yessssssssss! I got my Lee Webb fix!!!
Conversion Solutions dumps CEO Harris again
2006-12-05 10:53 ET - Street Wire
by Lee M. Webb
Conversion Solutions Holdings Corp., a virtually penniless grey market company that claims to own billions of dollars worth of bonds, has dumped semi-literate chief executive officer Rufus Paul Harris for the second time in less than a month. In the latest Keystone switcheroo, Howe Street promoter and Internet tout John L. Arlitt now heads the floundering promotion.
As previously reported by Stockwatch, the U.S. Securities and Exchange Commission suspended Conversion, then trading on the OTC Bulletin Board, and filed a lawsuit against the company and Mr. Harris in the U.S. District Court for the Northern District of Georgia on Oct. 24.
On Oct. 16, just eight days before the SEC enforcement action, Conversion issued a news release claiming that it had an asset portfolio, consisting primarily of bonds, worth approximately $7.3-billion and an estimated book value of $70.71 per share. (All amounts are in U.S. dollars.)
According to the SEC lawsuit, however, Conversion's outrageous claims are rubbish.
Among other things, the SEC alleges that Conversion and Mr. Harris made false and misleading claims regarding the company's purported ownership of billions of dollars worth of bonds, fraudulently inflating its stock price.
Early on, Conversion's cultish Internet followers rallied around Mr. Harris, casting him in the role of a David challenging the SEC Goliath, which many of the company's faithful apparently believe is a corrupt organization in league with naked short sellers.
In fact, even Michael Alexander, the former head and majority shareholder of Conversion's OTC-BB predecessor, the FrontHaul Group Inc., publicly threw his support behind Mr. Harris by means of a website called RufusvsSEC.com.
All that fickle support quickly waned, however.
The first switch
In the wee hours of Nov. 2, at approximately 3 a.m., Conversion issued a news release announcing that the company's board of directors had given Mr. Harris the boot "due to pending litigation."
Later that afternoon, however, a somewhat different story emerged.
According to a news release issued just after 3 p.m., shareholders controlling more than 51 per cent of what was reported as the company's 159 million outstanding shares voted to replace Conversion's entire board of directors and management for, among other things, triggering the SEC investigation, "filing erroneous financial statements" and publishing questionable press releases.
It is not clear how the company's outstanding share total jumped from the approximately 103 million shares reported by Mr. Harris on Oct. 16 to 159 million shares on Nov. 2, particularly given that Conversion's board passed a resolution on Sept. 19 to demand "a hold, halt and immediate recall of all FrontHaul restricted shares."
In any event, the company's largest shareholder, Mr. Alexander, who has previously voted 75 million FrontHaul shares, clearly wielded the hammer and the axe and took over as Conversion's sole officer and director.
While many starry-eyed members of Conversion's devoted Internet clan were expecting a financial industry heavyweight to take over as the company's chief executive officer, they quickly threw their fickle support behind Mr. Alexander.
A Canadian tout posting under the alias "tutankhamen," affectionately called "Tut" by the company's boosterish supporters, was among the capricious Conversion HotStockMarket.com cheerleaders who swiftly switched their allegiance to Mr. Alexander.
Among other things, presumably to correct the glaring deficiencies in the slipshod annual report created by Mr. Harris, the new chief executive officer planned to file an amended annual report and the quarterly report for the period ending Sept. 30, 2006, "as soon as possible."
At the time, Mr. Alexander advised that he did not plan to change the company's business model, notwithstanding the fact that Conversion's imaginative business model was inextricably linked to the allegedly bogus bond assets.
"I will be diligent in updating the shareholders during this process," Mr. Alexander stated.
As it turned out, after filing a Nov. 14 notice with the SEC that Conversion would be late in submitting its required first-quarter report, Mr. Alexander provided his only diligent update to shareholders later that evening when he reported that he had bailed out.
The return
In the late evening of Nov. 14, just 12 days after giving Mr. Harris and his associates the bum's rush, Mr. Alexander announced that he had resigned as Conversion's chief executive officer and director.
Mr. Alexander's associate Randy Moseley pulled the plug as the company's chief financial officer at the same time.
In announcing his surprise departure, Mr. Alexander reported that Mr. Harris was taking the reins once again.
By Mr. Alexander's optimistic assessment, Mr. Harris and the former management group from Georgia represented Conversion's best chance of monetizing "the particular bond assets claimed as assets" and implementing the company's business plan.
Washing his hands of the mess, Mr. Alexander wished reinstalled chief executive officer Mr. Harris the best of luck in the development of the company.
There was some early consternation among Conversion's cult-like Internet followers over the startling news of Mr. Harris's return, but most of them quickly recovered and expressed their support for the move.
Tut, the capricious Canadian tout, switched allegiance once again in favour of Mr. Harris.
Two days after Mr. Harris again donned the mantle of chief executive officer, the SEC filed a motion for default against the purported multibillion-dollar company, which had not even bothered to file an answer to the U.S. regulator's lawsuit.
On Nov. 17, the clerk of the U.S. District Court for the Northern District of Georgia entered the default against Conversion.
With some unrest growing among the company's devoted Internet followers, Mr. Harris called for "an emergency meeting of the shareholders committee via teleconference" and scheduled it for 5 p.m., time zone not disclosed, on Saturday, Nov. 18.
The ballyhooed emergency teleconference was hastily routed through Paltalk, an Internet site that provides virtual rooms with audio capability.
As it turned out, Conversion did not even have a properly constituted or functioning "shareholders committee."
Mr. Harris appointed James P. Gee, perhaps better known by his HotStockMarket alias "dogman," as chairman of the purported shareholders committee.
On the fly, Mr. Gee then selected a number of other HotStockMarket posters to participate in the teleconference.
The Canadian tout, Tut, was among those who were given the nod to take part in the privileged call.
Before the teleconference, a HotStockMarket poster known as "TonySoprano" forwarded a well composed and reasoned letter to Mr. Harris, setting out a number of issues of concern to shareholders that he wanted addressed.
Among other things, TonySoprano wanted some answers regarding the SEC lawsuit. Specifically, he asked about the status of an attorney to represent the company and the plan for addressing the default for non-response in the lawsuit.
He also wanted Mr. Harris to address the company's plan for timely filing of required reports with the SEC.
On behalf of shareholders, he further asked the chief executive officer to address issues regarding hiring a management team and providing validation of Conversion's assets by hypothecating one or more of the bonds and financing the claimed joint ventures.
It is not clear that any of those important issues were seriously addressed during the teleconference.
Within days of the call, TonySoprano told Conversion's HotStockMarket following that he had ended his association with the committee.
"As for me, I decided yesterday that the methods chosen by the CEO are so inconsistent with my principles that I would no longer be actively involved with the Shareholder's committee in an advisory role," TonySoprano remarked.
In a Nov. 19 missive that at least made the rounds among the company's Internet followers, Mr. Harris's hand-picked shareholders committee chairman Mr. Gee offered a report on the teleconference.
Mr. Gee advised that, due to urgent matters needing attention, he would be appointing temporary members to serve on the shareholders committee board for a period of 30 days, following which there would be "a democratic vote for the board of the committee."
According to Mr. Gee, the shareholders committee would be appointing the members of the nominating committee, compensation committee and review committee.
"Mr. Harris stated that the Shareholders Committee is very powerful and will be the backbone of the company," Mr. Gee wrote. "We will be able to basically appoint the people we want to lead the ship.
"I am very confident in our shareholder base, as I have met so many intelligent people since we started this journey.
"I ask that everyone pray for me and the board, as we do our best to do what is in the best interest of the shareholders of CSHD and for Mr. Harris as he leads us into battle."
Mr. Gee said that the committee planned to issue a press release divulging the names of the members of the board of the shareholders committee "very soon," but that has still not materialized.
On Nov. 27, just eight days after Mr. Gee penned his missive with its call to arms and prayers, the obscure shareholders committee turned on Mr. Harris.
Out again
According to a news release issued shortly after 11 p.m. on Nov. 27, shareholders reportedly representing more than 51 per cent of the undisclosed eligible voting shares of Conversion decided, based on the unanimous recommendation of the murky shareholders committee, to give Mr. Harris the boot once again.
Mr. Harris was reportedly ousted for the second time because of his breach of fiduciary responsibility by not retaining proper legal counsel to represent Conversion in the SEC lawsuit, his failure to file a timely response to the complaint and his earlier failure to file the company's annual report on time.
Again reportedly based on the unanimous recommendation of the largely nameless shareholders committee, shareholders reportedly owning 51 per cent of the eligible voting shares appointed Vancouver-based Mr. Arlitt as the company's chief executive officer and chairman of the board of directors.
Mr. Moseley, pending director and officer liability insurance, has reportedly agreed to return to lend a hand as interim chief financial officer of the purported multibillion-dollar company.
The second surprise removal of Mr. Harris caused a bit of a stir even among Conversion's devoted HotStockMarket followers, but most of them soon recovered and transferred their fickle fealty to Mr. Arlitt.
The changeable Canadian tout, Tut, was noticeably silent on the matter.
Interestingly, shortly after the news was released, Conversion's HotStockMarket followers opened a new thread proclaiming that their own Tut was actually the new chief executive officer.
A veteran HotStockMarket poster claimed that he had spoken to Tut several times and exchanged e-mails with him that traced back to Mr. Arlitt. He said he was 100-per-cent certain that Mr. Arlitt was the poster known as Tut.
The poster subsequently retracted his claim and recently advised a Stockwatch reporter that he has "never spoken to him physically," but he is now certain that Tut is not Mr. Arlitt.
In any event, the title of the HotStockMarket thread was later changed to remove any mention of Tut after several of Conversion's followers raised concerns over the appearance of a link between the cheerleading forum and the company's new chief executive officer.
Other members of Conversion's HotStockMarket clan protectively proclaimed that there was absolutely nothing wrong with Tut's touting posts, though many of the company's critics on other Internet chat sites dispute that claim.
Among other things, Conversion's critics argue that Tut's posts repeatedly urging shareholders to hold their shares, waxing on about fabulous wealth and imminent life-changing events constitute unfounded and shameless pumping, at the very least.
Moreover, some of the Canadian tout's posts invite questions about compliance with securities regulations. For example, his claims regarding holding a massive share position raise questions about following proper insider disclosure requirements.
"As for my and my groups holdings you will never see them but they are larger than you have learned how to count," Tut boasted on Nov. 21.
Intriguingly, all of touting Tut's more than 460 posts disappeared from HotStockMarket on Nov. 29.
The shenanigans
Evidently Mr. Harris was more than a bit upset at his second ouster from Conversion in less than a month and decided to make some noise about it.
On Nov. 29, semi-literate Mr. Harris posted a message to "Share Holders" with the subject line "Resent Events" on Conversion's website.
"This is very interesting and cool stuff, watch and document," Mr. Harris wrote, signing off as Conversion's chief executive officer.
Mr. Harris's cryptic message was removed later in the day, but the shenanigans did not end there.
On Nov. 30, Mr. Harris made one of his evening appearances on SubPennyRadio.com, an Internet-based radio talk show.
Sounding more than a little petulant, Mr. Harris questioned the legality of his latest ouster, hinted at some peculiar conspiracy involving the company's transfer agent, pouted that any assistance he provided the company in the future would be costly and generally bemoaned his recent treatment.
Given that Mr. Harris did not bother to file a response to the SEC lawsuit either, his possible future with any public company might soon be severely constrained.
On Nov. 29 the clerk of the Georgia Northern District Court entered a default against Mr. Harris, paving the way for the SEC to seek a default judgment for the relief requested in its Oct. 24 lawsuit.
Among other things, the U.S. regulator has asked for an order permanently prohibiting Mr. Harris from acting as an officer or director of any issuer that has a class of securities registered with the SEC.
In any event, Mr. Harris's disjointed Nov. 30 SubPennyRadio rant and remarkably unsympathetic responses to a concerned Conversion shareholder who claimed to have plowed his life savings into the flagging promotion turned many of the Georgia promoter's former supporters even more solidly against him and further into Mr. Arlitt's corner.
The new champion
The consensus among Conversion's HotStockMarket cheerleaders is that Mr. Arlitt is definitely far better suited for the role of chief executive officer of the purported multibillion-dollar company than Mr. Harris.
Many of the company's devoted followers point with satisfaction, hope and some reverence to Mr. Arlitt's brief biographical information posted to Conversion's website following the comical tussle with pouting Mr. Harris.
Mr. Arlitt claims to have over 20 years of extensive experience in the financial industry as president and chief executive officer of his wholly owned Arlitt Financial Corp., though other information indicates that his Vancouver-based company has only been around since 1990.
Prior to setting up Arlitt Financial, Conversion's latest chief executive officer says that from 1987 to 1990 he served as an account executive with Vancouver-based Georgia Pacific Securities Corp. and Jones, Gable & Company Ltd.
While Mr. Arlitt claims that his experience as a broker spanned three years, registration information obtained from the British Columbia Securities Commission (BCSC) tells a somewhat different story.
According to the BCSC, Mr. Arlitt's registration as an investment adviser with Jones Gable was approved on March 10, 1987, and terminated on Sept. 21, 1987.
By Sept. 29, 1987, Mr. Arlitt was working as a broker for Georgia Pacific Securities, but his registration with that Vancouver-based firm was terminated less than a year later on Aug. 31, 1988.
Conversion's new champion further reports that he has assisted in financial consulting and financing of numerous public companies through Arlitt Financial and his experience includes serving as president and director of numerous public companies.
The biographical sketch posted on Conversion's website and duplicated in a Nov. 29 SEC filing hardly does justice to Mr. Arlitt's experience as a Howe Street promoter and completely glosses over his Internet touting activities.
In a following article, Stockwatch will review Mr. Arlitt's association with approximately 20 companies in more detail and examine some of his earlier Internet touting.
Meanwhile, under Mr. Arlitt's direction, Conversion has reportedly hired a corporate and litigation attorney, Terry Howell of Atlanta-headquartered Fields, Howell, Athans, & McLaughlin.
At last report, Conversion was "also finalizing negotiations with an SEC law firm," but there has been no update regarding the outcome of those finalizing negotiations.
Mr. Arlitt has also signed on an obscure public relations firm, MPR Source Inc. of Plano, Tex.
Conversion, which rallied somewhat in the wake of the latest management shuffle, shed nine cents to close at 20 cents on Dec. 4.
Stockwatch will follow developments as the saga continues.
Comments regarding this article may be sent to lwebb@stockwatch.com.
(More information regarding Conversion Solutions Holdings Corp. is available in Stockwatch articles published on Oct. 13, 16, 18, 20, 24 and 26; and Nov. 2, 3, 7, 10 and 16, 2006.)
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