Litigation Release No. 20731 / September 19, 2008

Securities and Exchange Commission v. Conversion Solutions Holding Corporation and Rufus Paul Harris a/k/a Paul Rufus Harris, Civil Action No. 1:06-cv-2568-CC (N.D.Ga.)

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

The Securities and Exchange Commission announced today that on September 17, 2008, United States District Judge Clarence Cooper, of the Northern District of Georgia, issued a final judgment resolving all remaining issues in the case and determining remedies against Rufus Paul Harris and Conversion Solutions Holding Corporation.

The Commission's Complaint, filed October 24, 2006, alleged that Harris, from September 26 through October 23, 2006, carried out a fraudulent scheme to inflate the market price of Conversion's stock through a series of false statements in press releases and Commission filings made by the company. Most of the false statements detailed in the Complaint concerned assets which Conversion claimed to own but did not, including the entirety of two series of sovereign Venezuelan bonds.

In a previous Order issued July 21, 2008, granting the Commission's motion for default judgment, the Court found that: (1) Harris and Conversion violated Section 10b-5 of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder; (2) Conversion violated the reporting provisions of the Exchange Act (Section 13(a) and Rules 12b-20, 13a-1 and 13a-11) with regard to five separate Commission filings; (3) Harris aided and abetted Conversion's violations of the reporting provisions of the Exchange Act (Section 13(a) and Rules 12b-20, 13a-1 and 13a-11) with regard to those same five separate Commission filings; and (4) Harris falsely certified three separate periodic reports of Conversion filed with the Commission in violation of Rule 13a-14 promulgated under the Exchange Act.

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.

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.

On the basis of these findings, the Court permanently enjoined Harris and Conversion from future violations of the statutes it had found them to have violated in its July 21, 2008 Order. Additionally, the Court barred Harris, pursuant to Section 21(d)(2) of the Exchange Act, from acting as an officer or director of any issuer with a class of securities registered pursuant to Section 12 of the Exchange Act or that is required to file reports pursuant to Section 15(d) of the Exchange Act for a period of seven (7) years. Finally, the Court ordered Harris to pay a civil penalty of $1,170,000, and Conversion to pay a civil penalty of $250,000. The Court did not find a basis for disgorgement of any ill-gotten gains by Harris or Conversion. Accordingly, there is no statutory authority for the creation of a Fair Fund in this case, and any funds collected pursuant to the Court's September 17, 2008 Order will be paid to the U.S. Treasury.

Additional information concerning this action and the Commission's actions related to this matter can be found at:

Litigation Release No. 19883 / Oct. 25, 2006