U.S. Securities and Exchange Commission
Litigation Release No. 18893 / September 23, 2004
Securities and Exchange Commission v. Mobile Billboards of America, Inc., International Payphone Company, Reserve Guaranty Trust, Michael A. Lomas and Michael L. Young, Civil Action No. 1:04-CV-2763 (NDGA September 20, 2004)
The Securities and Exchange Commission ("Commission") announced that on September 21, 2004, it filed a complaint in the United States District Court for the Northern District of Georgia against Mobile Billboards of America, Inc. ("Mobile Billboards"), International Payphone Company ("International Payphone") itself and doing business as Outdoor Media Industries ("Outdoor Media"), Reserve Guaranty Trust ("Reserve Guaranty"), Michael A. Lomas ("Lomas") and Michael L. Young ("Young"). Mobile Billboards is a Delaware corporation with offices in Newbury, Ohio and Bridgeton, Missouri. International Payphone, a Delaware corporation, maintains its principal office in Norcross, Georgia. Outdoor Media is a division of International Payphone and has offices in Newbury, Ohio and Bridgeton, Missouri. Reserve Guaranty, a Delaware statutory trust, is located in Washington, DC. Lomas, who resides in Long Beach, California, is the chairman of Mobile Billboards. Young is the president and a director of Mobile Billboards and resides in Bridgeton, Missouri.
The complaint alleges that from 2001 through the present, defendants Lomas, Young, Mobile Billboards, Outdoor Media and Reserve Guaranty operated a Ponzi scheme involving the sale and leaseback of mobile billboards, selling more than $60.5 million of mobile billboard investments to more than 700 investors nationwide. According to the complaint, Mobile Billboards sold to investors a billboard frame that attached to the sides of a truck and a GPS monitoring system for $20,000. Mobile Billboards also entered into an agreement with the investor to buy-back the frame from the investor at the end of the seven year lease for its original purchase price. The complaint alleges that Outdoor Media leased the billboard frames back from investors for seven years for monthly payments equivalent to 13.49% annually. The complaint also alleges that Reserve Guaranty issued "Trust Secured Certificates" that guaranteed funding for Mobile Billboards' commitment to buy back the billboard frames at full price at the end of each seven-year lease. According to the complaint, the collective business did not generate sufficient advertising revenue to make monthly lease payments to investors and, instead, relied on new investor money to make those payments. The complaint also alleges that Mobile Billboards' sales materials made false claims grossly overstating the number of operational billboards and misrepresented the value of assets contributed to Reserve Guaranty.
The complaint charges the defendants with violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder and Lomas and Young with aiding and abetting violations of Section 15(a) of the Exchange Act,. The complaint seeks, among other relief, injunctions against future violations, disgorgement of all ill-gotten gains with prejudgment interest, and the imposition of civil penalties against defendants. On the same day the complaint was filed, the defendants consented to orders permanently enjoining the defendants from future violations, freezing the assets of defendants, ordering accountings by Lomas and Young, and appointing a Receiver for the assets of Mobile Billboards, International Payphone, itself and doing business as Outdoor Media, and Reserve Guaranty.
The Commission thanks the North Carolina Securities Division for its assistance in this matter.