Three sentenced in FBI fraud investigation
by Staff Report
Feb 29, 2012 | 1918 views | 0 0 comments | 7 7 recommendations | email to a friend | print
Rufus Paul Harris, 43, originally of Adairsville, Benjamin Stanley, 48, of Kennesaw, and Darryl Horton, 50, of Okemos, Mich., were sentenced Thursday by United States District Judge Timothy C. Batten to significant terms of imprisonment on fraud charges stemming from a stock pump-and-dump scam involving their former company, Kennesaw-based Conversion Solutions Holdings Corporation, according to the Federal Bureau of Investigations.

In commenting on the case, United States Attorney Sally Quillian Yates said, "These significant sentences reflect the seriousness of the massive fraud these defendants committed against numerous victims who invested in the defendants' company. By issuing false information about the company's assets, the defendants lured victims into purchasing stock at artificially high prices. While the defendants got rich, victims lost millions. But the defendants won't be enjoying any of the ill-gotten gains they will be spending many years in prison. The President's Financial Fraud Task Force will continue its work to root out fraud and restore investor confidence in our financial markets.

"Today is a great accomplishment in the fight against fraud. Investment fraud not only victimizes individual investors, but the American public. Postal inspectors will continue to work with its law enforcement partners to aggressively investigate and bring to justice those individuals who commit such crimes," said Keith Morris, Postal Inspector in Charge of the Atlanta Division.

Harris was sentenced to 23 years in prison to be followed by five years of supervised release. Stanley was sentenced to 16 years in prison to be followed by five years of supervised release. Horton was sentenced to 40 years in prison to be followed by three years of supervised release. Each defendant will be jointly and severally liable to repay $44,025,620.06 in restitution to more than 5,000 investor victims.

Harris and Stanley were convicted by the jury's verdict on May 26, 2011, after a two-week jury trial. Horton pleaded guilty to committing the offense of mail fraud while the jury was deliberating and no jury verdict was reached as to him.

According to Yates, the charges and other information presented in court, Harris was the founder and chief executive officer of CSHC; Stanley was the co-founder and chief operating officer; and Horton was the chief financial officer. The three defendants conspired to issue false press releases and financial statements about the company for the purpose of inflating the stock price, while at the same time they secretly transferred shares to family members who sold them at the inflated prices.

The defendants began issuing a series of press releases in July 2006, that publicly claimed CSHC's ownership or control of entire issuances of foreign sovereign bonds issued by the Republics of Venezuela and Finland. These bonds were, on their face, worth billions of dollars and paid tens of millions in annual interest. In at least one of the press releases, Harris was quoted as stating that, based on CSHC's acquisition of such large quantities of sovereign debt, "we are looking at a new justifiable reorganization release price of $25.63 [per share]."

At the time, CSHC shares generally traded at less than $1 per share. In October 2006, CSHC issued an annual report claiming as much as $800 million in assets, $500 million of which was in the form of foreign sovereign bonds as stated in at least some of the press releases. Also according to this report and its attachments, CSHC's anticipated income included $19,869,792 in interest revenue from those bonds.

The evidence at trial showed that the three defendants knew these public statements were untrue, and knew that CSHC had little if any assets of any value and did not own or control the foreign sovereign bonds and other assets that it claimed to have. CSHC also had little if any in the way of revenue or profits from any business activity.

On May 24, 2011, before the trial concluded, Harris jumped his bail and fled Atlanta. The trial continued as to the other two defendants and as to Harris in absentia. Harris was arrested by a U.S. Marshals Service task force in Utah on May 28, 2011, and he has been held in detention pending this sentence.

The case was investigated by special agents of the F.B.I. and Postal Inspectors with the U.S. Postal Inspection Service, based on a referral from the United States Securities and Exchange Commission (SEC ). The SEC has brought civil fraud charges against CSHD.