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

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 Facts 1 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).

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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 2

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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. 3

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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. 4

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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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