This issue is outlined in this Vmware KB article
Vmware Converter Error
When you try to convert the computer and you have selected to Synchronise Changes the error is displayed.
Disable UAC
The problem is caused because the converter tries to change the UAC policy.
Turn off UAC
By turning off the UAC you can convert the computer and then switch this back on. Once you have changed this you will need to reboot for this to take effect.
Restart Conversion
Now your conversion will run correctly and get past the 1% stage.
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