Utsick Spending Stripped Bare

The Securities and Exchange Commission filed a motion in U.S. District Court Sept. 9, asking for a final judgment ordering promoter Jack Utsick to repay more than $5 million in “ill-gotten gains” and civil penalties, signaling the end is near in the long-running fraud case and resulting receivership.

At issue isn’t whether Utsick must “pay disgorgement, prejudgment interest, and a civil penalty,” the motion states but, rather, how much those penalties should be.

Utsick, his companies, and former partners Robert and Donna Yeager were accused by the SEC in 2006 of improperly raising more than $300 million from at least 3,300 investors between 1998 and 2005.

In its motion for a final judgment, the SEC acknowledged the amount of “illegal profit” will never be recovered, but asked that Utsick be ordered to pay the amount he allegedly spent on himself rather than for legitimate business purposes.

The complaint itemizes those expenditures, and some of them must have raised an eyebrow or two at the SEC. In what is described as a “spending barrage,” the expenditures include visits to adult entertainment establishments in Venezuela, credit card charges at Macy’s, Bloomingdale’s and Victoria’s Secret, child support payments, personal artwork, collector and luxury cars, travel and a personal yacht.

The motion, backed by two affidavits including more than 80 pages of exhibits, accuses Utsick and the other defendants in the case of using “investor funds on a massive scale to pay for his expensive lifestyle.”

Affidavits compiled by forensic accountant Andrew Bernstein and receiver Michael Goldberg show Utsick and his then-girlfriend, Jennifer Homan, living a “millionaire’s lifestyle” in the Portofino Towers condominiums in Miami, paid for by investors who had allegedly been promised highly exaggerated rates of return on their money from high-profile concerts and other entertainment ventures.

Among Utsick’s personal expenses paid by Worldwide Entertainment or The Entertainment Group Fund were approximately $500,000 in alimony and child support payments; $34,000 for personal artwork; $35,000 on vehicle expenses including a 1961 Mercedes Benz and 1976 Porsche; $100,000 on summer camps and private schools for his children and those of Homan and $650,000 for personal income taxes.

Bernstein also itemized almost $900,000 spent for premium payments on personal life insurance policies, deposits into a personal IRA account, a “loan” of $112,500 to Utsick that was never repaid, almost $85,000 in direct payments to doctors and hospitals on Utsick’s behalf, $400,000 on personal legal fees and almost $200,000 in expenses related to a yacht Utsick had his companies buy for him.

Shareholder distributions to Utsick allegedly paid for a trip to Venezuela, the land of Hugo Chavez and free market communism, and at least two stops at a local adult establishment called Diva’s Club. Utsick’s books show two Diva’s Club visits to Worldwide Entertainment Inc., one for $3,984 on Nov. 19, 2005, and another the next day for $823.42.

“These extraordinary personal expenses clearly constitute Utsick’s ill-gotten gains,” the motion states. “Utsick and his companies represented to investors they would use their money solely for specific entertainment projects. Instead, they commingled investor funds into operating accounts, from which they paid Utsick’s living and other personal expenses.

“At no time did Utsick and the other defendants tell investors they would use investor money to make Utsick’s alimony and child support payments, pay for his girlfriend to take expensive trips around the world, buy clothes, go grocery shopping, pay for a luxury condominium, purchase life insurance policies, pay personal legal and accounting bills, and enjoy the myriad other personal uses to which Utsick chose to put investor money.”

Goldberg, in his role as court-appointed receiver for Utsick and his companies, has been identifying and selling recoverable assets and collecting accounts receivable since the SEC’s announcement in April, 2006. Utsick and the Yeagers agreed to a settlement with the SEC and avoided criminal charges.

However, the most recent motion adds civil penalties of $120,000 in addition to the order for “disgorgement” that was part of the original settlement agreement and confirms that Utsick has agreed that the allegations in the SEC’s original complaint were true.

Goldberg said in early reports to creditors that Utsick was cooperating with the SEC and the receivership.
The Yeagers also cooperated fully in the investigation, and Goldberg announced in August 2007 that their involvement in the receivership had been largely wound down.

In between, public documents and receivership reports have shown Utsick’s myriad entanglements in finance and entertainment, including an investment in Louisiana oil wells, production of “National Lampoon’s Pledge This!” starring Paris Hilton, and business ventures that ensnared promoters from Pennsylvania to Texas to Australia.

Utsick requested and was granted an extension of time until Oct. 27 to respond.