U.S. Securities & Exchange Commission
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U.S. Securities and Exchange Commission

United States of America
before the
Securities and Exchange Commission

Securities Exchange Act of 1934
Release No. 47994 / June 3, 2003

Investment Company Act of 1940
Release No. 26069 / June 3, 2003

Administrative Proceeding
File No. 3-11154

In the Matter of





The Securities and Exchange Commission ("the Commission") deems it appropriate that cease-and-desist proceedings be, and hereby are, instituted pursuant to Section 21C of the Securities Exchange Act of 1934 ("Exchange Act") and Section 9(f) of the Investment Company Act of 1940 ("Investment Company Act") against Main Street AC, Inc. ("Main Street" or "the Company") and Chester Billingsley ("Billingsley") (collectively, "Respondents").

In anticipation of the institution of these proceedings, Respondents have submitted an Offer of Settlement ("Offer") to the Commission, which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission or in which the Commission is a party, and without admitting or denying the findings contained in this Order, except the jurisdiction of the Commission over Respondents and the subject matter of these proceedings, which are admitted, Respondents consent to the issuance of this Order Instituting Cease-and-Desist Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934 and Section 9(f) of the Investment Company Act of 1940, Making Findings and Imposing a Cease-and-Desist Order ("the Order"), and to the entry of the findings set forth below.


On the basis of this Order and the Offer submitted by Respondents, the Commission finds that:


1. Main Street, a California corporation located in Ramona, California, has minimal assets and no revenues. Main Street does not file reports with the Commission and is not registered with the Commission as an investment company. Its securities are not listed on a stock exchange. Transactions in the Company's common stock are reported in the "Pink Sheets." Several privately-held companies were combined in 1994 to create Main Street. In connection with subsequent Chapter 11 reorganization proceedings that concluded in April 2000, Main Street issued stock and warrants. As of December 31, 2001, the date of Main Street's most recent audited financial statements, the company had 27,478,009 warrants outstanding.

2. Billingsley, 50, of Ramona, California, is Main Street's president and chief executive officer. Billingsley managed four mini-tender offers by Main Street, each dated August 28, 2002. Billingsley formerly directed the privately-held entities, which were combined to form Main Street.


On August 28, 2002, Main Street issued four mini-tender offers for up to 4.9% each of the shares of four New York Stock Exchange-listed energy companies. For each offer, the tender price was 25% above the August 27, 2002 closing price of the shares.1 The offers provided that Main Street could extend them for up to one year and that shareholders could not withdraw tendered shares. In total, Main Street offered to purchase up to approximately 56 million shares with an estimated aggregate price to Main Street of $288 million. The offers each stated that upon the close of the related offers and Main Street's listing, the Company intended to operate as a public closed-end investment company.

The offers stated that Main Street planned to finance its purchases through the exercise, by its more than 1,300 investors, of warrants that in total "would raise approximately $170 Million net on execution." The offers failed to adequately disclose, however, that the $170 million in funding assumed that over $150 million would be raised from the exercise of $7 warrants in a shell company whose most recent audit opinion contained a going concern paragraph. Thus, the offers failed to adequately disclose various contingencies, prerequisites and other information about Main Street that significantly impacted the company's ability to fund the tender offers.

Furthermore, Main Street subsequently issued press releases announcing it had purchased all of three of the four energy companies' shares tendered electronically during the first thirteen, fourteen or nineteen days of their respective offers, through proceeds realized from the exercise of warrants. These releases, however, failed to disclose that Main Street had raised nominal funds from fewer than 10 warrant holders and its purchases totaled 522 shares. These omissions left the impression that Main Street had the ability to fund the offers and stimulated shareholder interest in the offers. According to Main Street, approximately 7.8 million shares of the energy companies were tendered through October 4, 2002, the original expiration date of the offers. The offers were subsequently extended until October 15, 2002, and then closed.2


1. Section 14(e) of the Exchange Act

Section 14(e) of the Exchange Act makes it unlawful, inter alia, to omit to state any material fact necessary under the circumstances in order to make a statement not misleading, in connection with tender offers. As discussed above, Main Street violated Section 14(e) by omitting disclosures of significant contingencies, prerequisites and other information regarding its mini-tender offers. See generally City Investment Group, LLC, Admin. Proc. File No. 3-10222, Exchange Act Release No. 42,919 (June 12, 2000). Main Street's failure to disclose in its press releases the nominal amounts of stock purchased and funds raised also, under the circumstances, violated Section 14(e). These omitted disclosures in the mini-tender offers and the press releases were material to reasonable investors assessing the prudence of tendering their shares. Billingsley caused Main Street's violations of this provision.

2. Unregistered Investment Company

Section 3(a)(1) of the Investment Company Act defines "investment company" to include any issuer which "is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting, or trading in securities." Section 7(a) of the Investment Company Act prohibits any investment company, unless registered pursuant to Section 8 of the Investment Company Act, from offering for sale or selling securities or any interest in a security, and from purchasing or otherwise acquiring or attempting to acquire securities, through interstate commerce. Main Street violated Section 7(a) of the Investment Company Act by failing to register as an investment company while proposing to engage primarily in the business of investing in securities.3 Billingsley caused Main Street's violations of these provisions.


In view of the foregoing, the Commission deems it appropriate to accept the Offer submitted by Respondents and to impose the cease-and-desist order specified therein.

Accordingly, IT IS ORDERED that:

A. Pursuant to Section 21C of the Exchange Act and Section 9(f) of the Investment Company Act, Main Street shall CEASE AND DESIST from committing or causing violations and any future violation of Section 14(e) of the Exchange Act and Section 7(a) of the Investment Company Act.

B. Pursuant to Section 21C of the Exchange Act and Section 9(f) of the Investment

Company Act, Billingsley shall CEASE AND DESIST from committing or causing any violation and any future violation of Section 14(e) of the Exchange Act and Section 7(a) of the Investment Company Act.

By the Commission:

Jonathan G. Katz


1 Main Street's mini-tender offers were for the shares of Aquila, Inc., Dynegy, Inc., Mirant Corporation, and Reliant Resources, Inc., whose stocks had suffered steep price declines amid public disclosures concerning various investigations and controversies in the energy sector.

2 Main Street, after discussions with the staff of the Commission and in cooperation with its requests, announced in an October 10, 2002 press release that it would not be extending the offers past their new scheduled closing date of October 15, 2002. In accordance with its offers, Main Street returned all tendered shares within three days of the close, other than the nominal amount previously purchased. In determining to accept the Offer by Respondents, the Commission considered the remedial acts they undertook and the cooperation they afforded the Commission staff.

3 Main Street does not qualify for a statutory exclusion from the definition of an investment company under Section 3(c)(1) of the Investment Company Act because more than 100 persons beneficially own its securities.



Modified: 06/06/2003