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November 2004 State Government


Government Gumshoes Shut Down a Ponzi Scheme


T
he N.C. Secretary of State’s office, normally one of the quiet backwaters of state government, is basking in the spotlight for helping crack an unusual Ponzi scheme that bilked hundreds of investors nationwide out of tens of millions of dollars. Even the U.S. Securities and Exchange Commission is offering its kudos for the gumshoe work done here to stop the so-called mobile billboard scam.

Here’s how the scam worked: For $20,000, investors were told they could get in on the ground floor of a major new marketing innovation being sold by a Deleware company called Mobile Billboards of America. For their $20,000, investors received a billboard frame that attached to the sides of a truck. Mobile Billboards said it would help investors sell advertising on the trucks and that it would line up investors with a leasing company that would actually operate the business. There was even a guarantee that Mobile Billboards would buy back the equipment at full price at the end of seven years. It supposedly was a no-risk investment with a very high rate of return.

The trouble was, the mobile billboards attracted little if any actual advertising. In classic Ponzi sceme fashion, money from new investors was parceled out to earlier ones as their royalties.

Mobile Billboards began signing up investors in North Carolina last spring, and investigators in the Secretary of State’s office soon were receiving calls attempting to verify the credentials of an underwriting company, Reserve Guaranty, that supposedly was standing behind the buy-back offer.

The investigators learned that none of the parties was registered to do business in the state and most of the agents selling the securities weren’t licensed. The Secretary of State’s office issued cease and desist orders to Mobile Billboards and four of its agents.

Things were quiet for a while, but in late September the state investigators learned that Mobile Billboards was back in business and had duped more investors. It issued 23 more cease and desist orders to individuals selling the product. Investigators also learned that Mobile Billboards was active in several other states, and turned the evidence over to SEC.

On Sept. 23, the SEC filed a complaint in federal district court in Georgia against Mobile Billboards of America, three related businesses and two individuals, Michael Lomas and Michael Young, who were described as the brains behind the business. The complaint alleges that Lomas and Young duped more than 700 investors out of $60.5 million.


DOT Unveils 25-Year Highway Plan: There’s good news and bad about the state Board of Transportation’s new 25-year plan for maintaining and improving North Carolina’s highways. The good news is that the mammoth plan is finally a reality after four years of work, and that DOT has identified $55 billion in available revenues to fund the highway, rail and mass transportation projects. The $55 billion includes a 10 percent increase in available revenues for maintenance of existing roadways.

The bad news is that the long self-examination of North Carolina’s highway needs concludes that the state ought to spend $85 billion on maintaining and improving its transportation system. That means that DOT will only be able to meet two-thirds of the state’s 25-year transportation needs at its current funding levels, regardless of how the department’s resources are allocated.

“We have a responsibility to the citizens of North Carolina to make sure that we are directing our resources to the areas of highest priority,” said Board of Transportation member Nancy Dunn, who chaired the long-range planning committee charged with overseeing the development of the new plan.

NCDOT has been working to develop the Statewide Transportation Plan since September 2000, and the plan will be updated every four years to ensure it continues to meet the state’s changing needs.
Steve Tuttle



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