Utsick To Promote Brazil

A Florida judge’s ruling against beleaguered promoter Jack Utsick may not be the final word on the long-running fraud case alleged by the Securities and Exchange Commission. Utsick attorney Richard Kraut told Pollstar he intended to file a motion for reconsideration as well as a possible appeal as early as June 8.

Utsick is currently residing in Brazil, where he is attempting to establish a new business, according to the attorney.

“He’s trying to. He’s working on it,” Kraut said when asked if Utsick intended to continue his career as a concert promoter in another country.

Kraut said the idea to start over came from none other than Michael Goldberg, the court-appointed receiver in the case, in which Utsick is accused of operating an alleged “Ponzi scheme.” More than 3,000 people invested more than $300 million in Utsick companies The Entertainment Group Fund Inc. and Worldwide Entertainment.

Asked why Utsick went to Brazil in November 2007, in the middle of a criminal probe while former business partners Robert and Donna Yeager were released from the suit by cooperating with investigators, Kraut said Goldberg had suggested it early in the proceeding.

“Goldberg had encouraged Jack, after he took over his companies,” Kraut said. “Goldberg suggested, ‘Jack, why don’t you go to Australia and try to restart your career down there since you have all these deals and opportunities? Why don’t you consider England, or Germany?’ Brazil was one of the opportunities.”

And now that Utsick is in Brazil, he does not intend to return to U.S. shores without a guarantee of “safe passage” from the government, Kraut said. In other words, without the guarantee he won’t be arrested in the ongoing criminal investigation, the attorney acknowledged.

“The SEC wouldn’t go to Brazil, or Uruguay or Argentina to take his deposition and they insisted that he come to Miami,” Kraut said, maintaining that Utsick is cooperating with the court short of setting foot in the U.S.

“Jack was cooperating. He gave depositions in [two cases brought by Goldberg against former Utsick associates], and worked with Goldberg on the [Australian promoter Michael] Chugg settlement. He helped negotiate that,” Kraut said.

“Jack has always been helping the receiver. He’s offered to cooperate with respect to the Paris Hilton matter. He’s waiting for the phone to ring.”

He’ll likely find out soon how long he might be waiting. Kraut said he intended to file for reconsideration of the May 19 ruling by U.S. District Judge Paul Huck that orders Utsick to pay more than $4.1 million in disgorgement and other penalites in the case, and characterizes Utsick’s business endeavors as a “Ponzi scheme” and “personal piggy bank.”

Kraut takes issue with those two descriptions in particular, and accused the judge of accepting an erroneous definition of “Ponzi” given by Goldberg and the SEC, and failing to accept Utsick’s explanation of personal expenses in lieu of executive pay.

“Jack is considering filing a motion for reconsideration because of what we feel are numerous errors in the judge’s findings and conclusions,” Kraut said. “ Ordinarily, when people file such a motion it’s an uphill fight. But there’s so much about the findings and conclusions that we think are erroneous, and the standard is also clearly erroneous.

“We think there are good grounds for filing a motion for reconsideration and we’re also considering the possibility of an appeal for the same reason.”

Kraut acknowledged that investors whose notes were coming due may have been paid from accounts that contained money intended to pay concert and tour expenses that would not be incurred for some months, but maintains that does not fit the definition of “Ponzi.”

“From the very beginning of this case, the judge thought this was a Ponzi scheme. The SEC made an allegation in their complaint and used the term ‘Ponzi-like.’ Some of the investors were, sometimes, repaid in part from new investors’ funds.

“‘Ponzi’ is a word that gets thrown around much too freely, much too liberally. People misuse it all the time. I think Goldberg was much too liberal in the use of the word ‘Ponzi.’ This isn’t Ponzi. The judge didn’t understand that, and I don’t think Goldberg understands that,” Kraut said.

And Kraut said that many of Utsick’s investors were aware he was paying personal expenses from those funds.

“To call it a ‘personal piggy bank’ when the guy is working 20-hour days, seven days a week, devoting all his life and energy into building this business to at one time the second-biggest in the world – that didn’t just happen by itself,” Kraut said.

“Specific disclosures weren’t made in the offering materials that Jack would in effect be paying himself by having personal expenses paid for,” Kraut said. “But according to Jack, he spoke to investors personally and many investors knew that Jack was charging expenses to the company in lieu of a paid salary. I don’t know how any investor would have expected that the guy who was running the company wasn’t going to be compensated.”

The attorney reiterated his belief that Utsick’s compensation for heading TEGFI and WE, which he estimated at no more than $300,000 in any year, should be considered comparable to salaries received by Live Nation executives for similar work, and noted that Live Nation (and Clear Channel Entertainment before the spinoff) had lost money.

Kraut also took exception to the characterization of the salary paid to Jennifer Homan, Utsick’s then-girlfriend, who was a romantic partner but not a partner in the business. They intend to contest the repayment of half her salary, saying she performed legitimate executive work for the companies and deserved her full salary. The couple has since separated, and Homan is now living in Indiana and engaged to be married, according her MySpace page.

Kraut would not disclose Utsick’s location in Brazil, but did offer that he is getting by on his pension and Social Security payments.