Date: April 26, 2006
“Go on with business as usual,” said Michael L. Goldberg, the receiver, a Fort Lauderdale, Fla.-based attorney-shareholder with Akerman Senterfitt and an acknowledged expert on Ponzi Schemes. “We are honoring all of our debts. We are continuing to book shows and continuing to pay all the debts in connection with the shows,” he said.
Several million dollars have been paid out since he assumed the receivership position, which essentially means he is running the company, on Jan.18. “And we have plenty of cash” remaining, he said.
Goldberg said he cannot think of any reason why venue operators should be concerned about payment or cancellations or other considerations related to the case.
However, Attorney Denis Clive Braham, who has written a legal column for Venues Today and has several clients in the industry, but has no specific knowledge of the Utsick case, countered that it illustrates how investors should be cautious with their money.
Braham, who is CEO at the Dallas-based Winstead, Sechrest and Minick, PA, urged any concerned vendors to contact Goldberg and the SEC to determine the court's position on their specific date. To protect themselves, venue managers ?can confirm with the ticketing agencies that monies have been escrowed in accordance with the event contract,” he said. “The last thing a venue operator wants is to find out the event was cancelled at the last minute and there's no money available to refund to patrons.”
He also urged any concerned venue operator to check on their insurance coverage – just in case.
The SEC charges that principal John P. (Jack) Utsick, Worldwide Entertainment Inc. and Entertainment Group Fund Inc., improperly raised $300 million from 1998 through 2005 by selling fraudulent offerings in shows featuring top-name performers such as Shania Twain and Aerosmith. American Enterprises Inc., and Entertainment Funds Inc., including principals Robert Yeager and Donna Yeager, were also named in what the SEC called a fraudulent offering that raised millions of dollars from 3,300 investors nationwide.
The SEC said Utsick and the Yeagers enticed investors by promising high returns, anywhere from 15 to 25 percent and, in some instances, an additional 3 percent of profits. “The investments were usually for one year and many investors rolled over their principal and purported 'profits' from project to project,” according to the SEC.
The promised annual returns of up to 25 percent were “baseless,” according to the filing. The SEC also said Utsick co-mingled all of the funds received in the project in two operating accounts, Worldwide or Entertainment Group. He then paid all business and personal expenses from those funds, the SEC said.
The SEC charged Utsick also used investor funds for such personal purchases as two multi-million condominiums in Miami Beach, and to “fund his lavish lifestyle.”
“Many of the entertainment projects Worldwide and Entertainment Group promoted or produced lost money [and at least one project was not produced] and, as a result, earlier investors were paid with monies the defendants raised from new investors,” the SEC said.
The charged individuals, without acknowledging or denying guilt, have consented to a permanent injunction, an asset freeze, repatriation order, and repayment of funds and penalties, according to the SEC.
Utsick, in a statement, said he agreed to freeze assets, repay investors and pay fines. He also said he hoped to be able to work out a consulting arrangement with Goldberg to reorganize the company. Jack Utsick Presents, and affiliated companies, Jack Utsick NE Presents, Worldwide Entertainment and Stone City Productions reported $126,327,670 in box office receipts to Venues Today in 2005, from an attendance of 2.2 million involving 1,662 shows. [[KRISTIN IS CHECKING THESE NUMBERS]].
Utsick's company was placed in receivership in January after two investors filed a lawsuit against him, said Theresa Verges, assistant regional director of the SEC in Miami.
If Goldberg sounds confident, he has reasons. His practice areas include bankruptcy and creditor's rights. He has repeatedly won awards for being among the top lawyers in Florida and is listed in The Best Lawyers in America 2006 for his bankruptcy and creditor's rights work.
He also has a track record of receiver work. One of his clients was Service Five Investment Inc., a company involved in making loans to active military personal. When he was appointed receiver, the company had debts of $36 million. His plan approved by the Circuit Court in Miami led to creditors receiving 85 percent distribution.
Goldberg has had venue related clients but has no specific expertise in that area. But that is not a consideration for receivers, according to the SEC's Verges.
“The reason we have a receiver in place here – and Mike Goldberg is a good receiver – is to make sure that someone is in charge whose primary interest is to preserve the company's assets for the benefit of the investors,” she said.
She said the case is essentially settled. “Everything except the penalties and the amount of money they have to pay back,” she said.
She said there was no immediate end or time limit to how long the company will be in receivership but that the process takes months.
“There will have to be a forensic accounting, and a need to determine who's paid what and who is owed, and that will take some time,” she said.
Capable receivers such as Goldberg typically surround themselves with knowledgeable people, she said.
As to whether or not criminal charges could be filed, Verges said the SEC suit by itself does not make a determination one way or the other.
“What I can tell you is that the vast number of our SEC law replicates criminal statutes, so it is not uncommon for that to follow or be joined” by a criminal indictment, she said. But she added she could not comment one way or another on this particular case.
Utsick said in a statement he voluntarily entered into the agreement with the SEC to sort out the financial mess and repay investors. But he emphasized he does not admit to or deny any wrongdoing.
The 63-year-old Utsick grew his company into one of the four major promoters in the United States. He has produced tours by the Rolling Stones, the Bee Gees and Bruce Springsteen, as well as high-grossing musicals.
He blamed the tangle on his business's fast growth over the past four years.
“Unfortunately, as often happens with very rapid growth, internal record-keeping and accounting controls were not adequate to handle the rapid increase in business that resulted,” he said in his statement.
Interviewed for this story: Michael L. Goldberg (954) 770-8800, Theresa Verges (305) 982-6384, Denis Clive Braham, (713) 650-2743