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September 20, 2008 – Comments (6)

Rufus Harris, of Conversion Solutions Holdings -- who had a supporter (or sockpuppet?) here in CAPS, got what was coming to him last week.

Remember, one of this guy's whines was that illegal shorting was holding him back. What was actually holding old Rufus back was that he's nearly illiterate and his scams were too easy to see through. Still, he managed to fleece legions of investors, which just goes to show you how many people should not be placing their own stock market bets.

Court Renders Final Judgment Assessing Civil Penalties of $1,170,000 Against Harris and $250,000 Against Conversion, Barring Harris From Serving as an Officer or Director of a Public Company for Seven Years, and Enjoining Further Violations

And what about those dastardly shorts

The Court's September 17, 2008 decision followed a live remedies hearing on September 10, 2008, at which the Commission presented evidence that short-selling had no meaningful effect on Conversion's share price from September 26 through October 23, 2006, as only approximately 250,000 shares of Conversion were sold short short out of a total of over 62,000,000 shares traded during that period.

And don't miss this:

On the basis of the evidence presented at the hearing, the Court found that Conversion never had any business-related revenue, and that its only source of funds was an ongoing offering of convertible notes and/or stock that began before the time period charged in the Complaint. The Court also found that Conversion had not paid any money for any of the purported assets carried on its books, which consisted of various series of bonds, uncollected interest due on the purported bonds, and a document called the UCC-1 Note. The Court found that the UCC-1 Note is not a standard piece of commercial paper, but an eight-page document signed by an individual named David Hawkins, which purports to be an "Affidavit of Obligation" in favor of Mad Dog Builders, Inc. and Mr. Hawkins, and which contains references to purported legal concepts including the "individual energy protection maxim," the "social cooperation protection maxim," and the "Hebrew/Jewish Commercial Code."

The Court found that, through three relatives, Harris attempted, unsuccessfully, to sell up to 1.6 million shares of Conversion into the public market during the time period alleged in the complaint, while the stock was trading at dramatically inflated prices as a result of his fraudulent misstatements about Conversion's purported assets in Conversion's press releases and SEC filings. The Court found that the scheme caused tremendous harm to the investing public, resulting in many millions of dollars of losses to thousands of innocent investors.

I sincerely hope a criminal case throws this crook into jail, where he belongs.

Sj

6 Comments – Post Your Own

#1) On September 20, 2008 at 5:44 PM, EverydayInvestor (< 20) wrote:

I should point out that I blogged about this on my non-CAPS blog a few hours before you. There were two important things that you didn't catch:

1. Citron Research reported on this long before the SEC caught on.
2. The guy's name is Rufus, which means we need to bring up a comparison to the Rufus:

Anyways, excellent post. It is good to see others cover the wonderful world of penny stock fraud, and nice catch on the naked shorting link.

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#2) On September 20, 2008 at 5:50 PM, EverydayInvestor (< 20) wrote:

I should also point out this line from the SEC press release: "The Court did not find a basis for disgorgement of any ill-gotten gains by Harris or Conversion."

This is why I hate the SEC.

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#3) On September 21, 2008 at 10:56 AM, TMFBent (99.82) wrote:

Hasn't he been punished enough, really?

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#4) On September 21, 2008 at 12:15 PM, EverydayInvestor (< 20) wrote:

If you steal $100 from your neighbor and are caught you will have to repay the $100 and pay an additional fine. Even in civil actions, the aggrieved party recovers what was stolen from them (assuming the theif has the ability to pay).

In this case, the whole company was a sham, and his blatant lies caused the stock price to rise. The court found that "the scheme caused tremendous harm to the investing public, resulting in many millions of dollars of losses to thousands of innocent investors." At a bare minimum, he should pay restitution to everyone harmed and pay a fine that more than equals any salary he took from the company.

Saying that he has been punished enough is to ignore the great harm he caused. Also, because this was a public company, punishment should be particularly harsh to discourage future scoundrals from doing the same sort of thing.

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#5) On September 21, 2008 at 1:25 PM, TMFBent (99.82) wrote:

But come on. Poor Rufus. He already had to be embarassed, have his hard-earned company taken away from him. etc.

I'm pulling your chain, EDI. I want this guy to be in jail.

Sj

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#6) On September 22, 2008 at 10:50 AM, EverydayInvestor (< 20) wrote:

ah, okay. Subtlety and sarcasm don't work on me.

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