Former Executives Indicted on Charges of Conspiracy and Securities Fraud Related to Artificial Stock Inflation

DARRYL HORTON, 48, of Okemos, Michigan; BENJAMIN STANLEY, 47, of Kennesaw, Georgia; and RUFUS PAUL HARRIS, 41, of Adairsville, Georgia, made their first appearance today before a United States Magistrate Judge on federal charges of securities fraud and conspiracy in connection with a scheme to defraud investors of the publicly-traded entity known as Conversion Solutions Holdings Corporation (“CSHC”).

HORTON, STANLEY, and HARRIS were indicted on September 15, 2009. HORTON was arrested on October 17, 2009. STANLEY and HARRIS surrendered today.

According to Acting United States Attorney Sally Quillian Yates, the charges and other information presented in court: HARRIS was the founder and Chief Executive Officer of CSHC, STANLEY was the co-founder and Chief Operating Officer, and HORTON was the Chief Financial Officer. The indictment alleges 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 their own shares to family members who sold at the inflated prices.

The indictment charges that the defendants allegedly began issuing a series of press releases beginning in approximately August 2006, that publicly claimed CSHC’s ownership or control of entire issuances of foreign sovereign bonds issued by the Republics of Venezuela and Finland. These bonds were, on their face, worth billions of dollars and paid tens of millions in annual interest. In at least one of the press releases, HARRIS was quoted as stating that, based on CSHC’s acquisition of such large quantities of sovereign debt, “we are looking at a new justifiable reorganization release price of $25.63 [per share].” At the time, CSHC shares generally traded at less than approximately $1 per share. The indictment further alleges that, 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.

The indictment alleges that the three defendants knew these public statements were untrue, and that they knew that CSHC had little if any assets of any value and did not own or control the foreign sovereign 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 alleged 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 in August 2006, appreciated to more than $3 per share in October 2006. During this time, HARRIS, STANLEY, and HORTON allegedly 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.

The indictment charges HARRIS, HORTON, and STANLEY with one count of conspiracy to commit securities fraud and one count of securities fraud each. HARRIS is also charged with one count of providing a false certification of a financial statement. The securities fraud charges carry a maximum sentence of 25 years in prison and a fine of up to $250,000. The false certification of a financial statement charge carries a maximum sentence of 10 years in prison and a fine of up to $1,000,000. In determining the actual sentence, the Court will consider the United States Sentencing Guidelines, which are not binding but provide appropriate sentencing ranges for most offenders.

Members of the public are reminded that the indictment only contains charges. The defendants are presumed innocent of the charges and it will be the government's burden to prove the defendants' guilt beyond a reasonable doubt at trial.

This case is being investigated by Postal Inspectors from the United States Postal Inspection Service, and the FBI. This case was referred to the United States Attorney’s Office by the U.S. Securities & Exchange Commission, which previously filed a lawsuit against Conversion Solutions and HARRIS.

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Adairsville Man Sentenced for Possessing Child Pornography

RICKY LEE MCDANIEL, 53, of Adairsville, was sentenced today by United States District Judge Harold L. Murphy to serve five years in federal prison on charges of possessing child pornography.

“Child pornography is a permanent record of sexual child abuse, and its circulation on the Internet haunts the victims for the rest of their lives,” said Acting United States Attorney Sally Quillian Yates. “The defendant in this case had over 1,200 images and four video clips of child abuse stored on dozens of diskettes, and he will now receive the punishment that federal law provides for such deplorable conduct.”

Gordon County Sheriff Mitch Ralston said of the case: “I am pleased with the results of the arrest and prosecution of Ricky Lee McDaniel in connection with the child pornography charges brought against him by the U.S. Attorney’s Office. A defendant such as this is a menace not only to the children in our community, but to children elsewhere in our country. I recognize and applaud all of the intensive investigative work put into this case by the FBI, and I also commend the detective from my own staff who very capably assisted the FBI with this matter. I look forward to enhanced cooperation between the Sheriff's Office and federal authorities in detecting, arresting, and prosecuting persons involved in such vile activities.”

MCDANIEL was sentenced to five years in prison to be followed by three years of supervised release.

MCDANIEL was convicted of these charges on July 21, 2009 after a two-day trial.

According to Acting United States Attorney Yates, the charges and other information presented in court: Special Agents of the Federal Bureau of Investigation began investigating MCDANIEL, after an investigation in Oklahoma linked MCDANIEL’s Internet service to the receipt of child pornography. FBI agents assisted Gordon County Sheriff’s Department investigators in executing a search warrant of MCDANIEL’s home in Calhoun. Agents found, among other things, over 1,200 images and four video clips of child pornography being sexually abused on approximately 60 floppy diskettes. Several of the children shown being raped and abused in the images and videos were previously identified victims of child abuse cases from across the country.

This case was investigated by special agents of the FBI and investigators from the Gordon County Sheriff’s Department.

Assistant United States Attorney William G. Traynor prosecuted the case.

This case is being brought as part of Project Safe Childhood. In February 2006, the Attorney General launched Project Safe Childhood, a nationwide initiative designed to protect children from online exploitation and abuse. Led by the United States Attorney's Offices around the country, Project Safe Childhood marshals federal, state, and local resources to apprehend and prosecute individuals who exploit children via the Internet. For more information about Project Safe Childhood, please visit www.projectsafechildhood.gov.

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Adairsville Man Sentenced for Possessing Child Pornography

JERALD WAYNE ANDERSON, 64, of Adairsville, Georgia, was sentenced today by Senior United States District Judge Robert L. Vining, Jr., to serve more than 8 years in prison on a charge of receiving child pornography.

“Child pornography is a polite term for images of children being sexually abused,” said United States Attorney David E. Nahmias. “Instead of recoiling in horror at these images, as a normal person would, this defendant downloaded and collected thousands of images depicting the sexual exploitation of vulnerable children. Today’s harsh but just sentence is the appropriate punishment for a man who supported the abuse of these children by collecting and viewing child pornography.”

ANDERSON was sentenced to 8 years, 1 month in prison to be followed by 20 years of supervised release. ANDERSON was convicted of these charges on August 14, 2008, when he pleaded guilty to receiving child pornography through the use of a computer.

According to United States Attorney Nahmias and the information presented in court: In October 2007, ANDERSON was posing as a 13-year-old girl on the Internet and was chatting with an undercover police officer from Broward County, Florida, who also claimed to be a 13-year-old girl. Within minutes of beginning the chat, ANDERSON sent the police officer images of a young girl in various stages of nudity, including images that displayed her genitals. ANDERSON claimed that he was the child in the photographs and asked the undercover officer for nude pictures of herself. ANDERSON engaged in a similar online chat with an undercover police officer from Bensalem Township, Pennsylvania, in November 2007. Again, within minutes of beginning the chat, ANDERSON sent the same photos of a nude girl to the undercover officer. Later in November and again in December 2007, ANDERSON engaged in chats with the Florida undercover officer, again claiming to be a young girl, although he used different names from the earlier chats. He again sent nude photographs of a young female. The undercover officers issued subpoenas to various businesses to determine the location of the person who was distributing images of child pornography. The results pointed to a residential address in Adairsville, Georgia. In January 2008, the undercover officers passed the information on to Special Agents of the Federal Bureau of Investigation, and within days of receiving this information the agents obtained and executed a search warrant for the Adairsville address. The agents found that ANDERSON had approximately 140 CD’s and DVD’s containing thousands of images of child pornography. ANDERSON organized and labeled his collection of child pornography for easy access. The images on the discs showed children as young as 5 years old being sexually abused and engaged in sexually explicit conduct. ANDERSON admitted that he had collected the child pornography and that he had sent images of child pornography to at least 100 other persons.

This case is being brought as part of Project Safe Childhood. In February 2006, the Attorney General launched Project Safe Childhood, a nationwide initiative designed to protect children from online exploitation and abuse. Led by the United States Attorney's Offices around the country, Project Safe Childhood marshals federal, state and local resources to apprehend and prosecute individuals who exploit children via the Internet. For more information about Project Safe Childhood, please visit www.projectsafechildhood.gov.

This case was investigated by Special Agents of the Federal Bureau of Investigation. Assistance in this case was provided from the Broward County (FL) and Bensalem Township (PA) Police Departments.

Assistant United States Attorney Paul Jones prosecuted the case.

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Adairsville Man Pleads Guilty in Child Pornography Case

ERALD WAYNE ANDERSON, 63, of Adairsville, Georgia, pleaded guilty today before Senior United States District Judge Robert L. Vining, Jr. to one count of receipt of child pornography.

United States Attorney David E. Nahmias said of the case, “This defendant posed as a young girl on the internet, one of many deceptions used by sexual predators who try to reach and exploit our children through the computers in our homes. Thanks to coordinated law enforcement work across state lines, this defendant is pleading guilty and faces a long sentence in federal prison.”

According to United States Attorney Nahmias, and other information presented in court: In October 2007, the defendant engaged in an internet chat with an undercover police officer from the Broward County (Florida) Sheriff's Office. The defendant was posing as a 13-year-old girl. Approximately within 3 minutes of beginning the chat, the defendant began discussing modeling pictures with the undercover officer. The defendant sent the undercover officer a number of photographs over the internet of a young girl (which the defendant was claiming to be) engaged in various poses. Many of the photographs showed the girl in nude poses.

In November 2007, an undercover police officer from the Bensalem (Pennsylvania) Police Department was chatting online, and the defendant contacted her, again posing as a 13-year-old girl, but this time with a different name. Again, the defendant sent over the internet a number of "modeling photographs," which included many of the same pictures sent the previous month.

The local police officers issued subpoenas for the defendant's e-mail addresses and learned that he resided in Adairsville, Georgia. The case was then referred to the FBI, and on February 19, 2008, law enforcement officers executing search warrants found thousands of images of child pornography kept in briefcases and meticulously organized and labeled. These images showed girls under the age of 12 engaging in sexually explicit conduct. After waiving his Miranda rights, the defendant admitted to receiving and collecting child pornography.

Sentencing for ANDERSON is set for October 9, 2008, at 10 a.m. before Judge Vining. He faces a mandatory minimum sentence of five years in federal prison. There is no parole in the federal system.

This case is being investigated by Special Agents of the Federal Bureau of Investigation, with invaluable assistance provided by the Broward County, Florida, Sheriff’s Office, and the Bensalem (Pennsylvania) Police Department.

Assistant United States Attorney Paul Jones is prosecuting the case.

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