Judge Calls Halt to Bus Shelter ‘Pyramid Scheme’

A federal judge Tuesday ordered the largest bus shelter company in Southern California to stop selling investments in what the Securities and Exchange Commission alleges was a $48-million pyramid scheme that duped more than 4,500 investors.

U.S. District Judge William Keller granted the request by the SEC, which late Monday filed a lawsuit against Metro Display Advertising Inc. of Tustin alleging fraud and misappropriation by company President Jean Claude LeRoyer and his wife Karen. Silvia Scott, SEC assistant regional administrator, said the LeRoyers allegedly diverted more than $800,000 to make improvements on their Newport Beach home.

In addition, the SEC alleged that investors were never told that 25% of their $10,000 investments were being siphoned off to pay sales commissions and that the company had sustained net losses in excess of $7 million for the six months ended June 30, 1991.

A lawyer representing Metro Display denied the allegations, saying evidence will show that the company never intended to defraud investors and that the LeRoyers did not steal any company funds.

Metro Display, which operated as Bustop Shelters of California, filed for Chapter 11 bankruptcy reorganization Jan. 22, just weeks after it stopped making regular payments to investors. It is the largest of three companies in Southern California that install and sell advertising space on transit bus stop shelters. Altogether, Metro Display has 2,553 of the metal and glass shelters on the streets in more than 60 cities and counties in the Southland and in Southern Nevada, but it sold investments in more than 4,500 shelters.