Entrepreneur Pleads Guilty in O.C. Scheme

Entrepreneur Jean Claude LeRoyer, accused of bilking up to $43 million from mostly elderly investors in a city bus shelter-advertising scheme, pleaded guilty Wednesday to six charges of mail fraud and filing false income tax returns.

His wife, Karen, a former bookkeeper for the Tustin company that LeRoyer headed, pleaded guilty to three counts of filing false tax reports.

LeRoyer built his Metro Display Advertising Inc. on the idea that investors would pay $10,000 each to buy bus shelters, which they would lease back to the company so it could sell advertising space and pay investors rent and royalties.

But the company began growing too fast and LeRoyer lost control, leading him to use new investor money, in part, to pay royalties to former investors, said Assistant U.S. Atty. Ellyn Lindsay.

The LeRoyers, she said, “blatantly lied” to investors.

The plea agreements the LeRoyers made with prosecutors were sealed by a federal judge after his attorney, Gregory Nicolaysen of Beverly Hills, argued that LeRoyer could become a target for retribution if former associates learned that he was cooperating with authorities in their continuing investigation.

“Others are likely to be indicted,” Nicolaysen said. Lindsay, who didn’t contradict him in court, wouldn’t comment later about his statement.

LeRoyer, 52, faces a maximum sentence of 24 years in prison and a $1.5-million fine. Karen LeRoyer, 45, faces nine years in prison and a $750,000 fine. U.S. District Judge Alicemarie H. Stotler set sentencing for Feb. 14.

Jean Claude LeRoyer

Investors who bought about 2,600 shelters under LeRoyer, ousted him in January 1993, after he ran out of funds to keep the scam going. They put the company in bankruptcy with claims of $106 million and reorganized it by donating their shelters to the company in return for stock and offering creditors 50% cash upfront or a 100% refund over four years.

The plan won near unanimous approval from investors and creditors, and Metro Display has been operating out of bankruptcy for the past two years, meeting all of its payments, said Robert Lamb, its general manager.

Last year, he said, the company earned a modest profit on $7 million in advertising sales and is now expanding its base in Southern California and Las Vegas with shelters in Northern California.

The current success has come no thanks to LeRoyer, he said.

“If he has any punishment coming, he deserves it,” said Lamb, 69, who came out of retirement to help revive Metro Display. “He hurt a lot of people and shattered a lot of lives.”

Most of the investors, he said, were elderly Southern Californians who used their retirement savings. Instead, he said, many lost their homes.

“There are a lot of heartbreaking stories,” said Lamb, who bought 35 shelters himself. “We fully believe that LeRoyer knew what was going on. He knew he didn’t have enough money and began taking investor money for his own use.”

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LeRoyer, who has admitted his role and professed his remorse, wasn’t allowed by his lawyer to talk outside court.

Nicolaysen said his client pleaded guilty partly because he faced more serious accusations, like money laundering, which would have meant decades in prison. Under the plea arrangement, he said, LeRoyer is likely to receive less than five years in prison.

Prosecutors accused LeRoyer of bilking $20 million to $43 million from 1,200 investors, telling them that Metro Display was a financially sound and successful company and would pay monthly lease payments on the shelters from advertising it sold.

Instead, LeRoyer’s company was losing a “significant” amount of money and was simply using funds from new investors to make the payments, prosecutors charged.

Lamb, a retired Rockwell International Corp. aerospace engineer, said that in taking over the company, investors learned that LeRoyer had picked up enough investors to pay for about 4,600 shelters. Yet he had only 2,600 shelters with only 1,000 more backed up in inventory, Lamb said.

Ironically, LeRoyer works for a competing company that has built more than two dozen shelters in Southern California. “He’s in competition with us, but it’s very, very minor,” Lamb said.