Below is the full text version of the Appeal to the United States Supreme Court on behalf of Richard Altomare against the Securities and Exchange Commission. This is a landmark case and story on the perils of naked short selling, an inefficient regulatory agency that failed to stop it (SEC), and the unconstitutional actions taken by the SEC to silence one company (Universal Express) and its Chairman and CEO, Richard Altomare, from being recognized for his whistle blower status and voice of reason, clarity, and truth against injustice.
For media and other inquiries that would like PDF versions of all 17 major posts via email please send request to usxpshareholders(at)gmail(com).
No. 08A696
____________________
In The
Supreme Court of the United States
________<>________
RICHARD A. ALTOMARE,
CHRIS G. GUNDERSON,
Petitioners,
v.
U.S. SECURITIES AND EXCHANGE COMMISSION,
Respondent.
________<>________
On Petition For Writ Of Certiorari To The United
States Court Of Appeals For The Second Circuit
________<>________
PETITION FOR WRIT OF CERTIORARI
________<>________
CARL E. PERSON, Esq.
Representing Petitioners:
Richard A. Altomare and Chris G. Gunderson,
325 W. 45th Street – Suite 201
New York NY 10036-3803
(212) 307-4444, fax: (212) 307-0247
i
QUESTIONS PRESENTED FOR REVIEW
Pursuant to Rule 14.1(a), this petition for a writ of
certiorari to the Second Circuit in appeal case SEC
v. Universal Express, Inc. 07-2407-cv whose
November 13, 2008 Summary Order (see Appendix
Page 1) that is sought to be reviewed by the
Petitioners listed in the Caption is respectfully
submitted on the following questions presented for
review:
1. Did the courts below err in failing to dismiss
the SEC’s case against the Company and its officers
on the basis that such case was an attempt by the
SEC to obtain review of orders of the Bankruptcy
Court which review is prohibited by the Bankruptcy
Code?
2. Did the courts below on summary judgment
for the Securities and Exchange Commission (the
“SEC”) without any hearing or testimony ignore the
core issue of the naked shorting scandal underlying
Petitioners case which naked shorting scandal long
covered-up by the SEC in favor of culpable Wall
Street interests has become a significant aspect of
the present financial crisis?
3. Did the courts below err in failing to award
summary judgment to the Company and its officers
in their good-faith reliance on the immunities and
protections afforded by the United States
Bankruptcy Code and the provisions of the
ii
Company’s Reorganization Plan specifically
designed by the Bankruptcy Court to combat the
naked shorting scandal and to immunize and
protect the Company and its officers in their good
faith actions after the SEC denied assistance to the
Company to combat the naked shorting scandal?
4. Did the courts below err in failing to give
credence to and take judicial notice of the long-term
naked shorting scandal by Wall Street interests of
the shares of small public companies over the last
eight years which destroyed thousands of those
companies and the investments of millions of
ordinary Main Street investors and of the securities
regulator’s failure to enforce existing regulations
against this practice and its cover-up of the naked
shorting scandal underlying the present financial
crisis?
5. Did the courts below err in failing to
recognize the important provisions of the United
States Bankruptcy Code relied upon by the
Company and the Petitioners to combat the naked
shorting scandal and the opinions of the United
States Supreme Court in over 140 cases upholding
the provisions and immunities of the Bankruptcy
Code and the powers of the Bankruptcy Courts?
6. Did the courts below err in depriving the
Petitioners of their Sixth Amendment rights to have
a jury assess their good faith efforts to save the
Company and its investors from the naked shorting
scandal?
iii
LIST OF ALL PARTIES
Pursuant to Rule 14.1(b), a list of all
Defendant parties to the proceeding SEC v.
Universal Express, Inc. et al. (SDNY) 04-cv-2322 in
the Southern District of New York taken on appeal
to the Second Circuit in appeal case SEC v.
Universal Express, Inc. 07-2407-cv whose
November 13, 2008 Summary Order (see Appendix
Page 1 “App. 1”) that is sought to be reviewed by the
Petitioners listed in the Caption, and there is no
corporate entity petitioner herein for this petition
for a writ of certiorari; other parties are:
Plaintiff / Respondent:
U.S. SECURITIES AND EXCHANGE
COMMISSION,
Represented by:
The Solicitor General of the United States
Room 5614 Department of Justice
950 Pennsylvania Avenue, N.W.
Washington, DC 20530-0001
Defendants:
• UNIVERSAL EXPRESS, INC.,
• MARK S. NEUHAUS,
• GEORGE J. SANDHU,
• SPIGA, LTD., and
• TARUN MENDIRATTA,
iv
TABLE OF CONTENTS
Page
QUESTIONS PRESENTED FOR REVIEW........i
LIST OF ALL PARTIES…………………............iiiTABLE OF AUTHORITIES…….…………………....vi
OPINIONS BELOW……………………………………...1
JURISDICTION…………..……………………….……..1
CONSTITUTIONAL PROVISIONS………..……....2
STATUTES INVOLVED…………….………..…….....3
STATEMENT OF CASE………………………………....9
REASONS FOR GRANTING THE WRIT……......9
I. Overview………………………………………….......9
II. Importance of the Issue………………........11
III. Erroneousness of Decision below in
failing to apply settled Supreme Court
Precedents in over 140 cases…………….......16
CONCLUSION……………………………………….......34
v
APPENDIX
2nd Circuit Summary Order filed November 13,
2008 in 07-2407-cv 04-cv-2322 SEC v. Universal
Express, Inc……………………………………App. 1
UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK FINAL
JUDGMENT AGAINST UNIVERSAL EXPRESS,
INC., RICHARD A. ALTOMARE AND CHRIS G.
GUNDERSON filed March 3, 2007 in 04-cv-2322
SEC v. Universal Express, Inc……………….App. 5
UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK OPINION
AND ORDER filed February 21, 2007 in 04-cv-2322
SEC v. Universal Express,
Inc………………………………………………..App. 18
TABLE OF AUTHORITIES
Cases:
Page
United States v Energy Resources Co., Inc. et al ,
495 U.S. 545, 110 S. Ct. 2139, 10-9 L. Ed. 2d 580
(May 29, 1990)……………………………….….…6,16
McMillan v. McNeill, 17 U.S. 209, 210 (1819);
Patterson v. Winn, 30 U.S. 233, 241 (1831);
Nelson v. Carland, 42 U.S. 265, 267 (1843);
Ex Parte Christy, 44 U.S. 292, 297, 298
(1845); Fowler v. Hart, 54 U.S. 373, 375
(1851); Morgan v. Thornhill, 78 U.S. 65, 66
vi
(1870); Cleveland Insurance Company v.
Globe Insurance Company, 98 U.S. 366, 369
(1878); Barton v. Barbour 104 U.S. 126, 134
(1881); Dushane v. Beall, 161 U.S. 513, 515
(1896); Bardes v. First Nat. Bank, 178 U.S.
524, 534, 535 (1900); White v. Schloerb, 178
U.S. 542, 547 (1900); Mueller v. Nugent, 184
U.S. 1,13 (1901); Whitney v. Wenman 198
U.S. 539, 550, 551-552 (1905); Babbitt v.
Dutcher, 216 U.S. 102, 105 (1910); Acme
Harvester Co. v. Beckman Lumber Co., 222
U.S. 300, 312 (1911); United States Fidelity
& Guaranty Co. v. Bray, 225 U.S. 205, 217
(1912); Robertson v. Howard, 229 U.S. 254,
261, 262 (1913); Hull v. Burr, 234 U.S. 712,
717 (1914); Weidhorn v. Levy, 253 U.S. 268,
271-273 (1920); Taylor v. Voss, 271 U.S. 176,
190 (1926); Weil v. Neary, 278 U.S. 160, 171,
172 (1929); Ex parte Baldwin, 202 U.S. 610,
616-617 (1934); Local Loan Co. v. Hunt, 292
U.S. 234, 240 (1934); Continental Illinois
Nat. Bank & Trust Co. of Chicago v. Chicago
R. I. & P. Ry. Co., 294 U.S. 648, 675 (1935);
Louisville Joint Stock Land Bank v. Redford,
295 U.S. 555, 585 (1935); Meyer v. Kenmore
Hotel Co., 297 U.S. 160, 165 (1936); Schwartz
v. Irving Trust Co., 299 U.S. 456, 462, 463
(1937); Wayne United Gas Co. v. Owens
Illinois Glass Co., 300 U.S. 131, 136 (1937);
Wright v. Vinton Branch of Mountain Trust
Bank, 300 U.S. 440, 446, 447 (1937); Wright
v. Union Central Life Ins. Co., 304 U.S. 502,
518 (1938); Connecticut Railway & Lighting
vii
Co. v. Palmer, 305 U.S. 493, 502 (1939);
Taylor v. Standard Gas & Electric Co., 306
U.S. 307, 323 (1939); Popper v. Litton, 308
U.S. 295, 303-304 (1939); Securities and
Exchange Com’n v. U.S. Realty & Imp. Co.,
310 U.S. 434, 455 (1940); American United
Mut. Life Ins. Co. v. City of Avon Park, Fla.,
311 U.S. 138, 145 (1940); Sampsell v.
Imperial Paper & Color Corp., 313 U.S. 215,
220 (1941); Prudence Realization Corp. v.
Geist, 316 U.S. 89 (1942); Young v. Higbee
Co., 324 U.S. 204, 214 (1945); Order of Ry.
Conductors of America v. Pitney, 326 U.S.
561, 566-567 (1946); Heiser v. Woodruff, 327
U.S. 726, 731, 732 (1946); Vanston
Bondholders Protective Committee v. Green,
329 U.S. 156 162 (1946); United States
National Bank et al. v. Chase National Bank,
et al., 331 U.S. 28, 36 (1947); Williams v.
Austrian, 331 U.S. 642, 648 (1947); Callaway
v. Benton, 336 U.S. 132, 149 (1949); National
Ins. Co. v. Tidewater Co., 337 U.S. 582, 655
(1949); Manufacturers Trust Co. v. Becker,
338 U.S. 304, 310, 311-312 (1949); Katchen v.
Landy, 382 U.S. 323, 327 (1966); Protective
Committee for Independent Stockholders of
TMT Trailer Ferry v. Anderson, 390 U.S. 414,
424 (1968); Palmore v. United States, 411
U.S. 389, 409 (1973); Curtis v. Loether, 415
U.S. 189 195 (1974); Butner v. U.S., 440 U.S.
48, 55-56 (1979); Fullilove v. Klutznick, 448
U.S. 448, 472-473 (1980); Northern Pipeline
Const. Co. v. Marathon Pipeline Co., 458 U.S.
viii
50, 55, 56-60 (1982); U.S. v. Whiting Pools,
Inc., 462 U.S. 198, 206, 210 (1983); NLRB v.
Bildisco & Bildisco 465 U.S. 513, 527-528
(1984); Ohio v. Kovacs, 469 U.S. 274, 280
(1985); Kelly v. Robinson, 479 U.S. 36, 46
(1986); Norwest Bank Worthington v. Ahlers,
485 U.S. 197, 200 (1988); United States v.
Ron Pair Enterprises, Inc. 489 U.S. 235, 245-
246 (1989); Granfinanciera, S.A. v. Nordberg,
492 U.S. 33, 70-71 (1989); Pennsylvania Dept
of Public Welfare v. Davenport, 495 U.S. 552,
563 (1990); Langenkamp v. Culp, 198 U.S.
42, 44-45 (1990); Grogan v. Garner, 498 U.S.
279, 286-287 (1991); Johnson v. Home State
Bank, 501 U.S. 78, 88 (1991); Dewsnup v.
Timm, 502 U.S. 410, 418 (1992); Hollywell
Corp. v. Smith, 503 U.S. 47, 55 (1992); Taylor
v. Freeland & Kronz, 503 U.S. 638, 645
(1992); Patterson v. Schumate, 504 U.S. 753,
760 (1992); Pioneer Inv. Services Co. v.
Brunswick Associates Ltd. Partnership, 507
U.S. 380, 389 (1993); BFP v. Resolution Trust
Corporation, 511 U.S. 531, 546 (1994); U.S.
Bancorp Mortg. Co. v. Bonner Mall
Partnership, 513 U.S. 18, 20 (1994); Celotex
Corp. v. Edwards, 514 U.S. 300, 303-307
(1995); Things Remembered, Inc. v. Petrarca,
516 U.S. 124, 133 (1995); United States v.
Noland, 517 U.S. 535, 539 (1996); Bank of
America Nat. Trust and Sav. Ass’n v. 203
North LaSalle Street Partnership, 526 U.S.
434, 438 (1999); Hartford Underwriters Ins.
Co. v. Union Planters Bank, N.A., 530 U.S. 1,
ix
8, 9 (2000); Miller v. French, 530 U.S. 327,
360, 361 (2000); FCC v. NextWave Personal
Communications Inc., 537 U.S. 293, 302
(2003); Till v. SCS Credit Corp. 541 U.S. 465,
482 (2004); Central Virginia Community
College v. Katz, 546 U.S. 356, 359 (2006);
Marshall v. Marshall, 547 U.S. 293, 306
(2006); Marrama v. Citizens Bank of
Massachusetts, 549 U.S. 365, 367, 375 (2007);
Travelers Casualty and Sur. Co. of America
v. Pacific Gas & Elec. Co., 549 U.S. 443, 454
(2007); Florida Dept. of Revenue v. Piccadilly
Cafeterias, Inc., 128 S.Ct. 2326,
2336, 2340 (2008)…………………………………….15
Statutes:
11 U.S.C. §1123(b)(5) ……..………………..…6,17,18
11 U.S.C. §1129(a)(11)……..………………………..17
11 U.S.C. §101 et seq., particularly
§§1123, 1125, 1109. ………………..3,7,21,24,26-29,31
11 U.S.C. §1125(d)………..……………….……3,24,28
11 U.S.C. §1109(a) …………………………………5,25
11 U.S.C. §1123 ………………………….…3,21,27,32
Other:
House Report No. 95-595, 1978 Acts, to Public Law
95-598, November 6, 1978, 92 Stat. 2633….……..26
1
PETITION FOR WRIT OF CERTIORARI
Petitioners Richard A. Altomare and Chris
G. Gunderson, respectfully pray that a writ of
certiorari issue to review the summary order below.
________<>________
OPINIONS BELOW
The order of the United States Court of
Appeals for the Second Circuit in appeal case SEC
v. Universal Express, Inc. 07-2407-cv whose
November 13, 2008 Summary Order appears at
App. 1 to the Petition.
________<>________
JURISDICTION
The United States Court of Appeals for the
Second Circuit decided Petitioners’ case on
November 13, 2008. Petitioners have timely filed
this petition for certiorari with the Jan 29, 2009
Application (08A696) to extend the time to file a
petition for a writ of certiorari from February 11,
2009 to April 12, 2009, was granted by Justice
Ginsberg on February 17, 2009 extending the time
to file until April 13, 2009. Petitioner invokes this
Court’s jurisdiction under 28 U.S.C. § 1254(1).
________<>________
2
CONSTITUTIONAL PROVISIONS
Sixth Amendment – Trial by jury and rights of
the accused; Confrontation Clause, speedy trial,
public trial, right to counsel:
In all criminal prosecutions, the accused
shall enjoy the right to a speedy and public
trial, by an impartial jury of the State and
district where in the crime shall have been
committed, which district shall have been
previously ascertained by law, and to be
informed of the nature and cause of the
accusation; to be confronted with the
witnesses against him; to have compulsory
process for obtaining witnesses in his favor,
and to have the Assistance of Counsel for his
defense.
Seventh Amendment – Civil trial by jury.
In suits at common law, where the
value in controversy shall exceed twenty
dollars, the right of trial by jury shall be
preserved, and no fact tried by a jury, shall
be otherwise re-examined in any court of the
United States, than according to the rules of
the common law.
________<>________
3
STATUTES INVOLVED
The Company and its officers acted in good
faith reliance on the following language in Section
1123 of the Bankruptcy Code, 11 U.S.C. §1123,
among others:
“(a) Notwithstanding any otherwise applicable
non-bankruptcy law, a plan shall
* * *
(5) provide adequate means for the plan’s
implementation such as
* * *
(j) issuance of securities of the debtor . . . for
cash, for property, for existing securities, or in
exchange for claims or interests, or for any
other appropriate purpose; . . . (emphasis
added).
Once the Bankruptcy Court determined that
the Company’s Reorganization Plan contained
“adequate information,” the Company and its officers
acted in good faith reliance on Section 1125 of the
Bankruptcy Code, which states that once such a
finding is made by the Bankruptcy Court, no other
law or rule governed the Company’s conduct. 11
U.S.C. §1125(d) states, as follows:
“Whether a disclosure statement
required under subsection (b) of this section
contains adequate information is not governed
4
by any otherwise applicable non-bankruptcy
law, rule, or regulation, but an agency or
official whose duty is to administer or enforce
such a law, rule, or regulation may be heard
on the issue of whether a disclosure statement
contains adequate information. Such an
agency or official may not appeal from, or
otherwise seek review of, an order approving a
disclosure statement.” (Emphasis added)
Moreover, the company and its officers are
made specifically immune from suit arising from the
issuance of securities under the Reorganization Plan
and the 1994 Stock Incentive Plan pursuant to the
safe harbor provisions of Section 1125(e), which
provides in pertinent part:
“A person . . . that participates, in good faith
and in compliance with the applicable
provisions of this title, in the offer, issuance,
sale, or purchase of a security, offered or sold
under the plan, . . . is not liable, on account of
such . . . participation, for violation of any
applicable law, rule or regulation governing . .
. the offer, issuance, sale, or purchase of
securities. (Emphasis added).
This is unequivocal black letter statutorily
imbued immunity in this case for the Company and
its officers.
The SEC’s civil suit against the Company
and its officers, including its request for
5
preliminary and permanent injunctions, are
improper attempts by the SEC to appeal the orders
and decrees of the Bankruptcy Court, including the
orders approving the “First Amended Disclosure
Statement Pursuant to Section 1125 of the
Bankruptcy Code” (the “Disclosure Statement”), the
First Amended Plan of Reorganization, the
Confirmation Order and the 1994 Stock Incentive
Plan.
Section 1125(d), Title 11 of the Bankruptcy
Code provides, as follows – “Whether a disclosure
statement…contains ‘adequate information’ is not
governed by any otherwise applicable nonbankruptcy
law, rule or regulation, but an agency
or official whose duty is to administer or enforce
such law, rule or regulation may be heard on the
issue of whether a disclosure statement contains
adequate information. Such an agency or official
may not appeal from, or otherwise seek review of,
an order approving a disclosure statement.”
(Emphasis added)
Section 1109(a) of Title 11 specifically
prohibits the SEC from appealing, on its own
behalf, any judgment, order or decree in the
reorganization case, as follows:
“The Securities and Exchange Commission
may raise and may appear to be heard on any issue
in a case under this chapter, but the Securities and
Exchange Commission may not appeal from any
6
judgment, order, or decree entered in the case.”
(Emphasis added).
The Supreme Court also recognizes in great
number of its decisions over the years cited herein
that Bankruptcy Courts, as courts of equity have
broad powers, as evidenced by the Supreme Court’s
following discussion of the Bankruptcy Code in the
signal Energy Resources case, infra:
“The Code [Bankruptcy Code], however,
grants the bankruptcy courts residual authority to
approve reorganization plans including ‘any …
appropriate provision not inconsistent with the
applicable provisions of this title.’ 11 U.S.C.
§1123(b)(5); see also §1129. The Code also states
that bankruptcy courts may ‘issue any order,
process, or judgment that is necessary or
appropriate to carry out the provisions’ of the Code.
§105(a).”
The Court also recognizes the Bankruptcy
Court’s authority to include in Reorganization
Plans any provision to fulfill the Bankruptcy
Court’s overriding responsibility underpinning the
Bankruptcy Court’s approval of Reorganization
Plans to assure itself that the reorganization will
succeed. (11 U.S.C. §1129(a) (11).
The Bankruptcy Code is replete with
provisions that cover post-confirmation matters,
some of which are as follows:
7
§1123. “Contents of Plan”
“ (a) Notwithstanding any otherwise applicable
non-bankruptcy law, a plan shall-
***
(5) provide adequate means for the plan’s
implementation, such as –
***
(B) transfer of all or any part of the property
of the estate to one or more entities, whether
organized before or after the confirmation of
such plan;
***
(E) …modification of any lien;
(F) …modification of any indenture or
similar instrument;
(G) curing or waiving of any default;
(H) extension of a maturity date or a change
in an interest rate or other term of
outstanding securities;
(I) amendment of the debtor’s charter;
(J) issuance of securities…for any other
purpose.
(b) Subject to subsection (a) of this section, a plan
may-
***
(6) include any other appropriate provision
not inconsistent with the applicable provisions of
this title.”
In addition, the Bankruptcy Code provides
many other examples of future effectiveness of
8
orders and rulings of the Bankruptcy Court. See for
example:
§1113. “Rejection of collective bargaining
agreements”
§1114. “Payment of insurance benefits to
retired employees”
“Subchapter III – Post confirmation Matters’
§1141. Effect of confirmation
§1142. Implementation of plan
§1143. Distribution
§1144. Revocation of an order of confirmation
________<>________
9
STATEMENT OF CASE
REASONS FOR GRANTING THE WRIT:
I. Overview
Pursuant to Rule 14.1(g), this petition for a
writ of certiorari is respectfully submitted based
upon the following statement of the case:
This case involves the failure of the SEC to
stop naked shortsellers from destroying Universal
Express, Inc. (“Universal”) and thousands of other
small publicly-traded companies.
The naked shortsellers, operating as gangs
usually from or with Wall Street houses such as
Bear, Stearns, would attack the stock of small
companies with comparatively small amounts of
publicly-traded stock for the purpose of driving the
stock down, and pushing the company into
bankruptcy.
The purpose of pushing them into
bankruptcy was to be able to keep the proceeds of
the naked short sale, because it was widely
assumed by naked short sellers that they did not
have to report any cover transaction when the
short-traded company filed for bankruptcy.
From the company’s standing, the driving
down of the company’s stock price destroyed the
10
ability of the company to obtain credit lines, and
destroyed existing credit lines.
Universal and Appellants on numerous
occasions complained to the SEC about these illegal
practices, but the SEC always helped the naked
shortsellers. First, by doing nothing, and then by
attacking Universal and the Appellants.
Universal, through Appellants, sought to
counter the naked shortsellers’ moves by raising
money through the issuance and sale of new
common stock through the bankruptcy exemptions
and immunities under the Bankruptcy Code. This
was done to offset the loss of credit lines caused by
the naked shortsellers’ attacks on Universal’s stock
price and as a result its ability to obtain financing.
Universal sued some of the naked
shortsellers and obtained two judgments totaling
$700,000,000, which the SEC took away by forcing
us out of business and selling Universal’s assets for
about $35,000.
Universal had the right to issue stock under
the bankruptcy exemptions, as a company that had
come out of bankruptcy, and the SEC wholly
disregarded the rights of Universal and the
Appellants and went to the aid of the illegal
shortsellers. It might be observed that in due
course the wolfpack turned on one of its own. When
Bear Stearns was having financial difficulty, the
naked shortsellers (presumably not including any
11
traders from Bear Stearns) were there to drive Bear
Stearns out of business.
II. Importance of the Issue
This case presents a significant aspect of the
present financial crisis, the naked shorting scandal.
The naked shorting of the shares of small public
companies by Wall Street interests over the last
eight years has destroyed thousands of those
companies and the investments of millions of
ordinary Main Street investors.
The securities regulator failed over the last
eight years to take any effective steps against this
national shorting scandal. Only on July 15, 2008
and September 15, 2008 did the SEC finally admit
that naked shorting was a huge national problem in
connection with the financial meltdown and the
failure of major financial institutions. At that point,
the SEC sought to protect from the naked shorting
scandal the Wall Street interests that were doing
the naked shorting for more than eight years who
had now turned on each other in their insatiable
greed.
The SEC denied for over eight years that
naked shorting was a problem and failed to take
any effective action to prevent the issuance of
trillions of counterfeit and unregistered shares sold
into the market by vulturous Wall Street interests
in the names of small public companies (but not
12
shares issued by such companies) destroying their
market prices.
As a result of this regulatory failure and
cover-up by the SEC of the naked shorting scandal,
bordering on criminality, thousands of middle-class,
Main Street small public companies were destroyed
and forced into bankruptcy by the naked shorters,
millions of small investors lost their life savings
and hundreds of thousands of employees lost their
jobs.
Universal Express, Inc. was one of those
thousands (estimated to be 10,000) small public
companies destroyed by the naked shorters, in
league with the SEC, over the last eight years.
Universal, its President and CEO Mr. Richard
A. Altomare and Mr. Gunderson, its General
Counsel, have been prominent whistleblowers
against naked shorting for over ten years and the
SEC has over the same period sought to harass,
destroy and silence them on behalf of the naked
shorters, culminating on May 2, 2008 at the behest of
the SEC in the brutal incarceration by the court
(Lynch, J.) of Mr. Altomare in solitary confinement
for 83-days for purged civil contempt, which Mr.
Altomare established was improper.
The Office of the Inspector General of the SEC
(the “OIG”) is currently investigating important
aspects of this entire matter. These include the
conflicts of the receiver appointed by the court
13
(Lynch, J.) at the request of the SEC, Jane
Moscowitz of Florida, who had previously
represented prominent naked shorters and who
denied the existence of the naked shorting scandal
and who in a few days destroyed a viable and
growing small public company Universal Express,
with a market capitalization of over 111 Million
Dollars in 2006, by selling off and giving away in a
few days its businesses and assets without proper
auction or bidding processes for a few thousand
dollars.
The OIG is also investigating allegations that
the then Regional Director of the Denver Office,
George B. Curtis, perjured himself in a letter to
Senator Nelson on the Universal case among other
things denying the existence of the naked shorting
scandal.
It is also estimated that since naked shorters
never need to produce or cover their positions with
actual shares of companies thus forced into
bankruptcy, their gains from these illegal activities
were never reported to the Government and tax
revenues sufficient to pay off the National Debt
were lost.
For over eight years it is clear that the SEC’s
culture is to defer to and not to regulate powerful
Wall Street elites, but only to focus on small, less
powerful interests. This is so though its Charter
mandates protection for ordinary investors, not
brokers and hedge funds.
14
The revolving door of the SEC leading to
huge salaries with these same Wall Street elites
fosters this lack of regulation culture.
On September 18, 2008, Presidential
Candidate Senator John McCain called for the
firing of Chairman Cox for failing to regulate the
naked shorting scandal.
On December 18, 2008, President-Elect
Obama, in nominating the new SEC Chairman,
stated that the SEC, as the regulator assigned to
oversee Wall Street had failed to regulate and had
“dropped the ball” over the years, substantially
causing the present financial crisis.
On January 27, 2009, the Senate Banking
Committee at hearings accused the SEC of a total
failure to regulate Wall Street, including the
Madoff scandal.
On February 4, 2009, the House Financial
Services subcommittee determined at hearings that
the SEC had totally failed to regulate Wall Street
in the interest of the American people and that the
SEC has operated only to protect Wall Street
institutions and not ordinary Main Street investors
as it is charged in its charter.
On March 18, 2009, the Office of Inspector
General of the SEC issued a report finding that the
SEC had failed to regulate the naked shorting
15
scandal, that naked short selling was a significant
factor in the financial collapse and that the SEC
had ignored over 5,000 complaints on naked
shorting from investors during a twelve-month
period.
The Company, Universal Express, Inc. and
its officers, having failed to obtain the assistance of
the SEC from a virulent attack on the Company by
the naked shorters, sought to protect the Company
and its investors by relying on the provisions of its
Reorganization Plan and the United States
Bankruptcy Code, specifically designed for this
protection.
The courts below in an avalanche of hubris in
favor of the SEC failed to consider or discuss in
detail in connection with the summary judgment
(Lynch, J.) without any hearing or testimony these
important provisions of the Bankruptcy Code and
the opinions of the United States Supreme Court in
over 140 cases upholding the provisions and
immunities of the Bankruptcy Code and the powers
of the Bankruptcy Court; see, especially, cases
listed in the Table of Authorities on pages v through
ix.
This case thus represents the supremacy of
the United States Bankruptcy Code and the powers
and orders of the Bankruptcy Court in the
implementation of a Confirmed Plan of
Reorganization for the Company over SEC
jurisdiction and rules, in connection with the naked
16
short selling scandal and its substantial impact in
causing the present financial crisis.
This case also represents the clear
protections and immunities for the Company and
its officers afforded by the Bankruptcy Code and
the provisions provided by the Bankruptcy Court in
the Company’s Reorganization Plan to afford them
protections from the national scandal of naked
shorting, which protections the SEC refused to
provide leading to the destruction of the Company
and thousands of other small public companies.
III. Erroneousness of Decision below in
failing to apply settled Supreme Court
Precedents in over 140 cases
The signal United States Supreme Court
Case United States v Energy Resources Co., Inc. et
al., 495 U.S. 545, 110 S. Ct. 2139, 10-9 L. Ed. 2d
580 (May 29, 1990), greatly supports the positions
of the Company and its officers in its reasoning and
referencing a number of favorable Bankruptcy
Code provisions.
The Supreme Court’s holding discusses and
approves the broad powers of the Bankruptcy Court
as a court of equity under the Bankruptcy Code.
The Court also recognizes the in futuro
application of pre-confirmation orders to postconfirmation
applications, as do many of the
17
Bankruptcy Code provisions. In this case, payouts
over a five or six year period of employment taxes,
appointing a trustee for that specific purpose (in
one of the cases) and ordering the IRS to first apply
these payments, also in futuro, to trust fund debts,
despite IRS policy and regulations.
The Court also recognizes the Bankruptcy
Court’s authority to include in Reorganization
Plans “any appropriate provision not inconsistent
with the applicable provisions of this title.” (11
U.S.C. §1123(b)(5) and to include any provision to
fulfill the Bankruptcy Court’s overriding
responsibility underpinning the Bankruptcy
Court’s approval of the Reorganization Plan to
assure itself that the reorganization will succeed.
(11 U.S.C. §1129(a) (11).
This discussion and the referenced provisions
are especially significant for the long term success
of a developing small public company and the in
futuro protections and procedures to assure such
success, including, in the instant case, the Stock
Incentive Plan, deemed necessary by the
Bankruptcy Court to assure that company’s future
success and protection from manipulation arising
from the naked shorting scandal.
The Supreme Court, significantly, decided
the issues in this case with respect to two separate
corporate “fresh start” reorganizations by two
separate Bankruptcy Courts in Rhode Island and
Massachusetts, consolidated by the First Circuit,
18
confirming the First Circuit decisions in those
two cases.
The Supreme Court also recognizes that
Bankruptcy Courts, as courts of equity have broad
powers, as evidenced by Supreme Court’s following
discussion of the Bankruptcy Code:
“The Code [Bankruptcy Code], however,
grants the bankruptcy courts residual authority to
approve reorganization plans including ‘any …
appropriate provision not inconsistent with the
applicable provisions of this title.’ 11 U.S.C.
§1123(b)(5); see also §1129. The Code also states
that bankruptcy courts may ‘issue any order,
process, or judgment that is necessary or
appropriate to carry out the provisions’ of the Code.
§105(a).”
Universal Express, Inc., a developing small
public company, was reorganized under a
Confirmed Plan of Reorganization in 1994.
Under the Plan, Mr. Richard A. Altomare,
who was not involved with prior management, was
appointed by the Bankruptcy Court as the manager
of the reorganization. Mr. Altomare worked closely
with the Bankruptcy Court for three years, without
any compensation or payment of expenses, and
upon the successful reorganization of the Company,
was appointed by the Bankruptcy Court as the
Company’s Chairman, President, CEO and sole
director.
19
Mr. Altomare was awarded a long term
employment agreement by the Bankruptcy Court
and given broad powers under the Plan for the
future development of the Company.
Mr. Gunderson joined the Company in 1995
as its General Counsel. Mr. Gunderson has an
unblemished record at the Bar for more than 44
years. He is a graduate of Columbia University
School of Law where he was a Harlan Fiske Stone
Scholar.
Universal Express, Inc., had developed,
grown and been successful and recognized despite
the unrelenting attack for many years by naked
short sellers, Wall Street financial interests,
brokers, hedge funds and market makers who sold
into the market in the name of the Company
billions of unregistered, phantom and counterfeit
shares, collapsing the Company’s stock price from
$2 to 2 cents per share and, thereafter, keeping the
Company’s stock price well below fractions of a
cent.
Universal Express, Inc., its President and its
General Counsel, proved that naked short selling
existed upon the attack by the naked shorter sellers
on the Company’s shares in 1998. The General
Counsel showed by statistics that the volume of the
Company’s shares traded was 11 times the
Company’s outstanding shares and more than 68
times its average daily volume.
20
State court juries in Florida in 2001 and
2003 awarded the Company verdicts exceeding a
total of $700,000,000 against naked short sellers.
In a press release issued in September, 2003, the
Company stated that if ordinary people (jurors)
understand that “you can’t sell what you don’t own
and never deliver,” which is naked shorting and
counterfeiting of shares, “why can’t the SEC
understand” this national problem.
Within a month after the Company’s second
jury verdict against the naked shorters and the very
wide publicity attending the Company’s verdicts, an
embarrassed SEC, through its Denver office,
commenced a program of harassment against the
Company, with more than 13 subpoenas for
documents. The Company initially volunteered to
provide information on contracts for proposed
acquisitions and funding sources for those
acquisitions. Before these documents were even
received by the attorneys at the Denver office of the
SEC, they were calling those acquisition candidates’
and funders’ senior officers, threatening them with
reprisals so that they would move away from the
Company. This pattern of intimidation of the
Company was in full swing and successful since
several large proposed acquisitions were terminated.
The harassment of the Company and its officers, as
whistleblowers on naked shorting, and the
harassment of its business partners and potential
business partners and funders, continued unabated
thereafter and continue today in the form of this civil
suit.
21
The Company, its President and General
Counsel were determined not to be bullied by a
conflicted regulatory agency, which has failed the
investing public on this national naked shorting
scandal in favor of Wall Street interests, in a clear
violation of its Charter to protect investors.
The Company, it’s President and General
Counsel did not violate the Federal Securities Acts
by causing the Company to issue shares of stock
which had not been registered with the SEC. To the
contrary, those shares had been issued pursuant to
a Chapter 11, Bankruptcy Code, Plan of
Reorganization, which Plan had been confirmed by
the Bankruptcy Court and such shares were
exempt from the registration requirements of the
Securities Acts.
The SEC’s essential misstatement in its civil
action against the Company and its officers is its
description of Universal’s common stock issuance to
certain persons as “illegal, unregistered... shares”. In
support of its complaint the SEC represented that a
search of its databases disclosed no registrations for
the shares in question. What the SEC did not inform
the lower court is that the subject Universal shares
were duly and legally issued and sufficiently
registered pursuant to law. The law involved was
not and is not the normal domain of the SEC, the
Securities Acts, but the United States Bankruptcy
Code, 11 U.S.C. 101 et seq., particularly §§1123, 1125
and 1109.
22
The daily recapitalization of the Company
caused by the naked shorting of the Company’s
shares gave the Company the clear right under the
Reorganization Plan, the Bankruptcy Court’s Orders
and the Bankruptcy Code to cover those counterfeit
and totally unregistered naked shorted shares with
shares of the Company properly issued under its
Reorganization Plan and the provisions of the
Bankruptcy Code.
The Company’s Reorganization Plan,
including the operable provisions covering the
issuance of shares, were filed with the SEC a number
of times during the Reorganization of the Company.
The General Counsel provided another copy
to the SEC Denver attorneys in response to their
subpoena of August, 2003 requesting documents on
the issuance of shares by the Company.
The Reorganization Agreement and the
specific operable provisions covering the issuance of
shares were specifically referenced as exhibits to all
of the annual reports 10-KSB’s of the Company.
On April 21, 2006, Mr. Gunderson testified
extensively at his deposition held by attorneys from
the SEC’s Denver Office concerning the operable
provisions covering the issuance of shares of the
Company’s Reorganization Plan and other
documents that are an integral part of the
Reorganization Plan. To stunned silence and no cross
23
examination, the General Counsel described those
documents, placed in evidence the Reorganization
Plan and the other documents that are an integral
part of the Plan, placed into evidence copies of the
immunity from suit provisions of the Bankruptcy
Code and the daily recapitalization of the Company
caused by the naked shorting of the Company’s
shares and the clear right of the Company to cover
those counterfeit and unregistered shares by shares
which the Company properly issued under its
Reorganization Plan and the provisions of the
Bankruptcy Code.
The securities issued by the Company under
the Reorganization Plan were not required to be
issued pursuant to any registration statement under
the securities laws, but were lawfully and properly
issued pursuant to the Company’s confirmed Plan
and the provisions of the Bankruptcy Code.
As indicated, the Reorganization Plan was
filed with the SEC and specifically referenced as an
exhibit in the Company’s 10-KSBs filed annually
with the SEC.
No other filing was required.
Similarly, the securities issued by the
Company under the Stock Incentive Plan,
specifically made an integral part of the
Reorganization Plan and approved by the
Confirmation Order of the Bankruptcy Court for
the future development of the Company, were also
24
lawfully and properly issued pursuant to the
Company’s confirmed Plan and the provisions of the
Bankruptcy Code.
The Stock Incentive Plan was filed with the
SEC as an integral part of the Reorganization Plan
and itself specifically referenced as an exhibit in
the Company’s 10-KSBs filed annually with the
SEC.
No other filing was required.
The SEC’s civil suit against the Company
and its officers, including its request for
preliminary and permanent injunctions, are
improper attempts by the SEC to appeal the orders
and decrees of the Bankruptcy Court, including the
orders approving the “First Amended Disclosure
Statement Pursuant to Section 1125 of the
Bankruptcy Code” (the “Disclosure Statement”), the
First Amended Plan of Reorganization, the
Confirmation Order and the 1994 Stock Option
Plan (“Stock Incentive Plan”).
Section 1125(d), Title 11 of the Bankruptcy
Code provides, as follows – “Whether a disclosure
statement…contains ‘adequate information’ is not
governed by any otherwise applicable nonbankruptcy
law, rule or regulation, but an agency
or official whose duty is to administer or enforce
such law, rule or regulation may be heard on the
issue of whether a disclosure statement contains
adequate information. Such an agency or official
25
may not appeal from, or otherwise seek review of,
an order approving a disclosure statement.”
(Emphasis added)
The SEC’s suit is a clear attempt to appeal
an order of the Bankruptcy Court approving the
disclosure statement, including the Stock Incentive
Plan.
Section 1109(a) of Title 11 specifically
prohibits the SEC from appealing, on its own
behalf, any judgment, order or decree in the
reorganization case, as follows:
“The Securities and Exchange Commission
may raise and may appear to be heard on any issue
in a case under this chapter, but the Securities and
Exchange Commission may not appeal from any
judgment, order, or decree entered in the case.”
(Emphasis added).
What could be clearer! All of the provisions of
the Disclosure Statement, the First Amended Plan
of Reorganization and the Stock Incentive Plan
cannot in any respect be appealed from or
challenged by the SEC, which is exactly what it
attempts to do in its civil suit against the Company
and its officers. These black letter statutory
provisions enjoin the SEC from complaining in any
way, other than in the Bankruptcy proceedings, of
any of the provisions, judgments, orders or decrees
in the Company’s confirmed reorganization case.
26
The SEC had the opportunity to intervene
and be heard in the Company’s Bankruptcy
proceeding on the protective provisions of the Stock
Incentive Plan and the other relevant and related
provisions of the Disclosure Statement and the
First Amended Plan of Reorganization and chose
not to do so. Now, the SEC cannot appeal the
protective provisions provided by the Bankruptcy
Court and the Bankruptcy Code through the back
door of its civil suit, including its requests for
injunctive relief.
House Report No. 95-595, 1978 Acts, to
Public Law 95-598, November 6, 1978, 92 Stat.
2633 provides the legislative history underlining
Section 1109, as follows:
“Section 1109 authorizes the
Securities and Exchange Commission and
any indenture trustee to intervene in the
case at any time on any issue. They may
raise an issue or may appear and be heard on
an issue that is raised by someone else. The
section, following current law, denies the
right of appeal to the Securities and
Exchange Commission. It does not, however,
prevent the Commission from joining or
participating in an appeal taken by a true
party in interest. The Commission is merely
prevented from initiating the appeal in any
capacity.” (Emphasis added)
27
The shares of Universal’s common stock
referred to in the Complaint in this civil action
were issued in accordance with and pursuant to
Exhibit “I” of the confirmed Chapter 11 Plan,
defined therein as the Stock Incentive Plan.
The Universal shares were duly and legally
issued and sufficiently registered pursuant to law.
The law involved, as indicated above, was
not and is not the normal domain of the SEC, the
Securities Acts, but the United States Bankruptcy
Code, 11 U.S.C. §101 et seq., particularly §§1123
and 1125.
The Company and its officers acted in good
faith reliance on the following language in Section
1123 of the Bankruptcy Code, 11 U.S.C. §1123,
among others:
“(a) Notwithstanding any otherwise applicable
non-bankruptcy law, a plan shall
* * *
(5) provide adequate means for the plan’s
implementation such as
* * *
(j) issuance of securities of the debtor . . . for
cash, for property, for existing securities, or in
exchange for claims or interests, or for any
other appropriate purpose; . . . (emphasis
added).
28
Once the Bankruptcy Court determined that
Universal’s Reorganization Plan (the First Amended
Plan of Reorganization and Disclosure Statement),
including the 1994 Stock Option Plan contained
“adequate information,” the Company and its officers
acted in good faith reliance on Section 1125 of the
Bankruptcy Code, which states that once such a
finding is made by the Bankruptcy Court, no other
law or rule governed Universal’s conduct. 11 U.S.C.
§1125(d) states, as follows:
“Whether a disclosure statement
required under subsection (b) of this section
contains adequate information is not governed
by any otherwise applicable non-bankruptcy
law, rule, or regulation, but an agency or
official whose duty is to administer or enforce
such a law, rule, or regulation may be heard
on the issue of whether a disclosure statement
contains adequate information. Such an
agency or official may not appeal from, or
otherwise seek review of, an order approving a
disclosure statement.” (Emphasis added)
Moreover, the company and its officers are
made specifically immune from suit arising from the
issuance of securities under the Reorganization Plan
and the 1994 Stock Incentive Plan pursuant to the
safe harbor provisions of Section 1125(e), which
provides in pertinent part:
“A person . . . that participates, in good faith
29
and in compliance with the applicable
provisions of this title, in the offer, issuance,
sale, or purchase of a security, offered or sold
under the plan, . . . is not liable, on account of
such . . . participation, for violation of any
applicable law, rule or regulation governing . .
. the offer, issuance, sale, or purchase of
securities. (Emphasis added).
This is unequivocal black letter statutorily
imbued immunity in this case for the Company and
its officers.
The SEC had knowledge that the shares
were properly issued pursuant to the Stock
Incentive Plan of Packaging Plus Services, Inc.,
Universal’s former name, but ignored that fact.
The Stock Incentive Plan was specifically
made an integral part of the Reorganization Plan
by the Confirmation Order of the Bankruptcy Court
pursuant to Section 1125 of the Bankruptcy Code.
Universal and its officers believe that this
case was undertaken by the SEC, following a period
of intense harassment by the SEC, to gag Universal
and its officers as whistleblowers from continuing
their public and increasingly hostile criticism of the
SEC’s failure to implement action to stop the naked
short selling manipulations of the stock of small
publicly traded U.S. companies, especially
including Universal.
30
The SEC’s recent order on July 15, 2008,
temporarily banning naked short selling to protect
Wall Street banks is complete vindication of
Universal Express and its officers in their over ten
year battle against naked shorting and flies in the
face of the SEC’s denial of this national scandal
and failure to act for over 15 years; a scandal which
has resulted in the destruction and fatal damaging
of thousands of small public companies, the loss of
the investments and savings of millions of ordinary
shareholders and the loss of jobs for thousands of
employees.
The national scandal of naked short selling,
condoned and covered-up by a conflicted SEC for
many years, has sucked the market capitalization
from smaller public companies, including Universal
Express, putting thousands of such companies out
of business and destroying the investments and
jobs of millions of Americans. This scandal, ignored
by the SEC, has destroyed the American dream of
taking small private companies’ public and growing
their businesses through the growth of their stock.
Thousands of developmental products, beneficial to
the public, including health advances, never had a
chance for the national market. Trillions of dollars
were siphoned from the capitalizations of public
companies by the naked shorters with the intent
and result of bankrupting those companies so that
the naked shorts would never have to be covered by
delivery of actual shares and, as a consequence, the
shorters did not have to pay any taxes on their
gains; taxes that would have been large enough, as
31
indicated above, to pay off the National Debt of the
United States.
The SEC’s arrogance is unsurpassed in the
annals of government regulators, complaining
about the shares of our Company, which have been
properly issued and clearly recorded in our public
filings with the SEC for over 14 years, without any
complaint by the SEC concerning such reports,
while the SEC improperly permitted
marketmakers, broker-dealers and hedge funds to
sell trillions of unregistered and counterfeit shares
in companies’ names in violation of its own
securities statutes, regulations and rules and the
Counterfeiting Statutes of the United States.
The terms of the Stock Incentive Plan,
including the expander clause permitting the
Company to issue additional shares to cover the
recapitalization of the Company on a daily basis
caused by the humongous amount of counterfeit
shares issued in the name of the Company, was
itself specifically confirmed by the Bankruptcy
Court pursuant to the Bankruptcy Code.
The Stock Incentive plan covers the future
development of the Company for an extended
period exceeding ten years or more.
The Bankruptcy Code is replete with
provisions that cover post-confirmation matters,
some of which are as follows:
32
11 U.S.C. §1123. “Contents of Plan”
“ (a) Notwithstanding any otherwise applicable
non-bankruptcy law, a plan shall-
***
(5) provide adequate means for the plan’s
implementation, such as –
***
(B) transfer of all or any part of the property
of the estate to one or more entities, whether
organized before or after the confirmation of
such plan;
***
(E) …modification of any lien;
(F) …modification of any indenture or
similar instrument;
(K) curing or waiving of any default;
(L) extension of a maturity date or a change
in an interest rate or other term of
outstanding securities;
(M) amendment of the debtor’s charter;
(N) issuance of securities…for any other
purpose.
(b) Subject to subsection (a) of this section, a plan
may-
***
33
(6) include any other appropriate provision
not inconsistent with the applicable provisions of
this title.”
In addition, the Bankruptcy Code provides
many other examples of future effectiveness of
orders and rulings of the Bankruptcy Court. See for
example:
§1113. “Rejection of collective bargaining
agreements”
§1114. “Payment of insurance benefits to
retired employees”
“Subchapter III – Post confirmation Matters’
§1141. Effect of confirmation
§1142. Implementation of plan
§1143. Distribution
§1144. Revocation of an order of confirmation
34
CONCLUSION
For the foregoing reasons, petitioners
Richard A. Altomare and Chris G. Gunderson
respectfully requests that the Supreme Court grant
review of this matter.
Respectfully submitted,
Dated: April 10, 2009 /s/ Carl E. Person
New York, New York __________________
CARL E. PERSON, Esq.
Representing Petitioners:
Richard A. Altomare and
Chris G. Gunderson,
325 W. 45th St. – Suite 201
New York NY 10036-3803
212-307-4444, Fax 307-0247
Click Links Below For Easy Navigation:
1. Supreme Court Case
2. 150 Articles: SEC finally admits Naked Short Selling is a HUGE problem and a cause for financial crisis (July 15th, 2008 et. seq-September 15th, 2008 et. seq)
3. Richard Altomare's "Prison Inc." Book Excerpts
4. Universal Express Statement
5. Universal Express Recitation of Facts by General Counsel
6. Brief in Support of USXP Entitlement to Trial by Jury
7. Universal Express Complaint filed against SEC- March 3, 2004
8. USXP Full Page Ad in New York Times
9. Office of Inspector General Semi Annual Report to Congress- March 31, 2008
10. Richard Altomare's Speech on Naked Short Selling
11. USXP Quarterly and Annual Reports
12. Exhibit A and B: Universal Express Press Releases and Published Articles on Naked Short Selling 1998-2007
13. Universal Express Motion for Partial Summary Judgment
14. Supplemental Declaration of Chris G. Gunderson- Nov 13, 2006
15. Universal Express et al Motion for Reconsideration- March 8th, 2007
16. USXP Memo of Law in Support of Motion for Reconsideration
17. Universal's Declaration of General Counsel in Response to SEC's Request for a Receiver
