The transcript - part 3:
Doc 311 - Part 3
OCR extract
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Altomare has received millions of dollars in income in recent years, has declared millions of dollars in assets, has a substantial cash flow, and has recently liquidated more than $500,000 in jewelry, but as of yet has only disgorged $60,000 to the Court. In October of last year, after having failed to pay a cent on the judgment for more than seven months (during which time
Altomare had substantial assets and cash flow), Altomare paid $30,000 towards the judgment and pledged to pay each month thereafter either 20% of his gross monthly earnings, or $10,000,
whichever is greater. (10/12/07 Tr. at 37.) Altomare has already missed two payments in his self-imposed schedule. Perhaps in order to excuse his nonpayment, he claims that there is little, if any, equity in both of his homes, and that his current payments on those properties are substantial. He also points to lease obligations for three luxury vehicles. Altomare’s effort to depict his luxurious living arrangements as liabilities, or as necessary living expenses, is a classic example of chutzpah.
Altomare and his wife own at least two properties. Their primary residence is in the Bocaire development in Boca Raton, Florida. On November 3, 2006, Altomare estimated the value of the house to be $1.4 million. (D. Ex. 3 at 172.) In March 2007, the month of the judgment, Altomare valued the house at $1.6 million, with $900,000 in equity. (P. Ex. H.) Testifying before this Court in February 2008, without providing a real estate appraisal for the property, Altomare valued the residence at approximately $1.1 million, with a double mortgage that exceeds the value of the house by approximately $80,000. (2/4/08 Tr. at 25.)[7] While Altomare claims that the house is encumbered by a second mortgage of approximately $178,000 in the form of a Wachovia line of credit (2/4/08 Tr. at 25, 45), he has not provided any documentation demonstrating that the credit line is actually secured by the property. Altomare has not documented any efforts to reduce his expenses or generate income from this residence, such as by renting the property and moving to less extravagant quarters.
The Altomares’ secondary residence is a condominium in Highland Beach, Florida. At the October 2007 hearing, Altomare and his wife committed to putting this second home on the market, with the proceeds gained from the sale going to pay down the judgment. (10/ 12/07 Tr. at 37.)[8] At that time, Altomare’s attorney represented that the property had $300,000 to $800,000 in equity. (Id. at 37.) On October 4, 2006, the property was appraised at $3.3 million. (D.Ex. 2 at 80.) In March 2007, Altomare valued the property at $4.7 million, with $2.7 million in equity. (P. Ex. H.) In his February 2008 testimony before this Court, without providing a recent appraisal, Altomare estimated the property to be currently valued at somewhere between $2.5 and $2.8 million, and testified that the property was double mortgaged in excess of $2.8 million. (2/4/08 Tr. at 27-28.)[9] Although Altomare represents that the property is on the market, it has yet to be sold. Even assuming the property is eventually sold, it is unclear whether such a sale would satisfy any portion of Altomare’s disgorgement obligations, assuming Altomare’s testimony that the property has negative equity is accurate. In the interim, Altomare has not documented any efforts to try to rent the condo or to otherwise make productive use of the property while it is on the market. Moreover, Altomare may be in a better position to satisfy the judgment of this Court by simply giving up the property, as he would be able to divert those funds that now go to its maintenance and mortgage to the Clerk of the Court. Nevertheless, Altomare continues to expend funds (of uncertain origin) to maintain this second luxury residence, rather than to use such funds to pay the disgorgement and prejudgment interest amounts.
[7] The Court can take judicial notice of the widespread decline in property values over the past year. See, e.g., Abby Goodnough, More Election Troubles in Florida, but That Doesn’t Bother the Governor, N.Y. Times, March 17, 2008, at A15 (“Florida is facing its worst financial crisis in decades, mostly because of the housing downturn.”). Whatever the present value of Altomare’s properties, the fact is that he failed to liquidate these assets when ordered to pay disgorgement more than a year ago.
[8] Again, while Altomare credibly testified that the sale of this property in the current market is difficult, he had taken no action to dispose of the property in the seven months preceding the October 2007 hearing.
[9] As of November 29, 2007, the current balance owed on the first mortgage was $2,099,222 (D. Ex. 5 at 250), and as of January 9, 2008, the current balance owed on the second mortgage was $747,801 (D. Ex 6 at 252).
[10] Altomare insists that he was contractually obligated to make these payments. (2/4/08 Tr. 29-30, 35-36, 68; D. Exs. 9, 10, 11.) However, the documentation provided by Altomare does not demonstrate that he was contractually obligated to make all the payments that he did. Pursuant to the contract between Altomare and the Weinstein Design Group, Altomare paid an upfront “design fee” of $20,000, and agreed to thereafter pay the cost of materials and labor of the renovation plus a certain premium payment based on the cost of the materials and labor. (See D. Ex. 9.) The Altomares would appear to be obligated to cover the costs of those materials and labor they chose to order, plus a markup based on a percentage of total costs. (Id.) However, the initial contract does not appear to obligate the Altomares to pay anything beyond the initial design fee, to obligate the Altomares to purchase any furniture or materials that were recommended by the designer, or to prevent the Altomares from scaling down the project and its costs where possible. (Id.) In fact, it appears that after the judgment of the Court was entered, the project expanded rather than contracted. After March 31, 2007, the total cost of the project increased by $99,266. (Compare D. Ex. 9 at 335 (listing a grand total of $591,225.99 on the March 21, 2007 invoice) with id. at 395 (listing a grand total of $690,492.14 on the November 26, 2007 invoice).) Altomare has not produced any documents or other evidence demonstrating that he was unable to control these costs, or would have been unable to revise the design plans to decrease the total cost of the project.
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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)
