CEO of Kennesaw Company Turned Fugitive

Three former corporate officers of a Kennesaw-based company were found guilty in federal District Court today of defrauding investors.

Rufus Harris, the former CEO of Conversion Solutions Holdings Corp., fled this week before the verdict was delivered and is being sought as a fugitive.

After a two-week trial, Harris, 43, formerly of Adairsville, and company co-founder Benjamin Stanley, 48, of Kennesaw were convicted on federal charges of securities fraud, wire fraud and conspiracy in connection with a scheme to defraud investors of the publicly traded company. A third defendant, Darryl Horton, 50, of Okemos, MI, pleaded guilty to conspiracy.

“This was a classic stock pump-and-dump scheme. The defendants, the three top officers of a publicly traded company, pumped up the company’s stock price with false claims and inflated financial statements while they were secretly dumping stock through immediate family," U.S. Attorney Sally Yates said in a press release. "Today’s verdict is a bittersweet victory for the many victims who believed the defendants and invested and lost money." 

According to Yates and information presented in court, the criminal activity began in August 2006. The three men conspired to issue false press releases and financial statements to inflate the stock price while transferring shares to family members, who then sold at the inflated prices.

The defendants issued press releases that claimed the company owned more than $1 billion in foreign bonds issued by Venezuela and Finland. In at least one of the press releases, Harris was quoted as saying, “We are looking at a new justifiable reorganization release price of $25.63" per share.

At the time, the shares generally traded for less than $1. The false statements helped drive the price up to $3, and the trio's relatives sold their shares for $2 to $3 each.

The company also issued an annual report claiming as much as $800 million in assets.

Evidence presented in court showed the three defendants knew those public statements were false, and the company "had little if any assets of any value and did not own the foreign sovereign bonds and other assets that it claimed to have."

Harris waived his right to an attorney and elected to represent himself on the first day of trial. He was staying at a motel but checked out Monday evening and drove away in a dark-colored minivan, investigators said.

He never returned to court, and the trial proceeded without him.

A "multiagency, nationwide manhunt" is trying to capture him, Yates said.

Harris and Stanley face a maximum sentence of 25 years in prison and a fine of $250,000 for securities fraud, 25 years in prison and a fine of $250,000 for conspiracy and 20 years in prison and a fine of $250,000 for each count of wire fraud.

Harris also faces up to 10 years in prison and a $1 million fine for false certification of a financial statement.

After his guilty plea to conspiracy, Horton will likely receive the maximum sentence of five years in prison and a fine of $250,000, according to the announcement from the U.S. Attorney's Office.

Sentencing is scheduled for Aug. 18.

“These individuals demonstrated an immense level of greed as they conspired to defraud others in a far-reaching investment scam that resulted in many victims," said Special Agent Brian Lamkin of the FBI's Atlanta Field Office.

He said Harris "will soon join his co-defendants in answering for these crimes in that the law enforcement community has already begun efforts to ensure his recapture.”

The U.S. Marshals Service is hunting for Harris and asks anyone with information about his location to call 404-909-1483.