Sentencing Memo

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UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA CASE NO. 13-60240-CR-DIMITROULEAS UNITED STATES OF AMERICA

v.

RICHARD ALTOMARE,

Defendant. /

GOVERNMENT=S SENTENCING MEMORANDUM

The United States, by and through the undersigned Assistant United States Attorney,

respectfully submits the following Sentencing Memorandum:

I. Background Facts1

Defendant Richard Altomare is the former chief executive officer of a publicly traded

company called Universal Express, Inc. In March 2007, the SEC obtained a final judgment in the

Southern District of New York permanently barring Altomare and other Universal Express

insiders from "participating in an offering of penny stock, including engaging in activities with

a broker, dealer, or issuer for the purposes of issuing, trading or inducing or attempting to induce

the purchase or sale of any penny stock" (PSI, 4).

Despite the March 2007 Order, Altomare agreed in 2013 to promote the stock of Sunset

Brands, Inc. (SSBN), a fledgling company whose stock was trading for less than a dollar, and

rarely at that. Altomare agreed to write and edit press releases for the company and otherwise

1 The facts in this section represent a summary of the Offense Conduct from the April 3, 2014 PSI (DE: 68).

Case 0:13-cr-60240-WPD Document 70 Entered on FLSD Docket 04/16/2014 Page 1 of 10

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work to attract investors to purchase SSBN's common stock. In January of 2013, Altomare

began communicating with a former associate about manipulating the public market for shares

of SSBN's common stock. Unbeknownst to Altomare, his former associate was an informant

and confidential source ("CS") cooperating with the Federal Bureau of Investigation.

During recorded meetings and telephone conversations in January and March, 2013,

Altomare proposed that he and the CS work together in a "pump-and-dump" scheme where the

CS would purchase shares of SSBN's stock (then valued at approximately 93 cents per share) to

artificially increase the stock's trading volume and price. As a result of the CS's purchases,

investors would be given the false impression that SSBN's stock value was rising and that

there was a public market for SSBN's stock.

In addition to compensating the CS with SSBN stock to participate in the scheme,

Altomare agreed to bolster the fraudulent buying program by prompting SSBN to issue one or

more favorable press releases about the company to coincide with the CSs stock purchases.

The purpose of the press releases was to give the investing public the false impression that the

increase in the share price and trading volume of SSBN stock was induced by positive news about

the company. During the course of the conspiracy, Altomare spoke of manipulating the value

of the stock to increase to 2, 3, and as much as $9.00 from the approximately 93 cent per share

price of the stock at the time. The plan called for the CS to sell his shares to the investing public

after the value of the stock was artificially increased, which profits would be shared equally by

the CS and Altomare.

In furtherance of the conspiracy, Altomare had discussions with SSBN officials regarding

a private investor who purportedly was interested in purchasing SSBN's stock. Altomare never

mentioned the fraudulent buying scheme. Rather, Altomare touted the investor to SSBN officials


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as a legitimate stock promoter and convinced them to issue a stock certificate of 70,000

free-trading shares of SSBN stock to the investor (who was actually the CS) in exchange for a

discounted price of approximately 50 cents per share, or $35,000.

On March 15, 2013, Altomare provided the CS with an advance copy of an SSBN press

release describing an increase in the appraised value of SSBN'S assets and a schedule of other

positive news to be released regarding the company. With this information in hand, the CS agreed

to purchase 2,150 shares of SSBN stock that same day. (In fact, the shares were purchased by the

FBI through an undercover bank account.) On March 22, 2013, Altomare caused a stock

certificate for 70,000 free-trading shares of SSBN to be delivered via Federal Express to the

CS in Weston, Florida. Altomare had the shares sent to the CS as a kickback payment for the CS's

participation in the "pump-and-dump" scheme. The value of the stock was approximately 93

cents per share at the time SSBN issued the stock certificate. On March 26, 2013, Altomare

caused a press release to be issued on behalf of SSBN. The press release contained information

which Altomare had previously given the CS, but which had not been made available to the

public. Within 30 minutes of the issuance of the press release, in accordance with the plan put

forth and agreed to by Altomare, the CS purported to make two additional purchases of SSBN's

common stock. No additional purchases were made.

On May 23, 2013, Altomare voluntarily met with FBI Agents Michael Sputo and Tim

Wright. After changing his story multiple times, Altomare ultimately admitted he gave the CS

a press release before it was issued to the public, and that the CS purchased 3,000 or 4,000 shares

of SSBN stock afterward. Sometime later during the interview, Altomare admitted that if the CS

had received the news and traded on it before it came out, that would be a problem. Altomare

then reversed himself once again and denied his involvement in the entire scheme.


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On February 26, 2014, Altomare was found guilty after a five-day jury trial on all counts of

the four-count Indictment. Count 1 charged him with mail fraud, in violation of 18 U.S.C.

1341, and counts 2-4 charged him with securities fraud, in violation of 15 U.S.C. 78j. The

Indictment also alleged forfeiture, but the undersigned indicated before the trial began that the

Government would not pursue forfeiture.

II. Argument

The PSI recommends a total base offense level of 17 and a corresponding guideline range

of 24-30 months of imprisonment (PSI, 33 & 70). The PSI correctly reports that Altomares

trial testimony was inconsistent with the evidence presented by the government at trial, but defers

to the Court the application of an enhancement pursuant to U.S.S.G. 3C1.1 for obstruction of

justice (PSI, 21). Because Altomare testified falsely that he acted without the intent to commit

fraud, the obstruction enhancement should be applied. And, because the offense conduct

involved an intricate scheme to defraud investors and involved unwitting participants, a two level

enhancement under 2B1.1(b)(10)(C) for use of sophisticated means should also be applied.

Obstruction of Justice Laundering Enhancement

Under the Sentencing Guidelines, perjury under oath can justify an enhancement for

obstruction of justice. United States v. Geffrard, 87 F.3d 448, 453 (11th Cir. 1996). For purposes

of this enhancement, perjury is defined as false testimony concerning a material matter with the

willful intent to provide false testimony, rather than as a result of confusion, mistake, or faulty

memory. United States v. Dunnigan, 507 U.S. 87, 94 (1993). Four elements are required to make

a perjury finding: (1) the testimony must be under oath or affirmation; (2) the testimony must be

false; (3) the testimony must be material; and (4) the testimony must be given with the willful

intent to provide false testimony and not as a result of a mistake, confusion, or faulty memory.


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United States v. Singh, 291 F.3d 756, 763, n.4 (11th Cir. 2002).

Altomares trial testimony meets all of the Dunnigan elements for obstruction.

Altomare testified falsely that he was unaware of the CSs plan to manipulate the market for

SSBN stock, and that he had been coerced by the CS to engage in the fraudulent buying program.

In particular, Altomare testified that, initially, his only intention in speaking with the CS was for

the CS to invest in and legitimately promote SSBNs stock. Altomares innocent intent claim,

however, contrasted sharply with the recorded telephone calls and meetings admitted into

evidence, including recorded conversations that occurred very early on in the investigation.

On January 17, 2013, just six days after Altomare and the CSs first recorded

conversation, Altomare left two messages for the CS which revealed his knowledge and intent of

the scheme to defraud investors, and his role in conceiving it, thereby invalidating any claim of

coercion by the CS. In the first telephone message, Altomare explained how he wanted to take

advantage of SSBN, a startup company whose stock was not trading: I dont wanna help

them [the SSBN principals] with the stock until they pay big time and I want them to be

pathetically in need of us See Exhibit A at p. 2 (emphasis supplied). Before the CS could

even return his call, Altomare left a second message explaining a plan he put together that would

be profitable not just for him, but for the CS as well: Ive got something very exciting to talk to

you about when you get a chance give me a call. I think youre gonna be as excited as I am,

uhm, about a, a way in which I, I structured something that, uhm, could be a real win-win for

everybody, especially you and me. Id. (emphasis supplied).

During a telephone call later that day, Altomare laid out his plan. In essence, Altomare

had convinced a principal at SSBN to release shares of the company as a retainer for the CS. Id.


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at p. 3. After explaining that he and the CS would split the shares, Altomare made clear what he

wanted the CS to do with the stock: If nothing else, you and Ill, ah, just pump the [expletive]

out of the stock and make money there, too. See Exhibit A at p. 6. With this plan in place,

Altomare then set out to use his position as a consultant to SSBN to further the scheme he

conceived.

The evidence established that Altomare misled SSBN about the CSs financial means and

intentions. SSBN representatives Bert Watson, Jr. and Jeffrey Betros testified that Altomare

touted the CS as an investor who could legitimately promote the company using publicly

available marketing information created by the company. They agreed to send 70,000 shares of

SSBN to the investors brokerage account based on Altomares representation that the investor

would pay for them, when, in fact, the plan called for the CS to sell the 70,000 shares once the

price of SSBNs stock had been artificially inflated and then split the proceeds with Altomare.

Watson and Betros also testified they were unaware that Altomare had released advance copies

of SSBNs press releases to the investor. Despite this evidence, Altomare falsely maintained

that he merely brokered the sale of 70,000 shares of stock between the CS and SSBN.

Altomares testimony was not only given under oath and false, but material. His

testimony was designed to mislead the jury into believing he did not have the intent to manipulate

the market for SSBN stock, and that he had been entrapped by the CS. Thus, if the jury had

believed Altomares testimony, it would have found him not guilty of the charged offenses.

Because this testimony, if believed, would tend to influence or affect the issue under

determination, it was material. Singh, 291 F.3d at 763; United States v. Pedron, 284 Fed. Appx


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598, 603 (11th Cir. 2008) (affirming obstruction enhancement after district court made a factual

finding that the jury had to completely reject defendant's testimony in order to find him guilty.)

Finally, the nature of Altomares testimony is such that it could not have been the result of a

mistake, accident, or confusion. Altomares testimony is irreconcilable with the evidence

presented at trial, namely, the numerous recorded conversations with the CS, the lies he told

Watson and Betros, and his admissions to law enforcement thereafter. Altomares entire account

of the events leading up to the March 2013 purchases of SSBN stock was deliberately designed to

mislead the jury into returning a verdict of not guilty. The only conclusion from the record is that

Altomares testimony was knowingly and intentionally false. Accordingly, the United States

respectfully requests that the Court make a factual finding that Altomare offered perjured testimony

on a material matter at trial. See, e.g., Singh, 291 F.3d at 763.

Sophisticated Means Enhancement

Section 2B1.1(b)(9)(C) of the Guidelines prescribes a two-level enhancement where the

offense involves sophisticated means. Sophisticated means refers to especially complex or

especially intricate offense conduct pertaining to the execution or concealment of an offense.

U.S.S.G. 2B1.1, comment (n.9(B)). In evaluating whether a defendant qualifies for the

enhancement, the proper focus is on the offense conduct as a whole, not on each individual step.

United States v. Barrington, 648 F.3d 1178 (11th Cir. 2011) (Each action by a defendant need not

be sophisticated in order to support this enhancement.).

Testimony at trial showed Altomare directed Watson and Betros, who were unwitting

participants, to issue kickback shares and forward a timed press release to him before publication

and after the fraudulent buying program began. Moreover, while Altomare did not personally


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participate in the fraudulent buying program, the CS, who was responsible for this portion of the

scheme, testified that the shares of SSBN purchased as part of the buying scheme occurred at

Altomares direction and with his knowledge.

Altomares conduct is strikingly similar to the defendant in United States v. Brennan, 2014

WL 1394654 (11th Cir. April 11, 2014) (unpublished), a securities fraud case where the Eleventh

Circuit affirmed the district courts application of the sophisticated means enhancement. Noting

that application of the enhancement is based on the offense conduct as a whole as opposed to the

defendants personal conduct in perpetrating the offense, the court held that the conspirators use

of a timed press release and the designation of kickback shares, like the methods employed in

similar cases in which we have affirmed the imposition of a sophisticated means enhancement,

relied on deception and third party non-participants to conceal the underlying activity. Id. at *2

(citing United States v. Ghertler, 605 F.3d 1256, 1267 (11th Cir. 2010)). Like the defendant in

Brennan, Altomare deceived third-party non-participants, namely the principals of SSBN, in order

to conceal the fraudulent scheme to defraud investors. Thus, as in Brennan, the two level

enhancement under 2B1.1(b)(10)(C) should be applied.


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Conclusion

Based on the foregoing, the undersigned respectfully recommends that the Court apply the

two-point obstruction enhancement under U.S.S.G. 3C1.1, as well as the two-point enhancement

under 2B1.1(b)(10)(C), for Altomares use of sophisticated means to commit the offenses of

conviction. With these enhancements, Altomares base offense level would increase from 17 to

21, making his guideline imprisonment range 37-46 months.

Respectfully submitted,

WIFREDO A. FERRER UNITED STATES ATTORNEY

By: s/ Alejandro O. Soto

Alejandro O. Soto Assistant United States Attorney Florida Bar No. 0172847 99 N.E. 4th Street, Suite 400 Miami, Florida 33132 Telephone No. (305) 961-9034 Facsimile No. (305) 536-4699


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CERTIFICATE OF SERVICE

I HEREBY CERTIFY that a true and correct copy of the foregoing Government=s

Sentencing Memorandum was sent via CM/ECF on the 16th day of April, 2014, to all counsel of

record.

s/ Alejandro O. Soto Alejandro O. Soto

Assistant United States Attorney


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