Law360, Miami (January 15, 2016, 5:53 PM ET) -- The former CEO of baggage-handling company Universal Express Inc. tried to convince a skeptical panel of Eleventh Circuit judges Friday that he had not planned the pump-and-dump stock scheme that earned him a three-year prison sentence.
In appealing Richard Altomare's conviction, attorney Richard Klugh, told the judges that his client's statements about the Nevada-based Sunset Brands Inc. stock were all “talky talk” and “puffery” and that Altomare never schemed to inflate the stock's price, which prior to his involvement was less than a dollar.
“There was no pump and no dump, and there was never any plan for a pump and dump,” Klugh said.
But the judges seemed dubious and pressed Klugh on Altomare's actions. U.S. Circuit Judge Adalberto Jordan pointed out that the FBI informer working with Altomare set up a shell company so he could buy shares to get around an injunction against Altomare for a prior illegal stock scheme involving the baggage firm.
U.S. Circuit Judge Stanley Marcus said there appeared to be evidence to support a conviction.
“Didn't Mr. Altomare say, 'If nothing else, you and I will just pump the shit out of the stock'?” the judge asked. “Was he simply blowing smoke?”
But Klugh said Altomare had no basis to think the stock would move and called it all “nonsense that didn't have the capacity to get off the ground.”
Prosecutors say Altomare began discussing the possibility of manipulating the market for shares of Sunset Brands stock with an FBI confidential source in January 2013. Two months later, Altomare was writing press releases trying to pump up the stock and get investors to bite, according to the indictment.
He was convicted of the scheme in February 2014 and sentenced in May of that year to 37 months in prison.
The U.S. Securities and Exchange Commission had already permanently barred Altomare from working with penny stocks in 2007 because of his involvement in a Universal Express scheme to issue stock illegally and inflate the share price of the company.
Altomare was first hit with enforcement proceedings by the SEC in 2004 when the agency alleged that Universal Express illegally issued more than 500 million shares of penny stock and then used a series of false press releases and other misleading statements to pump up the prices.
The SEC contended that Altomare and Universal Express in-house counsel Chris Gunderson distributed the illegal stock through three resellers who acted as consultants to the company. Former race car driver Mark Neuhaus was named as one of the three resellers and a defendant.
In February 2007, the SEC secured a judgment ordering Universal Express, Altomare and Gunderson to pay nearly $22 million. The judge also issued an injunction against violating securities laws and barred Altomare from serving as the officer or director of a publicly traded company.
U.S. Circuit Judges Adalberto Jordan, Stanley Marcus and John Walker sat for the Eleventh Circuit.
Altomare is represented by Richard C. Klugh and John E. Bergendahl.
The U.S. is represented by David M. Lieberman, Kathleen Mary Salyer, Wifredo A. Ferrer, Emily M. Smachetti, Alejandro O. Soto and Michael P. Sullivan of the U.S. Attorney's Office for the Southern District of Florida.
The case is U.S. v. Altomare, case number 14-12259, in the U.S. Court of Appeals for the Eleventh Circuit.
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