The transcript - part 2
Doc 311 - Part 2
OCR extract
DISCUSSION
I. Legal Standards
A party may be held in civil contempt for failure to comply with an order of the Court “if the order being enforced is clear and unambiguous, the proof of noncompliance is clear and convincing, and the defendant[] ha[s] not been reasonably diligent and energetic in attempting to accomplish what was ordered.” See EEOC v. Local 638, 753 F.2d 1172, 1178 (2d Cir. 1985) (citation and internal quotation marks omitted). “It is not necessary to show that defendant[] disobeyed the district court’s orders willfully.” Id. (citations omitted).
Altomare, as an alleged contemnor who claims that he is unable to pay a judgment, “bears the burden of producing evidence of his inability to comply” with the disgorgement order. Huber v. Marine Midland Bank, 51 F.3d 5, 10 (2d Cir. 1995), citing United States v. Rylander, 460 U.S. 752, 757 (1983); McPhaul v. United States, 364 U.S. 372, 379 (1960); Maggio v. Zeitz, 333 U.S. 56, 75-76 (1948). Altomare’s “burden is to establish his inability clearly, plainly, and unmistakably.” Huber, 51 F.3d at 10. In other words, Altomare must clearly establish “that compliance is impossible.” Rylander, 460 U.S. at 757. If Altomare “offers no evidence as to his inability to comply . . . or stands mute,” he fails to meet that burden. Huber, 51 F.3d at 10, quoting Maggio, 333 U.S. at 75. Altomare “must demonstrate his inability to comply categorically and in detail.” SEC v. Bankers Alliance Corp., No. 95 Civ. 0428, 1995 WL 590665, at *2 (D.D.C. May 5, 1995) (citation and internal quotation marks omitted). Moreover, proof that Altomare cannot pay the entire amount would not absolve him from paying as much as is possible to pay under the circumstances:
When an order requires a party to pay a sum certain, a mere showing that the party was unable to pay the entire amount by the date specified is insufficient to avoid a finding of contempt. When a party is absolutely unable to comply due to poverty or insolvency, inability to comply is a complete defense. [Citation omitted.] Otherwise, the party must pay what he or she can. SEC v. Musella, 818 F. Supp. 600, 602 (S.D.N.Y. 1993) (citations omitted). The court will presume a present ability to comply with an order where at some point in the past a defendant could have complied with that order. SEC v. Princeton Econ. Int’l Ltd., 152 F. Supp. 2d. 456, 459 (S.D.N.Y. 2001).
II. Legal Standards Applied
In recent years, Altomare has had a substantial income. His 2006 W-2 from Universal Express recorded wages of $1.67 million (P. Ex. 13; 2/4/08 Tr. at 87-88), and his 2007 W-2 recorded wages of $1.745 million (D. Ex. 22). As would be expected under these circumstances, Altomare’s personal bank accounts reflect the receipt and disbursal of substantial sums, with millions of dollars passing through those accounts in recent years. (See P. Exs. 11, 14, 18, 19, K.) For example, between January 9, 2007, and January 8, 2008, Altomare deposited $1.57 million in his Wachovia bank account, with $1.18 million deposited on or after March 8, 2007. (P. Ex. 19; P. Ex. K, ¶¶ 2-5.)
In addition to having millions in income and a substantial cash flow, Altomare also has substantial assets, some of which appear to be relatively liquid. As of March 2007, the month of this Court’s judgment, Altomare claimed to own $6 million in artwork and jewelry, to have a life insurance policy with a cash value of $7 million, and to have $850,000 cash on hand and in banks, $900,000 in equity in his first home and $2.7 million in equity in his second home, and no credit card debt. (P. Ex. H.)2 In addition to artwork and jewelry, Altomare has other property of value, such as high-end audio visual equipment. (D. Ex. 10.) In September 2007, Altomare sold some jewelry and watches for $571,000, but little if any of the cash generated by the sale went to pay off the judgment. (See P. Exs. 38A-38B, 57.)[3]
Although certain aspects of Altomare’s financial situation are clear, such as his substantial income and assets, other aspects are far from clear. For example, in his testimony, Altomare insisted that his only source of income over the past 16 years has been Universal Express. (2/4/08 Tr. at 103.) However, many deposits in his bank account simply do not correspond in date or amount to recorded payments made by Universal Express to Altomare.[4] In addition to failing to account for the source of certain funds, Altomare has failed to account adequately for the disposition of other funds.
[2] The record does not reflect for what purpose Altomare prepared the March 2007 financial statement or to whom it was given. When asked to discuss this document, marked as Receiver’s Exhibit 11, during the course of his deposition, Altomare invoked his privilege against self incrimination and refused to even identify the document. (See P. Ex. 58 at 72.)
[3] Altomare did not notify either the SEC or the Court before the liquidation, and has not adequately documented where the proceeds from that cash sale have gone. Since Altomare has paid only $60,000 towards the judgment, and nothing at all until October 2007, it is clear that little, if any, of the jewelry proceeds were used to satisfy the judgment.
[4] By the SEC’s calculation, $747,175.46 in deposits to Altomare’s bank account in 2007 did not originate from Universal Express. (P. Ex. K, ¶ 9.) When confronted with examples of
suspicious deposits, Altomare was unable to identify the sources of those funds. (See 2/4/08 Tr. at 113-15.)
[5] Furthermore, although Altomare claimed that he only has one checking account (2/4/08 Tr. at 103), it appears that Altomare has made use of at least one other checking account, and a prime equity line of credit.6 Even in light of these troubling gaps and inconsistencies, Altomare has yet to provide a full sworn accounting of his financial situation, and, at his deposition, invoked his Fifth Amendment privilege against self incrimination in response to many questions about his financial situation.
[6] Altomare appears to have a Washington Mutual checking account number ending in 1791 that is in use. (D. Ex. 8 at 261, 280.) The existence of this checking account may explain the apparent disappearance of funds, such as the $160,466 in proceeds from the Washington Mutual second mortgage. (Id. at 270.) Altomare has produced no records for this account. Moreover, Altomare has a prime equity line of credit at Wachovia Bank. (See P. Ex. D at 54; P. Ex. K, ¶ 10.) Altomare never produced records for this account identifying disbursements from and payments to the credit line. However, the Receiver was able to obtain bank statements for the account, which show that the balance on October 13, 2006, five months before the judgment, was $10,481.38. (P. Ex. D at 54; P. Ex. K, ¶ 10.) Since January 1, 2007, Altomare has drawn at least $288,900 against that credit line. (P. Ex. E; P. Ex. K, ¶ 10.)
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04/18/2008 311 OPINION AND ORDER: The SEC's motion for an adjudication of contempt is granted. The Court finds that defendant Altomare is in contempt of this Court's Order of March 8, 2007. Defendant Altomare is ordered to surrender to the United States Marshal for the Southern District of New York on May 2. 2008, to be incarcerated until such time as he purges himself of the contempt, unless he has paid the disgorgement amount in full by that date. Failure to surrender will result in the issuance of a warrent for his arrest. (Signed by Judge Gerard E. Lynch on 4/18/08) (mr) (Entered: 04/18/2008)
