U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19226 / May 17, 2005
Securities and Exchange Commission v. Scott B. Hollenbeck, Timothy L. Bradshaw and Steven K. Gilley, Civil Action No. 1:05-CV-1272 (NDGA May 13, 2005)
The Securities and Exchange Commission ("Commission") announced that on May 13, 2005, it filed a complaint in the United States District Court for the Northern District of Georgia against Scott B. Hollenbeck ("Hollenbeck"), Timothy L. Bradshaw ("Bradshaw") and Steven K. Gilley ("Gilley"). The defendants worked as commissioned sales agents for Mobile Billboards of America, Inc. ("Mobile Billboards"). Mobile Billboards and others were permanently enjoined from future violations of the registration, antifraud and broker-dealer registration provisions of the federal securities laws on September 21, 2004. SEC v. Mobile Billboards of America, Inc., et al., Civil Action No. 1:04-CV-2763, N.D.Ga.
The complaint alleges that Hollenbeck, Bradshaw and Gilley each engaged in the unregistered sale of Mobile Billboards' securities in the form of investment contracts. The investment contracts included the purchase of two billboard frames which sold for $20,000 per unit. Investors simultaneously leased the billboards back to Outdoor Media Industries, Inc. (Outdoor Media"). Investors were told that Outdoor Media would purportedly pay the lease payments, approximating 13.49% per year, to investors. Mobile Billboards agreed to buy back the billboards after seven years at the full purchase price, purportedly guaranteed by Reserve Guaranty ("Reserve Guaranty"). According to the complaint, the investment program functioned as a Ponzi scheme and relied on new investor money to make lease payments. The complaint further alleges that the sales materials used by Hollenbeck, Bradshaw and Gilley made false claims about the number of operational billboards and misrepresented the value of other assets. According to the complaint, the defendants knew or recklessly ignored information indicating that the Mobile Billboards program was a Ponzi scheme, and added misrepresentations of their own, including claims that the investment was secured or guaranteed. The complaint also alleges that Hollenbeck, Bradshaw and Gilley were the three highest volume sales agents, selling approximately $11 million, $5.3 million and $4.7 million, respectively, of the Mobile Billboards investments.
The complaint charges the defendants with violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder. The complaint seeks, among other relief, injunctions against future violations, accountings, disgorgement of all ill-gotten gains with prejudgment interest, and the imposition of civil penalties against the defendants.