ATLANTA—The United States Attorney’s Office today announced that RUFUS PAUL HARRIS, 43, originally of Adairsville, Georgia but most recently from Oklahoma City, was arrested on Sunday morning by deputies of the U.S. Marshals Service at a residence in Provo, Utah, after a five-day nationwide manhunt. Harris fled Atlanta on Monday evening, May 23, 2011, after the eighth day of a jury trial in which he was facing charges of securities fraud, wire fraud, falsifying financial statements, and conspiracy. He was convicted of all eight counts. He had been on bond pending resolution of the trial.
In a statement issued today, United States Attorney Sally Quillian Yates said, “I am happy to announce that this defendant was arrested without incident less than a week after he fled. In that short time, the defendant was able to travel nearly 2,000 miles, but that was not far enough for the talented and hard working deputies of the United States Marshals Service and the other federal and local law enforcement agencies that assisted. The defendant, who was convicted of a multi-million stock pump-and-dump fraud scheme, will now find that his problems have gone from bad to worse.”
Deputy United States Marshal Jim Joyner said, “This is a unique case where we were notified promptly that the individual had absconded. Lead Deputy Lorena McCaigue was able to coordinate an interstate investigation utilizing other Marshals Service offices, particularly in Oklahoma and Utah, and local law enforcement, and follow the trail that Mr. Harris unintentionally left. Once she was able to verify his location, she turned over apprehension operations to a U.S. Marshals Service task force in Utah, and the defendant was arrested without incident.”
According to United States Attorney Yates, the charges, and other information presented in court: HARRIS was the founder and chief executive officer of Conversion Solutions Holdings Corporation (“CSHC”); co-defendant BENJAMIN STANLEY, 48, of Kennesaw, Georgia, was the co-founder and chief operating officer; and co-defendant DARRYL HORTON, 50, of Okemos, Michigan, was the chief financial officer. The evidence showed that 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 were secretly transferring shares to family members who sold at the inflated prices.
The defendants issued a series of press releases publicly claiming that CSHC’s ownership of over a billion dollars in foreign bonds. 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 income included $19,869,792 in interest revenue from those bonds.
According to the evidence presented in court, 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 the foreign 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.
During the weeks that the misrepresentations were being publicly disseminated via press releases and SEC filings, CSHC’s stock price on the open market more than tripled. The stock, which was a “penny-stock” trading for less than $1 per share on the Over-the-Counter Bulletin Board in August 2006, appreciated to more than $3 per share in October 2006. During this time, HARRIS, STANLEY, and HORTON transferred substantial quantities of CSHC stock to family members and others, who sold the stock in the open market at artificially inflated prices of between $2 - $3 per share.
On the first day of the trial, HARRIS waived his right to an attorney, instead electing to represent himself. HARRIS. Investigation by United States Postal Inspectors revealed that on Monday, May 23, 2011, at approximately 6:20 p.m., HARRIS checked out of the motel and exited the parking lot in a dark colored minivan. HARRIS failed to report to court on Tuesday, May 24, 2011, and a warrant for his arrest was issued. The trial proceeded against all three defendants, in HARRIS’ absence. HARRIS was convicted of all eight counts on Thursday, May 27, 2011. STANLEY was also convicted of wire fraud, securities fraud, and conspiracy; and HORTON pleaded guilty while the jury was deliberating to conspiracy.
Defendants HARRIS and STANLEY could receive a maximum sentence of 25 years in prison and a fine of up to $250,000 for the securities fraud charge, 25 years in prison and a fine of up to $250,000 for the conspiracy charge, and 20 years in prison and a fine of up to $250,000 for each count of the wire fraud charges. The false certification of a financial statement charge, as to HARRIS, carries a maximum sentence of 10 years in prison and a fine of up to $1,000,000. Defendant HORTON, by virtue of his plea, will likely receive the maximum sentence of five years’ imprisonment for the count to which he pled guilty, and also faces a fine of up to $250,000. Defendant HARRIS may also face additional charges of bail jumping.
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