Discovering Utsick

A former assistant to troubled promoter Jack Utsick allegedly made unauthorized payments worth $5 million from The Entertainment Group Fund Inc., now in receivership, to an entity called Universal Entertainment in 2005.

Lyn Chong, a high school-educated secretarial assistant, used the money to purchase a waterfront house, pay taxes and live large, alleges receiver Michael Goldberg in a June 27th report to creditors.

The latest report, Goldberg’s first since March, outlines Chong’s payments and other discoveries of note as his unraveling of Utsick’s complicated financial dealings continues. The receivership was agreed to in a settlement between Utsick, Robert and Donna Yeager, and their partnerships, with the U.S. Securities and Exchange Commission in April 2006.

The SEC alleges Utsick and the Yeagers defrauded 3,300 investors of more than $300 million between 1998 and 2005.

The allegations against Chong are the latest in a series of surprises uncovered by Goldberg’s investigation. The receiver filed an injunctive action against Chong, obtaining a temporary restraining order freezing her assets pending final determination of the rights of the Utsick creditors. The court later extended the freeze pending a civil trial.

Goldberg reports he is considering criminal charges in that case as well.

A complaint has also been filed by Goldberg with National Association of Securities Dealers Dispute Resolution against investment brokers GunnAllen Financial.

According to the report, GunnAllen engaged in aggressive trading "on margin" on TEGFI’s behalf that Goldberg alleges resulted in $10 million in losses. The receivership is seeking $10 million in compensatory damages, plus attorneys fees and undisclosed punitive damages.

The Yeagers have wound down their part of the settlement, having concluded a separate settlement pending SEC approval in which they will return all profits they received by doing business with Worldwide Entertainment, TEGFI and Utsick. They will also pay a fine, according to Goldberg’s report.

"It is expected that the Yeagers will turn over to the receivership estate more than $6 million in assets consisting of cash, automobiles, a boat, retirement accounts, several homes in Louisiana and their share of a house in Sunny Isles Beach, Fla."

In another development, plans by the estate receivership to continue investment in a Louisiana oil drilling operation may be hitting the skids. Support by creditors for the plan appears to be waning as new reports by independent geophysicists of the property’s potential were not as rosy as in previous estimates. In addition, drilling company Browning Gas & Oil more than doubled its original estimated cost to drill to $2.4 million.

Goldberg advised creditors he and an investors panel came to the conclusion the receivership should again "explore selling our interest in lieu of investing."

In addition to progress reports on other issues, including pending litigation and the sale of Utsick’s Miami Beach condominium home and office, Goldberg also reported that a movie Utsick executive produced – "National Lampoon’s Pledge This!" – was released October 25, 2006, and released on DVD less than two months later.

Utsick sank $6 million into the flick, and Goldberg authorized the payment of an additional $300,000 in post-production costs just to get it finished, apparently in hopes of cutting the estate’s losses.

However, the film’s star, a budding actress by the name of Paris Hilton, "completely refused to support the movie" after being paid $1 million for her appearance as a South Beach sorority queen.

"Accordingly, I believe the estate was damaged by this breach and I am exploring the possibility of taking action to recover damages which I expect to commence shortly," Goldberg wrote of the wayward heiress, who certainly knows her way around a courtroom.