Read Edward James Lawson, Automated Revenue Creation, LLC, and Guaranteed Results Advertising, LLC - Summary Order To C&D and OSC text version

ADMINISTRATIVE PROCEEDING BEFORE THE SECURITIES COMMISSIONER OF MARYLAND

IN THE MATTER OF: *

EDWARD JAMES LAWSON * and AUTOMATED REVENUE CREATION, LLC * and GUARANTEED RESULTS ADVERTISING, LLC * RESPONDENTS. * * * * * * * * *

Securities Division No. 2007-0080

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SUMMARY ORDER TO CEASE AND DESIST AND ORDER TO SHOW CAUSE

WHEREAS, the Securities Division of the office of the Maryland Attorney General, pursuant to the authority granted in section 11-701 of the Maryland Securities Act, Title 11, Corporations and Associations Article, Annotated Code of Maryland (2007 Repl. Vol.) (the "Securities Act"), undertook an investigation into the securities-related activities of Edward James Lawson, Automated Revenue Creation, LLC, and Guraranteed Results Advertising, LLC (collectively the "Respondents"); and WHEREAS, as a result of that investigation, the Maryland Securities Commissioner (the "Commissioner") finds grounds to allege that the Respondents have violated sections 11-301, 11-401, 11402, and 11-501 of the Securities Act; NOW THEREFORE, pursuant to section 11-701.1(a) of the Securities Act, it is hereby: ORDERED, that Edward James Lawson, Automated Revenue Creation, LLC, and Guaranteed Results Advertising, LLC, and each of them, their officers, directors, employees, agents and anyone else involved in the offer or sale of investments in its "NarrowCast" advertising business in or through the Respondents, immediately cease and desist from soliciting investments in, or offering or selling securities or investment contracts in or from Maryland, pending a hearing in this matter or until such time as the

Commissioner modifies or rescinds this Order. Willful violation of this Order is punishable as a criminal offense under section 11-705 of the Securities Act by a fine not exceeding $50,000 or imprisonment not exceeding three years, or both. IT IS FURTHER ORDERED that each Respondent show cause why a final order should not be issued against it, assessing that Respondent the statutory penalty of $5,000 per violation of the Securities Act, and permanently barring that Respondent from engaging in the securities business in or from Maryland.

I. 1. Securities Act.

JURISDICTION

The Commissioner has jurisdiction in this matter pursuant to section 11-701.1 of the

II. 2.

RESPONDENTS

Edward James Lawson ("Ed Lawson") is the Managing Director/President/CEO of

Automated Revenue Creation, LLC, and Guaranteed Results Advertising, LLC, with business addresses at 1700 Rockville Pike, Rockville, Maryland, 20852. In various filings with the State of Maryland, Ed Lawson also uses addresses in Gaithersburg, Maryland. 3. Automated Revenue Creation, LLC, ("ARC") is a Maryland limited liability company

since 2006, with an address at 9611 Brassie Way, Gaithersburg, Maryland 20886. In company documents, ARC uses an address of 1700 Rockville Pike, Suite 400, Rockville, Maryland, 20852. 4. Guaranteed Results Advertising, LLC, ("GRA") is a Maryland limited liability

company since 2006, with an address at 1700 Rockville Pike, Suite 240, Rockville, Maryland, 20852.

III.

STATEMENT OF FACTS

On information and belief, the Commissioner alleges the following as the basis for this Order:

5.

ARC at all relevant times has been in the business of providing advertising services

through a medium known as "NarrowCast" television. 6. ARC identifies "Ed Lawson" as its registered agent in its filing with the Maryland

Department of Assessments and Taxation. 7. GRA at all relevant times has been in the business of providing advertising services

through a medium known as "NarrowCast" television. 8. GRA identifies "Edward J. Lawson" as its registered agent in its filing with the Maryland Department of Assessments and Taxation. 9. In its marketing materials, ARC describes "NarrowCast" television as using "LCD television technology ... and creative television commercials in high-traffic shopping venues, resulting in direct response by targeted customers." 10. ARC represented to investors that it operated a system of television monitors at gas stations, convenience stores, and other retail establishments, for its "NarrowCast" advertising. 11. Beginning in 2006, through word of mouth, investment agreements were offered by or on

behalf of ARC. Later, investment agreements were offered in the name of Guaranteed Results Advertising. In those later investment agreements, GRA states that it was formerly known as ARC. 12. The standard investment agreement offered and sold by ARC and GRA was labeled as an

"Agreement to Secure Host Advertising Locations and Sell, Install, and Manage Advertising Screens Gas Station Owner." ARC and GRA represented to investors that they were investing into the system of television monitors at gas stations, convenience stores, and other retail establishments, for its "NarrowCast" advertising. 13. The standard investment agreement offered and sold by ARC and GRA purports to give

the investor video monitors at a specific location. The investor was often referred to as a "Screen Owner" or a "HAL (Host Advertising Location) Owner." However, virtually none of the investor agreements actually state a specific location of "Owner's Monitors." Rather, the money from investors was placed into a pool of funds for the operation of the entire system of television monitors for ARC and GRA's "NarrowCast" advertising. 14. Some of the investment agreements offered and sold by the Respondents state that the term of the agreement is to be five (5) years, while other investment agreements offered and sold by the Respondents state that the term of the agreement is to be ten (10) years. 15. Some of the investment agreements offered by ARC and GRA promised the investor

payment of $167,400, annually, for a period of five to ten years, on a one-time investment of $89,800. 16. Some of the investment agreements also provided for a payoff if ARC or GRA is sold. "In the event of a Company Purchase, Marketer (GRA/ARC) shall pay Owner (the investor) an amount equal to $1,674,000, less all payments received by Owner to date of termination." 17. One version of the investment agreement offered and sold by the Respondents states that on an investment of $89,800, "Owner (the investor) shall pay Marketer (ARC/GRA) the balance of one hundred percent (100%) of the monthly Advertising Revenue, less than an amount equal to the greater of 18% of the monthly Advertising Revenue or $13,950. In the event that the Owner's share of the Advertising Revenue per month is less than $13,950, Marketer shall pay Owner the difference between the actual Owner's share of the Advertising Revenue per month and $13,950. (Italics added.)" In other words, ARC and GRA are promising a minimum payment to the investor of $13,950 per month. 18. The minimum investment made by an investor with ARC and GRA appears to be

$15,800. 19. The maximum single investment made by an investor with ARC and GRA appears to be

$89,900. However, there does not appear to be any cumulative limit on how much an individual or entity can invest with ARC and GRA. 20. Respondents sold securities, in the form of these investment contracts, to at least 25

residents of the State of Maryland. 21. 22. Ed Lawson signed investment agreements on behalf of ARC and GRA. Mark Mitchell, James Anderson, and Robert Young also signed investment agreements on behalf of ARC and GRA. 23. The investment agreements that have been offered and sold by the Respondents are

"securities" within the meaning of section 11-101 of the Securities Act. 24. The Securities Division has no record of securities registration for an offering by or in

the name of ARC or GRA, nor has any claim of exemption or status as a federal-covered security been filed with the Division with respect to any such offering. 25. ARC is not registered with the Securities Division as a securities broker-dealer or agent,

or as an investment adviser or investment adviser representative. 26. GRA is not registered with the Securities Division as a securities broker-dealer or agent,

or as an investment adviser or investment adviser representative. 27. Ed Lawson is not registered with the Securities Division as a securities broker-dealer or

agent, or as an investment adviser or investment adviser representative. 28. Mark Mitchell is not registered with the Securities Division as a securities broker-dealer or agent, or as an investment adviser or investment adviser representative. 29. James Anderson is not registered with the Securities Division as a securities broker-

dealer or agent, or as an investment adviser or investment adviser representative. 30. Robert Young is not registered with the Securities Division as a securities broker-dealer or agent, or as an investment adviser or investment adviser representative. 31. Investors were given no disclosure materials prior to or at the time of their investment,

and received no disclosure information relating to the risk involved in the investment. 32. Investors were not informed that Ed Lawson, Mark Mitchell, James Anderson, and

Robert Young are not registered to offer or sell securities in the State of Maryland. 33. Investors were not informed that Lawson was convicted in the Circuit Court of Montgomery County, Maryland, in 1985, for Failure to File (the offering of a business opportunity) with the Securities Commissioner. 34. Investors were not informed of a Federal Tax Lien filed against Lawson in 1993 in the

amount of $383,809.04. The lien was satisfied in September 2007. 35. Investors were not informed of a civil action by the Secretary of State of Maryland in the

Circuit Court for Anne Arundel County, Maryland, that found Lawson in violation of the Maryland Charitable Solicitation Act. The civil action resulted in a judgment in 2003 against Lawson in the amount of $219,000. 36. Recently, a number of investors have asked Lawson for a refund of the money they invested with ARC and GRA. Lawson has made various representations to investors, including that ARC and GRA may be able to pay back to investors 40% to 70% of their investment. 37. On May 12, 2008, Lawson, pro se, filed Bankruptcy Petition number 08-16523 in the U.S.

Bankruptcy Court for the District of Maryland on behalf of Guaranteed Results Advertising, LLC. On May 19, 2008, the Court issued an "Order Dismissing Case for Failure to Comply with Local Bankruptcy Rule 1002-1." 38. In June 2008, Lawson issued checks to investors on behalf of GRA. A number of the checks were post-dated. After investors inquired with the bank from which the checks were to be drawn, Lawson stopped payment of the checks, and explained that he would be opening a new bank account from which to issue the checks.

COUNT I (Offer and Sale of Unregistered Securities) WHEREAS, section 11-501 of the Securities Act makes it unlawful for any person to offer or sell a security in this state unless the security is registered, is exempt from registration under the Act, or is a federal covered security; and WHEREAS, the investments in ARC and GRA that were offered and sold by the Respondents constitute "securities" within the meaning of section 11-101 of the Act, in the form of investment contracts and notes; and WHEREAS, there is no record of registration, or of a claim of exemption from registration or qualification as a federal covered security filed with the Division by or on behalf of ARC or GRA; and WHEREAS, Respondents have offered and sold securities in Maryland in violation of the registration requirements of section 11-501 of the Act; THEREFORE, IT IS HEREBY ORDERED that Respondents, their officers, directors, employees, agents, and anyone else involved in the offer and sale of ARC and GRA securities, immediately cease and desist from offering and selling securities in or from Maryland, in violation of section 11-501 of the Securities Act, pending a hearing in this matter or until such time as the

Commissioner modifies or rescinds this Order. Willful violation of this Order could result in criminal penalties under section 11-705 of the Securities Act. ORDERED that each Respondent show cause why a final order should not be issued against that Respondent that orders Respondents to cease and desist from further violation of Section 11-501 of the Securities Act, assesses each Respondent the statutory penalty of $5,000 per violation of Section 11-501, permanently bars each Respondent from the securities and investment advisory business in Maryland and orders any other sanction or combination of sanctions against each Respondent as permitted under Section 11-701.1.

COUNT II (Acting as Unregistered Broker-Dealer and/or Agent) WHEREAS, section 11-401 of the Securities Act makes it unlawful for any person to transact business in the offer and sale of securities in this state as a broker-dealer or agent unless that person is registered as such pursuant to the Act; and WHEREAS, under section 11-101(c) of the Act, a "broker-dealer" is defined as a person engaged in the business of effecting transactions in securities for the account of others or for his own account; and WHEREAS, under section 11-101(b) of the Act, an "agent" is defined as an individual other than a broker-dealer, including a partner, officer or director of an issuer, who represents a broker-dealer or issuer in effecting or attempting to effect the purchase and sale of securities; and WHEREAS, Edward J. Lawson acted as an agent of ARC and GRA, offered and sold securities in this state in the form of investment contracts or notes in ARC or GRA, and supervised others doing so; and WHEREAS, Edward J. Lawson is not registered with the Division as an agent to transact securities business in this state; THEREFORE, IT IS HEREBY ORDERED that Respondents, their officers, directors,

employees, agents, and anyone else involved in the offer and sale of ARC and GRA securities, immediately cease and desist from acting as broker-dealers or agents in or from Maryland, in violation of section 11-401 of the Securities Act, pending a hearing in this matter or until such time as the Commissioner modifies or rescinds this Order. Willful violation of this Order could result in criminal penalties under section 11-705 of the Securities Act. ORDERED that each Respondent show cause why a final order should not be issued against that Respondent that orders Respondents to cease and desist from further violation of Section 11-401 of the Securities Act, assesses each Respondent the statutory penalty of $5,000 per violation of Section 11-501, permanently bars each Respondent from the securities and investment advisory business in Maryland and orders any other sanction or combination of sanctions against each Respondent as permitted under Section 11-701.1.

COUNT III (Employment of Unregistered Agents for Sale of Securities) WHEREAS, under section 11-101(c) of the Act, a "broker-dealer" is defined as a person engaged in the business of effecting transactions in securities for the account of others or for his own account; and WHEREAS, under section 11-101(b) of the Act, an "agent" is defined as an individual other than a broker-dealer, including a partner, officer or director of an issuer, who represents a broker-dealer or issuer in effecting or attempting to effect the purchase and sale of securities; and WHEREAS, the investment agreements in ARC and GRA sold by Respondents are securities under the Act; and WHEREAS, under section 11-402(a) of the Act, and the regulations promulgated thereunder, it is unlawful for any broker-dealer or issuer to employ or associate with an agent unless the agent is

registered pursuant to the Act; and WHEREAS, Edward J. Lawson, Mark Mitchell, James Anderson, and Robert Young, as agents of ARC and GRA, solicited offers to purchase, offered to sell, and sold securities issued by ARC and GRA; and WHEREAS, Edward J. Lawson, Mark Mitchell, James Anderson, and Robert Young are not registered to act as a broker-dealer or agent in this state; THEREFORE, IT IS HEREBY ORDERED that Respondents, their officers, directors, employees, agents, and anyone else involved in the offer and sale of ARC and GRA securities, immediately cease and desist from employing unregistered agents for the offer or sale of securities in or from Maryland, in violation of section 11-402 of the Securities Act, pending a hearing in this matter or until such time as the Commissioner modifies or rescinds this Order. Willful violation of this Order could result in criminal penalties under section 11-705 of the Securities Act. ORDERED that each Respondent show cause why a final order should not be issued against that Respondent that orders Respondents to cease and desist from further violation of Section 11-402 of the Securities Act, assesses each Respondent the statutory penalty of $5,000 per violation of Section 11-501, permanently bars each Respondent from the securities and investment advisory business in Maryland and orders any other sanction or combination of sanctions against each Respondent as permitted under Section 11-701.1.

COUNT IV (Material Misrepresentations and Omissions in Connection with Sale of Securities) WHEREAS, section 11-301 of the Securities Act prohibits any person, in connection with the offer, sale or purchase of any security, directly or indirectly to: (1) employ any device, scheme or artifice to defraud; (2) make any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not

misleading; or (3) engage in any act, practice, or course of business which operates or would operate as a fraud or deceit on any person; and WHEREAS, Respondents offered and sold securities in the form of investment agreements with ARC and GRA by making materially false and misleading statements regarding the value of ARC and GRA investments and the promised investor profits; and WHEREAS, Respondents omitted material facts that were necessary to make statements that were made not misleading, including full representation of the risks associated with an investment in ARC and GRA, the use of invested funds, and the registration and disciplinary history of management personnel; THEREFORE, IT IS HEREBY ORDERED that Respondents, their officers, directors, employees, agents, and anyone else involved in the offer and sale of ARC and GRA securities, immediately cease and desist from engaging in misrepresentation in connection with the offer or sale of securities in or from Maryland, in violation of section 11-301 of the Securities Act, pending a hearing in this matter or until such time as the Commissioner modifies or rescinds this Order. Willful violation of this Order could result in criminal penalties under section 11-705 of the Securities Act. ORDERED that each Respondent show cause why a final order should not be issued against that Respondent that orders Respondents to cease and desist from further violation of Section 11-301 of the Securities Act, assesses each Respondent the statutory penalty of $5,000 per violation of Section 11-501, permanently bars each Respondent from the securities and investment advisory business in Maryland and orders any other sanction or combination of sanctions against each Respondent as permitted under Section 11-701.1.

NOTICE OF HEARING AND REQUIREMENT OF ANSWER IT IS FURTHER ORDERED, pursuant to section 11-701.1 of the Securities Act and the Code of

Maryland Regulations, COMAR 02.02.06.06, that each Respondent shall file with the Securities Commissioner a written Answer to this Order within fifteen days of service of the Order. The Answer shall admit or deny each factual allegation in the Order and shall set forth affirmative defenses, if any. A Respondent without knowledge or information sufficient to form a belief as to the truth of an allegation shall so state. The Answer also shall indicate whether the Respondent requests a hearing. A hearing will be scheduled in this matter if one is requested in writing. Failure by any Respondent to file a written request for a hearing in this matter shall be deemed a waiver by that Respondent of the right to such a hearing. Failure of a Respondent to file an Answer or a request for a hearing shall result in entry of a final order directing that Respondent permanently to cease and desist from violation of the Act and imposing the sanctions sought in this Order.

IT IS SO ORDERED:

June 24

, 2008

Commissioner's Signature is on File with Original Document MELANIE SENTER LUBIN SECURITIES COMMISSIONER

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Edward James Lawson, Automated Revenue Creation, LLC, and Guaranteed Results Advertising, LLC - Summary Order To C&D and OSC

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