harris fired back with a motion to reconsider Judge Cooper's order on Nov. 7, 2007. The SEC chimed in with a brief in opposition to the promoter's motion for reconsideration and filed a motion for a default judgment against the defendants on Nov. 16 of last year. As part of his attempt to derail the SEC's effort to bring the matter to a close with a default judgment, on Dec. 17, 2007, Mr. Harris filed a motion to compel discovery and for sanctions against the U.S. regulator for allegedly failing to provide proper disclosure. Judge Cooper addressed all three of the outstanding motions in the 15-page order issued on July 21. The order The judge first addressed Mr. Harris's motion for reconsideration of the Oct. 30, 2007, order denying the defendant's motion to set aside the earlier entry of default. Judge Cooper noted that reconsideration is proper only if the movant has demonstrated that there has been an intervening change in the law, new evidence has been discovered that was not available at the time the original order was entered or that reconsideration is necessary to correct a clear error of law or prevent manifest injustice. According to Judge Cooper's assessment, none of the arguments advanced by Mr. Harris, which ranged from a lament about not having enough money to hire an attorney to, among other things, allegations of improper conduct by the SEC and its lawyers, identified a change in the law, newly-discovered evidence or a need to correct a clear error of law. "Instead, Mr. Harris's motion for reconsideration merely recites arguments that could have been made in his initial motion to set aside the default, and it provides no basis for the court to reconsider its prior decision," Judge Cooper stated, going on to deny Mr. Harris's motion. Judge Cooper then turned to a consideration of the SEC's motion for default judgment, noting that the defendants, by their default, have admitted the complaint's well-pleaded allegations of fact. According to the judge, those well-pleaded allegations of fact establish that Conversion and Mr. Harris violated a number of securities regulations. "Conversion's filings with the SEC, signed by Mr. Harris, represented that Conversion owned and/or managed millions of dollars in bonds which were not, in fact, owned or managed by Conversion, and this information could only be described as information that would be important to a reasonable investor," Judge Cooper determined. "Press releases were issued containing the same false information," he continued. "The release of this information influenced the price and trading of Conversion's stock. "Mr. Harris knew that the bond information was false and/or acted with severe recklessness in connection with the SEC filings and press releases, and Mr. Harris's scienter may be imputed to Conversion." Agreeing with the U.S. regulator, Judge Cooper says that those false filings and press releases violated Section 10(b) of the Exchange Act and SEC Rule 10b-5. Judge Cooper also found that the company violated certain periodic reporting requirements in SEC filings "that fraudulently overstated Conversion's assets" and that Mr. Harris aided and abetted those reporting violations by causing the false statements and reports to be made. The judge further determined that the SEC had established that Mr. Harris had signed false certifications accompanying Conversion's periodic reports containing financial statements "even though he knew that the forms contained material misstatements." Having found Mr. Harris and Conversion liable for the violations alleged in the SEC complaint, Judge Cooper turned to the question of relief. The U.S. regulator is requesting permanent injunctive relief, an order permanently barring Mr. Harris "from acting as an officer or director of any issuer of registered securities or of any entity required to file reports with the SEC" and substantial monetary civil penalties. Judge Cooper has scheduled an evidentiary hearing for Sept. 10 to determine the appropriate sanctions. Inasmuch as Judge Cooper denied Mr. Harris's motion for reconsideration and entered a default judgment against him, the bungling promoter's motion to compel discovery and motion for sanctions for failing to disclose was denied as moot. The reaction Mr. Harris, who once had a fairly large cult-like Internet following, served up some thoughts on Judge Cooper's order to the few remaining zealots who congregate on the latest of a series of members-only message boards controlled by the promoter. (To retain the full flavour of Mr. Harris's posts, they are reproduced without drawing attention to the errors.) "No Worries here, does not change anything to me, This was their intent all along!!!" Mr. Harris, posting as "Boss," exclaimed. "And no this is not the end, I look at it as retaliatory for a few recent and current events/actions!!! "As I said before as long as I am alive, the day of reckoning will come!!" Mr. Harris continued his excited rant in a subsequent post. "See what cranking up the heat will get ya!!!" Mr. Harris wrote. "Just Another day in the neighborhood!!!" "Did you expect this to be the result of your latest heat exchange?" one of Mr. Harris's devoted sycophants asked. "Yeah Me and a few friends were completely expecting something, after a few shots were fired across their bow!!" Mr. Harris replied. "They also fire back!!!" While the precise nature of this particular metaphorical exchange of fire is a bit of a mystery, most observers of the promoter's legal antics relating to the SEC lawsuit realize that Mr. Harris has been shooting blanks. The Georgia promoter went on to ask one of his faithful followers, ordained minister Robert Fry, whether SEC attorney Alana Black had asked him to testify at the upcoming hearing. "I have been told by several that they were planning this and that she has asked several to testify!!!" Mr. Harris wrote. "The ole I only bought because of this!!!" Mr. Harris then took a direct swipe at Judge Cooper. "I do like How Cooper denied one and mooted the other to keep from addressing the legal violations by the SEC!!!" Mr. Harris continued from the safety of his Internet message-board bunker. "You Go Cooper you managed dodged that bullet!! "I be the other court will not see it that way!!!" It remains to be seen whether Mr. Harris will show up for the scheduled hearing and, if so, whether he will be quite so quick to thumb his nose at Judge Cooper's ruling. In a ********** interview, Ms. Black, the SEC's senior trial counsel in the case, also offered some comments about the most recent development. "I'm glad to see we got that order and at least that resolved the issue of those pending motions," Ms. Black told **********. "And I'm hopeful that people will get some closure in their minds after this hearing." ********** asked Ms. Black whether any of the evidence the SEC was planning to present would be in the form of affidavits or other documents that would be filed with the court prior to the hearing. "I think it is mostly going to be presented through witnesses, rather than be filed," Ms. Black said. "If it was something that I could have just filed, it would have been easier for me to do that at the time I made the motion initially. "So, I'm not expecting to do a bunch of substantive filings before the hearing, although one never knows what will happen in this case and I could have to respond to substantive pleadings as I've had to do in the past." Ms. Black pointed out that the hearing will be open to the public and a transcript of the proceeding will subsequently be available for a fee payable to the court reporter. ********** will obtain a copy of the transcript following the hearing. "One thing that will happen is that the judge will eventually issue an order and those orders typically recite the evidence heard in court, so that will be available to people over PACER," Ms. Black said. The SEC attorney confirmed that Mr. Harris could present evidence bearing on the matter of relief at the hearing and question any of the witnesses. "If there is a hearing, both sides would have the opportunity to present evidence on whatever the question is that is in play at that hearing," she told **********. Ms. Black acknowledged that she has heard from a number of investors who have expressed dissatisfaction with the notion of a default judgment and insist that the matter should go to trial. "These facts have now been established to the satisfaction of the court and it would not be a good use of government resources to have a show trial to try to satisfy some investors," the SEC lawyer remarked. "I feel for them," Ms. Black added. "I want them to understand what happened. I think you are doing a great service by laying it out in a way that is funny for people and lays out the facts." ********** will continue to follow developments. Meanwhile, Conversion registers only sporadic light trading on the grey market and last changed hands for a tenth of a penny on July 24. Comments regarding this article may be sent to lwebb***********.com. [/QB][/QUOTE]
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