Oct 30, 2006 (financialwire.net via COMTEX) -- October 30, 2006 (FinancialWire) (By Stock Patrol)
The Securities and Exchange Commission is turning up the heat on Conversion Solutions Holdings, Inc. (OTCBB: CSHD) and its CEO, Rufus Paul Harris.
First, the SEC temporarily suspended trading of Conversion Solutions securities, citing the questionable accuracy of public statements concerning the company's interest in $5.5 billion of bonds issued by the Republic of Venezuela. Now, the Commission has gone one step further, accusing Conversion Solutions and Harris of orchestrating an elaborate scheme to manipulate the price and volume of the company's stock. The SEC filed a civil complaint with the United States District Court in Atlanta, Georgia alleging that the company issued a series of bogus press releases and filed false public statements claiming ownership of the multi-billion dollar Venezuelan bonds.
The SEC action follows closely on the footsteps of the company's improper conduct. On September 26, 2006, Conversion Solutions issued a press release and filed a Form 8-K disclosure statement announcing that it had added "5 Billion euro denominated Global Bonds issued by the Republic of Venezuela" to its existing portfolio. The company went so far as to provide international identification numbers for the bonds.
But, as the SEC discovered, the identification codes cited by the company related to a much smaller Venezuelan bond offering, a 700 million euro bond series, not a 5 billion euro bond offering. And, the SEC claims, the company did not even control the entire 700 million euro bond issue.
Despite that discrepancy, which became evident to regulators but certainly would have eluded most ordinary investors, the company issued another press release on September 27th reiterating the same phony claim.
The SEC also says that the company falsely claimed ownership of an additional $500 million in Venezuelan bonds. Here again, the Commission charges that the company did not own or control all of those bonds at the time it claimed them as assets.
According to the SEC complaint, Conversion Solutions' fraudulent activities were not limited to false claims about Venezuelan bonds. On September 27, 3006, the company issued a press release announcing the finalization of contracts with "Deutch (sic) Bank ABN Amro Bank, Dresdner Bank and Kommerce (sic) Bank" which would be the "foundation" of the company's "projected funding platform." These statements evidently were as flawed as the company's spelling. The SEC says that these claims were false and misleading. In particular, the company did not enjoy any special relationship with Deutsche Bank.
The company's statements apparently had a dramatic impact on the market for its shares. On September 26th, Conversion Solutions stock closed at $1.01 a share, on volume of 498,303 shares. On September 27th, after the press releases and public filings had circulated, the company's stock closed at $1.75 a share. Volume that day was 4,932,180.
The effect was even more dramatic on September 28th. That day Conversion Solutions stock closed at $3.02 a share, over 14 million shares changed hands.
The SEC is seeking an order enjoining the defendants from future violations of the securities laws, directing disgorgement of ill-gotten gains and barring Harris from serving as an officer or director of a public company.
Investors can only hold their breath and hope some of those ill-gotten gains wind up in a restitution fund.
Stay tuned.
(Stock Patrol partners with Investrend Information's (http://www.investrendinformation.com) Investors Resource Center). |
