Conversion Solutions Holdings (fka CSHD)

[rabblerouser]

Conversion Solutions has an intriguing cast of players

2006-10-16 21:30 ET - Street Wire

by Lee M. Webb

Conversion Solutions Holdings Corp., the purported multibillion-dollar offspring resulting from the merger of a virtually penniless "grey sheet" outfit and The FrontHaul Group Inc., a financially challenged OTC Bulletin Board company, has an intriguing cast of characters supporting the wild promotion that has attracted a cult-like following.

FrontHaul, the OTC-BB company involved in the merger that produced Conversion Solutions, had a paltry $57,000 in cash and a reported negative net worth of $1.8-million as of March 31, 2006. (All amounts are in U.S. dollars.)

The other party to the penurious partnership, Conversion Solutions Inc. (CVSU), had a picayune $1,560 in cash as of June 30, 2006, according to audited financial statements filed on Sept. 29.

Rather incredibly, CVSU, a grey sheet company with no revenue that was incorporated in February of 2005, claimed to have net assets of approximately $789.5-million at the end of June.

Even more incredibly, the notes to the financial statements disclose that, subsequent to the audit period, penniless CVSU purportedly acquired a note on Lehman Brothers Holdings PLC worth approximately $579-million and Republic of Finland bonds worth approximately $938-million. The note and the bonds reportedly carry coupons at 6.18 per cent and 6 per cent, respectively.

Rounding out the spate of incredible recent acquisitions, on Sept. 27 Conversion Solutions reported that it had added Republic of Venezuela Global Bonds worth approximately $6.25-billion to its asset management portfolio.

As previously reported by Stockwatch, prior to the reported acquisition of the $6.25-billion worth of Venezuelan bonds, Conversion Solutions founder and chief executive officer Rufus Paul Harris publicly claimed on an Internet chat site that the company's stock is worth $54 per share.

In marathon sessions on SubpennyRadio.com that have run into the wee hours of the morning, Mr. Harris has defended his airy valuation.

At least one other key player in the promotion who joined Mr. Harris and other Conversion Solutions executives during an Internet-based radio show that ran until 3 a.m. claims that the stock should be trading at $70 per share or more.

Some of the company's cult-like followers on chat sites such as InvestorsHub.com and particularly HotStockMarket.com, which is Mr. Harris's personal favourite, suggest that the stock is worth $140 per share or more.

Critics of the company scoff at such lofty valuations, suggesting that even at its current price of approximately $2 per share Conversion Solutions is, at best, an overblown promotion that will likely draw some action from the U.S. Securities and Exchange Commission (SEC).

As noted in an earlier Stockwatch article, the short history of Conversion Solutions is a somewhat convoluted tale involving a handful of key players and some financially challenged companies, all with little, if anything, in the way of successful track records.

In this article, Stockwatch will review some of the players involved with the OTC-BB promotion. The relevant companies will be examined in more detail in a future article.

The players

Rufus Paul Harris, formerly known as Paul R. Harris, probably deserves pride of place among the players involved with Conversion Solutions.

According to the notably brief biographical information on the company's website, Mr. Harris's experience ranges from "high-end corporate financing to bond origination."

"Mr. Harris has facilitated and originated projects, corporate and bond financing for more than 10 years," the website proclaims.

Mr. Harris is also credited with being "the Founder and originator of Waatle Holdings Corp and CVSU" and co-founder of Songwi Trust.

Interestingly, Mr. Harris's biographical information on the company's website contains no mention of his involvement in another murky operation, Enhancement Holdings LLC.

Enhancement was incorporated in South Carolina in March of 2002. At that time, Mr. Harris was going by the name Paul R. Harris.

Less than three weeks after the Enhancement incorporation documents were filed, Mr. Harris made an $18-million offer to purchase a bankrupt golf and tennis resort in Florida.

Oddly, the incorporation documents for Enhancement reportedly listed Pravin Patel, a well-known Carolina hotelier as its registered agent. Mr. Patel told a reporter, however, that he had never heard of the company or Mr. Harris.

Mr. Harris attempted to clear that issue up by claiming that the registered agent was not the well-known Carolina hotel magnate Pravin Patel, but another Patel with a different first name. Alas, Enhancement's Mr. Patel did not have a working telephone number.

In another peculiar twist, one of the purported directors of Enhancement, Charles Metcalf, claimed that he had resigned weeks before the offer for the resort was made. Moreover, Mr. Metcalf alleged that his signature had been forged on the incorporation certificate.

On May 1, 2002, Mr. Metcalf filed a statement of dissociation from Enhancement Holdings with the Secretary of State for South Carolina.

In the end, Mr. Harris failed to ante up the $1-million deposit to back his $18-million offer and the property was later auctioned to serious bidders who filed security deposits.

Mr. Harris, still signing documents as Paul R. Harris, brought Enhancement back into play in December of 2002 when he entered into an agreement with troubled Broadband Wireless International Corp., which already had a checkered history.

The SEC launched an investigation into Broadband in June of 2000 and filed a civil suit against the company and affiliated individuals and entities on Aug. 11, 2000. In conjunction with the lawsuit, the SEC obtained a court order appointing a temporary receiver for the company.

The U.S. regulator dropped its suit against the company in December of 2001 and, after exiting the federal receivership, Broadband entered Chapter 11 bankruptcy.

While penniless Broadband was still in the process of reorganizing under bankruptcy protection, Mr. Harris showed up with an offer to transfer a $100-million "insurance guarantee bond" from Enhancement to the company to be used to obtain a $57-million line of credit.

In return for the insurance guarantee bond to be used to set up a line of credit, Mr. Harris wanted three seats on Broadband's board of directors and, once certain conditions were met, 20 million shares.

The deal was inked on Dec. 28, 2002, and Mr. Harris reportedly had Enhancement provide the $100-million bond to Broadband in February of 2003.

Mr. Harris subsequently joined the company's board of directors along with two of his associates, Benjamin Stanley and John Walsh, both of whom are now directors and executives of Conversion Solutions.

In addition to joining Broadband's board of directors, Mr. Harris went on to serve a stint as the company's chief executive officer beginning in 2003 and Mr. Stanley assumed the role of chief financial officer.

Alas, things quickly soured at Broadband.

In May of 2004, Broadband filed a lawsuit against Enhancement and Messrs. Harris, Stanley and Walsh for fraud, negligent misrepresentation and breach of contract.

Among other things, a June 16, 2004, amended complaint alleged that the purported $100-million bond served up by Mr. Harris and Enhancement had been underwritten by insolvent companies based in the Philippines and was worthless.

The complaint also alleged that the defendants had assigned the worthless paper to at least two other individuals.

Broadband went on to allege that, contrary to the representations of the defendants, no credit line was ever established. Accordingly, the company claimed that Mr. Harris and his two associates should never have been appointed to the board of directors.

The complaint also alleged that the defendants made fraudulent alterations to the Dec. 28, 2002, agreement with Broadband to make it appear that it had actually been executed on Aug. 12, 2002, in an attempt to skirt at least some of the 12-month hold period on 20 million shares issued to them as part of the deal.

According to the Broadband allegations, the defendants went on to illegally unload shares during a pump and dump campaign they orchestrated.

On Oct. 13, 2004, Messrs. Harris, Stanley and Walsh fired back with their own allegations.

"The plaintiffs has (sic) attempted to defraud the court by submitting partial facts and documentation and purged (sic) themselves by submitting sworn testimony in the form of affidavits," the sometimes tortured complaint alleged in part.

In particular, the defendants pointed the finger at Broadband's Michael Williams, Keith McAllister and Ron Tripp -- the people primarily responsible for trying to get rid of Mr. Harris and his two associates -- as the real miscreants who should be booted out of the company.

Interestingly, the defendants made no mention at all of the $100-million bond in their complaint; nor did the filing contain any reference to the 20 million Broadband shares they had been issued.

As the case unfolded, the company obtained a preliminary injunction prohibiting Messrs. Harris, Stanley and Walsh from holding themselves out as officers of Broadband.

The court also order Broadband to hold a special shareholders election to determine who should serve as the company's directors.

After a couple of adjournments because of the lack of a quorum, the special shareholders meeting was finally concluded on Dec. 9, 2004, and Messrs. Harris, Stanley and Walsh were given the boot.

On Jan. 19, 2005, Broadband dropped its lawsuit against Mr. Harris and his two associates.

"After the removal of Paul Harris, Benjamin Stanley and John Walsh from our board of directors and due to the fact that they have no assets to attach, we decided it would be in the best interest of the Company to dismiss the case without prejudice," Broadband reported in a subsequent SEC filing.

Well before getting the boot from Broadband, Mr. Harris was already busy with another project.

Indeed, on June 17, 2004, the day after Broadband filed its amended complaint against him and his two associates, Mr. Harris, using the name Rufus Paul Harris, took on the role of chief executive officer for Waatle Holdings Corp.

Jerry Bivens, now a director and secretary of Conversion Solutions, became an officer of Arizona-incorporated Waatle in March of 2005.

Mr. Harris's ousted Broadband associate, Mr. Stanley, became an officer of Waatle on June 17, 2005. Mr. Stanley is now a director and the chief operating officer of Conversion Solutions.

Interestingly, while Conversion Solutions claims that Mr. Stanley is the "founder and co-originator" of Waatle, which was incorporated in June of 2004, documents filed with the Arizona Corporations Commission do not show any role for him with the company until June of 2005.

Evidently heading Waatle did not consume all of Mr. Harris's time.

In April of 2005, the energetic Mr. Harris entered into a stock purchase agreement to acquire approximately 22.9 million shares representing more than 98 per cent of the outstanding shares of Delaware-incorporated CVSU from the company's founder, William Tay.

Apparently there was some delay in completing the deal, but it was reportedly finalized on June 7, 2005, and Mr. Harris took over as chairman, president, chief executive officer and treasurer of CVSU.

Mr. Harris's sidekick, Mr. Stanley, assumed the title of chief operating officer and investor relations representative at CVSU.

On June 10, 2005, just three days after taking control of CVSU, Mr. Harris "made an Acquisition and Business combination offer" to Waatle, which reportedly had 10 subsidiaries and $250-million in assets, in exchange for 35 million shares.

On June 17, 2005, Waatle shareholders reportedly unanimously approved the merger, though it appears that the deal was not actually consummated under the terms originally proposed.

Specifically, the number of issued and outstanding shares of CVSU as of June 30, 2006, cannot be reconciled to include a transaction involving the issuance of 35 million shares to Waatle.

In any event, with the merger of CVSU and Waatle, at least part of the promotion was pretty much ready to roll.

Michael D. Alexander, the former head of FrontHaul, is another significant player in the reconstituted OTC-BB promotion.

Mr. Alexander took control of an inactive public shell, The Furia Organization Inc., in August of 2004 after the company executed a 1-for-five reverse split and then issued 20 million common shares and 500,000 preferred shares convertible into 50 million common shares to acquire his privately held FrontHaul Inc.

Under an employment agreement with reorganized Furia, Mr. Alexander was further guaranteed that his holdings of common shares would never fall below 60 per cent of the company's issued and outstanding shares.

FrontHaul Inc., formed just a little more than two months before Mr. Alexander inked the deal with Furia, was billed as "an Internet-based, business-to-business information exchange, which provides a centralized database of freight load information accessible by any enabled wireless device or through the Internet."

Under Mr. Alexander's stewardship as chief executive officer and majority shareholder, the ballyhooed trucking and logistics company, renamed The FrontHaul Group Inc. earlier this year, racked up approximately $6.8-million in losses by March 31, 2006.

On July 12, penniless CVSU and money-losing FrontHaul announced their merger agreement.

As subsequently disclosed, CVSU shareholders received one share of FrontHaul for each share of CVSU and Conversion Solutions became the surviving entity.

The merger, which will be reviewed in more detail in a future article, was reportedly completed on Sept. 13.

Mr. Alexander, the majority shareholder of FrontHaul and certainly a major shareholder of the surviving Conversion Solutions, did not retain a position as either an officer or a director of the company.

The former head of FrontHaul did not let any grass grow under his feet. By Oct. 3, Mr. Alexander reportedly took over as president, chief executive officer, chairman and majority shareholder of Texas-based Ecowood Ltd.

Mr. Alexander is evidently negotiating some as yet vague deal with Conversion Solutions regarding his most recent project.

"This purchase comes with unbelievable assets, to include, standing rainforest timber management, a major titanium deposit, clear title to all the logs at the bottom of the Amazon River and its tributaries, with carbon credits," Mr. Alexander reported in a gushing news release that was issued under the trading symbol for Conversion Solutions.

"We will utilize all resources at our disposal to begin the monumental task of rebuilding and replanting the lost Amazon Rain Forest," he went on.

For some people, the purported assets of Ecowood may indeed be "unbelievable," as Mr. Alexander remarked.

Clearly not to be outdone by multibillion-dollar claims of Conversion Solutions, Mr. Alexander claims that the submerged Amazon logs have a market value of $75-billion.

Moreover, Mr. Alexander says that the "carbon credits" have a current value of $4-trillion.

"The current value of the titanium is yet to be determined do to the unknown sizes of the deposit," the Oct. 3 news release notes.

Investors may be waiting with bated breath for the value of the titanium deposit.

While negotiating with Conversion Solutions for the management of these unbelievable assets, Mr. Alexander says that Ecowood would like to hear from anyone else interested in joint ventures or partnerships.

"We would be especially interested in hearing from environmentally friendly organizations and/or advocates including but not limited to Bill Gates (MSFT), former President Bill Clinton and Vice President Al Gore and Leonardo Di Caprio to name a few," Mr. Alexander says. "These individuals and their organizations have like minded goals with our management for the environment."

Mr. Alexander's Amazon venture, a recycled promotion, has been given some play during marathon Internet-based radio talks featuring several executives of Conversion Solutions.

Mr. Alexander, who apparently has little inhibition about dropping the F-bomb and other expletives in public, has also joined in the cheerleading for Conversion Solutions on SubPennyRadio.com.

Among other things, Mr. Alexander suggests that Conversion Solutions should be trading at $70 per share or more, if the SEC would do its job.

Perhaps unsurprisingly, many of the company's cultish Internet followers delight in Mr. Alexander's cheerleading, though some think that he should curb his foul language.

While Mr. Alexander may seem a little rough around the edges to some followers of Conversion Solutions, executive vice-president and director Sabra Dabbs is much more refined.

Ms. Dabbs's experience and qualifications are glowingly, if vaguely, set out on the company's website.

"Ms. Dabbs is active in global asset management, investments, finance, business development and development of corporate infrastructure," the company reports. "Her experience includes more than twenty years in management; nine years of finance, mergers, and acquisitions; and five years in international business development and negotiations at the highest levels.

"She has first hand experience in emerging markets in the Far East, Latin America, and the Eastern Europe.

"Ms. Dabbs' business career has included ownership of several companies within the United States and Internationally covering a spectrum of interests within Corporate Management, Financial Advisory, Project Funding and Information Technology."

Recently, Ms. Dabbs has been fielding telephone calls and reassuring the company's shareholders that everything is moving ahead as planned.

She has also been dropping by HotStockMarket.com, an Internet chat site that is home to the most devoted of the company's cult-like following.

Ms. Dabbs also recently joined other Conversion Solutions executives to tout the company's future on obscure SubPennyRadio.com.

A more recent addition to Conversion Solutions, Mitchell Sepaniak, has also been doing yeoman's work since being given the nod as executive vice-president of operations on Sept. 21.

In announcing his appointment, Conversion Solutions actually put some names to the companies Mr. Sepaniak has been involved with.

Among other things, Conversion Solutions reported that most recently Mr. Sepaniak was the chief executive officer of Weida Corp.

In fact, Mr. Sepaniak was formerly the chief executive officer of Weida Communications Corp., a former OTC-BB company.

Mr. Sepaniak was appointed president, chief executive officer and chairman of Weida on June 11, 2004. At the same time, Joseph Zumwalt was appointed senior vice-president and chief financial officer of the company.

While Mr. Sepaniak was at the helm, Weida held itself out in promotional press releases and other public disclosures as a provider of ground-based transmitters and receivers that allowed corporate and government clients to use satellite communications in China.

Weida imploded amid SEC and FBI investigations into the company and at least some of its officers, most notably Mr. Zumwalt.

The SEC suspended trading in Weida on April 25, 2005.

After Weida went into the dumpster, the company gave Mr. Sepaniak the boot.

On Sept. 6, 2005, Weida entered into a "confidential" separation agreement with Mr. Sepaniak that was subsequently filed with the SEC. Mr. Sepaniak's termination was effective the same day.

On Dec. 30, 2005, Weida publicly announced that it really had no effective interest in the ballyhooed China operations that lay at the heart of the promotion.

In March of this year, Weida filed for bankruptcy protection.

On Sept. 18, the SEC filed a civil suit against Mr. Sepaniak's former Weida associate, Mr. Zumwalt.

Among other things, the SEC alleged that Mr. Zumwalt manipulated the price of Weida's stock to as much as $5 per share and greased brokers to sell the stock privately.

"Hundreds of investors, many elderly and unsophisticated, allegedly paid millions of dollars for Weida common stock at these inflated prices between June 2004 and April 2005," the SEC claims.

There is nothing to suggest that Mr. Sepaniak had the slightest clue about what his fellow Weida officer was up to in fraudulently flogging the company's shares.

In perhaps a bit of irony, on the same day that Conversion Solutions announced the addition of Mr. Sepaniak to the company's executive team, the SEC issued a news release regarding its suit against Mr. Zumwalt.

According to the Sept. 21 SEC announcement, Mr. Zumwalt, awaiting sentencing in a parallel criminal case, consented to a final judgment permanently enjoining him from violating securities laws and imposing a permanent bar against him serving as an officer or director.

The SEC also noted that the investigation is continuing, though the U.S. regulator offered no indication regarding the direction or scope of that investigation.

Meanwhile, Mr. Sepaniak has recently been busy liaising with Conversion Solutions shareholders, fielding questions about the share structure and reassuring investors that the company is on track with respect to its operations and meeting its regulatory obligations.

The common touch

Some of the key players in the Conversion Solutions promotion seem to have what might be characterized as "the common touch."

After all, it is not very often that executives of a purported multibillion-dollar company, including the grand pooh-bah himself, Mr. Harris, take the time to post to Internet chat sites or natter on into the wee hours of the morning on an obscure Internet radio program.

Many of the company's cult-like followers are overwhelmed by this apparent down-to-earth camaraderie.

Conversion Solutions also seems to have its finger on the pulse of what moves gullible penny stock investors, in addition to the usual nudge-and-a-wink blarney about imminent riches.

For example, Conversion Solutions quickly tapped into the rallying potential of launching an assault against naked shorting, whether real or imagined.

In addition to pointing the finger at naked shorters and so-called Internet "bashers" during marathon radio shows, Conversion Solutions issued a news release on Sept. 20 claiming that its Non-Objecting Beneficial Owner (NOBO) list had identified more than 75.4 million "in market shorts."

According to Conversion Solutions, a Sept. 13 NOBO list indicated that 15,184 shareholders held more than 106.4 million shares when there were only approximately 30.9 million free trading shares available.

It appears that Automatic Data Processing Inc. provided Conversion Solutions with an incorrect NOBO list, but the company did not bother to say anything about that.

Interestingly, an Oct. 3 NOBO list reports that 4,911 shareholders hold approximately 39.3 million shares.

Many of the company's cult-like followers, convinced that naked shorters have been hammering the share price, simply brush off that discrepancy.

While brushing off discrepancies and ignoring criticisms of the company, avid fans embrace the notion, suggested by Ms. Dabbs, that Conversion Solutions will rock Wall Street.

Critics of the company suggest silly notions like that smack of another episode of "Crazy Street Meets Wall Street."

Taking a hit

The company's loyal followers have been anticipating the overdue filing of an annual report that many believed would fully justify a share price of at least $15 and possibly a price of $54 per share or more.

Conversion Solutions filed the annual report before the market closed for the first session of the week.

Alas, for the most part, the annual report for the year ending June 30, 2006, is simply a rehash of previous filings including the audited financial statements for Conversion Solutions filed on Sept. 29.

As for Mr. Harris's earlier chatter about "resetting" the company's stock price to $15, the annual report indicates that Conversion Solutions will "reset the Share value to an equivalent of $15.00 by issuing additional shares to each shareholder of record as of the close of business on October 30, 2006."

In other words, some significant dilution is on the way, if Mr. Harris's peculiar scheme passes muster with the U.S. regulator.

Even some of the company's devoted followers were disappointed with the annual report.

The stock traded as high as $2.53 during the day, but the share price took a hit after the annual report was filed.

With more than 2.5 million shares changing hands, Conversion Solutions shed 40 cents to close at $1.80 on Oct. 16.

Stockwatch will continue to follow developments.

Comments regarding this article may be sent to [e-mail].

(More information regarding Conversion Solutions Holdings Corp. is available in a Stockwatch article published on Oct. 13, 2006.)

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