Jackson memorabilia auction nets loss for Universal Express
South Florida Business Journal - by Brian Bandell
Universal Express' nationally publicized auction of Michael Jackson family memorabilia didn't net the windfall the Boca Raton-based company expected.
It actually lost hundreds of thousands of dollars on the deal, according to a report by receiver Jane Moscowitz, who took over the company after it lost a lawsuit to the SEC.
In December 2006, Universal Express reported that it paid $5.8 million to New Jersey-based Vintage Associates for thousands of Jackson clothes, drawings and personal effects. The collection was seized in a bankruptcy court case of Michael Jackson's parents.
During an interview at the time, Universal Express CEO Richard Altomare said he expected the auction to generate $40 million to $50 million for his publicly traded luggage shipping company.
Days after the May auction in Las Vegas, Altomare said in a press release that the sales generated between $1.5 million and $2 million.
According to Moscowitz, the auction brought it only $580,110, but Universal Express won't see any of that money.
"The morass of litigation and money owed surrounding the acquisition and auction of this collection make it highly unlikely that any funds will be realized from the sale of this collection," she wrote. "The receiver is, instead, seeking to minimize liabilities."
The real purchase price of the collection was $4 million, but Universal Express only gave Vintage Associates $150,000, she reported. The seller now claims that title to the items never passed to Universal Express.
New York-based Guernsey's agreed to a 15 percent commission with a $700,000 minimum payment to run the auction. Universal Express advanced Guernsey's $200,000.
But Michael and Janet Jackson sued Universal Express in Las Vegas and stopped it from selling some of their personal items.
The bids were lower than expected without those items and because no minimum value was assigned, Moscowitz reported. Some items were not purchased or paid for.
The Jackson 5 tapes weren't auctioned. The family believes it owns the intellectual property of the unreleased songs. The receiver asked Altomare to return them.
Guernsey's had $780,110 in its account for the auction, plus the company's advance. Universal Express could get $80,110, but the auction expenses plus legal fees, Moscowitz reported, would more than exhaust that.
Altomare did not return a call to his home.
In April, the SEC won $25.7 million against Universal Express, Altomare and general counsel Chris Gunderson over selling unregistered securities and issuing false press releases. The company then raised $9.5 million more by selling unregistered shares, which prompted a New York federal judge to replace Altomare with a receiver, who found the company did not have enough assets to remain in business without illegally selling stock. Altomare is under federal investigation.
The company's legal troubles were easily viewable through a Google search. Yet, dozens of companies signed promotional deals with Universal Express. Many of those companies are now on Universal Express' $5.9 million unpaid accounts list.
The largest creditor is Team Rensi Motorsports, a Charlotte, N.C.-based NASCAR team. Owner Ed Rensi said an ad agency brought them a $2 million sponsorship with Universal Express for the season, starting in February. The company only paid $100,000. Not wanting to violate the contract, Rensi kept Universal Express' logo on the car through the season, instead of selling it to another sponsor.
"I decided to sue them and, when I did, I realized they had a receiver," he said. "I knew so little about the company and what they did."
Rensi depended on the ad agency to do due diligence. He is no longer working with that agency because of this, he added.
The ownership of the Florida Panthers and the BankAtlantic Center, where Universal Express had signage during the 2006-2007 season, had $544,950 due from the company.
"A lot of times, due diligence doesn't go as deep as it should because of the interest of making a sale," said Derek Hodes, owner of Miami-based Momentum Marketing, which lines up event and venue sponsorships. "Salespeople are on the front line and expected to perform, and there's a lot of pressure to go with that."
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