New motion filed today in SEC v USXP
Julie K. Lutz (Calif. 77246)
Leslie J. Hughes (Colo. 15043)
Attorneys for Plaintiff
SECURITIES AND EXCHANGE COMMISSION
Central Regional Office
1801 California Street, Suite 1500
Denver, Colorado 80202
(303) 844-1000
(303).844-1068 (facsimile)
Robert B. Blackburn (RB 1545)
Local Counsel for Plaintiff
SECURITIES AND EXCHANGE COMMISSION
Northeast Regional Office
3 World Financial Center – RM 4300
New York, NY 10281-1022
(212) 336-1050
UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK
U.S. SECURITIES AND EXCHANGE COMMISSION, :
:
Plaintiff :
:1:04-cv-02322 (GEL)
v. :
:
UNIVERSAL EXPRESS, INC., et al., :
:
Defendants. :
PLAINTIFF’S MOTION FOR ENTRY OF CIVIL CONTEMPT
AGAINST DEFENDANTS UNIVERSAL EXPRESS, INC., RICHARD A. ALTOMARE,
AND CHRIS G. GUNDERSON
Plaintiff Securities and Exchange Commission moves the Court to enter an order finding
the defendants Universal Express, Inc., Richard A. Altomare, and Chris G. Gunderson in civil
contempt of the Court’s order for preliminary injunction entered April 20, 2004, and the final
judgment entered on April 2, 2007. Contrary to the Court’s orders, the defendants have
continued to violate the securities registration provisions by issuing over 5.4 billion shares of
2
Universal Express stock during the first three months of 2007 when no registration statement was
in effect and an additional 15.536 billion since the April 2, 2007 entry of the Court’s final
judgment. Altomare and Gunderson’s actions also violated the penny stock bars entered against
them. Universal Express and Altomare have continued to make materially false and misleading
statements in reports filed with the Commission on March 26, May 21, and June 14, 2007. The
defendants have failed to pay disgorgement and prejudgment interest by April 16, 2007 as
ordered, and Altomare has violated the officer and director bar imposed upon him by the Court’s
Final Judgment entered April 2, 2007. These flagrant violations can only be addressed by entry
of civil contempt sanctions.
I. Background
On March 24, 2004, the Commission brought a civil injunctive action against Universal
Express, Altomare, and Gunderson alleging that they had offered and sold over 500 million
shares of Universal Express stock without filing a registration statement, and were making false
and misleading statements in connection with the offer and sale of the securities of Universal
Express. The Court entered a temporary restraining order on March 24, 2004, which was later
converted to a preliminary injunction on April 20, 2004. [Docket 6 and 20] The Court
preliminarily enjoined Universal Express, Altomare and Gunderson from violating Sections 5(a),
5(c) and 17(a) of the Securities Act [15 U.S.C. §§ 77e(a), 77e(c) and 77q(a)] and Sections 10(b),
13(a) and 13(b)(2) of the Exchange Act [15 U.S.C. §§ 78j(b), 78m(a) and 78m(b)(2)] and Rules
10b-5, 12b-20, 13a-1 and 13a-13 [17 C.F.R. §§ 240.10b-5, 240.12b-20, 240.13a-1 and 240-13a-
13]. The preliminary injunction specifically prohibited the defendants from using the mails or
interstate commerce to offer or sell a security for which no registration statement was in effect.
3
On February 21, 2007, the Court entered an Opinion and Order that found that Universal
Express, Altomare, and Gunderson had violated the securities registration and anti-fraud
provisions of Sections 5 and 17(a) of the Securities Act and Section 10(b) of the Exchange Act
and Rule 10b-5 thereunder, and found entry of a permanent injunction was appropriate. (Opinion
at p. 26) [Docket 172] This decision made permanent the Court’s earlier preliminary injunction
prohibiting the defendants from violating these provisions. The Court also found it appropriate
to bar Altomare from serving as an officer and director of a public company. (Opinion at pp. 27-
28) The Opinion and Order were served on counsel for all parties by email sent on February 21,
2007 through the Electronic Court Filing (ECF) system. Mr. Tifford, the attorney for Universal
Express, Altomare and Gunderson, confirmed receipt of the Opinion on February 23, 2007 in a
telephone call with plaintiff’s attorneys. See Declaration of Leslie J. Hughes at para. 2 (“Hughes
Decl.”).
On April 2, 2007, the Court entered a Final Judgment, which permanently enjoined
Universal Express, Altomare and Gunderson from violations of Sections 5 and 17(a) of the
Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5. [Docket 179] The Court
ordered Universal Express to pay disgorgement of $9,959,828 plus prejudgment interest of
$1,986,827 and a civil penalty of $9,959,828, for a total of $21,906,483. (Judgment at p. 4,
Section IV.) The Court also ordered Altomare to pay disgorgement of $1,419,025 plus
prejudgment interest of $283,073 and a civil penalty of $1,419,025, for a total of $3,121,123.
(Judgment at p. 6, Section V.) The Court also ordered Gunderson to pay disgorgement of
$361,317 plus prejudgment interest of $72,077 and a civil penalty of $361,317 for a total of
$794,711. (Judgment at pp. 7-8, Section VI.). Defendants’ payments were due within ten
business days after entry of the order which made them due on or before April 16, 2007. The
4
Final Judgment was served on counsel for all parties by email sent on April 2, 2007 through the
ECF system. Mr. Tifford, the attorney for Universal Express, Altomare and Gunderson,
confirmed receipt of the Final Judgment on April 16, 2007 in a telephone call with plaintiff’s
attorneys. Hughes Decl. at para. 3.
The defendants are in contempt of the Court’s preliminary injunction, and the Final
Judgment for the following reasons. Between January 1, 2007 and March 31, 2007, Universal
Express, Altomare and Gunderson violated the preliminary injunction by using interstate
commerce to offer and sell at least 5,404,200,000 new shares of Universal Express without filing
a registration statement for those transactions. After entry of the Final Judgment, these
defendants continued their blatant contempt of the Court’s Order by offering and selling an
additional 15.536 billion shares without filing a registration statement. Altomare’s and
Gunderson’s participation in these offers and sales after April 2, 2007 also violate the penny
stock bars entered against them. In addition, Universal Express and Altomare have violated the
preliminary injunction by making false statements in the company’s amended annual report for
the year ending June 30, 2006 filed on Form 10-KSB with the Commission on March 26, 2007
(“2006 Form 10-K”), the March 31, 2007 quarterly report filed on Form 10-QSB with the
Commission on May 21, 2007 (“March 2007 10-Q”) and the amended December 31, 2006
quarterly report filed on Form 10-QSB on June 14, 2007 (“December 2006 10-Q”). To date, the
defendants have not paid into the registry of the Court the amounts ordered in disgorgement, and
prejudgment interest. 1
1 The defendants have also not paid the civil penalties ordered. The SEC is not seeking to
enforce the civil penalties through this motion for contempt since collection of penalties is
controlled by the Federal Debt Collection Procedures Act at 28 U.S.C. § 3001 et seq.
5
Moreover, Altomare has violated the officer and director bar by continuing to act as the
chief executive officer and sole director of Universal Express, signing the two reports after entry
of the Final Judgment on April 2, 2007 and making statements as the chief executive officer of
Universal Express in numerous corporate press releases. Although the defendants filed a notice
of appeal on June 2, 2007, the Final Judgment remains in effect since no stay has entered. The
defendants belatedly moved for stay of the judgment on June 20, 2007. Hughes Decl. at para. 5.
Since no stay has been entered, the defendants are required to comply with the Court’s orders.
Plaintiff intends to file its response in opposition to the defendants’ request for a stay on July 5,
2007.2 Civil contempt is necessary to stop the defendants’ repeated violations of the federal
securities laws.
II. Legal Argument
A. The Court Has Inherent Power To Enforce Its Orders Through Civil Contempt
Courts have inherent power to enforce compliance with their lawful orders through the
imposition of civil contempt sanctions. Shillitani v. United States, 384 U.S. 364, 370, 86 S. Ct.
1531, 16 L. Ed. 2d 622 (1966); Armstrong v. Guccione, 470 F.3d 89, 101-02 (2d Cir. 2006)
(corporate officer incarcerated for contempt for failure to turn over assets). These powers are
“governed not by rule or statute but by the control necessarily vested in courts to manage their own
affairs so as to achieve the orderly and expeditious disposition of cases.” Chambers v. NASCO, Inc.,
2 Under Fed. R. Civ. P. 62(c), the court has discretionary power to suspend an injunction
during the pendency of an appeal A party seeking a stay has the burden of proving (1) that it is
likely to succeed on the merits of the appeal, (2) unless a stay is granted the movant will suffer
irreparable injury, (3) that no substantial harm will come to other parties, and (4) that a stay will
do not harm to the public interest. No stay of the injunction should be granted because the
defendants are unlikely to succeed on the merits having presented no new evidence or law to
support their position; they will not suffer irreparable injury because the injunction merely orders
them to comply with the law; there is substantial harm to investors who purchased unregistered
securities, to the deterrent effect of SEC enforcement actions and to the enforceability of court
orders.
6
501 U.S. 32, 43, 115 L. Ed. 2d 27, 111 S. Ct. 2124 (1991), quoting Link v. Wabash R.R. Co., 370 U.S.
626, 630-31, 8 L. Ed. 2d 734, 82 S. Ct. 1386 (1962).
Civil contempt sanctions, which the Commission seeks in this case, are designed to compel
future compliance with a court order and are considered coercive and avoidable through obedience,
and thus may be imposed in an ordinary civil proceeding upon notice and an opportunity to be heard.
International Union, UMWA v. Bagwell, 512 U.S. 824, 827, 114 S. Ct. 2552, 129 L.Ed.2d 642 (1994).
A contempt sanction, whether civil or criminal, can take the form of incarceration and/or imposition of
a monetary fine. SEC v. Credit Bancorp, Ltd., 2000 U.S. Dist. LEXIS 9755 *8 (S.D.N.Y. 2000). A
sanction is considered civil and remedial if it either coerces the defendant into compliance with the
court’s order, or compensates the complainant for losses sustained. Id. at *7-8, citing Bagwell, 512
U.S. at 829. Contempt involving discrete, readily ascertainable acts, such as payment of a judgment,
properly may be adjudicated through civil contempt proceedings. Bagwell, 512 U.S. at 833.
The standard for entering a contempt order in the Second Circuit is that “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 defendants have not
been reasonably diligent and energetic in attempting to accomplish what was ordered.” SEC v.
Margolin, 196 U.S. Dist. LEXIS 11299 * 6 (S.D. N.Y. 1996), citing EEOC v. Local 638, 753 F.2d
1172, 1178 (2d Cir. 1985); see also King v. Allied Vision, Ltd., 65 F.3d 1051, 1058 (2d Cir. 1995);
SEC v. Musella, 818 F. Supp 600, 605 (S.D.N.Y. 1992). "A clear and unambiguous order is one
that leaves no uncertainty in the minds of those to whom it is addressed, who must be able to
ascertain from the four corners of the order precisely what acts are forbidden." Id. (Citations and
quotations marks omitted). It need not be shown that the defendants disobeyed the court's order
7
willfully. See EEOC v. Local 638, 753 F.2d at 1178, citing McComb v. Jacksonville Paper Co., 336
U.S. 187, 191, 93 L. Ed. 599, 69 S. Ct. 497 (1949).
B. Universal Express, Altomare and Gunderson Are in Contempt for Violating the
Prohibition on Unregistered Stock Sales
The Court’s preliminary injunction entered on April 20, 2004, was clear and unambiguous.
It prohibited Universal Express, Altomare, and Gunderson from offering or selling a security unless
a registration statement was in effect or an exemption from registration applied. The defendants
knew from the SEC’s motion for summary judgment filed on August 18, 2006 that there was no
legal basis for their claim that their offers and sales of Universal Express shares were exempt from
registration under the Bankruptcy Code. In spite of the Court’s preliminary injunction, Universal
Express offered and sold 5,404,200,000 new shares between January 1, 2007 and March 31, 2007.3
Altomare was substantial participant in Universal Express’ offers and sales because he as the
president authorized the offers and sales by signing instruction letters directing the company’s
transfer agent to transfer ownership of the shares to third parties. Gunderson was also a substantial
participant in Universal Express’ offers and sales because he prepared opinion letters which he sent
to the transfer agent directing the issuance of the shares. The defendants sent instructions and
opinion letters to the company’s transfer agent in New York by facsimile transmission, which
involves the use of interstate commerce. Universal Express has filed no registration statements
with the Commission since its last Form S-8 filed on January 22, 2002. Hughes Decl. at para. 7.
3 Universal Express and Altomare admit in the March 2007 Form 10-Q that “During the nine
months ended March 31, 2007 the Company issued 8,715,500,000 shares of common stock. Of
such shares 670,000,000 were sold, 7,985,000 shares were issued for deferred services and
60,500,000 were issued for services.” Exhibit 1 at p. 10. Reducing these numbers by shares
issued in the quarters ending on September 30, and December 31, 2006, as reported in the Forms
10-Q filed by the company, Universal Express sold 670,000,000 shares and exchanged
4,734,200,000 shares for deferred services. These two amounts total 5,404,200,000 shares.
8
From April 2, 2007, the day the final judgment was entered, and continuing through at least
June 18, 2007, Altomare instructed the transfer agent of Universal Express to issue 15,536,000,000
new shares of Universal Express stock to ten entities or individuals. See Exhibit 7, Master Control
log Continental Stock Transfer & Trust. Using the claimed exemption rejected in the Court’s
Opinion on February 21, 2007,4 in each of the letters to the transfer agent, Altomare stated in
substantially similar language, “Please issue from treasury __ stock certificates for ______ shares
each of Universal Express Common Stock in the name of __________. This stock is to be free
trading under the S-8 registration of the Company’s 1994 Stock Option Plan. Please send the
certificates Fed Ex to:” an entity or person at the address listed. For an example of the letters see
Exhibit 8. Hughes Decl. at 17. The letters are from Richard A. Altomare as the President of
Universal Express and sent by facsimile transmission to the transfer agent in New York.
Altomare’s letters are transmitted with opinion letters from Chris Gunderson, the General Counsel
of Universal Express, which state in identical language, “Please be advised that the Company’s
1994 Stock Option Plan (the “Plan”) is an S-8 registration. You may rely on this opinion with
respect to instructions from the company with respect to the issuance of shares under the Plan.”
The fax coversheets for the letters indicate they were sent by Chris Gunderson. See Exhibit 8.
Gunderson ignores the Court’s Opinion and Order at page _ which held
To establish a violation of Section 5, the Commission must show that the defendants used
interstate transportation, communication or the mails in connection with the offer to sell or sale
of a security when no registration statement was in effect for the securities being offered or sold.
SEC v. Cavanagh, 445 F.3d 105, 111 n. 13 (2d Cir. 2005). Liability for violations of Section 5
4 The Court’s Opinion and Order entered February 21, 2002 explicitly found no merit to the
defendants’ claim that their issuances of unregistered shares were exempt from the registration
requirements under the 1994 Option Plan contained in the bankruptcy reorganization plan. (Opinion
at 5- 6, 18-22)
9
extends to those who participate in an offer to sell or engage in steps necessary to the distribution
of security. Cavanagh, 155 F.3d at 134; SEC v. Chinese Consol. Benevolent Ass'n, 120 F.2d
738, 740-41 (2nd Cir.), cert. denied, 314 U.S. 618 (1941). Thus, "those who had a necessary role
in the transaction are held liable as participants." SEC v. Murphy, 626 F.2d 633, 650-51 (9th Cir.
1980); see also SEC v. Holschuh, 694 F.2d 130, 139-40 (7th Cir. 1982), citing SEC v. Culpepper,
270 F.2d 241, 247 (2d Cir. 1959). Under this doctrine, a participant in an unregistered
distribution of stock is liable as a primary violator of Section 5 if his participation is "necessary
and substantial and not simply 'de minimis.'" SEC v. Softpoint, Inc., 958 F. Supp. 846, 860
(S.D.N.Y. 1997).
The defendants violated the Court’s explicit language in the preliminary injunction, and
final judgment by continuing to violate Section 5 by making unregistered offers and sales of
securities when no registration statement was in effect. Since the Commission has established
the offer and sale of unregistered securities through the use of interstate commerce, the burden
shifts to the defendants to show that a claimed exemption from registration is available. SEC v.
Ralston Purina Co., 346 U.S. 119, 126 (1953); SEC v. North American Research and
Development Corp., 424 F.2d 63 (2d Cir. 1970); SEC v. Culpepper, 270 F.2d 241, 246 (2d Cir.
1959).
C. Universal Express and Altomare Are in Contempt of the Court’s Orders by Making
False and Misleading Statements.
On April 20, 2004, the Court also preliminarily enjoined Universal Express, Altomare and
Gunderson from violating the anti-fraud provisions of Section 17(a) of the Securities Act, Section
10(b) of the Exchange Act, and Rule 10b-5, which, in part, prohibit the defendants from making
untrue statements of a material fact or omitting to state a material fact necessary in order to make
10
statements made, in light of the circumstances under which they were made, not misleading in
connection with the offer and sale of securities. The preliminary injunction was converted to a
permanent injunction in the Final Judgment that was entered on April 2, 2007.
The Court’s Opinion and Order entered on February 21, 2007 clearly advised the defendants
that their statements that Universal Express anticipated receiving $9 million of revenue from “over
9,000 independently owned and operated private postal stores” in its “WorldPost Network” in the
May 22, 2003 press release (Exhibit 4) were false and misleading because Altomare admitted no
network existed. (Opinion at 12-13.) Disregarding the Court’s finding, Universal Express and
Altomare repeatedly stated in three reports filed with the Commission since entry of the February
21, 2007 Opinion that the company receives purported “revenue streams” from a “private postal
network of 9,000 postal centers in a network called UniversalPost.” Hughes Decl. at para. 10; see
also 2006 Form 10-K, Exhibit 3 at p.6; the March 2006 10-Q, Exhibit 1 at p. 10; and December
2006 Form 10-Q, Exhibit 5 at p. 11 of 19. As the Court noted in its Opinion, Universal Express has
no connection to this network. (Opinion at pp. 12-13) Therefore, the statements in these SEC
filings about the projected revenues continue to be materially false and misleading
Universal Express and Altomare also made false and misleading statements about the status
of litigation with the Commission. Universal Express and Altomare represent in substantially
similar language in two reports that “On March 2, 2004, the Company brought an action against the
SEC in Federal Court in Florida seeking damages from the “naked shorting” of its shares and other
matters. Thereafter, on March 23, 2004, the SEC brought an action in Federal Court in New York
against certain officers of the Company. Both suits are pending.” See Exhibit 3, 2006 Form 10-K
at p. 38, Note 23 Legal Proceedings; and Exhibit 1, March 2007 Form 10-Q, at p. 17-18, in the
segment titled “Legal Proceedings.”
11
These statements are misleading, because Universal Express and Altomare fail to disclose
that the Company’s suit against the Commission was dismissed on March 30, 2005 [see Exhibit 6],
which decision was affirmed by the Eleventh Circuit Court of Appeals on April 18, 2006. See
Universal Express, Inc. v. United States Securities and Exchange Commission, 117 Fed. Appx. 52,
2006 U.S. App. LEXIS 9705 (11th Cir. 2006) (decision is marked not for publication).
Additionally, Universal Express and Altomare failed to disclose material facts that Universal
Express, not just the officers of the company, is named as a party in the SEC’s action pending in
this Court; that an Opinion and Order was entered on February 21, 2007 and a subsequent judgment
on April 2, 2007, which ordered the company to pay disgorgement, interest and civil penalties
exceeding $21 million. Hughes Decl. at para. 11. These are material facts since the judgment
significantly exceeds the revenues reported by Universal Express for the preceding nine months of
$1,212,929 and its purported assets of $11,963,171 reported in the March 2007 Form 10-Q, Exhibit
1 at pp 3, 5. Hughes Decl. at para 12.
Universal Express and Altomare also misled investors by identifying Altomare as the chief
executive, chairman of the board of directors, president and chief accounting officer of the
company in the three reports without disclosing that on February 21, 2007, the Court had found that
he was substantially unfit to serve as an officer and director of a public company and would be
barred from serving in that capacity. Hughes Decl. at para. 9.
D. Altomare Is Violating the Officer and Director Bar By Continuing to Act as the Chief
Executive Officer of Universal Express
Altomare is violating the Court’s prohibition against his acting as an officer and director of
a public company. Hughes Decl. at para. 8. On March 26, 2007, Altomare electronically signed
two certifications for the amended 2006 Form 10-K, and represented that he was the Chief
12
Executive Officer and Chief Accounting Officer of Universal Express. Hughes Decl. at para 6;
Exhibit 3 at pp. 48, 50-52. The entry of the February 21, 2007 Opinion and Order was a material
event that should have been disclosed in any filing signed by Altomare after that date. On May 21,
2007, Altomare electronically signed the March 2007 Form 10-Q as the company’s president and
Chairman of the Board of Directors, and certified the company’s compliance with Sarbanes-Oxley
Act of 2002 as the Chief Executive Officer and Chief Accounting Officer. Hughes Decl. At 6;
Exhibit 1 at p. 19. On June 14, 2007, Altomare electronically signed two certifications for the
amended December 2006 Form 10-Q in which he represented he was the Chief Executive Officer
and Chief Accounting Officer. Hughes Decl. at 6; Exhibit 5 at 18, 20, 21. These are blatant and
repeated acts of contempt of the Court’s Final Judgment barring him from acting as an officer and
director of a public company. Additionally, Universal Express has posted thirty-six press releases
on its website a www.usxp.com since April 2, 2007. In thirty-five of the press releases, Altomare
states and identified himself as the chief executive officer of the company. The latest press release
was issued on June 25, 2007. Hughes Decl. at para. 15.
As discussed above, Altomare has instructed the transfer agent of Universal Express to issue
15.536 billion shares to third-parties since April 2, 2007. He has also increased the number of
authorized shares five times from 22,950,000,000 to the latest increase of 41,950,000,000 on June
18, 2007. See Exhibit 9.
E. Universal Express, Altomare and Gunderson Are in Contempt of the Final Judgment
By Failing to Pay Disgorgement and Prejudgment Interest by April 16, 2007.
The Court’s Final Judgment entered April 2, 2007 is clear and unambiguous in ordering the
defendants to pay disgorgement and pre-judgment interest within ten business days of entry of the
order. Universal Express was ordered to pay disgorgement and prejudgment interest totaling
13
$11,946,655, Altomare was to pay $1,702,098, and Gunderson was to pay $433,394 into the
registry of the Court on or before April 16, 2007. The Court’s Docket reflects that the defendants
have paid no funds into the registry of the Court to satisfy the Final Judgment, nor have they sent
plaintiff’s counsel notice of any such payments. Hughes Decl. at para. 4. This is clear and
convincing proof of the defendants’ noncompliance.
The defendants have made no efforts to comply with the Court’s order directing the
payment of disgorgement and prejudgment interest. Universal Express reported total assets in its
March 2007 10-Q filed on May 21, 2007 of $11,963,171. See Exhibit 1 at p. 3. Moreover,
Universal Express reported on May 22, 2007 owning a Jackson Family Memorabilia Collection
valued by Universal Express at between $30 million and $200 million. Exhibit 2; Hughes Decl. at
para. 13. Yet the company has made no payments toward the judgment. Universal Express and
Altomare reported in the company’s annual report on Form 10-KSB filed March 26, 2007 that
Altomare was paid a salary of $650,000 for the fiscal year ending in June 2006, that he owned
22,990,173 shares of Universal Express stock, and that he has loans owed to the company of
$722,709 and his wife had received $906,000 as a “advance” from the company on June 20, 2006
without further explanation. Hughes Decl. at para. 14; Exhibit 3 at pp. 41- 44. Yet Altomare has
made no payments toward satisfaction of the judgment. Gunderson remains employed as general
counsel to Universal Express. He also has made no efforts to pay the judgment. The defendants
are clearly in contempt of the payment provisions of the Final Judgment. Hughes Decl. at para. 3 &
4. Imposition of a civil contempt sanction for the defendants’ noncompliance with the order to pay
disgorgement and prejudgment interest is warranted.
14
III. Appropriate Sanctions
Courts have wide discretion in fashioning remedial sanctions for civil contempt. See, In
the Matter of Dickinson, 763 F.2d 84, 87 (2d Cir. 1985). Civil contempt sanctions should either
seek to coerce the contemnor into future compliance with the court’s order or compensate the
complainant for losses resulting from the contemnor’s past noncompliance. King, 65 F.3d at
1062. A sanction may be both coercive and compensatory. New York State National Org. for
Women v. Terry, 886 F.2d 1339, 1353 (2d Cir. 1989), cert. denied, 495 U.S. 947, 109 L. Ed. 2d
532, 110 S. Ct. 2206 (1990). While a court must attempt to exercise the minimum power it can
to achieve the ends, it is important to select a sanction which is likely to have some impact.
When imposing coercive sanctions the court should consider: (1) the character and magnitude of
the harm threatened by the continued contumacy, (2) the probable effectiveness of the sanction
in bringing about compliance, and (3) the contemnor’s financial resources and the consequent
seriousness of the sanction’s burden. Terry, 886 F.2d at 1353. The defendants’ failure to
comply with the Final Judgment is a harm of substantial magnitude, undermining the deterrent
effect of Commission enforcement actions and the enforceability of court orders.
Coercion of the defendant to comply with a court’s order may be achieved by the
incarceration of the contemnor until he purges himself of contempt. Shillitani v. United States,
384 U.S. at 370; Penfield Co. v. SEC, 330 U.S. 585, 590, 67 S. Ct. 918, 91 L. Ed. 1117 (1947),
reh’g denied, 331 U.S. 865. Courts have ordered defendants incarcerated for failing to pay
disgorgement. See SEC v. Margolin, 1996 U.S. Dist. LEXIS 11299 *13-15 (S.D.N.Y. 1996)
(where defendant did not submit any funds in satisfaction of judgment appropriate to incarcerate
defendant to compel payment of disgorgement).
A. Sanctions Against Altomare
As the chief executive officer of Universal Express, Altomare has been the principal
instigator in the company’s repeated violations of the registration and anti-fraud provisions in
contempt of the Preliminary Injunction and Final Judgment. Altomare has perpetrated these
violations while in contempt of the Court’s Final Judgment barring him from serving as an
15
officer and director of a public company since its entry on April 2, 2007, or 88 days through June
29, 2007. On March 26, 2007, Universal Express reported that it is paying Altomare a salary of
$650,000 per year, which equates $2,500 per day for 260 business days in year.
The Commission requests that the Court impose a fine against Altomare of $220,000 (88
days multiplied by $2,500) for his contemptuous conduct in failing to resign from his officer and
director positions with Universal Express, which will be paid into the registry of the Court and
used to compensate investors in the company who were paying Altomare’s salary when it was
illegal for him to continue in that role. The Commission further requests that an additional daily
fine of $2,500 be assessed for every day that Altomare continues to violate the officer and
director bar. Altomare can purge his contempt by resigning all of his positions as an officer and
the sole director of Universal Express. In the case of a per diem fine, a contemnor can purge his
contempt and avoid the continued accumulation of the fine. See SEC v. Credit Bancorp, Ltd.,
2000 U.S. Dist. LEXIS 9755 *12 (S.D.N.Y. 2000).
However, since Altomare has ignored the Court’s earlier order to pay disgorgement,
prejudgment interest, and civil penalties totaling $3,121,123 for his prior violations of the
securities registration and anti-fraud provisions, the imposition of these substantial monetary
remedies was not enough to deter him from further violations of the federal securities laws. It
therefore appears that a lesser monetary sanction of $2,500 per day will compel his compliance.
Therefore, the Commission requests that the Court order Altomare to be incarcerated
immediately until he purges his contempt of the officer and director bar, by submitting to
Universal Express a letter of resignation from his positions as the president, chief executive
officer, chief accounting officer, and chairman of the board of directors, and issuing a press
release posted on the Universal Express website at www.usxp.com stating he has resigned his
positions as the president, chief executive officer, chief accounting officer, and chairman of the
board of directors to comply with the Court’s order barring him from serving as an officer or
director of a public company with shares registered under Section 12 of the Securities Exchange
Act of 1934. Further, the Commission requests the Court to order Altomare to cause Universal
16
Express to file a disclosure on Form 8-K with the Commission disclosing his resignation as an
officer and director of the company to comply with the Court’s Final Judgment. To establish his
compliance with the Court’s order, Altomare should be ordered to file with the Court copies of
his resignation letter, along with the press release, copy of the website posting, and Form 8-K
disclosing his resignation.
Altomare is also in contempt of the Court’s preliminary injunction which prohibited him
from offering or selling securities when no registration statement was in effect in violation of
Section 5 of the Securities Act. Between January 1, 2007 and March 23, 2007, Altomare was a
necessary participant in the offer and sale of over 5.4 billion shares of Universal Express by
instructing the transfer agent to issue new free trading shares when no registration statement was
in effect. Between April 2, 2007 and June 19, 2007, Altomare was a necessary participant in the
offer and sale of over 15.536 billion shares of Universal Express by instructing the transfer agent
to issue new free trading shares when no registration statement was in effect. Altomare’s
participation in the offers and sales after April 2, 2007, also violates the Court’s Final Judgment
entering a penny stock bar against Altomare. The Commission requests that the Court
incarcerate Altomare until he provides an accounting of all funds or services received by
Universal Express, himself, or his family members directly or indirectly in exchange for the 20.9
billion shares. Altomare can purge the contempt by filing the accounting and paying into the
registry of the Court any funds that he or his family received as a result of these illegal stock
sales.
Altomare is also in contempt of the Court’s preliminary injunction for making false
statements about the UniversalPost network and the status of the company’s litigation with the
SEC in the 2006 Form 10-K, and also the Court’s Final Judgment for making the same false
statements in the amended December 2006 Form 10-Q and the March 2007 Form 10-Q. The
Commission requests that the Court order Altomare to issue a press release within five days of
entry of the contempt order making accurate disclosure about the UniversalPost network and
accurately identifying the number of stores from whom Universal Express actually received
17
revenues during the fiscal year ending June 30, 2006, the quarter ending December 31, 2006 and
the quarter ending March 31, 2007. The Commission further requests that the Court order
Altomare to disclose in the press release the accurate status of the litigation between Universal
Express and the SEC, disclosing the full name of case, docket number and location of the court,
date of the decision, and that the company’s case against the SEC filed in the Southern District of
Florida was dismissed, and the decision was affirmed by the Eleventh Circuit Court of Appeals;
and that in the case pending in this Court, Universal Express is named as a party and that a Final
Judgment was entered on April 2, 2007 finding that Universal Express, Altomare and Gunderson
had violated the securities registration and anti-fraud provisions of the federal securities laws.
Further, Altomare must cause the company to post the press releases on the Universal Express
website at www.usxp.com along with copies of all three court opinions.
The Commission requests that the Court also order Altomare to be incarcerated until he
provides an accounting that identifies all his assets wherever located, provides copies of all his
bank account and brokerage account statements for the past year, and pays disgorgement and
prejudgment interest totaling $1,702,098, which was due on April 16, 2007 plus any accrued post
judgment interest on that amount.
B. Sanctions Against Universal Express
The Commission requests that the Court also order Universal Express to pay a fine of
$2,500 per day until it removes Altomare as an officer and director. The company can purge its
contempt by filing with the Court a letter addressed to Mr. Altomare which terminates his
employment, issuing a press release stating that Universal Express has terminated Mr. Altomare
from his positions as the president, chief executive officer, chief accounting officer, and
chairman of the board of directors to comply with the Court’s order barring him from serving as
an officer or director of a public company with shares registered under Section 12 of the
Securities Exchange Act of 1934, posting the press release on its website at www.usxp.com
along with a copy of the Court’s Order and Opinion entered February 21, 2007 and the Final
Judgment entered April 2, 2007. Further, the Commission requests that Universal Express be
18
ordered to file a disclosure on Form 8-K with the Commission disclosing its termination of
Altomare as an officer and director of the company to comply with the Court’s Final Judgment
and file a copy of the Form 8-K with the Court.
If the company’s termination of Altomare is determined to be a “change of control event”
under Altomare’s employment contract with Universal Express, then the Commission requests
that the Court order Universal Express to pay any accelerated salary benefits due to Altomare
under those provisions into the registry of the Court and deliver any stock to be issued to
Altomare into the registry of the Court to be applied toward satisfaction of the judgment entered
against Altomare.
The Commission also requests that the Court order Universal Express, within forty-five
days of entry of the contempt order, to file with the Commission amendments to its three
previously filed reports: 2006 Form 10-K, amended December 2006 Form 10-Q, and March
2007 Form 10-Q, which must be signed by an appropriate officer, who is someone other than
Richard Altomare. The three reports must disclose that the Form 10-K or 10-Q is being
amended to remove Mr. Altomare’s signatures and that this Court entered an Opinion and Order
on February 21, 2007 barring Altomare from acting as an officer and director of a public
company in the case of SEC v. Universal Express, Inc., Richard Altomare, Chris G. Gunderson,
Mark S. Neuhaus, George J. Sandhu, Spiga Ltd. and Tarun Mendiratta, civil action no. 1:04-CV-
02322 filed in the United States District Court for the Southern District of New York. The
reports must also delete the false and misleading information about the UniversalPost Network,
which was identified above, and accurately disclose the number of stores from which Universal
Express is receiving revenue during each of the reporting periods. The reports must accurately
disclose the dismissal of the company’s litigation against the Commission in the District Court
for the Southern District of Florida, and the entry of the Final Judgment against Universal
Express in this case and the status of the case on appeal. If the Company does not purge its
contempt by filing the amended reports with the Commission within forty-five days of entry of
19
the order for contempt, then the Court should impose an escalating fine sufficient to compel
compliance.
The Commission requests that the Court order Universal Express to disclose in a press
release filed within five days of entry of the contempt order the accurate status of the litigation
between Universal Express and the SEC disclosing the full name of case, docket number and
location of the court, date of the decision and that the company’s case against the SEC filed in
the Southern District of Florida was dismissed, and the decision was affirmed by the Eleventh
Circuit Court of Appeals; and that in the case pending in this Court, Universal Express is named
as a party and that a Final Judgment was entered on April 2, 2007 finding that Universal Express,
Altomare and Gunderson fad violated the securities registration and anti-fraud provisions of the
federal securities laws. Further, Universal Express must post the press releases on the Universal
Express website at www.usxp.com along with copies of all three court opinions. Universal
Express must file copies of the press release and website posting with the Court. If Universal
Express fails to issue the press release within five days, then the Court should impose an
escalating fine sufficient to compel compliance.
The Commission requests that the Court prohibit Universal Express from offering or
selling any of its securities until it retains outside counsel, who is not objectionable to the staff of
the Commission, which counsel must prepare a legal opinion as to whether each proposed the
offer and sale is required to be made pursuant to an effective registration statement or whether
there is an exemption from registration which applies. Outside counsel must send copies of each
legal opinion to counsel of record for the Commission in this case. Universal Express must file
with the Court a copy of the retainer agreement with its outside counsel.
The Commission also requests that Universal Express be ordered to provide, within five
days of entry of the contempt order, an accounting that that identifies of all the company’s assets
wherever located, all proceeds or services received in exchange for the over 20.9 billion shares
issued since January 1, 2007, and all compensation paid directly or indirectly to Altomare or his
family. The SEC requests that Universal Express be further ordered to provide copies of all
20
bank account and brokerage account statements for the past year. If Universal Express fails to
provide the accounting, then the Court should impose an escalating fine sufficient to compel
compliance.
The Commission requests that the assets of the company be frozen until Universal
Express pays into the registry of the Court the $11,946,655 which is due in disgorgement and
prejudgment interest.
C. Sanctions Against Gunderson
Gunderson is in contempt of the Court’s preliminary injunction which prohibited him
from offering or selling securities when no registration statement was in effect in violation of
Section 5 of the Securities Act. Between January 1, 2007 and March 23, 2007, Gunderson was a
necessary participant in the offer and sale of over 5.4 billion shares of Universal Express by
preparing instructions and opinion letters submitted to the transfer agent directing the issuance of
new free trading shares when no registration statement was in effect. Between April 2, 2007 and
June 19, 2007, Gunderson was a necessary participant in the offer and sale of over 15.536 billion
shares of Universal Express by preparing additional instructions and opinion letters submitted to
the transfer agent directing the issuance of free trading shares when no registration statement was
in effect. His participation in the offer and sale violates the penny stock bar entered against him
on April 2, 2007. The Commission requests that the Court incarcerate Gunderson until he
provides an accounting of all funds or services received directly or indirectly by Universal
Express, himself, or his family members in exchange the 20.9 billion shares. Gunderson can
purge the contempt by filing the accounting and paying into the registry of the Court any funds
that he or his family received as a result of these illegal stock sales.
Gunderson has failed to pay the disgorgement and prejudgment interest order by the
Court. The Commission requests that the Court order Gunderson to be incarcerated until he: (1)
provides an accounting that identifies all of his assets wherever located; (2) provides copies of
all his bank account and brokerage account statements for the past year; and (3) pays
disgorgement and prejudgment interest totaling $433,394.
21
IV. Scheduling a Hearing
The Commission respectfully requests that the hearing on this motion and its motion
seeking appointment of a receiver be set for argument on the same day. The public interest in
compliance with the federal securities laws and the defendants’ continuing flagrant violations of
the Court’s earlier orders warrant resolution of this matter at the Court’s earliest convenience.
Arthur Tifford, the attorney for Universal Express, has filed a notice of unavailability stating
without reasons that he is not available to participate in hearings from July 16, 2007 until August
27, 2007. [Docket 187] However, given the exigencies of the situation created by his clients’
flagrant contempt, the Commission requests that the Court set the hearing irrespective of defense
counsel’s purported unavailability. Defendants are represented by local counsel, who should be
able to appear in Mr. Tifford’s absence. The Commission also requests that the Court order the
defendants to appear and be present at the hearing on this matter.
IV. Conclusion
For the reasons set forth above, Plaintiff moves the Court for an order finding the
defendants in contempt and entering appropriate sanctions.
Dated: June 29, 2007
Respectfully submitted,
s/ Leslie J. Hughes
Leslie J. Hughes
Attorney for the Plaintiff
Securities and Exchange Commission
CERTIFICATE OF SERVICE
I hereby certify that on June 29, 2007, I electronically filed the PLAINTIFF’S
MOTION FOR ENTRY OF CIVIL CONTEMPT AGAINST DEFENDANTS
UNIVERSAL EXPRESS, INC., RICHARD A. ALTOMARE, AND CHRIS G.
GUNDERSON with the Clerk of the Court for filing and uploading to the CM/ECF system
which will send notification to the following as indicated to the parties listed below.
Arthur Tifford, Esq.
Tifford & Tifford, P.A.
1385 NW 15th Street
Miami, FL 33125
tiffordlaw@bellsouth.net
John A. Hutchings, Esq.
Dill Dill Carr Stonebraker & Hutchings, PC
455 Sherman Street, Suite 300
Denver, Colorado 80203
jhutchings@dillanddill.com
John B. Harris
Lara Shalov Mehreban
Stillman, Friedman & Shechtman, P.C.
425 Park Avenue
New York, NY 10022
lshalov@stillmanfriedman.com
jharris@stillmanfriedman.com
Harry H. Wise III, Esq.
500 Fifth Avenue, Suite 1650
New York, NY 10110
hwiselaw@aol.com
Marvin Pickholz, Esq.
Jason Pickholz, Esq.
Akerman Senterfitt LLP
335 Madison Avenue, Suite 2600
New York, NY 10017
Jason.pickholz@akerman.com
Dated: June 29, 2007
s/ Leslie J. Hughes (Colo. 15043)
Leslie J. Hughes
Attorney for the Plaintiff
News 
Market Data 
Discover 
