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Author Topic: CSHD: The Never-ending Story
T e x
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http://investorshub.*********/boards/board.asp?board_id=10980

some good Corey court cases showing up there, some he's filed and some against. Am hoping it becomes a solid thread. Anyway, legal pro/con--good to "get a read" on his mindset/tactics, etc...

[ November 10, 2007, 20:38: Message edited by: T e x ]

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Nashoba Holba Chepulechi
Adventures in microcapitalism...

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Ocqueoc
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quote:
Originally posted by glassman:
i haven't sorted out Corey yet.

Sabra Dabbs? we'll just have to watch her in action to find out what she does next. i won't be playing anything i know she is in on anytime soon.

That makes two of us!
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glassman
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it seems to me that the PIPE deal has something to do with the naked shorts.

i've searched far and wide, but i've never been able to find out exactly how they create the naked shorts...
even superior stock pickers like the motley fool were unable to decipher how it works for along time, then they started doing shorting themselves, so i suppose they figgered it out.

i suppose there must be a couple of ways to do it, but "toxic financing" seems to be one of the no-lose plays in the market...

death spiral convertibles is what the old-timers called it...

Death-spiral convertibles are privately held preferred stock or bonds that can be exchanged for shares of common stock. An investor will offer a company cash in exchange for a percentage of the company, but with a catch: The investor wants a guarantee that the investment's value won't fall (or won't fall much). If the stock does fall, the investor gets more shares -- and a bigger stake in the company.

If Acme's shares rise, the vulture capitalist keeps 30 percent of the business and makes money. [See chart.] But Let's say the stock price is cut in half-which means, of course, that the value of the company is cut in half. By the terms of this death-spiral convert, the vulture's stake cannot fall below $25 million. So instantly, a pile of new shares is handed over to the vulture capitalist, and his stake rises to 50 percent. And if the stock ever recovers, he'll still own half of Acme.com.


http://findarticles.com/p/articles/mi_m0HWW/is_11_4/ai_71886195

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Don't envy the happiness of those who live in a fool's paradise.

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wallymac
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quote:
Originally posted by glassman:
it seems to me that the PIPE deal has something to do with the naked shorts.

i've searched far and wide, but i've never been able to find out exactly how they create the naked shorts...
even superior stock pickers like the motley fool were unable to decipher how it works for along time, then they started doing shorting themselves, so i suppose they figgered it out.

i suppose there must be a couple of ways to do it, but "toxic financing" seems to be one of the no-lose plays in the market...

death spiral convertibles is what the old-timers called it...

Death-spiral convertibles are privately held preferred stock or bonds that can be exchanged for shares of common stock. An investor will offer a company cash in exchange for a percentage of the company, but with a catch: The investor wants a guarantee that the investment's value won't fall (or won't fall much). If the stock does fall, the investor gets more shares -- and a bigger stake in the company.

If Acme's shares rise, the vulture capitalist keeps 30 percent of the business and makes money. [See chart.] But Let's say the stock price is cut in half-which means, of course, that the value of the company is cut in half. By the terms of this death-spiral convert, the vulture's stake cannot fall below $25 million. So instantly, a pile of new shares is handed over to the vulture capitalist, and his stake rises to 50 percent. And if the stock ever recovers, he'll still own half of Acme.com.


http://findarticles.com/p/articles/mi_m0HWW/is_11_4/ai_71886195

AJW is involved with a company that I followed over the past year RKLC. If you look at the filing for the financing this is part of what you see.

"On March 3, 2006, we completed financing agreements by executing a securities purchase agreement with the following entities: AJW Partners, LLC, AJW Offshore, Ltd., AJW Qualified Partners, LLC and New Millenium Capital Partners II, LLC. Under the securities purchase agreement, we will issue up to $2,000,000 in callable secured convertible notes. The notes are convertible into shares of our common stock. The conversion price is based on the average applicable percentage of the average of the lowest three (3) Trading Prices for the Common Stock during the twenty (20) Trading Day period prior to conversion. The “Applicable Percentage” means 50%; provided, however, that the Applicable Percentage shall be increased to (i) 55% in the event that a Registration Statement is filed within thirty days of the closing and (ii) 60% in the event that the Registration Statement becomes effective within one hundred and twenty days from the Closing. The timing of the conversion is at the option of the holder. The notes are secured by a grant of a general security interest in all of our assets both tangible and intangible. The Company simultaneously issued to the private investors seven year warrants to purchase 3,000,000 Series A warrants at an exercise price of $1.00 and 3,000,000 Series B warrants at an exercise price of $1.50"

http://www.otcbb.com/asp/Info_Center.asp

Now if you look at the chart from that time to now.

http://stockcharts.com/h-sc/ui?s=RKLC&p=D&yr=2&mn=0&dy=0&id=p72400251546


It's my belief that they use the Offshore portion to short the stock, driving the PPS down. They know that they will receive more shares the lower the PPS goes so they are borrowing against stock that do not yet possess. So they make the money on the way down and buy/or are issued the stock after the fact.

At least that is what I believe they do.

Wally

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T e x
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yup...

coming & going

sell into the run...short once it tops.

If the company wrecks? even better

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Nashoba Holba Chepulechi
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wallymac
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It would be interesting to see if any company has ever done well after getting involved with AJW. My guess is that none have.

I know that I would not touch a stock anymore that has any association with AJW.

Wally

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T e x
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lol...

you can touch 'em...just don't be hugging [Smile]

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Nashoba Holba Chepulechi
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Stockstar69
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OK, what did I miss? Looking at the court info...it looks like what I said months ago. How can Rufus defend himself and/or the company if he was fired/replaced/rehired, etc. etc. several times? Somebody may have hid something but it may not have been Rufus.

Let go back to the beginning...We have billions in bonds somewhere. [Eek!]

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NEL
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I'm hoping to make back some of my CSHD loses with FFBU, anyone else in this? OTCBB reverse merger Shell company owned by Joseph Meuse. (I bought $500 worth at .008 today up to .07)
FWIW

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T e x
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NEL, called it as a day-runner.

You seen our thread?

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Nashoba Holba Chepulechi
Adventures in microcapitalism...

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thesource
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very nice NEL ......

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NEL
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Tex, seen it been watching and doing DD closely.
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T e x
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atta gurl.

lol, not much DD, over there...

we shout em, and either hit em or don't [Big Grin]

sometimes, they keep going, though

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Nashoba Holba Chepulechi
Adventures in microcapitalism...

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NEL
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wow, just reading all the latest crepe on this over at hot stock, yikes sounds like a novel
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trade04
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wow u guys really having a BALL with this huh lol
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TimW
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I'm still waiting since september for my broker to produce some certificates for me.

*shrug*

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BooDog
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Just fyi. I saw this when it was doing a RS. BTON to BRIT in the RS thread (still not able to trade yet - could be me) BUT ANYWAY.... John Arlitt was sponsoring this a bit last year as a buyer. BRIT is a jewelry entity up in Canada britton.com. The way it looks they haven't been doing anything with it for about a year. Something to keep a third eye on. Thought I'd put it here for the Arlitt fans. Not sure if he is still assosiated with britton or not.

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All post are my opinion. Do your own DD. Who's clicking your buy/sell button!?

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Ocqueoc
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For Mr.C

HAPPY BIRTHDAY TO YOU
HAPPY BIRTHDAY TO YOU
MAY THE GOOD LORD BLESS YOU
HAPPY BIRTHDAY , HAPPY BIRTHDAY
HAPPY BIRTHDAY TO YOU

ALL our love , Mom and Dad

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Ocqueoc
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Boodog,
As far as I know there is no Tut fans here, but I could be wrong.

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BooDog
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I doubt there are ANY cshd fans left. Just saw the connection with him and Jacek Oscilowicz. Following the money so to speak.

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All post are my opinion. Do your own DD. Who's clicking your buy/sell button!?

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Ocqueoc
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FYI

I see the sec filed a motion today (on pacer)
I'm sorry, I don't know how to cut and paste [Roll Eyes] or I'd put it here.

I know, Tex, I should know by now but I forgot LOL

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wallymac
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quote:
Originally posted by Ocqueoc:
FYI

I see the sec filed a motion today (on pacer)
I'm sorry, I don't know how to cut and paste [Roll Eyes] or I'd put it here.

I know, Tex, I should know by now but I forgot LOL

Here you go:


PACER UPDATE

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF GEORGIA

ATLANTA DIVISION

SECURITIES AND EXCHANGE
COMMISSION,
Plaintiff,

Civil Action No.

v.

1:06-CV-2568-CC

CONVERSION SOLUTIONS
HOLDING CORPORATION and
RUFUS PAUL HARRIS a/k/a
PAUL RUFUS HARRIS,

Defendants.


MOTION FOR DEFAULT JUDGMENT

AND SUPPORTING MEMORANDUM OF LAW


Plaintiff, Securities and Exchange Commission (“Commission”) hereby
moves for a default judgment against both Defendant Rufus Paul Harris a/k/a Paul
Rufus Harris (“Harris”) and Defendant Conversion Solutions Holding Corporation
(“Conversion”), pursuant to Rule 55 of the Federal Rules of Civil Procedure. In
support of its motion, Plaintiff submits the following memorandum of law.

PROCEDURAL HISTORY

The relevant facts are straightforward. The Complaint in this matter
was filed on October 24, 2006. On November 4, 2006, Harris was served with the

Summons and Complaint, along with other associated documents. Harris’s
Answer to the Complaint was thus due to be filed not later than November 24,
2006.

Conversion was served with the Summons and Complaint, along with other
associated documents, through its registered agent for service of process, Harvard
Business Services of Lewes, Delaware, on October 26, 2006. Conversion’s
Answer to the Complaint was thus due to be filed not later than November 15,
2006.

On November 16, 2006, Plaintiff filed the returns of service of process for
both Harris and Conversion with the Court. Thereafter, on November 16, 2006,
Plaintiff applied to the Clerk for an entry of default as to Conversion. On
November 17, 2006, the Clerk entered a default as to Conversion. On November
28, 2006, Plaintiff applied to the Clerk for an entry of default as to Harris. On
November 29, 2006, the Clerk entered a default as to Harris.

On April 24, 2007, Harris filed with the Court a document styled “Defendant
Conversion Solutions Holding’s Answer and Defenses to Complaint for Injunctive
and Other Relief”. On May 11, 2007, Plaintiff moved to strike this Answer.
Subsequently, on May 15, 2007, Harris moved that the Clerk’s entry of default be
set aside and filed another Answer. On October 30, 2007, the Court granted

Plaintiff’s motion to strike the Answer and denied Harris’s motion to set aside the
entry of default as to himself individually and as to Conversion. On November 7,
2007, Harris filed a “Motion for Reconsideration/Rehearing of the Court’s October
30, 2007 Order Entered by This Court” and a related Motion for Enlargement of
Time to File Supplemental Affidavits. In a separate pleading filed
contemporaneously with this motion, Plaintiff opposes Harris’s motions for
reconsideration of the Court’s October 30, 2007 Order and for Enlargement of
Time.

ARGUMENT

A. ENTRY OF A DEFAULT JUDGMENT IS APPROPRIATE

Entry of a judgment by default is appropriate against both Defendants Harris
and Conversion. Defaults have been entered by the Clerk. Accordingly, the
factual allegations of the Complaint, except for those relating to damages, are taken
as true. 10 C. Wright, A. Miller & M. Kane, Federal Practice and Procedure, §
2688, p. 412 (2d ed. 1983); Thomson v. Wooster, 5 S.Ct. 788 (1885).

B.
FACTUAL ALLEGATIONS

The allegations of the Complaint, which are accepted as true with regard to
both defendants in accordance with the previous entries of default, include the
following:

1.
Conversion is a publicly-trading company with its principal place of
business in Kennesaw, Georgia. Conversion was incorporated in Delaware under
the name Conversion Solutions, Inc., on February 11, 2005. Conversion purports
to be a “diversified holdings company which was formed to originate, fund and
source funding for asset-based transactions in the private market.”


2.
Conversion’s stock was quoted publicly on the OTC Bulletin Board
under the symbol “CSHD,” “CSHDE” or “CDSH.OB” between August 2006 and
the filing of the Complaint October 24, 2006.


3.
Harris, a resident of Adairsville, Georgia, was the chief executive
officer of Conversion at all relevant times through the filing of the Complaint on
October 24, 2006. According to Conversion’s most recent Form 10-K, Harris has
facilitated and originated projects, corporate and bond financing for more than 10
years, with experiences ranging from high-end corporate financing to bond
origination.


4.
In September and October 2006, Conversion issued a series of press
releases, and filed with the Commission a current report and an amended current
report on Form 8-K and 8-K/A, respectively, an annual report on Form 10-KSB
and two amended annual reports on Forms 10-KSB/A, all of which fraudulently
overstated Conversion’s assets.


5.
On September 26, 2006, Conversion filed a Form 8-K (“September 26
Form 8-K”) with the Commission using Harris’ electronic signature.


6.
The September 26 Form 8-K stated that Conversion’s “Board of
Directors has approved a contract extension with the Caracas Group and accepted
into its Asset Management Portfolio an additional 5 Billion Euro denominated
Global Bonds on the Republic of Venezuela with an 11% annual coupon.” This
statement was false.

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wallymac
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7.
The September 26 Form 8-K further stated that the bond had been
loaded in the Euroclear system with an international security identification number
of DE0006106875 and a Common Code of 012481241.


8.
The sole exhibit to the September 26 Form 8-K was a press release
from Conversion dated September 25 making substantively identical claims.


9.
The identifying codes noted in the September 26 Form 8-K and the
attached September 25, 2006 press release correspond to a €700 million bond
series issued by Venezuela, not a €5 billion series.


10.
On the morning of September 27, 2006, Conversion and Harris
issued a press release paraphrasing and restating the same claim (“September 27 €5
Billion Venezuelan Bond Press Release”). It stated that “an additional 5 Billion


Euro denominated Global Bonds on the Republic of Venezuela with a [sic] 11%
annual coupon has been added to Conversion’s Asset Management Portfolio.”


11. Conversion does not own, or manage as an asset, the entire €700
million bond series issued by Venezuela corresponding the to the identifying codes
listed in the September 26 Form 8-K, the September 25, 2006 press release
attached to it, and the September 27 €5 Billion Venezuelan Bond Press Release.


12.
In fact, there has been trading activity in the €700 million
Venezuelan bond issue in question during the period Conversion claims to have
owned it.
13.
Also on the morning of September 27, 2006, Conversion and Harris
issued a second press release, titled “Conversion Solutions Announce the
Completion of the Banking Platform for Our Global, Sovereign and Institutional
Investors” (“September 27 Banking Platform Press Release”).


14.
The press release stated that Conversion had “obtained contracts
from . . . Deutche [sic] Bank, ABN Amro Bank, Dresdner Bank and Kommerce
[sic] Bank” and that “the mentioned banks will be the foundation for our projected
funding platform.”


15.
The September 27 Banking Platform Press Release contained
material misstatements of fact, or at least was misleading. On information and


belief, Deutsche Bank does not have any contract with Conversion, with the
possible exception of an ordinary bank account relationship.


16.
On September 29, 2006, Conversion filed an amended current report
under Form 8-K/A (“September 29 Form 8-K/A”) with the Commission. Audited
financial statements for the period ended June 30, 2006 were annexed to the
September 29 Form 8-K/A.


17.
In the financial statements, Conversion listed assets including a long-
term investment in bonds valued at $500 million. Note 12 to the financial
statements explained that, on March 15, 2006, Conversion “acquired full
ownership of Global Bonds issued through the Republic of Venezuela with an
issuance date of July 31, 1998 and a maturity date of August 15, 2018. The
principal amount of the bonds is $500,000,000 USD with a fixed interest rate of
13.625%, computed on a semi-annual basis.” Note 12 went on to give the
Common and international security identification numbers for the bonds and stated
that the bonds had been acquired on March 15, 2006.


18. Conversion’s claim to have acquired the entire series of $500 million
Venezuela 13 5/8% bonds on March 15, 2006 and to have held them through June
30, 2006, is false.

19.
Some, and possibly all, of the $500 million Venezuelan bond issue
was owned by entities other than Conversion during the relevant time period. In
fact, there has been trading activity in the $500 million Venezuelan bond issue
during the period Conversion claims to have owned it. Moreover, a substantial
portion of the $500 million bond issue, approximately $39 million, has been owned
by corporate affiliates of FMR Co. (Fidelity Investments) during the relevant
period.


20.
On October 16, 2006, Conversion filed an annual report on Form 10-
KSB with the Commission.


21.
On October 17 and 19, 2006, Conversion filed amended annual
reports on Forms 10-KSB/A with the Commission.


22.
With regard to the $500 million Venezuelan bond issue, the audited
financial statements attached to these forms were essentially identical to those
incorporated in the September 29 Form 8-K/A discussed above.


23.
Thus, Conversion’s claim to have acquired the entire series of $500
million Venezuela 13 5/8% bonds on March 15, 2006 and held them through June
30, 2006, was repeated in the October 16 Form 10-KSB and the October 17 and 19
Forms 10-KSB/A.


24.
Trading activity in Conversion’s stock increased dramatically after the
two September 27 press releases were issued.


25.
On Tuesday, September 26, Conversion’s stock closed at a price of
$1.01 per share on a volume of 498,303 shares traded.


26.
On September 27, the stock closed at $1.75 per share on a volume of
4,932,180 shares, an increase of over 73% in price and almost 890% in trading
volume.


27.
The effect of the fraudulent releases continued into Thursday,
September 28, when Conversion’s stock closed at $3.02 per share on a volume of
14,037,728 shares traded. The price and volume remained above the September 26
levels through the date of the Complaint, October 24, 2006.


28.
As described above, Conversion and Harris, in connection with the
purchase or sale of securities, directly or indirectly employed devices, schemes, or
artifices to defraud; made untrue statements of material facts or omitted to state
material facts necessary in order to make the statements made, in the light of the
circumstances under which they were made, not misleading; or engaged in acts,
practices, or courses of business which operated as a fraud or deceit.


29.
Conversion and Harris knowingly, intentionally and/or recklessly
engaged in the conduct described above.

30.
While engaging in the above courses of conduct, Conversion and
Harris, directly or indirectly, made use of the mails, or means or instruments of
transportation or communication in interstate commerce, or means or
instrumentalities of interstate commerce.

31.
By reason of the foregoing, Conversion and Harris violated or are
about to violate, and unless restrained and enjoined, will continue to violate
Section 10(b) the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder
[17 C.F.R. § 240.10b-5].


32.
Defendant Conversion, from September through October 19, 2006
violated Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-11
thereunder, by filing current and periodic reports (specifically, its September 26
and 29, 2006 Forms 8-K and 8-K/A, its October 16, 2006 Form 10-KSB, and its
October 17 and 19, 2006 Forms 10-KSB/A) which: 1) were materially misleading,
or 2) which failed to include such further material information as would have been
necessary to make the statements not misleading.


33.
Defendant Harris, from September 2006 through October 19, 2006,
aided and abetted Conversion’s violations of Section 13(a) of the Exchange Act
and Rules 12b-20, 13a-1 and 13a-11 thereunder, which occurred when Conversion
filed current and periodic reports (specifically, its September 26 and 29, 2006


Forms 8-K and 8-K/A, its October 16, 2006 Form 10-KSB, and its October 17 and
19, 2006 Forms 10-KSB/A) which: 1) were materially misleading; or 2) which
failed to include such further material information as would have been necessary to
make the statements not misleading. Through the conduct described in the above
paragraphs, Harris knowingly substantially assisted Conversion’s violations of this
section and rules.


34.
Defendant Harris knowingly signed certifications which were
included in current and periodic reports that Conversion filed with the Commission
pursuant to Section 13(a) of the Exchange Act [15 U.S.C. §§78m(a)] which
contained untrue statements of material fact.


35.
By reason of the foregoing, Harris violated Rule 13a-14 [17 C.F.R. §
240.13a-14].


C.
VIOLATIONS


1. Harris and Conversion Committed Securities Fraud


Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5
thereunder [17 C.F.R. § 240.10b-5] prohibit fraudulent conduct in connection with
the purchase and sale of securities. To prove violations based on
misrepresentations or omissions, the Commission must show that the
misrepresentations or omissions were material. SEC v. Texas Gulf Sulphur Co.,


401 F.2d 833 (2d Cir. 1968), cert. denied sub nom., 394 U.S. 976 (1969), reh’g
denied, 404 U.S. 1064 (1972). A misrepresentation or omission is material if there
is a substantial likelihood that under all circumstances it would have assumed
actual significance in the deliberations of a reasonable investor. Basic, Inc. v.
Levinson, 485 U.S. 224 (1988); TSC Indust., Inc. v. Northway, Inc., 426 U.S. 438
(1976).

The misrepresentations made by Conversion and Harris were material.
Conversion and Harris have claimed falsely that Conversion has billions of dollars
worth of assets. The sharp increase in the trading activity of Conversion’s stock after
the September 27 press releases were issued, when it increased in price and trading
volume by over 73% and almost 890% over the previous day’s closing figures, also
reflects the materiality of the false and misleading information that was provided to
the market.

The Commission must also establish that the defendants acted with scienter to
prove violations of Section 17(a)(1) of the Securities Act, Section 10(b) of the
Exchange Act and Rule 10b-5. Aaron v. SEC, 446 U.S. 680 (1980). In the Eleventh
Circuit, scienter may be shown by "severe recklessness," defined as "those highly
unreasonable omissions or misrepresentations that involve not merely simple or even
inexcusable negligence, but an extreme departure from the standards of ordinary care, and that present a danger of misleading buyers or sellers which is either known to the
defendant or is so obvious that the defendant must have been aware of it." McDonald
v. Alan Bush Brokerage Co., 863 F.2d 809, 814 (11th Cir. 1989).
__________________

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wallymac
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Scienter is clearly present here. The repeated and outlandish nature of the
misleading statements by Conversion and Harris shows recklessness, if not outright
knowledge of the falsity of their claims. Harris controls Conversion. Accordingly, his
scienter is imputed to it. SEC v. Manor Nursing Centers, Inc., 458 F. 2d 1082, fn18
(2d Cir. 1972).

2.
Conversion Violated Reporting Provisions


Section 13(a) of the Exchange Act and Rules 13a-1 and 13a-11 thereunder
require certain issuers to file with the Commission annual and current reports
containing, among other things, financial statements prepared in conformity with the
requirements of the Commission's rules and regulations. In addition, Rule 12b-20
under the Exchange Act requires that such reports contain, in addition to disclosures
expressly required by statute and rules, such other information as is necessary to
ensure that the statements made in those reports are not, under the circumstances,
materially misleading. The requirement that an issuer file reports under Section 13(a)
embodies the requirement that such reports be true and correct. See SEC v. Savoy
Industries, Inc., 587 F.2d 1149, 1165 (D.C. Cir. 1978). Regulation S-X provides that


financial statements not prepared in conformity with GAAP are presumed to be
inaccurate. 17 C.F.R. § 210.4-01(a)(1).

Conversion violated Section 13(a) and Rules 12b-20, 13a-1 and 13a-11 on five
separate occasions, when it filed current reports on Forms 8-K and 8-K/A on
September 26 and 29, 2006, and annual reports on Forms 10-KSB and 10-KSB/A on
October 16, 17, and 19, 2006 containing the material misstatements discussed above.

3.
Harris Aided and Abetted Conversion’s Reporting Violations


Section 20(e) of the Exchange Act defines “aiding and abetting” to include
rendering substantial assistance in the violation. Harris aided and abetted
Conversion’s violations of Section 13(a) of the Exchange Act by knowingly
recording fictitious assets on the company’s financial statements, and by otherwise
describing fictitious assets in those reports. He did this on five separate occasions,
corresponding with Conversion’s filing of the Forms 8-K and 8-K/A filed on
September 26 and 29, 2006, and the annual reports on Forms 10-KSB and 10-KSB/A
filed on October 16, 17, and 19, 2006.

4.
Harris Falsely Certified Reports


Exchange Act Rule 13a-14 requires principal executive and financial
officers to certify in quarterly and annual Commission filings that, among other


things, they have read the filing; that it does not contain any untrue statements, or
omissions, of material facts; that the filing fairly presents the financial condition
and results of operations and cash flows of the issuer; and that they have disclosed
to the audit committee and auditors all significant deficiencies of internal controls
of the company. Harris violated Rule 13a-14 on three separate occasions, when he
knowingly certified the fraudulent financial statements included in Conversion’s
Forms 10-KSB and 10-KSB/A filed on October 16, 17, and 19, 2006.
__________________

D.
INJUNCTIVE AND RELIEF IS APPROPRIATE


In analyzing the need for injunctive relief, courts focus on whether there is a
reasonable likelihood that the defendant, if not enjoined, will engage in future illegal
conduct. See, e.g., SEC v. Bonastia, 614 F.2d 908 (3d Cir. 1980); SEC v.
Commonwealth Chemical Securities, Inc., 574 F.2d 90, 100-101 (2d Cir. 1978).

In determining the likelihood of future violations, the totality of the circumstances
is to be considered. SEC v. Murphy, 626 F.2d 633, 655 (9th Cir. 1980). In granting or
denying injunctive relief, courts have considered the following factors:

1. the egregiousness of the violations;

2. the isolated or repeated nature of the violations;

3. the degree of scienter involved;

4. the sincerity of the defendant's assurances, if any, against future violations;


5. the defendant's recognition of the wrongful nature of his conduct;

6. the likelihood that the defendant's occupation will present opportunities (or
lack thereof) for future violations; and

7. the defendant's age and health.

In this case, permanent injunctive relief is appropriate because Harris
orchestrated a massive fraudulent scheme through Conversion’s false press releases
and Commission filings. The misconduct occurred on a repeated basis, even in the
short time period (less than one month) charged in the Complaint. Moreover, it is
clear from Harris’s comments in open court and from his pleadings that he still does
not recognize, or at least does not acknowledge, the wrongful nature of his conduct.
Still in his thirties and with no apparent means of support but for future fraudulent
activity, Harris poses a significant danger of additional violations. As discussed in
paragraph G, below, Plaintiff is requesting a hearing on this motion in which to
present evidence of the substantial harm caused to numerous investors by Harrris’s
and Conversion’s actions.

E.
HARRIS SHOULD BE BARRED FROM ACTING AS AN OFFICER
OR DIRECTOR IN THE FUTURE


In light of the egregiousness of Harris’s fraud, this Court should issue an
Order pursuant to Section 21(d)(2) of the Exchange Act [15 U.S.C.§ 78u(d)(2)]
permanently prohibiting Harris from acting as an officer or director of any issuer


that has a class of securities registered with the Commission pursuant to Section 12
of the Exchange Act [15 U.S.C. § 78l] or that is required to file reports with the
Commission pursuant to Section 15(d) of the Exchange Act [15 U.S.C.§ 78o(d)].

F.
CIVIL PENALTIES SHOULD BE IMPOSED


In addition, Section 20(d) of the Securities Act and Section 21(d)(3) of the
Exchange Act provide that the Commission may seek to have a court impose civil
penalties. First tier penalties for violations arising after February 14, 2005 may be
imposed up to the larger of $6,500 for a natural person or $65,000 for any other
person, or the amount of ill-gotten gain. When the violation involves fraud, second
tier penalties may be imposed up to $65,000 for a natural person or $325,000 for
any other person. A “third tier” civil penalty of up to the larger of $130,000 for a
natural person or $650,000 for any other person, or the amount of ill-gotten gain
may be imposed when any provision of the Securities Act or the Exchange Act is
violated, if the violation involved fraud or deceit and the violation resulted in
substantial losses or created a significant risk of substantial losses to other persons.
See 17 C.F.R. § 201.1003.

The SEC requests that the Court order Harris and Conversion to pay
substantial civil penalties in amounts determined by the Court to be appropriate. As
discussed above, their violations clearly involved fraud and deceit. In addition,


their violations resulted in very substantial losses to many, many investors, as
Plaintiff will demonstrate through evidence to be presented in the hearing it has
requested on this motion. Harris was the chief architect of Conversion’s fraud, and
the person it acted through in making every misrepresentation charged in the
Complaint. Harris clearly acted with scienter. As Conversion’s chief executive
officer at all relevant times, his state of mind is imputed to the company. See
Armstrong, Jones & Co. v. SEC, 421 F.2d 359, 362 (6th Cir.), cert. denied, 398
U.S. 958 (1970); SEC v. Interlink Data Network of Los Angeles, Inc., No. Civ.
A93-3073, 1993 WL 603274 at *9, (C.D. Cal. Nov. 15, 1993), rev’d on other
grounds, 77 F.3d 1201 (9th Cir. 1996). In light of the high degree of scienter
associated with the charged fraudulent activities and the enormous losses to
investors that flowed from them (which Plaintiff will show at the requested
hearing), substantial civil penalties are appropriate in this case for each violation
committed by Defendants.

G.
ADDITIONAL INFORMATION AND REQUEST FOR A HEARING

Plaintiff requests that the Court order a hearing on this Motion for Default
Judgment, so that it may present evidence concerning the amount of civil penalties
appropriate for the Court to order.


Specifically, Plaintiff plans to present the testimony of victims who
purchased shares of Conversion at tremendously inflated prices after relying on the
fraudulent misrepresentations made by Defendants charged in the Complaint.
These victims will explain the substantial losses that they suffered, and the effects
of those losses on their daily lives. In addition, Plaintiff plans to present the
testimony of a staff accountant of the Commission, to quantify for the Court the
approximate total losses to investors flowing from Defendants’ fraudulent
misrepresentations. Finally, Plaintiff will present evidence of Defendant Harris’s
plan to enrich himself and his family members through stock sales during his
fraudulent manipulation of Conversion’s stock price.


CONCLUSION

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a surfer
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that sums it up nicely...

Thanks Wally.


I like this line here....

Moreover, it is
clear from Harris’s comments in open court and from his pleadings that he still does
not recognize, or at least does not acknowledge, the wrongful nature of his conduct.
Still in his thirties and with no apparent means of support but for future fraudulent
activity, Harris poses a significant danger of additional violations.

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Mr. CATIAEngineer
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I am sooo thankful that this will get to see its day in court....Federal court. I think it will be very interesting, kinda wish it wasnt such a distance for me to catch it live myself.

May someone please show us the evidence?

-------------

edit
Hmmm....is the SEC trying to skip the trial? How can they request such a thing?

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thesource
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Well that about sums it up . Notice the blame is on RPH's head . It might be true that there was other crap leading up to this but the fact is Rufus mislead and flat out lied to investors and as a result led to the significant price increase of the stock . Once the default is granted , there will be a criminal case brought before a Federal Grand Jury with this being the nail in the coffin for this dip $hit .

Now they need to go after Sabra before she screws more people with her new company .

--------------------
----- Game Over -----

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Ocqueoc
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Wally to my rescue once again!!!

Thank you , you kind sir!

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TimW
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Just got a cert in the mail today for my CSHD and other stock shares i had in my closed account.

Interesting, CSHD is the only one where the CEO or authorized officers signature is not on it. Instead, its a digital copy of john arlitt's.

Oh well, ill build it into a nice glass coffee table.. remind me every day of my mistake.

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thesource
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quote:
Originally posted by Mr. CATIAEngineer:
I am sooo thankful that this will get to see its day in court....Federal court. I think it will be very interesting, kinda wish it wasnt such a distance for me to catch it live myself.

May someone please show us the evidence?

-------------

edit
Hmmm....is the SEC trying to skip the trial? How can they request such a thing?

Its over ..... all thats left is for the Judge and the SEC to decide what actions will be taken civily against CSHD . The next step foward is to go after those responsible for this criminally .

As for evidence , for some reason I guess you guys think this is an episode of Perry Mason but its not . This is a federal civil suit . It requires the defendant "CSHD' to respond to it in a timely manner prescribed by law which they did not . There for the Default Judgement is in place and its game over for CSHD . Evidence does not even play much of a role in this if the defendant cannot not even file a timely responce in court to begin with .

--------------------
----- Game Over -----

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new2stocks
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[Eek!]

http://www.digitalislandsinc.com/misc/index.html

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T e x
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quote:
Originally posted by new2stocks:
[Eek!]

http://www.digitalislandsinc.com/misc/index.html

noice, lol...

was gonna post that my own self...

hope everybody remembers the "tie-in"

--------------------
Nashoba Holba Chepulechi
Adventures in microcapitalism...

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thesource
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quote:
Originally posted by new2stocks:
[Eek!]

http://www.digitalislandsinc.com/misc/index.html

Now that was some good reading .

--------------------
----- Game Over -----

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TimW
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I laughed.. until it kicked in, that crap, im one of those people too.

Then my heart dropped in sorrow.

I really wish there was solid evidence between paul poetter, 4309, and CSHD..

Because 4309's tiny little cubicle office is walking distance from my house.. Id gladly go see if they got my money!! [Mad]

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TimW
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So who runs this board? I just noticed contact information i posted for paul poetter awhile back has been edited out in my posts. I had those posts bookmarked and now stuff is missing.

Could allstocks possibly have been in on the scam? [Eek!]

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