USA v. Altomare Doc 76 Filed 02 May 14

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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 RESPONSE TO DEFENDANTS OBJECTIONS
TO THE PRESENTENCE INVESTIGATION REPORT

The United States, by and through the undersigned Assistant United States Attorney,
respectfully submits the following Response to Defendants Objections to the Presentence
Investigation Report:
I. Procedural History
On April 3, 2014, Senior United States Probation Officer Thomas Felasco disclosed the
PSI to counsel of record (DE:68). Attorney J ohn Bergendahl entered an appearance as
counsel for the defendant on April 20, 2014 (DE:69). On April 16, 2014, the undersigned
filed a sentencing memorandum requesting the application of enhancements for obstruction
of justice pursuant to U.S.S.G. 3C1.1, and use of sophisticated means to commit the offense
of conviction under 2B1.1(b)(10)(C). On April 21, 2014, defense counsel filed an
unopposed motion requesting additional time to file objections to the PSI (DE:71), which the
Court granted the following day (DE:72). On April 28, 2014, defense counsel sent an email
Case 0:13-cr-60240-WPD Document 76 Entered on FLSD Docket 05/02/2014 Page 1 of 14

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to United States Probation Officer Thomas Felasco noting the following objections:
[T]he prior civil order did not definitively cover the charged criminal activity, nor did it use
sufficiently precise language to [ ] warrant a subsequent sentence enhancement (including use
of the term "penny stock"). As regards the loss, the defense position is that neither actual or
intended loss theories reach the amount referred to of $70,000. No actual deprivation of value
was contemplated by the defendant, nor would it have reasonably been likely to occur as a
result of the conduct. (To exemplify, fraudulently inducing the purchase of an item at its actual
value carries with it no loss, despite the purchaser's erroneous expectation of a profit, even if
that unfulfilled expectation derived from a defendant's representations.) The specific
guidelines for securities fraud make the loss determination so particularized for that very
reason. And the prosecution loss theory in this case does not appear to meet that guideline
standard
1

Defense counsel did not object to the facts in the PSI.

II. Defendants Objections to the PSI
While not explicitly referenced in defense counsels e-mail, Defendant appears to object to
paragraph 25 of the PSI, which recommends an 8 point increase of his base offense level under
2B1.1(b)(1)(E), [b]ecause the intended loss was more than $70,000, but not more than $120,000.
(Id.) Defendant also likely objects to paragraph 26 of the PSI, which recommends a two point
increase under 2B1.1(b)(9)(C), [b]ecause the offense involved a violation of a prior, specific
judicial or administrative order, injunction, decree, or process, the offense level. (Id.) The
Government supports the recommendation made by Senior Probation Officer Felasco, which
reflects a conservative calculation of the $75,650 loss Defendant intended to cause. The
Government also supports the recommendation in the PSI for a two point increase under
2B1.1(b)(9)(C) because the March 8, 2007 Order prohibiting Defendant from " inducing or
attempting to induce the purchase or sale of any penny stock clearly prohibited him from paying
the CS to buy shares of a penny stock, regardless of Defendants motive for doing so.

1 This email was written by attorney Richard Klugh on behalf of defense counsel of record, J ohn Bergendahl. Mr.
Klugh explained that Mr. Bergendahl was still in trial in Orlando and therefore unable to file a detailed motion
regarding the issues raised in his e-mail. The undersigned was copied on that e-mail.

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III. Argument
A. The loss amount of $75,650 reported in the PSI was accurate.
Under the Guidelines promulgated by the United States Sentencing Commission, the
amount of loss caused by a defendant's offense will provide a basis for an enhancement. U.S.S.G.
2B1.1(b)(1). Section 2B1.1 provides for a base offense level of 6, with graduated increases [i]f
the loss exceeded $5,000. U.S. Sentencing Guidelines Manual 2B1.1 (2013). The application
notes following 2B1.1 explain that loss is the greater of actual loss or intended loss. Id. at cmt.
n. 3(A). Actual loss means the reasonably foreseeable pecuniary harm that resulted from the
offense. Id. at cmt. n. 3(A)(i). Intended loss (I) means the pecuniary harm that was intended to
result from the offense; and (II) includes intended pecuniary harm that would have been
impossible or unlikely to occur (e.g., as in a government sting operation U.S. Sentencing
Guidelines Manual 2B1.1 cmt. n. 3(A)(ii) (2001) (emphasis added). [R]easonably foreseeable
pecuniary harm means pecuniary harm that the defendant knew or, under the circumstances,
reasonably should have known, was a potential result of the offense. Id. at cmt. n. 3(A)(iv).
While Defendant argues that [t]he specific guidelines for securities fraud make the loss
determination [ ] particularized, the guidelines actually recognize that [t]he court need only
make a reasonable estimate of the loss. Id. at cmt. n. 3(C).
The evidence admitted at trial establishes that Defendants actions resulted in an actual loss
of $65,100, and that he intended to cause a loss of at least $75,650. Because loss is the greater of
actual loss or intended loss, Id. at cmt. n. 3(A), the recommended loss amount in the PSI of
$75,650 is correct, and Defendants objection should be overruled.


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1. Defendant caused an actual loss to SSBN of $65,100
In objecting to the loss amount in the PSI, Defendant argues that [n]o actual deprivation of
value was contemplated by the defendant, nor would it have reasonably been likely to occur as a
result of the conduct. (To exemplify, fraudulently inducing the purchase of an item at its actual
value carries with it no loss, despite the purchaser's erroneous expectation of a profit, even if that
unfulfilled expectation derived from a defendant's representations.) Defendant, in other words,
claims he did not intend to cause any loss because he merely induced the CS to purchase SSBN
shares at their actual value.
This is the same argument Defendant made, and the jury rejected, at trial. While
Defendant misled the principals of SSBN into believing he had brokered the sale of those shares,
he actually promised those shares to the CS as compensation for the fraudulent buying program.
The recorded calls admitted into evidence made clear that Defendant expected the CS to sell the
shares after artificially inflating SSBNs shares price and then split the proceeds with Defendant,
assuming their illegal venture succeeded. By fraudulently inducing SSBN to provide those shares
to the CS and unknowingly subject itself to that risk of loss, Defendant intended to cause and did
cause an actual loss to SSBN of the value of the shares. See United States v. Surles, 424 Fed. Appx.
834, 836-837 (11
th
Cir. 2011) (defendant not entitled to credit against loss calculation for guideline
purposes where his actions caused victim to unwittingly subject itself to risk of loss); United States
v. Menichino, 989 F.2d 438, 442 (11
th
Cir.1993) (per curiam) (same).
Moreover, while the shares were ultimately returned to SSBN, Defendant is not entitled to
a credit against actual loss. The commentary to Section 2B1.1 provides that the loss amount
should only be reduced by [t]he money returned, and the fair market value of the property
returned and the services rendered, by the defendant... to the victim before the offense was

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detected. Id. at cmt. n.3(E)(i) (emphasis added). Here, the shares were returned by the FBI, not
Defendant, and they were not returned to the victim until well after Defendants arrest and
prosecution. See United States v. Nixon, 465 Fed. Appx. 912, 921 (11
th
Cir. 2012) (rejecting
defendants assertion that loss amount should be reduced by the amount he pledged in restitution,
because the Guidelines suggest that the loss amount shall only be reduced by the money returned
before the offense was detected) (emphasis not added.)
2. The PSI correctly reports that Defendant intended to cause a loss of at least $75,650
Even if the Court concludes that no actual loss occurred, the Court may still consider the
loss Defendant intended to cause. United States v. Toussaint, 84 F.3d 1406, 1407 (11th Cir.1996)
(Nowhere does the commentary require or even suggest that some actual loss must occur before
any intended loss may be considered. In fact, the plain language indicates that the contrary is
true.). While Defendant argues that no intended loss would [] have reasonably been likely to
occur as a result of the conduct, intended loss includes pecuniary harm that Defendant intended to
cause, even if what he intended was unlikely or impossible. U.S. Sentencing Guidelines Manual
2B1.1 cmt. n. 3(A)(ii) (2001); United States v. Wai-Keung, 115 F.3d 874, 877 (11th Cir.1997) (It
is not required that an intended loss be realistically possible).
As reported in the PSI, Defendant proposed a scheme whereby the CS would purchase
shares of SSBN's stock (then valued at only approximately 93 cents per share) to increase the
stock's trading volume and price. Defendant promised to compensate the CS by providing him
shares of SSBN stock to participate in the scheme he (Defendant) concocted. After the value of
the stock was artificially manipulated and increased, the CS would sell his shares to the investing
public and the CS and Defendant would share the profit earned from the sale of said shares. On at
least one occasion during the course of the conspiracy, Defendant spoke of manipulating the value

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of the stock to increase from approximately 93 cents to $2.00 or $3.00 per share. On another
occasion, he discussed with the CS the possibility of increasing the value of each share to $9.00.
(PSI at 7.) In order to calculate the intended loss, the Probation Officer multiplied the amount
of money Defendant expected to gain from the sale of each stock after the share price was
artificially increased by the amount of shares he and the CS came to control:
Here, Defendant caused SSBN to transfer 70,000 of its stock to the CS, and then
caused the CS to buy an additional 5,650 shares of SSBN in connection with the
fraudulent buying program, for a total of 75,650 shares. As a result of the
defendant's scheme, he expected to gain more than $1.00 per share of stock which
was to be sold by the CS. The value of SSBN's stock was approximately 93 cents
per share at the time of the offense, while the defendant discussed with the CS how
the value of the stock would be increased to at least $2.00 or $3.00 per share. An
extremely conservative intended loss amount attributable to the defendant is
derived by attributing $1.00 per share for the number of shares controlled by
Defendant and the CS during the course of the conspiracy. During the course of the
conspiracy, Defendant and the CS came to control a total of 75,650 stock shares,
which includes 70,000 from the stock certificate issued by SSBN plus a total of
5,650 shares purchased by the FBI. When using a very conservative amount of
$1.00 per share, which would be the very least Defendant stood to gain from the
offense, the intended loss is estimated to be $75,650.

(PSI at 19.) This is precisely the approach taken by the court in United States v. Margulies,
2010 WL 2375960 (E.D. Pa. J une 10, 2010), a case whose facts are strikingly similar to the instant
case. In Margulies, the defendant engaged in a scheme to artificially inflate the price of a publicly
traded companys stock. Unbeknownst to the defendant, his partner in the scheme was a
cooperating source for the government. During a recorded conversation with the CS, the
defendant agreed to compensate the CS to buy stock in the company in order to cause artificial
demand in the [ ] stock and thereby drive the price up. During another recorded conversation
with the CS, The defendant stated that he believed the fraudulent buying program could bring the
price of the stock from $.30 to at least $2.00, and as high as $8.00 or $9.00, per share. The

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defendant also provided the CS with an upcoming, non-public press release in order to create
trading activity and shield the fraudulent buying program from regulatory scrutiny. After the
press release was issued, the CS purchased 5,100 shares of the company, at the direction of the
defendant, for between $.90 and $1.00.
The defendant pled guilty to one count of securities fraud and aiding and abetting, in
violation of 15 U.S.C. 78j(b) and 78ff, 17 C.F.R. 240.10b-5, and 18 U.S.C. 2, the very same
statutes Defendant was convicted of violating in this case in Counts 2-4. In calculating the
intended loss caused by the defendant in Margulies, the district court used the formula:
Defendant intended for the [public companys] share price to be raised to at least
$2.00 by execution of the fraudulent scheme. The monetary difference in the share
price between the $.30 share price, as of May 21, 2008, and the target share price of
$2.00 is $1.70. Based on the 1,475,380 shares owned by Defendant, and the $1.70
difference in share price, the intended loss that would have resulted from the
fraudulent scheme was at least $2,508,146.

2010 WL 2375960, at *4. This is the same formula used by the Probation Officer in this case to
calculate an intended loss of $75,650.
While Defendant in this case intended to split the proceeds of the shares with the CS, he
remains liable for the entire amount for purposes of calculating intended loss. Under the
Guidelines, conduct relevant to sentencing includes all acts that a defendant aided, abetted, [or]
counseled. U.S.S.G 1B1.3(a)(1)(A). It also includes all reasonably foreseeable acts and
omissions of others in furtherance of the jointly undertaken criminal activity. U.S.S.G
1B1.3(a)(1)(B). Like the defendant in Margulies, Defendant aided and abetted the acts of the CS,
who received the 70,000 shares as compensation for his agreement to participate in the fraudulent
buying program, and purchased 5,650 shares of SSBN stock at Defendants direction as part of the

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fraudulent buying program. (PSI at 9-11.) Therefore, $75,650 is a reasonable estimate of the
intended loss in this case. The evidence in fact, supports a higher loss calculation.
Instead of the $2.00 share price recommended in the PSI, the Court could use the highest
share price that Defendant intended SSBN stock to reach, $9.00, which would make the intended
loss amount $605,200 (75,650 [shares controlled by Defendant and CS] x $8.00 [the difference
between the actual and artificially inflated share price Defendant hoped to reach]). (PSI at 7.)
Moreover, while Defendant and the CS ended up actually controlling 75,650 shares of SSBN
stock, the Court could consider that Defendant told the CS that he had convinced SSBNs
principals to provide him a million shares for the fraudulent scheme. See Exhibit A at p. 3. Using
this figure, which more accurately reflects the amount of shares Defendant intended to control, the
intended loss amount would be $8,000,000.00 (1 million shares x $8.00).
While it is impossible to know whether SSBN would ultimately have released those shares
to Defendant, or whether the share price might have reached $9.00 as a result of the fraudulent
buying program, the schemes likelihood of success need not be considered by the court in
calculating intended loss. [W]hen a sentencing court is determining the proper punishment for a
defendant's fraud, the court uses the reasonable mathematical limit of his scheme, rather than his
concrete result. A criminal pays the price for the ambition of his acts, not their thoroughness.
United States v. Patterson, 595 F.3d 1324, 1327 (11th Cir.2010); see also United States v. Grant,
431 F.3d 760, 765 (11
th
Cir. 2005) (latent impossibility of actually utilizing a check's full face
value does not automatically negate the counterfeiter's subjective intent to do so); Wai-Keung, 115
F.3d at 877 (11th Cir.1997). Accordingly, the intended loss amount of $75,650 in the PSI was not
only accurate, but conservative.


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B. Defendants conduct violated the March 2007 penny stock bar
Section 2B1.1(b)(9)(C) of the Guidelines recommends a 2 point enhancement of the
defendants base offense level [i]f the offense involveda violation of any prior specific
judicial or administrative order, injunction, decree, or process not addressed elsewhere in the
guidelines. (Id.) The civil order at issue states, in pertinent part, that the defendant is "permanently
barred" 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. A penny stock is any equity security that has a price of
less than five dollars, except as provided in Rule 3a51-1 under the Exchange Act of 1934, 17
C.F.R. 240.3a51-1." (Exhibit B, March 8, 2007, Order at p. 9.)
2

The evidence admitted at trial establishes that Defendant engag[ed] in activities with
an issuer for the purposes of issuing any penny stock. Defendant was convicted in Count 1
of causing SSBN to mail a stock certificate comprising 70,000 shares of SSBN stock to the CS as
compensation for the CSs involvement in a fraudulent buying program. The evidence
established that Defendant understood that SSBN would issue the stock directly to the CS
through SSBNs transfer agent:
CHS: So were gonna get a [stock] cert for 70,000 shares. Okay for that.
RA:
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And hopefully tomorrow.
CHS: Okay, theyre gonna send it to my, my friends address?

2 The March 8, 2007 Order was issued by District Court J udge Gerald Lynch, of the Southern
District of New York in connection with a civil suit filed by the SEC against Defendant and others,
for his role in preparing and submitting several false press releases to artificially inflate the share
price of Universal Express, Inc., for whom Defendant then served as CEO. (Id. at 4.)

3 RA refers to Defendant Richard Altomare.

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RA: Whatever address you gave me.
CHS: Okay, so its gonna go directly there? So, uhm, if you get a UPS or a FedEx
tracking number, I could just tell him.
RA: Thats what Im gonna ask them for.
CHS: And then just email it to me, thats fine. Okay, thats perfect, uhm.
RA: And Im supposed to see, Im supposed to get the documents from the company to
the transfer agent so that we feel and we know its on its way
(Exhibit C, Transcript of Recorded Conversation on March 14, 2013.)
In addition, Defendants own version of the events prove that he engag[ed] in activities
with SSBN for the purpose of induc[ing] the purchase or sale of any penny stock. In his
objections to the PSI, Defendant argues that he did not intend to cause any loss because
fraudulently inducing the purchase of an item at its actual value carries with it no loss, despite
the purchaser's erroneous expectation of a profit, even if that unfulfilled expectation derived from a
defendant's representations. He argues, in other words, that all he did was induce the CS to
purchase SSBNs 70,000 shares of stock at their actual value. However, because the actual value
of the stock at the time was $.93, and he dealt directly with SSBN - the issuer of that stock -
Defendant violated the March 2007 Order by engaging in activities with an issuer for the
purpose of induc[ing] the purchase or sale of any penny stock.
Defendants claim that the term penny stock was insufficiently clear to warrant an
enhancement lacks merit, particularly given his experience as the former CEO of Universal
Express, a publicly traded company. The term penny stock is clearly defined by the March 2007
Order as any equity security that has a price of less than five dollars, except as provided in Rule
3a51-1 under the Exchange Act of 1934, 17 C.F.R. 240.3a51-1." (Exhibit B, at p. 9.) Pursuant

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to 17 C.F.R. 240.3a511, a stock with a value of less than $5 per share is a penny stock unless it
is (1) a national market stock with a market value of listed securities greater than $50 million for
90 consecutive days, or (2) has tangible net assets of less than $2,000,000. (Id.); see also S.E.C.
v. Abellan, 674 F. Supp.2d. 1213, 1223 (W.D.Wash.2009). Tangible net assets must be
demonstrated by audited financial statements. 17 C.F.R. 240.3a51-1g(3)(i).
SSBNs stock clearly fell within the definition of a penny stock during Defendants
fraudulent scheme in 2013. First, it literally traded for pennies, that is, $.93, when the CS first
purchased shares of SSBN at Defendants direction, and never came close to reaching $5.00
during the time period alleged in the Indictment. See Exhibit E, OTC Market Chart for SSBN, at
http://www.otcmarkets.com/stock/SSBN/chart. It also traded on the over the counter market
known as the Pink Sheets, (PSI at 5), so it was not a national market stock. See S.E.C. v.
Abellan, 674 F.Supp. 2d. at 1223 (stock trading at less than $5.00 on the Pink Sheets is a penny
stock.) Moreover, even if SSBN were a national market stock, it would have remained a penny
stock in 2013 pursuant to 240.3a51-1 because of its relatively small market value. The market
value of a publicly-traded company is obtained by multiplying the number of its outstanding
shares by its share price. In re Enron Corp. Secs., 529 F. Supp.2d 644, 759 (S.D. Tex. 2006).
With just over 7 million shares outstanding, which traded at or near $1.00 per share in 2013,
SSBNs market value was roughly $7 million. See Exhibit D, Detailed Quote for SSBN), at
https://www.otcbb.com/asp/Info_Center.asp; Exhibit E. This is far short of the $50 million dollar
market value necessary for a stock to be excluded from the definition of a penny stock. Finally,
as an over the counter company, SSBN published unaudited financial statements, rendering its
tangible net asset value irrelevant purposes of 240.3a51-1g(3)(i). See Exhibit F, SSBN 2013
Annual Report, at http://www.otcmarkets.com/stock/SSBN/filings. Accordingly, regardless of

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whether Defendant persuaded SSBN to issue 70,000 shares of stock to the CS for sale or as
compensation for a stock fraud scheme, Defendant violated the March 2007 Order.
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4 While not mentioned in the PSI, Section III of the March 2007 Order also permanently retrained and enjoined
Defendant from violating, directly or indirectly, Section 10b of the Exchange Act, 15 U.S.C. 78j(b), and Rule 10b-5,
17 C.F.R. 240.10b-5, by using any means or instrumentality of interstate commerce, or of the mails, or of any facility
of any national security exchange, in connection with the purchase or sale of a security (a) to employ any device
scheme or artifice to defraud, which is precisely what Defendant was convicted of in Counts 2-4. See Exhibit B, at 3,
p.3.

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IV. Conclusion
Based on the foregoing, the undersigned respectfully recommends that the Court overrule
Defendants objections to the PSI and apply (1) the 8 point increase of Defendants base offense
level under 2B1.1(b)(1)(E), [b]ecause the intended loss was more than $70,000, but not more
than $120,000.under 2B1.1(b)(10)(C), and (2) the two point increase under 2B1.1(b)(9)(C),
[b]ecause the offense involved a violation of a prior, specific judicial or administrative order,
injunction, decree, or process, the offense level. (Id.)

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. 4
th
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 Government=s Response to
Defendants Objections to the PSI was sent via CM/ECF on the 2
nd
day of May, 2014, to all
counsel of record.
s/ Alejandro O. Soto
Alejandro O. Soto
Assistant United States Attorney

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