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UNIVERSAL EXPRESS CASE PROFILE - December 1, 2009
Universal Express (USXP) operated as a pristine and exemplary small public company for 17 years.
It was ignominiously silenced by some rogue government officials in days.
For the good of our future economic trading system and other vulnerable United States public companies the following facts need to be exposed and understood.
We ask the interested public to simply allow these chronological facts in this profile to speak for themselves.
Was justice served? When will it be served?
Does the present Securities and Exchange Commission and the United States Court of Claims need to address these facts?
On July 27 2009 the SEC, after more than ten years of denial, finally admitted that the naked shorting of the shares of all public companies including small public companies like Universal Express was a huge national problem. (I)
On August 5, 2009 the SEC after more than ten years of actually denying to the public and the courts that this illegal counterfeiting process existed, announced it had brought its first enforcement action against only selected small house brokers who only naked shorted from 2005 to 2007. (2)
These long though overdue but ineffective tentative actions were initiated by the present SEC administration and its new Chairman. (3)
Then on October 21, 2009 United States Senator Edward E. Kaufman in a floor speech to the Senate urged the SEC to finally and effectively ban naked shorting which had been a huge national problem for all public companies, finally including small public companies as well. (4)
In his speech Senator Kaufman referred to Senate Bill No. 605 which is to ban naked short selling. He and a number of other Senators have introduced and cosponsored Bill No. 605. He concluded, “We need to send a strong message to the SEC that the United States Congress will not tolerate (its continued) inaction on this critical issue.” (5)
However the previous SEC administrations had failed for more than a decade to take any effective regulatory or enforcement action against illegal naked shorting or naked shorters themselves (6)
These non-regulation and non-enforcement failures of the previous SEC administrations to stop naked shorting borders on criminality, cover-up or, at the least, gross fraud. (7)
Our case involves the failure of previous SEC administrations to stop naked short sellers and SEC employees from destroying Universal Express and thousands of other small publicly-traded companies. (8)
The core issue of the naked shorting scandal underlies these paragraphs. Naked short selling is selling shares one does not own, will never purchase nor deliver. Each such sale is an illegal violation of the securities laws and the anti-counterfeiting statutes of the United States. It is also grand larceny under the laws of every State. This illegal process was long covered-up by previous SEC administrations in favor of culpable Wall Street interests and has been a significant cause of the present financial global crisis. (9)
Previous SEC administrations denied and ignored frequently-requested assistance by Universal Express and its officers to combat the naked shorting of its shares. (10)
The long-term naked shorting scandal by Wall Street firms of the shares of small public companies under previous SEC administrations destroyed thousands of those companies and the investments of millions of ordinary Main Street investors including over 65,000 Universal Express shareholders. (11)
The previous securities regulators total failure to enforce existing securities laws as well as its own regulations and its active cover-up of the naked shorting scandal was a gross breach of its fiduciary duty to small public companies, their investors, officers and employees. (12)
The previous SEC administration’s willful destruction of Universal Express and its vindictive attempts to silence its officers as whistleblowers on the naked shorting issue constitutes gross fraudulent misconduct. (13)
The naked short sellers operated like gangs or economic terrorist cells usually from or within Wall Street houses such as Bear Stearns and Lehman Brothers. They would attack the stock of small companies for the purpose of driving the stock down in value and pushing the targeted companies into bankruptcy. They could sell what they did not own. (14)
The naked shorters who attacked Universal Express combined their raid with internet postings of more than 700,000 false messages on the Company’s chat board thus attempting to drive the Company into bankruptcy. Significantly Universal Express heroically fought long and hard since 1998, although Bear Steams and Lehman Brothers collapsed in only one weekend under the same type of internet and naked short sale stock attacks. (15)
The purpose of pushing these public companies into bankruptcy was that the naked shorters would be able to keep the entire proceeds of their illegal naked short sales because they were never forced to cover or deliver when a company failed. It was a common practice that these SEC protected naked shorters did not even have to report these ill gotten revenues on their taxes. (16)
After the naked short sellers drove down the company’s stock price, it destroyed the ability of the company to obtain credit lines and maintain existing credit relationships. This further resulted in shareholders’ lack of confidence and often to predictable panic selling forcing corporate failures. (17)
On numerous occasions since 1998 Universal Express and its officers complained to the previous SEC administrations about these illegal practices, but surprisingly the SEC always helped the naked short sellers by their denials. First, by fraudulently doing nothing, and then by actually attacking Universal Express and its officers. (18)
Failing to get any help from the SEC, Universal Express was forced to sue some of the naked short sellers directly. The Company proudly obtained two Florida jury verdicts totaling $700,000,000 against the naked short sellers. These were the same judgments which the previous SEC administrations seized by fraudulently forcing Universal Express out of business and attempting to permanently silence those facts which the two juries determined appropriate for victim compensation. (19)
The Company filed 68 annual and quarterly reports with the SEC over a 17 year period without receiving any questions or criticisms. The previous SEC administrations disregarded the rights of Universal Express and its officers and shockingly went to the aid of the illegal short sellers. Despite the SEC’s fraudulent statements of denial and mistruths to the courts, Universal Express had the absolute right to issue stock under its bankruptcy exemptions to counteract the protected naked shorting of its shares. By obtaining a summary judgment fine with SEC fraudulent statements, Universal Express and its six subsidiaries were improperly closed, liquidated and corporate documents shredded despite an ongoing request for a trial or appeal. (20)
It might be further observed that in due course the same naked short selling wolf turned on two of its own. When Bear Stearns and Lehman Brothers were allegedly having financial difficulties during the last half of 2008, the naked short sellers were there to drive Bear Stearns and Lehman Brothers out of business in the same fashion. (21)
While Universal Express was being attacked by the SEC, Bernie Madoff was writing with the SEC’s blessing the short selling rules for the financial industry. He was, as we sadly note today, one of the biggest unregulated naked short seller for decades. (22)
Finally on July 15, 2008 and September 15. 2008 the previous SEC administration admitted under intense media exposure that naked shorting was a huge national problem underlying the failure of major financial institutions as a major cause of the financial meltdown. It was during this period of shockingly breaking public disclosure on naked shorting that the SEC incarcerated and sought with great efforts to fraudulently maintain in chained solitary confinement for 83 days Universal Express’ CEO, Richard Altomare, the most prominent speech giving whistleblower on naked shorting. (23)
At that point, the previous conflicted SEC administration actively sought to protect from the naked shorting scandal only selected Wall Street banks that were doing the naked shorting of thousands of small public companies for these same ten years. Many of these banks now turned on each other in their own insatiable and unregulated greed adding to unregulated confusion. (24)
The SEC had denied for over a decade that naked shorting was a problem and failed to take any enforcement action to prevent the issuance of trillions of counterfeit and unregistered shares sold into the market by vulture-like Wall Street interests in the names of small public companies destroying their market prices, in violation of the anti- counterfeiting statutes and securities statutes of the United States Congress. (25)
As a result of this ongoing regulatory failure and cover-up by previous SEC administrations of the naked shorting scandal, thousands of small public companies were destroyed and forced into bankruptcy by the naked shorters, millions of small investors lost their life savings and hundreds of thousands of employees lost their jobs. (26)
Universal Express was one of those estimated ten thousand small public companies to be destroyed by the naked shorters in league with previous SEC administrations, which has been paid (yes, paid) for every counterfeit share traded. (27)
Universal Express, it’s President and CEO Mr. Richard A. Altomare and Mr. Gunderson, its General Counsel, had been prominent whistleblowers against naked shorting for more than ten• years. Instead of supporting and protecting these whistleblowers, they were fraudulently and illegally harassed and targeted by previous SEC administrations in order to silence them even by closing down and defaming their 17 year business model. (28)
The previous SEC administrations denied the existence of naked shorting as a problem for stock marketplaces and failed to enforce its own regulations to stop the practice. They also were determined after years of fraudulently targeted harassment to continue to try to silence by any and all means these very persistent whistleblowers, Universal Express and its CEO who was also a former United States Marine. (29)
These SEC actions to fraudulently harass, destroy and silence Mr. Altomare on behalf of the naked shorters culminated on May 2, 2008 at the behest of the SEC in the brutal incarceration of Mr. Altomare into chained solitary confinement for eighty three (83) days for purged civil contempt which Mr. Altomare, after a 40 pound weight loss, sadly proved was improper. (30)
In a few days, at the behest of the previous vindictive and conflicted SEC administration, this viable and growing American small public company that was Universal Express having a market capitalization during its fiscal year 2006 of $111 Million Dollars was fraudulently defamed in the business marketplace and improperly liquidated for $35,000. (31)
It is also estimated that since naked shorters never need to deliver or “cover” their positions with actual shares of companies thus forced into bankruptcy, their gains from these illegal activities have never been reported to the government. The Wall Street Journal stated in July 2007 that the naked shorting losses to American taxpayers was valued at $2.5 billion daily. Accordingly, the lost tax revenues from this illegal trading permitted by the previous SEC administrations over the relevant period was conservatively more than $7 trillion - sufficient to pay off our national debt. (32)
It is clear that the culture of previous SEC administrations was to defer to and not to regulate powerftrl Wall Street elites, but only to focus on small, less powerftil companies. Despite the fact that the SEC’s Charter mandates protection for ordinary investors not just brokers and hedge fluids this fact remains painfully true. (33)
The revolving door of the SEC leading to huge accounting, legal and consulting salaries with these same Wall Street elites also fostered this SEC lack of regulation culture. (34)
Presidential Candidate Senator John McCain on September 18. 2008 called for the firing of former SEC Chairman Cox for failing to regulate the naked shorting scandal. (35)
On December 18, 2008 President-Elect Obama, in nominating the new SEC Chairman, stated that the SEC, as the regulator assigned to oversee Wall Street had failed to regulate and had “dropped the ball” over the years, substantially causing the present financial crisis. (36)
On January 27 2009 the Senate Banking Committee at hearings accused the previous SEC administrations of a total failure to regulate Wall Street. (37)
On February 4, 2009 the House Financial Services subcommittee determined at hearings that the previous SEC administrations had totally failed to regulate Wall Street and that the SEC had operated only to protect Wall Street institutions and not ordinary Main Street investors as it is charged by Congress in its charter. (38)
On March 18, 2009 the Office of Inspector General of the SEC issued a report finding that previous SEC administrations had failed to regulate the naked shorting scandal, that naked shorting was a significant factor in the present financial collapse and that the SEC had ignored many thousands of complaints on naked shorting from small public companies and investors. (39)
On June 2, 2009 the Chief Executive of the NASDAQ told the U.S. Chamber of Commerce that naked shorting was the real problem underlying the present financial crisis. (40)
On March 3, 2009, April 1, 2009, June 24, 2009 and July 22, 2009 numerous United States Senators sent joint letters to the new SEC Chairman urging that the SEC ban naked shorting as a huge problem and a principal cause of the present financial crisis and the cause of great damage to and destruction of public companies, especially smaller public companies like the now destroyed Universal Express. (41)
On June 25, 2009 United States Senator Edward E. Kaufman in a floor speech to the Senate stressed in great detail the “fierce urgency” for the SEC to ban naked shorting as a huge problem and a principal cause of the present financial crisis and the cause of great damage to and destruction of public companies, especially smaller public companies. (42)
On July 27, 2009 the SEC, after more than ten years of denial, finally admitted that the naked shorting of the shares of all public companies, including small public companies like Universal Express was a huge national problem. (43)
On August 5, 2009 the SEC finally, after more than ten years of actually denying that this illegal process existed, announced it has brought its first enforcement action against only small house brokers who naked shorted from 2005 to 2007. (44)
These actions were taken after more than a decade of previous SEC administrations denying that naked shorting existed or was even a problem. It ignored naked shorting. It actively covered-up and failed to regulate the naked shorting scandal. Its’ inactions bordered on criminality and, at the least, gross fraud. Its’ inactions were in the long-term and perpetual interests of Wall Street banks and firms who were illegally committing the naked shorting in the first place. (45)
On October 21, 2009 United States Senator Edward E. Kaufman in a floor speech to the Senate urged the SEC to finally and effectively ban naked shorting which has been a huge national problem for all public companies, now finally including small public companies as well. (46)
In his speech, Senator Kaufman referred to Senate Bill No. 605, to ban naked short selling, which he and a number of other Senators have introduced and cosponsored. He concluded, “We need to send a strong message to the SEC that the United States Congress will not tolerate (its continued) inaction on this critical issue.” (47)
In conclusion, Universal Express had corporately developed and had become globally recognized despite the rogue SEC harassment supporting the unrelenting attack since 1998 by naked short sellers, unscrupulous Wall Street financial interests, fraudulent brokers, hedge funds and market makers who sold into the market billions of USXP unregistered and counterfeit shares. This caused the collapse of the Company’s stock price from $2.00 to $.02 (2 cents) per share and, thereafter, kept the Company’s stock price well below fractions of a cent, despite the strong growth of the Company’s businesses, including a tripling of revenues each quarter for more than five years. (48)
In more than 100 press releases, letters and visits to government officials and in worldwide speeches• and webcasts as well as a full page New York Times announcement, Universal Express, its President and its General Counsel, proved that naked short selling existed upon the attack by the naked short sellers on the Company’s shares. They even showed by statistics that the volume of the Company’s shares traded was 11 times the Company’s outstanding shares and more than 68 times its average daily volume. (49)
As stated, State court juries in Florida in 2001 and 2003 awarded the Company verdicts exceeding a total of $700,000,000 against naked short sellers. In a press release issued on September 23, 2003, entitled “Universal Express.. .Declares War on ‘Naked Short Selling’,” the Company stated “If normal everyday people acting as juries can understand this naked shorting scheme, why can’t the SEC “? (50)
Within a month after the Company’s second jury verdict against the naked shorters and the very wide publicity attending the Company’s verdicts, an embarrassed SEC, through its Denver office, commenced a fraudulent program of harassment against the Company with more than 13 subpoenas for thousands of documents demanded to be produced in only a few days. Not one attempt to aid the Company was offered by the SEC. (51)
The Company volunteered to provide information on contracts for current proposed acquisitions and its’ funding sources for those acquisitions. (52)
Yet, before these documents were even received by the attorneys at the Denver office of the SEC, agents were actually calling and visiting those acquisition candidates’ and flmders’ senior officers, threatening them with reprisals or tax audits so that they would move away from the Company and its success. (53)
This horrific and inappropriate SEC pattern of intimidation attempting to prevent Universal Express’ continued success was in frill swing and successful since several large proposed acquisitions were then terminated. (54)
The SEC’s fraudulent harassment of the Company and its officers, as whistleblowers on naked shorting and the harassment of its business partners and potential business partners and finders continued unabated thereafter. (55)
The Company, its President and General Counsel, who value free speech under our Constitution, were determined not to be bullied by a conflicted and improperly paid regulatory agency, which had failed the investing public on this national naked shorting scandal in favor of Wall Street interests in clear violation of its Congressional mandate. (56)
This scandal, clearly ignored by previous SEC administrations, had destroyed the ongoing American dream of taking small private companies public and growing those businesses through the growth of their stock base. (57)
Thousands of lost developmental products beneficial to the public including Universal Express’ innovative logistic businesses never had a chance for the national market. (58)
Trillions of dollars have been siphoned from the capitalizations of public companies by the naked shorters with the intent and result of bankrupting those companies so that the naked shorts would never have to be “covered” by delivery of actual shares. (59)
The present SEC’s recent admission on July 27 2009 that naked short selling has been a huge problem for all public companies, including small public companies like Universal Express and its announcement on August 5. 2009 of its first enforcement action against only small house brokers who naked shorted, constitute complete vindication of Universal Express and its officers in their over ten year battle against naked shorting, incriminates former SEC perjurers and sadly cements the history of the previous SEC administrations’ fraudulent conduct against these dedicated whistleblowers. (60)
Further historical information is also available on the following website:
www.richardaltomare.com
Exhibits supporting each of the aforementioned paragraphs are available upon request by contacting raaltomare@yahoo.com or chgunderson@gmail.com.
December 1, 2009
Mr. Gunderson Acted At All Times in “Good Faith” Under
The Statutorily Imbued Immunities of the United States Bankruptcy Code
With Respect to the Temporary Suspension
Mr. Gunderson, as General Counsel, is protected from temporary suspension by the statutorily imbued immunities of the United States Bankruptcy Code, 11 U.S.C. Secs. 101 et seq., which immunities were specifically provided in great detail by the Bankruptcy Court in the Company’s Reorganization Plan and Disclosure Statement. These powers, positions and immunities were directed by the Bankruptcy under the Bankruptcy Code.
The SEC continued contumacious denial of the Company’s and the President’s and Mr. Gunderson’s position and rights under the Bankruptcy Code and the rulings of the Bankruptcy Court would have been dealt with harshly by that Court if the SEC had, as they were permitted to do, appeared in those proceedings. The SEC had full knowledge of the proceedings and failed to appear. Once they so failed, they are estopped from proceeding against adversely against the President, Mr. Gunderson or other employees on matters specifically provided by the Reorganization Plan of the Company as approved by the Bankruptcy Court, including the issuance of shares to advisors and consultants under the Stock Option Agreement (also referred to in the Reorganization Plan as the Stock Incentive Plan, the functional equivalent of an S-8 registration, filed initially with the SEC and many times thereafter, in such amounts as are necessary to match the daily recapitalization of the Company caused by the billions of unregistered, counterfeit and phantom shares permitted by the SEC to be issued by the naked shorters in the name of the Company, but for which the Company received no consideration.
The Company, its President and Mr. Gunderson, as General Counsel, had at all times acted in good faith reliance on the orders of the Bankruptcy Court, the long-term provisions of the Reorganization Plan, confirmed by the Bankruptcy Court and the immunities provided to the Company, its officers and employees under the Bankruptcy Code.
Mr. Gunderson, as General Counsel of the Company for over 12 years, provided the Denver office of the SEC with copies of the reorganization documents in response to their second subpoena for share-issuance documents. They chose to ignore this and chose to charge the Company for unregistered shares, when in fact such shares were and have been properly issued and registered.
On April 21, 2006, Mr. Gunderson testified at his continued deposition conducted by attorneys for the SEC extensively concerning the Company’s Reorganization Plan and the included Stock Incentive Plan. To stunned silence and no cross examination by the SEC attorneys, Mr. Gunderson described those documents, placed in evidence each such document constituting the functional equivalent to the S-8 registration, placed into evidence copies of the immunity from suit provisions of the Bankruptcy Code and the daily recapitalization of the Company caused by the naked shorting of its shares over the years and the clear right of the Company to cover those counterfeit and unregistered shares by shares properly issued by the Company under its Reorganization Plan and the provisions of the Bankruptcy Code.
The Company, its President and its General Counsel, Mr. Gunderson, have acted properly and in good faith. The SEC has acted without good faith in its attack on the Company, its President and its General Counsel. It has acted to destroy the principal whistleblower on naked shorting to cover its conflicted behavior as a regulator charged with protecting investors, but favoring instead Wall Street interests destroying small American public companies, their employees and investors with their illegal activities for their own profit and greed.
The United States Constitution Pursuant to Due Process
Prevents Imposing the Temporary Suspension
Prior to “De Novo” Review by the Appellate Process
The United States Constitution requires that the SEC not impose a temporary suspension while a “de novo” review is pending of a summary judgment by a lower court.
This is more important in the attempted suspension of Mr. Gunderson because the summary judgment in this instance was entered without any hearing before the lower court or any evidence introduced by testimony before the court.
Initial briefs have been filed with the United States Court of Appeals of the Second Circuit on October 26, 2007 appealing the summary judgment by the lower court on behalf of the President and the General Counsel and a reply brief by the SEC on November 26, 2007.
It would be a denial of due process under the United States Constitution for the SEC to impose a temporary suspension of Mr. Gunderson until the “de novo” review of the summary judgment upon the completion of the appeals process.
This is especially certain in view of the SEC’s conflicted positions in this case.
In review of a summary judgment, especially where, as in this case, no hearing was held before summary judgment was entered, the “de novo” review is a complete and total review of the lower court by the appellate courts, as if the appellate courts were deciding the issues themselves for the first time, without the opinion of the lower court before them; the appellate court views the law and issues underlying the summary judgment anew or “de novo”; Scott v. Harris, 127 S. Ct. 1769, 167 L.Ed.2d 686 (April 30, 2007); State Farm Mut. Auto Ins, Co. v. Cambell, 538 U.S. 408, 123 S. Ct. 153, 155 L.Ed.2d 585 (April 7, 2003); Easley v. Cromartie, 532 U.S. 234, 121 S. Ct. 1452, 149 L.Ed.2d 430 (April 18, 2001); Kumbo Tire Co., Ltd. V. Carmichael, 526 U.S. 137, 119 S. Ct. 1167 (March 23, 1999); Klehr v. A.O. Smith Corp., 521 U.S. 179, 117 S. Ct. 1984 (June 19, 1997); McMillian v. Monroe County, Ala., 520 U.S. 781, 117 S. Ct. 1754 (June 2, 1997).
Mr. Gunderson relies in his appeal on all of the statutorily imbued immunities under the United States Bankruptcy Code and the Reorganization Plan of the Company, including the Reorganization Plan’s Stock Incentive Plan. These immunities and protections for Mr. Gunderson, the President of the Company and the Company, are basic and should be decided by the appellate courts before any suspension is imposed.
On December 19, 1991, the Company, then called Packaging Plus Services, filed for reorganization under Chapter 11, Bankruptcy Code, in the United States Bankruptcy Court, Eastern District of New York. The Bankruptcy Court, on February 18, 1994, in Case No. 191-18486-260, confirmed the Company’s Plan of Reorganization (“the Chapter 11 Plan”). Thereafter the Company changed its name to Universal Express, Inc., and Mr. Gunderson was appointed as its General Counsel. Mr. Gunderson maintains that the Company, its President and General Counsel did not violate the Federal Securities Acts by causing the Company to issue shares of stock which had not been registered with the SEC. To the contrary, those shares had been issued pursuant to a Chapter 11, Bankruptcy Code, Plan of Reorganization which Plan had been confirmed by the Bankruptcy Court and the shares were exempt from the registration requirements of the Federal Securities Acts, as set forth below.
Section 1125, Bankruptcy Code, 11 U.S.C. Sec. 1125, in pertinent part provides:
(e) A person that solicits acceptance or rejection of a plan, in good faith and in compliance with the applicable provisions of this title, or that participates, in good faith and in compliance with the applicable provisions of this title, in the offer, issuance, sale, or purchase of a security, offered or sold under the plan, of the debtor, of an affiliate participating in a joint plan with the debtor, or of a newly organized successor to the debtor under the plan, is not liable, on account of such solicitation or participation, for violation of any applicable law, rule, or regulation governing solicitation of acceptance or rejection of a plan or the offer, issuance, sale, or purchase of securities.
Section 1145, Bankruptcy Code, 11 U.S.C. § 1145, is entitled “Exemption from securities laws” and in pertinent part provides:
(a) Except with respect to an entity that is an underwriter as defined in subsection (b) of this section, section 5 of the Securities Act of 1933 and any State or local law requiring registration for offer or sale of a security or registration or licensing of an issuer of, underwriter of, or broker or dealer in, a security do not apply to--
(1) The offer or sale under a plan of a security of the debtor, of an affiliate participating in a joint plan with the debtor, or of a successor to the debtor under the plan—
(A) in exchange for a claim against or interest in, or a claim
for an administrative expense in the case concerning, the debtor
or such affiliate; or
(B) principally in such exchange and partly for cash or property;
(2) the offer of a security through any warrant, option, right to subscribe, or
conversion privilege that was sold in the manner specified in paragraph (1) of this subsection, or the sale of a security upon the exercise of such a warrant, option, right, or privilege;
Exhibit “I” to the Chapter 11 Plan was a document entitled “1994 Stock Option Plan” which in pertinent part provided:
This Plan shall be known as the “1994 Stock Option Plan” (the “Plan”).
The purpose of this Plan is to provide a method to give incentive to
those persons or entities who, in the sole and absolute discretion of the Board of Directors of Packaging Plus Services, Inc., a Delaware
corporation (“the Company”), are responsible for the management,
growth, and/or protection of the Company’s business and who are
making and can continue to make substantial contributions to the
success of the Company’s business including, but not limited to, present
and future officers, directors, employees, consultants, franchisees and
professional advisors of the Company or any future Parent or
Subsidiary.
It is anticipated that the Plan will encourage them to acquire capital
stock ownership in the Company, thus giving them a, or increasing their,
proprietary interest in the Company, providing them with greater
incentive and encouraging their continuance in the service, and
promoting the interests, of the Company and all of its stockholders...
* * *
The shares to be issued upon exercise of options which are granted
pursuant to this Plan shall be made available, at the discretion of the
Board of Directors, either from the authorized but unissued shares of
Common Stock or from shares of Common Stock which are reacquired
by the Company, including shares which are purchased in the open
market.
* * *
If the number of outstanding shares of Common Stock of the Company
shall be changed by reason of any recapitalization, stock split, or stock dividend, the aggregate number and kind of shares for which options
may thereafter be granted under this Plan and the number of shares
subject to options theretofore granted under and the price per share
payable upon exercise of such options shall be adjusted as determined
by the Plan Administrators, in their sole and absolute discretion, so as
to reflect such change; provided, however, that no such adjustment shall
be made by reason of the issuance of additional shares of the Company
for services, property or money regardless of whether the Company
received adequate consideration.
* * *
Paragraph VI.F of the confirmed Chapter 11 Plan provided:
The protection afforded by Bankruptcy Code section 1125 with regard
to the solicitation of acceptances or rejections of the Plan and with
regard to the offer, issuance, sale, or purchase of the Postpetition Senior
Secured Notes and the New Common Stock and New Warrants issued
and distributed to the holders of Claims and Administrative Claims or
in connection with the Plan and the Confirmation Order, shall apply to
the full extent provided by law. The entry of the Confirmation Order
shall constitute the determination by the Bankruptcy Court that
Reorganized PPS, PPS, and each of their respective officers, directors,
partners, employees, members or agents, and each Professional Person,
attorney, accountant, or other professional employed by any of them,
shall have acted in good faith and in compliance with the applicable
provisions of the Bankruptcy Code pursuant to Bankruptcy Code section
1125 and the federal securities laws. In addition, the exemption from
the requirements of section 5 of the Securities Act and any state or local
law requiring registration for the offer or sale of a security provided for
in Bankruptcy Code section 1145 shall apply to the New Common
Stock, the New Warrants, and the Warrants Shares to be issued under
the Plan in exchange for any Claim against or interest in PPS. Entry of
the Confirmation Order shall also constitute an order of the Bankruptcy
Court that the Debtor has, by virtue of its public filings, complied with
the reporting requirements of the Securities Act of 1934 through the
Effective Date. Upon Confirmation, however, as a publicly held
corporation the Debtor remains subject to Securities and Exchange
Commission reporting requirements and subsequent to Confirmation of
the Plan and the Reorganized PPS intends to comply with all periodic
reporting requirements including Section 12 (g) of the Securities Exchange Act of 1934.
* * *
The SEC’s essential misstatement in the civil action is its description of Universal’s common stock issuance to certain persons as “illegal, unregistered... shares”. In support of its complaint, and its ex parte application for a preliminary injunction, the SEC represented that a search of its databases disclosed no registrations for the common stock shares in question... What the SEC did not inform the lower court is that the subject Universal stock shares were duly and legally issued and sufficiently registered pursuant to law. The law involved was not and is not the normal domain of the SEC, the Securities Act of 1933 and Securities Exchange Act of 1934, but the United States Bankruptcy Code, 11 U.S.C. 101 et seq., particularly §§ 1123, 1125 and 1145. The SEC had knowledge that the shares in question were properly issued pursuant to the 1994 Stock Option Plan of Packaging Plus Services, Inc., Universal’s former name, but ignored that fact.
The 1994 Stock Option Plan was part of the Reoganization Plan for the company, approved and confirmed by the United States Bankruptcy Court, Eastern District of New York, pursuant to Section 1125 of the Bankruptcy Code. The filing of the Stock Option Plan (also referred to in the Reorganization Plan as the Stock Incentive Plan) was and is a registration statement or its functional equivalent. It was filed with the SEC as part of the Reoganization Plan and as a separate exhibit on Form 8-K as a part of the Company’s transition Report 10-KSB for the period ending June 30, 1994. Subsequently, on an annual basis, it has been filed with the SEC as an exhibit to the company’s annual 10-KSB reports. Pursuant to law it is an S-8 registration covering advisors and consultants whose future need by Universal had been determined by the Bankruptcy Court for the long-term development of the company.
At all times Mr. Gunderson, as General Counsel for Universal, acted in good faith reliance on the following language in Sections 1123 of the Bankruptcy Code, 11 U.S.C. § 1123, among others:
(a) Notwithstanding any otherwise applicable nonbankruptcy law, a plan shall
* * *
(5) provide adequate means for the plan’s implementation such as
* * *
(j) issuance of securities of the debtor…for cash,
for property, for existing securities, or in
exchange for claims or interests,
or for any other appropriate purpose;... (emphasis added)
Once the Bankruptcy Court determined that Universal’s Reorganization Plan (the First Amended Plan of Reorganization and Disclosure Statement) including the 1994 Stock Option Plan contained “adequate information,” the Company’s General Counsel acted in good faith reliance on Section 1125 of the Bankruptcy Code, which states that once such a finding is made by the bankruptcy court, no other law or rule governed Universal’s conduct. 11 U.S.C. Section 1125(d) states:
Whether a disclosure statement required under subsection (b) of this
Section contains adequate information is not governed by any otherwise
applicable nonbankruptcy law, rule or regulation, but an agency or official
whose duty is to administer or enforce such a law, rule, or regulation, may
be heard on the issue whether a disclosure statement contains adequate
information. Such an agency or official may not appeal from, or otherwise
seek review of, an order approving a disclosure statement.
See also Section 1145, 11 U.S.C. Sec. 1145.
The Bankruptcy Court’s determination was not and is not appealable by the SEC, 11 U.S.C. Sec. 1109.
Moreover, the company and persons acting for or with it are immune from suit arising from the issuance of securities under the Reorganization Plan and the 1994 Stock Option Plan pursuant to the safe harbor provisions of Section 1125(e), which provides in pertinent part:
A person… that participates, in good faith and in compliance
with the applicable provisions of this title, in the offer, issuance,
sale, or purchase of a security, offered or sold under the plan…
Is not liable, on account of such…participation, for violation of
any applicable law, rule or regulation governing…the offer,
issuance, sale or purchase of securities. (emphasis added)
The SEC Is Conflicted On the Principle Issue
Underlining the Temporary Suspension
Of “Naked Shorting” and the Federal Whistleblower Law
The SEC has violated the federal Whistleblower Protection Act of 1989, 5 U.S.C. Secs. 1213 et seq., in its actions against the Company, its President and Mr. Gunderson, its General Counsel.
The naked shorting scandal is known as “Stockgate”
The naked short selling manipulations reached catastrophic financial proportions by July 2001, the date of Universal’ s first multi-million dollar judgment against some involved in its victimization through such a scheme.
The SEC’s exposure in what has already been publicly exposed despite its efforts to silence the Company, its President and General Counsel, among others, is the result of its earning a fee on every naked short trade executed, along with the fees on such sales earned by the Depository Trust Clearing Corporation (“DTCC”), resulting in hundreds of millions of dollars in fees, and the humongous scope of the scandal and the billions of dollars worth of unsettled naked short trades.
A very brief sampling of the Stockgate revelations and condemnations are filed as Exhibit A.
As indicated, in 2003, the Denver office SEC commenced a pattern of harassment against the Company and its President and General Counsel from attorneys at its Denver office.. The Company’ General Counsel initially volunteered to provide information on the contracts for proposed acquisitions and funding sources for those acquisitions. Before these documents were even received by the attorneys at the Denver office they were calling those acquisition candidates’ and funders senior officers, threatening them with reprisals so that they would move away from the Company. This pattern of intimidation was successful since several large acquisitions totaling more than $160 Million Dollars were terminated.
The SEC’s attack on the Company and its General Counsel as whistleblowers on naked shorting was in full swing in 2003, and continues to date.
The Company, its President and General Counsel has been bullied by the SEC, a conflicted regulatory agency which has failed the investing public on this national naked shorting scandal in favor of Wall Street interest, in clear violation of its Charter to protect investors.
The SEC commenced its case against the Company on March 22, 2004, twenty-two days following the filing of an action by the Company against the SEC in federal court in Florida on March 2, 2004. The Company’s sued the SEC for extensive and sustained harassment of the Company and its officers, including its President and General Counsel, to silence them on the naked shorting scandal and, in addition, sued the SEC for failure to take any effective action to stop naked shorting. Conveniently and typically, the SEC relied on its “immunity” to defeat this action in order to further cover-up its cooperation with the naked shorters for over ten years and to silence the Company and its officers.
Publicly available facts prove, among other things, (i) that the SEC ignored the Company’s and others’ repeated voices of concern and increasing public criticism regarding naked short selling of stock for years, (ii) the SEC had enormous financial interest in allowing the continuation of naked short selling, (iii) the naked short selling of stock had turned into a nationwide scandal known as “Stockgate”, (iv) that by July, 2001, the Stockgate scandal was well known within the SEC to have reached staggering range of hundreds of billions of dollars, (v) the SEC literally sat on a proposal initiated outside of the SEC to ban naked shorting of stock in 2001 for almost 2 ½ years, and even currently condones, if not fosters, delays in implementing any material preventative measures.
Universal, its President and General Counsel have been out in the forefront of publicly and openly challenging the SEC since 1997 on its improper inaction on naked shorting. See some samples of Company press releases on the naked shorting scandal issued by the President and General Counsel as Exhibit B.
The Company, assisted by the testimony of its President and General Counsel, received a $389 million dollar judgment victory in July 2001 and later its $137 million dollar judgment in April 2003, which substantially fueled the movement against the SEC and others to ban naked shorting. It is clear that the harassment by the SEC against the Company which commenced in May, 2003, one month after the Company’s second jury verdict against the naked shorters, was a response by an embarrassed SEC to silence the Company, its President and General Counsel. Its civil action was nothing more than a transparent contrivance to further silence these whistleblowers.
All of these actions by the SEC to harass and intimidate the Company, its President and General Counsel for ten years were designed to silence them for their public protest against the SEC’s long-term failure to act in the national scandal of naked shorting, and such actions were and are violations by the SEC and its minions of the Whistleblower Protection Act with respect to the Company, its President and Mr. Gunderson, its General Counsel, as whistleblowers, generally, and under the Act: Garcetti v. Ceballos, 126 S.Ct. 1951, 164 L. Ed.2d 689 (May 30, 2006); Graham County Soil & Water Conservation Dist. v. U.S. ex rel. Wilson, 545 U.S. 409, 125 S. Ct. 2444, 162 L. Ed.2d 390 (June 20, 2005); Desert Palace, Inc. v. Costa, 539 U.S. 90, 123 S. Ct. 2148, 156 L.Ed.2d 84 (June 09, 2003); National Whistleblower Center v. Nuclear Regulatory Commission, 531 U.S. 1070, 121 S.Ct. 758, 148 L.Ed.2d 66 (January 08, 2001); Hawaiian Airlines, Inc. v. Norris, 512 U.S. 246, 114 S.Ct. 2239, 129 L.Ed.2d 203 (June 20, 1994); Waters v. Churchill, 511 U.S. 661, 114 S.Ct. 1878, 128 L.Ed.2d 686 (May 31, 1994); Saudi Arabia v. Nelson, 507 U.S. 349, 113 S.Ct. 1471, 123 L.Ed.2d 47 (March 23, 1993); English v. General Electric Co., 496 U.S. 72, 110 S.Ct. 2270, 110 L.Ed.2d 65 (June 04, 1990; City of St. Louis v. Praprotnik, 485 U.S. 112, 108 S.Ct. 915, 99 L.Ed.2d 107 (March 02,1988) U.S. v Fausto, 484 U.S. 439, 108 S.Ct. 668, 98 L.Ed.2d 830 (January 25, 1988); Bush v. Lucas, 462 U.S. 367, 103 S.Ct. 2404, 76 L.Ed.2d 648 (June 13, 1983).