Feb. 23 (Bloomberg) -- Three former officers of Conversion Solutions Holdings Corp., based in Kennesaw, Georgia, were sentenced to prison terms as long as 23 years and ordered to make restitution of $44 million for running a so-called stock pump and dump scheme, the Justice Department said.
“These significant sentences reflect the seriousness of the massive fraud these defendants committed against numerous victims who invested in the defendants’ company,” Sally Q. Yates, U.S. Attorney in Atlanta, said in a statement. “While the defendants got rich, victims lost millions.”
The trio were convicted in federal court in Atlanta last year of conspiring to issue false press releases and financial statements to inflate the share price from less than $1 in August 2006 to $3 and $4 a share in October 2006, prosecutors said.
They transferred shares secretly to family members to cash in on the higher price, prosecutors said in the statement.
U.S. District Judge Timothy C. Batten sentenced Rufus Paul Harris, 43, a co-founder and chief executive officer of the firm, to 23 years in prison, to be followed by 5 years of supervised release. Harris, of Oklahoma City, Oklahoma, fled while on trial in Atlanta last year, according to the U.S. Attorney’s Office. He was captured in Utah four days later, the prosecutor’s statement said.
Harris’s lawyer, Howard Manchel of Atlanta, didn’t immediately respond to e-mail and phone messages seeking comment on his client’s sentence.
Chief Financial Officer
Benjamin Stanley, 48, of Kennesaw Georgia, co-founder and chief operating officer, was sentenced to 16 years. Chief Financial Officer Darryl Horton, 50, of Okemos, Michigan, got four and a half years in prison. Horton pleaded guilty to mail fraud while the jury was deliberating, according to the U.S. Attorney’s Office.
“We are disappointed in the length of the sentence” for Stanley, said his lawyer, Donald Samuel of Atlanta. Stanley “believed in the validity of the business model, the legitimacy of the investments,” said Samuel, acknowledging that the jury rejected the claim that he was duped as the investors were.
Efforts to reach Horton’s attorney by e-mail and phone after regular business hours weren’t immediately successful.
Prosecutors said the $44 million they are to pay in restitution will go to more than 5,000 victims.
The U.S. Securities and Exchange Commission referred the case to the federal investigators, according to the statement. The firm, a diversified holding company, has been delisted.
The company claimed $800 million in assets, most of it in foreign sovereign bonds, and income of almost $20 million a year in interest revenue. None of that was true, according to the government.
The case is U.S. v. Harris, 1:09-cr-00406, U.S. District Court, Northern District of Georgia (Atlanta).
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