What Will You Bid for a Lawsuit?
June 26, 2008, 1:58 pm
norris.blogs.nytimes.com
The saga of Universal Express continues, even as Richard Altomare, the former chief executive, remains in jail until he satisfies a federal judge that he has been honest in detailing his assets, and therefore cannot pay the judgment against him.
I had missed the latest report by the company’s receiver, but it is worth reading, particularly for those shareholders who continue to believe the company is a victim of naked short selling. Now true believers may be able to bid for the right to sue over those sales:
“Numerous Universal Express shareholders have sent repeated communications alleging that Universal Express was the victim of naked, and therefore, illegal short selling. They make this allegation based upon Altomare’s claim that it happened and upon episodes of extremely high volumes of trades in Universal stock. They believe that the decline in the stock’s value is attributable to the short selling and not to the issuance of over 20 billion shares since August 2004 or to the fact that the company never had a profitable quarter in its existence.
There have been several organized e-mail campaigns by these shareholders. A recent one involved their requests to have actual physical stock certificates to evidence their Universal shareholdings. According to e-mail traffic, this will thwart the naked short sellers. Moreover, these shareholders anticipate that Altomare is going to go back into business in a company that will trade on the London exchange and they will be able to trade these certificates for shares in that company. The Receiver paid the transfer agent to reinstate the company with the transfer agent so that the shareholders could obtain stock certificates from the transfer agent.
Additionally, given that a cause of action for illegal trading might exist, the Receiver engaged an expert with a long history as a compliance officer in the securities industry to investigate the accusation. The expert obtained a great deal of information showing that there were episodes of when there were high volumes of short sales, but the task of determining whether any of these short sales were illegal could not be accomplished with the minimal funds held by the Receivership. For this reason, the Receiver proposes . . . to offer this potential cause of action for sale. The Receiver has no ability to judge the value of this potential cause of action or whether it exists at all, but will assign it to the highest bidder if the Court so allows.”
Before anyone sends in a bid, they might ponder the evidence regarding how Mr. Altomare ran the company, and the fact that despite his pleas of relative poverty, he seems to have told people he had taken over a shell company in Europe and was hoping to make acquisitions.
There is also the deposition of Barbara Altomare, Mr. Altomare’s wife, who the receiver believes did no work for her generous salary from the company.
“She took the Fifth regarding what duties she had for the company and what business was conducted on a trip taken on a private jet to Las Vegas with children and grandchildren at the time of her sixtieth birthday.”
The Altomares brought money into Universal Express by illegally issuing billions of shares, and then spent it on themselves while stiffing company creditors and even employees, who were persuaded to put company expenses on their personal credit cards. It amazes me that people who lost money in the stock still defend the Altomares.
(Thanks to Gary Weiss, whose blog brought the latest receiver’s report to my attention.)
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