Memorabilia Auction house in serious legal trouble with SEC

UPDATE: [b]Damages against Universal Express, officers total $25.7 million[/b] As Universal Express prepares to auction off Michael Jackson memorabilia, its legal thriller with the SEC is dancing toward an appeals court. An order by New York Federal District Court Judge Gerard Lynch, filed on April 2, calls for a penalty of $21.9 million against the Boca Raton-based company, $3.1 million against CEO Richard Altomare and $794,711 against corporate counsel Chris Gunderson. Lynch had previously ruled that they violated securities trading laws by selling unregistered shares of Universal Express and issuing misleading press releases to inflate the value of those securities. The judge’s ruling also prohibits Altomare from acting as an officer or director of a public company and permanently bars Altomare and Gunderson from participating in an offering of penny stocks, which are any equity worth less than $5. Shares of Universal Express (OTCBB: USXP) traded at 1/10 of a cent on April 10. The company had not disclosed the verdict in an SEC filing, although it has been the subject of posting on Internet bulletin boards. The defendants have until May 2 to appeal, although they may have to do so sooner because Lynch ordered them to pay the damages within 10 days. The defendants could ask the appeals judge to stay the penalties, pending the outcome. Universal Express and Gunderson did not return calls seeking comment. The company’s year-end SEC filing does not show enough cash to pay the $21.9 million penalty. Universal Express had $8.7 million in total assets, including $335,137 in cash and equivalents, the filing said. Moreover, the judge has ordered Universal Express to stop raising capital with unregistered shares. Altomare previously told the Business Journal that the securities it has been issuing and not registering with the SEC are allowed by a 1994 bankruptcy court case. Lynch said that case no longer applies to Universal Express. The company issued 12.9 billion shares last year without filing a public offering or private placement memorandum with the SEC, according to its SEC filing. Universal Express raised $5 million from issuing common stock for cash in the last six months of 2006. In December, the company signed a deal to pay $5 million to buy the Jackson memorabilia from a construction company owner. The auction of thousands of items from Jackson and his family will be conducted by Guernsey’s at the Hard Rock Hotel & Casino in Las Vegas on May 30 and 31. In a previous interview with the Business Journal, Altomare said the collection could sell for $40 million to $50 million. Jackson’s attorney has told national media outlets that the pop star is dismayed over the sale, but there are no pending legal actions opposing it. The collection includes gold records, costumes and master tape recordings. Jackson’s family lost possession of them after a long legal battle with construction company owner Henry Vaccaro, of New Jersey. Source: [url=http://sanantonio.bizjournals.com/southflorida/stories/2007/04/16/story5.html]sanantonio.bizjournals.com[/url]