CBS Lawsuit TDI 2006

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IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF MISSOURI

WESTERN DIVISION

NATHAN L. SIMMONS; PATRICIA A. HERRON d/b/a Herron & Company; KEITH A. FRANKLIN d/b/a FRANKLIN OUTDOOR ADVERTISING COMPANY; and SIGNX LLC,

) ) ) ) ) ) ) )

) Civil Case No. 06-0863-CV-W-JTM Plaintiffs, )

) JURY TRIAL DEMANDED v. ) ) CBS OUTDOOR INC. ) f/k/a Viacom Outdoor Inc. f/k/a Infinity Outdoor Inc.;

) )

WALLY KELLY; HAROLD GUSTIN; and GEORGE GROSS,

) ) )

Defendants. )

COMPLAINT

Plaintiffs Nathan L. Simmons, Patricia A. Herron d/b/a Herron & Company (“Herron”),

Keith A. Franklin d/b/a Franklin Outdoor Advertising Company (“Franklin”), and Signx LLC

(“Signx”) allege:

NATURE OF THE ACTION

1. This action arises out of a scheme to defraud small billboard operators out of their

investment in and right to leases for various premium billboard locations. The scheme of

defendants CBS Outdoor, Inc., f/k/a Viacom Outdoor, Inc., f/k/a Infinity Outdoor, Inc. (“CBS”),

Wally Kelly, Harold Gustin, and George Gross involved inducing the plaintiffs and other small

billboard operators to reveal the locations of their premium sites to CBS as the leasing agent for

Case 4:06-cv-00863-DW Document 1 Filed 10/19/06 of 55

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various railroads based on the representation that billboard locations along railroad lines would

be distributed on a “first-come, first-served” basis.

2. Once defendants induced the plaintiffs to reveal their billboard locations,

defendants CBS, Kelly, Gustin, Gross and other coconspirators directed the denial of those

applications, or stalled a response on those applications, and then CBS either took the sites for

itself or planned to take those sites. In addition, the defendants used this scheme to devalue the

businesses owned by the plaintiffs and other small billboard operators so that CBS could have

the opportunity to purchase those companies at a reduced price and thereby keep the plaintiffs

and other small business owners from competing with CBS, or at least to ensure the small

operators remain weaker competitors. The defendants committed these acts against many small

billboard operators in several states.

3. To accomplish their scheme, defendants and other coconspirators, known and

unknown to the plaintiffs, took advantage of CBS’s role as the leasing agent of Burlington

Northern/Santa Fe Railroad, CSX Railroad, Kansas City Southern Railway, Norfolk Southern

Railway, and other railroads. In its role as leasing agent for these railroads, CBS was supposed

to manage applications to lease property to billboard advertising businesses on a “first-come,

first-served” basis. In order to process the application, CBS required the applicants to identify

the proposed site.

4. To further this scheme, maintain the secrecy of the conspiracy, and fraudulently

obtain the leases to these premium locations, the defendants made false, fraudulent, and

misleading statements and omissions by telephone, fax, e-mail, and through the mails in

violation of numerous criminal statutes including 18 U.S.C. §§ 1341 (mail fraud) and 1343 (wire


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fraud). The defendants also made false, fraudulent, and misleading statements and omissions in

face to face communications to further their scheme.

5. In addition, the coconspirators obstructed justice and tampered with witnesses in

violation of 18 U.S.C. § 1512, threatened to retaliate against witnesses in violation of 18 U.S.C.

§ 1513, interfered with interstate commerce in violation of 18 U.S.C. § 1951, and conspired to

violate each of these laws.

6. Through this conduct the defendants also made fraudulent omissions and

misrepresentations to plaintiffs, tortiously interfered with plaintiffs’ business expectancies, and

unfairly competed with the plaintiffs, all in violation of law and causing substantial damages for

which defendants are jointly and severally liable. Defendants’ engaged in willful and outrageous

misconduct, malice, aggravated and egregious fraud, wantoness, and oppression. Defendants’

conduct was also consciously indifferent, recklessly indifferent, and deliberately disregarded the

rights of plaintiffs. Thus, defendants’ conduct justifies an award of punitive damages in such an

amount as will serve to punish defendants and to deter them and others from like conduct.

7. Defendants are jointly and severally liable for treble damages for their operation

of an enterprise through a pattern of racketeering activity in violation of 18 U.S.C. § 1962(c).

PARTIES

8. Plaintiff Simmons is an individual who resided and at all relevant times has

resided in Coffee County, Alabama.

9. Plaintiff Herron is an individual who resided and at all relevant times has resided

in Johnson County, Kansas.

10. Plaintiff Franklin is an individual who resided and at all relevant times has resided

in Wright County, Minnesota.


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11. Plaintiff Signx is an Oklahoma limited liability company with its principal place

of business in Claremore, Oklahoma.

12. Defendant CBS is one of many subsidiaries of CBS Corporation and is a

Delaware corporation with its principal place of business in Arizona. CBS is registered to do

business in Missouri. Its registered agent is CSC-Lawyers, Inc., 221 Bolivar Street, Jefferson

City, Missouri. It can be served with process at its office at 2459 Summit Street, Kansas City,

Missouri 64108.

13. Defendant Wally Kelly is currently the Chairman and Chief Executive Officer of

CBS and formerly served as its president. He resides in Arizona and can be served personally at

2502 North Black Canyon Highway, Phoenix, Arizona 85009.

14. Defendant Harold Gustin is a New York resident who can be served personally at

839 Lowell St, Woodmere, New York 11598.

15. Defendant George Gross is currently the Vice President for the Eastern Region of

CBS. He resides in New York and can be served personally at 185 U.S. Highway 46, Fairfield,

New Jersey 07004.

JURISDICTION AND VENUE

16. This Court has jurisdiction over this action pursuant to 28 U.S.C. § 1331 as the

claims brought under the Racketeer Influenced Corrupt Organizations Act, 18 U.S.C. § 1961 et

seq. raise a federal question.

17. In addition, this Court has jurisdiction over this action pursuant to 28 U.S.C.

§ 1332, as this Complaint also brings state law claims by citizens of the states of Alabama,

Kansas, Oklahoma, and Minnesota against citizens of other states, and the amount in controversy

exceeds $75,000.


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18. Venue is proper in this judicial district pursuant to 28 U.S.C. §§ 1391(b) and (c)

and 18 U.S.C. § 1965(a) as defendant CBS has an office and an agent in this district and it

transacts business here.

FACTUAL BASIS FOR CLAIMS

Significant Mergers and Acquisitions in the Development of CBS Outdoor Inc.

19. In the 1990s, Transportation Displays Inc. (TDI), an outdoor advertising firm with

a large presence in the United States, served as the exclusive agent for processing applications

for leases of billboard sites along railroad rights-of-way for numerous national railroads,

including Norfolk Southern, Kansas City Southern, Boston & Maine, and Amtrak railroads.

Defendant Gustin worked for TDI as an executive in the billboard acquisition process. In 1996,

Infiniti Broadcasting Corporation—the radio arm of CBS Corporation—purchased TDI.

20. Also in the 1990s, Outdoor Systems Inc. was the largest outdoor advertising

company in North America (and the world). Defendant Kelly was an executive at Outdoor

Systems Inc. One of its sources of revenue was its role as the exclusive leasing agent for

billboard sites along the rights-of-way for various national railroads, including Burlington

Northern Santa Fe and CSX railroads.

21. In December of 1999, Infinity Broadcasting Corporation—the radio arm of CBS

Corporation—acquired Outdoor Systems Inc. for approximately $8.7 billion. On April 25, 2000,

Outdoor Systems Inc. changed its corporate name to Infinity Outdoor Inc. With this acquisition,

CBS Corporation obtained control of the billboard application process for every major railroad in

the United States except Union Pacific.

22. On May 4, 2000, CBS Corporation merged with Viacom International Inc.

resulting in a new company called Viacom Inc. At the annual meeting of Viacom Inc.


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shareholders on June 29, 2000, Chairman and Chief Executive Officer Sumner M. Redstone gave

a speech in which he stated:

The media and entertainment industry as a whole is currently benefited from several powerful trends. The exciting news for Viacom, and for you, its shareholders, is that we will reap disproportionate benefits. . . . Viacom has an extraordinary management team, lead by the best operator in the business, Mel Karmazin. Mel and I share an obsession with building shareholder wealth, and we have delivered. Together, we will be unrelenting in our drive to exceed what we thus far accomplished. And helping us to get there is a deep and seasoned team of operational executives who continue to outperform their peers year after year. You can look to them to drive cash flow growth at our core operations at the rate of 20% or more.

23. For a time, Infinity Outdoor (f/k/a Outdoor Systems Inc.) and TDI operated

independently under the Viacom umbrella. On August 1, 2001, Viacom Inc. merged the two

divisions into the Viacom Outdoor Group and named Wally Kelly as President and Chief

Executive Officer. In a press release that day, Kelly stated, “I look forward to working with our

new, combined team of talented management and sales executives to unleash the power of this

new division.”

24. On August 28, 2001, the Viacom Outdoor Group changed its name to Viacom

Outdoor Inc. In 2002, Viacom Outdoor Inc.’s revenues totaled $1.6 billion.

25. On December 31, 2005, Viacom Inc. split into two separate publicly traded

companies: CBS Corporation and Viacom Inc.

26. As a part of this split, Viacom Outdoor Inc. became CBS Outdoor Inc., a

subsidiary of CBS Corporation. For purposes of clarity and conciseness, this Complaint will

refer to CBS Outdoor Inc. and its predecessor entities as “CBS.”


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27. On information and belief, CBS is currently the single largest owner and operator

of outdoor advertising structures in North America. CBS and its major competitors, Lamar and

Clear Channel, today control over two-thirds of the billboards in the United States.

Billboard Advertising on Railroad Property

28. At all relevant times plaintiffs Simmons, Herron, Franklin, and Signx have been

engaged in the outdoor advertising business, buying, selling, leasing, constructing, and

maintaining billboards and providing services related thereto. A vital part of this business

involves identifying and leasing desirable locations where billboards can be constructed in

accordance with state and local regulations and rented for profit, and obtaining the necessary

permits to construct those billboards.

29. Plaintiffs and others like them identify and obtain leases to desirable billboard

sites. Once sites are identified, plaintiffs and others like them determine who the owner of the

site is and how to obtain the lease and appropriate permits.

30. Some of the sites identified by the plaintiffs are located on property and/or rights-

of-way owned by railroads, usually near highways and public thoroughfares.

31. Railroads usually use an agent to process applications for leasing these potential

billboard sites. At all relevant times CBS and its predecessors had contractual arrangements with

almost all of the nation’s railroads to act as their agent for leasing billboard sites on railroad

property.

32. Railroads have a legitimate interest in ensuring that outdoor advertising structures

located on their property are located so as not to be a safety hazard for railroad personnel or the

public. If those safety concerns can be satisfied, however, billboards offer a long-term income

stream to the railroads that is valuable to them. Thus, it is in the interest of the railroads to


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consider and to approve billboard applications expeditiously. For example, prior to its

acquisition by CBS, it was standard practice at TDI for applications to be processed in 30 to 60

days. CBS could process railroad billboard applications within 30 to 60 days as well if it wanted

to do so.

33. As a result of the acquisitions and mergers described above, at all relevant times

CBS was the leasing agent for CSX Railroad, the Burlington Northern/Santa Fe Railroad,

Norfolk Southern Railway, Amtrak, and Kansas City Southern Railway, among others. Though

CBS’s current headquarters are in Phoenix and New York, its operations are decentralized, and it

has dozens of offices around the country. The CBS office in charge of handling applications for

billboard locations on rights-of-way of the CSX and the Burlington Northern Railroad systems is

in Atlanta, Georgia. The CBS office in charge of handling applications for billboard locations on

rights-of-way of the Norfolk Southern, Kansas City Southern Railways, Amtrak, and Boston &

Maine Railroad is in Philadelphia, Pennsylvania, the former headquarters of TDI.

34. In addition to its duties as a fiduciary for CSX, Burlington Northern, Kansas City

Southern, Norfolk Southern, Amtrak, and other railroad systems, CBS had a thriving outdoor

billboard advertising business of its own. CBS boasts that it is the largest out-of-home

advertising company in North America with over 100,000 billboards and transit advertising in

nearly every major city.

CBS’s Conflicting Interests and Incentive to Defraud

35. In these dual roles, CBS has a conflict of interest. On the one hand, CBS owes a

fiduciary duty to the railroads it represents to encourage independent sign companies and

individuals to bring in as many legitimate billboard sites as possible for the railroads’

consideration, as the development of more billboards would maximize the railroads’ revenue


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from this business. As a billboard company itself, however, it is in CBS’s interest to control as

many billboards on as many premium locations as possible in order to maximize its revenue and

its market power, as well as to limit the opportunities for its competitors to place competing

billboards.

36. It has been CBS’s publicly stated policy to encourage small billboard operators

and independent sign companies to apply for leases along the rights-of-way of the railroads for

which it serves as leasing agent. To further this goal, CBS announced to potential applicants that

its policy was “first-come, first-served.” In concept, the first person or business which identified

a good billboard location along a railroad right of way would have the right to apply for the

location and to build a billboard on that site. This “first-come, first-served” policy was intended

to maximize the number of opportunities the railroads would have to lease billboards located on

their property, as that policy encourages billboard operators to identify premium locations to

CBS.

37. CBS required that independent sign companies identify the location of the

proposed site as part of the process of applying for that site.

38. Though this policy was presented as a tool for promoting the railroads’ interests,

in practice CBS used independent billboard operators like the plaintiffs to identify premium

billboard sites at no cost or expense to CBS, which would then fraudulently steal those sites for

itself. Each of the defendants directed or participated in that fraudulent activity.

39. In addition, over the last several years CBS has been buying up premium

billboard locations and billboard companies from small operators in order to expand its already

substantial market share. CBS sought to minimize the value of existing “small operator”


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billboard companies by denying them premium railroad sites so that CBS could purchase those

companies at a discounted price and remove them from the marketplace as competitors.

40. Generally, CBS does not steal the sites of its larger competitors such as Clear

Channel Communications or Lamar Advertising because it realized that those competitors would

have the resources and legal talent to fight back. But CBS assumed that small operators like the

plaintiffs would fear to challenge the great white shark of the industry.

41. To further defendants’ scheme, CBS employed various strategies to steal

billboard sites. Sometimes CBS falsely informed small independent sign companies who

brought premium locations to CBS’s attention that “another” company had applied for the

location they identified before they had identified those locations. Other times, CBS would

simply withhold a decision from the applicant. CBS would then submit its own application for

the same or nearby location, award the site to itself, obtain the appropriate permits, and obtain

the leases. Plaintiffs were victims of this scheme on several occasions. On other occasions, CBS

would falsely blame indefinite delays on the railroad in hopes the applicant would give up or

drop its application. Other times, CBS would stall an application until local codes changed, then

deny the application as unbuildable. This tactic reduced CBS’s competition, thereby increasing

its market power. On some occasions CBS would deny the applications of those companies it

was trying to purchase to reduce the companies’ value prior to closing on the purchase.

42. The motivation for this scheme was that CBS received a much higher revenue

stream by owning the billboard than it did merely by acting as the agent for the railroad

companies. The billboard is worth more to CBS than its agency fees. In addition, it was able to

obtain control over some of these small companies by purchasing them at a price below what

their fair market value would have been if they had been properly awarded the billboard sites that


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they had identified. Some companies were forced to sell out to Lamar or Clear Channel, thereby

reducing the number of CBS’s competitors. These actions served to reduce the number of CBS’s

competitors in several local markets.

BEGINNING TO UNCOVER THE SCHEME—THE FIRST LAWSUIT

43. In 1997 and 1998 Curtis Massood, a billboard entrepreneur based in Kansas City,

Missouri, identified three valuable billboard sites along railroad property.

44. After discovering that he would have to apply for the billboard sites with CBS,

the railroad’s agent, Massood discussed the process with CBS employees. These employees

informed Massood that CBS had a “first-come, first-served” policy.

45. In reliance on the “first-come, first-served” policy, Massood revealed the identity

of the sites to CBS and was told that he was the first to do so. Massood then sought permit

letters from CBS that would allow him to get the proper measurements to file an official

application for the sites. But, contrary to its representations, CBS stalled their response to

Massood’s request for permit letters and, on February 19, 1998, sent Massood a letter telling him

that another outdoor advertising company had applied for the same sites at an earlier date.

46. This communication to Massood was a fraudulent misrepresentation. CBS

actually stole those sites for itself after Massood brought them to CBS’s attention.

47. CBS had a strong financial incentive to steal Massood’s sites because, even

before Massood identified the sites, CBS made it known that it wanted to purchase Wilson-

Curtis Inc., the outdoor advertising company owned by Massood and his partner Wilson Tanner,

Jr., and certain billboard assets owned individually by Massood.

48. CBS eventually purchased Wilson-Curtis Inc. and some of Massood's billboard

assets a year later.


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49. David Gilley, the former Property Development Manager in CBS’s Atlanta office,

and someone who witnessed the taking of Massood’s sites, has admitted that Massood was the

first person/entity to identify the sites that CBS stole.

50. During the summer of 2000, Massood and Tanner brought a lawsuit against CBS

in the Circuit Court of Jackson County, Missouri, alleging that CBS had committed fraud in the

way it obtained the billboard sites Massood identified to CBS in January 1998, and that these

actions also amounted to tortious interference with business expectancies. That lawsuit was

entitled Massood and Tanner v. Infinity Outdoor Inc. (“CBS I”) and was assigned Jackson

County Circuit Court case number 00-CV-214627.1

51. In the course of discovery in that litigation, plaintiffs deposed Gilley and Gilley’s

boss, Randy Romig, who was CBS’s Director of Real Estate Acquisitions. These depositions

took place in Atlanta on November 8, 2000.

52. Around the time of these depositions in November 2000, Romig threatened

Gilley’s employment by suggesting Gilley would lose his job with CBS if he told the truth about

why CBS rejected Massood’s efforts to obtain the sites he identified.

53. Further, as alleged in greater detail below, defendant Kelly also attempted to bribe

Gilley into silence by offering him a dramatic increase in salary and other benefits when he

attempted to alert senior officers within the CBS organization of the defendants’ racketeering

activities. All of these actions were taken in the course of Massood’s affirmative and continuing

effort to learn the truth behind the denial of his application for the three Burlington billboard

locations.

1 Tanner dismissed his claims without prejudice in CBS I in May 2001.


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54. CBS I was ultimately dismissed on “standing” grounds. The Court of Appeals for

the Western District of Missouri held that the claims made in CBS I belonged to Wilson-Curtis

and that—because Massood had sold his shares in the company—he lacked standing to bring

those claims. See Massood v. Infinity Outdoor Inc., No. WD60956 (Mo. Ct. App. filed Sept. 24,

2002).

THE SECOND LAWSUIT REVEALS CBS’S FORMAL POLICY OF STEALING SITES FROM SMALL BILLBOARD OPERATORS

55. On January 16, 2004, three plaintiffs filed an action against CBS and CBS

employees Wally Kelly, Harold Gustin, Randy Romig, and Randy Jackson in the United States

District Court for the Western District of Missouri. See Craig Outdoor Advertising, Inc. et al. v.

Viacom Outdoor, Inc. et al. (Case No. 4:04-cv-00074-DW) (“CBS II”).

56. The plaintiffs in CBS II, Craig Outdoor Advertising Inc., Curtis Massood,

Midwest Outdoor Media LLC, and Patriot Outdoor LLC, alleged violations of the federal RICO

statutes, common law fraud (including fraud by omission), tortious interference with a business

expectancy, and unfair competition.

57. Plaintiffs’ in CBS II and Massood in CBS I both alleged that small outdoor

advertising companies identified valuable sites to CBS in reliance on assurances that CBS

followed a “first-come, first-served” policy. CBS, though various means, stole plaintiffs’ sites

for itself.

58. During discovery in CBS II, it was revealed that the conduct which resulted in the

injury to the plaintiffs was (and remains) CBS’s official policy. In late January 2002, defendant

Kelly called a meeting in New York City attended by defendants Kelly, Gustin, and Gross. Also

in attendance at that meeting were Gilley, Leon “Chip” Tolleson, and Don Avjean. This meeting

was called, in part, to encourage defendants and their agents to induce small outdoor advertising


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companies to identify valuable billboard sites on railroad property that CBS could take for itself,

as it had done with Massood in 1998-99 and Ad Trend in 2000-03.

59. In the January 2002 meeting defendant Kelly made it clear to the CBS employees

present that, despite the announced “first-come, first-served” policy, CBS’s actual policy is to

deny all applications for good sign locations on railroad property submitted by any “small

operators” of billboard companies. Defendant Kelly explained that CBS did not make enough

money merely collecting a lease payment from billboard operators after buying the easement

from the railroad. Defendant Kelly stated that the more profitable course would be for CBS to

appropriate good sign locations brought to it by small billboard operators.

60. As part of defendant’s Kelly’s new plan, CBS hired two consultants (and former

colleagues of Kelly’s at Outdoor Systems Inc.), Don Avjean and Leon “Chip” Tolleson. Kelly

established that Tom Rende,2 Gilley, and others were to send all applications from small outdoor

advertising companies for billboard sites on railroad property to George Gross in CBS’s New

York office. Gross was to then forward the applications to Avjean (in Florida) or Tolleson (in

Phoenix) via fax or mail. Avjean and Tolleson, in turn, would review the sites to see if they were

valuable, working with CBS’s regional managers to see what sites CBS might want to take for

itself. Harold Gustin was also intimately involved in this review process. If the regional

managers wanted the sites for CBS, then CBS would award the sites to itself, and the

applications of the small billboard operators were to be rejected.

61. Defendant Kelly made it clear, however, that this policy would not be enforced

against the two other major billboard companies in the United States—Lamar Advertising and

Clear Channel. Defendant Kelly suggested that the reason for this difference in treatment was

2 Tom Rende was the CBS employee who oversaw sign applications on the property of Kansas City Southern and Norfolk Southern Railways, Amtrak, and Boston & Maine Railroad. Rende was based in CBS’ Philadelphia office.


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that the other large companies would realize what was going on and have the resources to mount

a legal battle against CBS’s efforts to steal premium billboard locations identified to it.

Defendant Kelly suggested that the smaller companies would not have the resources to pursue a

legal challenge to CBS’s efforts to steal billboard locations brought to it by smaller billboard

operators.

DEFENDANTS’ FRAUDULENT SCHEME INJURED SMALL OUTDOOR ADVERTISING COMPANIES DOING BUSINESS IN JACKSON COUNTY, MISSOURI

62. During the summer of 2000, Ad Trend Inc. (“Ad Trend”),3 an Oklahoma

corporation with its prinicpal place of business in Jackson County, Missouri, located two

premium potential billboard sites on the north side of Missouri Highway 150. One site was

approximately 500 feet west of Missouri Highway 71 and the other was approximately one-half

mile west of Missouri Highway 71. These sites will be referred to as the Eastern and Western

“Highway 150 sites.” Ad Trend employed substantial effort to verify these sites satisfied the

requirement of Kansas City and could be built and managed profitably.

63. The Highway 150 sites are located on property owned by the Kansas City

Southern Railroad. In August 2001, Ad Trend learned that an application for the Highway 150

sites should be made to CBS’s Philadelphia office. Boeh called CBS’s Philadelphia office and

spoke to Tom Rende. Boeh described the site and its location and asked Mr. Rende about the

application procedure. At no time did Rende indicate that any other person or entity had applied

for the Highway 150 sites.

3 Ad Trend is not yet a party to this lawsuit, but plaintiffs anticipate Ad Trend will join their lawsuit in the near

future.


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64. Ad Trend’s principal, Jim Boeh—like Massood—had been told many times by

representatives of CBS that CBS had a “first-come, first-served” policy for its railroad

applications.

65. On August 14, 2001, Rende sent an application form by facsimile transmission

over telecommunication wires to Boeh instructing him to fill out the application forms and to

provide detailed information about the sites.

66. On or about August 20, 2001, Ad Trend submitted an application for the Highway

150 sites to CBS’s Philadelphia office as instructed by Rende. Under the previous and normal

practices of TDI, Ad Trend could reasonably have expected approval of its application in about

90 days. Despite Ad Trend’s repeated phone calls to Rende, no action was taken on Ad Trend’s

application for these sites during the remainder of 2001 or 2002.

67. Boeh called Rende several times during 2002 about Ad Trend’s 150 Highway

applications, only to be told that neither CBS nor Rende could get the Kansas City Southern

Railroad to take any action on Ad Trend’s applications.

68. Frustrated with the stalled applications, in January 2003 Boeh contacted Kansas

City Southern Railroad directly by telephone and learned from the railroad’s employee Glenn

Ebeling that an application had been approved for one of Ad Trend’s proposed sites.

69. Under the impression that one of Ad Trend’s applications had finally been

approved, Boeh then wrote to Rende on January 31, 2003, asking him to provide Ad Trend with

a permit letter so that Ad Trend could obtain the appropriate permits from state and city

authorities.

70. The application Kansas City Southern’s Glen Ebeling had referred to “as

approved,” however, was not Ad Trend’s application. Instead, the new application that CBS had


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sent to Kansas City Southern for approval had been submitted by David Hyatt of CBS’s Kansas

City office on January 10, 2003, only 16 months after Boeh had applied for the very same site.

71. On January 17, 2003, Rende issued a “permit letter” to CBS’s Kansas City leasing

agent Hyatt granting CBS permission to seek permits for the site Ad Trend had first identified

500 feet west of Highway 71 North of Highway 150. CBS then obtained the city permit on

February 14, 2003. On information and belief, Hyatt also obtained the required state permit on

behalf of CBS. Further, on information and belief, CBS has renewed these permits and CBS

intends to build a billboard on the site 500 feet west of Highway 71 for its own account.4

72. Another company, Masterpiece Media, applied to CBS for the Western 150 site

on June 25, 2002. By letter dated January 23, 2003, Gustin advised Masterpiece Media that “we

have been working with Kansas City Southern Railway on signboard sites within the same area

as another party through one of our other offices.” After hearing the news that it would not be

able to build its billboard on railroad property, Masterpiece Media approached a neighboring

landowner and obtained the right to place a billboard on land adjacent to railroad property.

73. Gustin never advised Ad Trend that CBS had decided to take the Western

Highway 150 site for itself. If Ad Trend would have known that CBS was looking to take the

site for itself, CBS would have done the same as Masterpiece Media, i.e., approach an adjoining

landowner to erect a billboard.

74. On March 21, 2003, CBS’s Senior Vice President for Landlease, defendant

Harold Gustin, informed Ad Trend in a letter posted in the United States mails that Ad Trend’s

application had been denied for the Western Highway 150 sites. Gustin justified his denial on

4 On December 29, 2003, Ad Trend assigned its rights in certain billboard locations, including the site 500 feet west of Highway 150, to Midwest Outdoor Media LLC. Midwest Outdoor sued CBS, Kelly, and Gustin in February 2004 in the United States District Court for the Western District of Missouri (Case No. 4:04-cv-00074-DW). The lawsuit resulted in CBS being held liable for fraud, tortious interference, and unfair competition, and Kelly and Gustin found liable under federal RICO statutes.


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his false claim that CBS had received multiple applications for the Western Highway 150 site

and on Boeh’s “perceived lack of activity during the past year.” Gustin falsely claimed that this

alleged “lack of activity” “prompted [CBS] to work with another party through one of our other

offices.” The “other party” to which Gustin was referring was, of course, CBS. Gustin also

directed Boeh to cease direct contact with CBS’s client Kansas City Southern.

75. Boeh responded to Gustin’s letter on April 11, 2003, noting that the lack of

activity was on CBS’s part, not that of Ad Trend. Moreover, he observed that CBS told him that

the application would be dealt with on a “first-come, first served” basis. Nevertheless, CBS

continued forward with its plan to steal the Highway 150 sites Boeh had identified.

76. CBS’s review of the site to see if CBS’s Kansas City office wanted it caused over

an 18-month delay in responding to Ad Trend’s request to secure the site. During CBS’s

fraudulent delay, Masterpiece Media secured a billboard location on property adjacent to the

Western Highway 150 Site. Under local zoning and state spacing regulations, Masterpiece

Media’s billboard, when built, prevented the construction of another billboard on the Western

Highway 150 site. CBS’s delay and fraudulent misrepresentations, therefore, caused Ad Trend

and Kansas City Southern to lose a valuable billboard location.

DEFENDANTS’ FRAUDULENT SCHEME INJURED PLAINTIFFS

ALLEGATIONS RELEVANT TO PLAINTIFF SIMMONS

77. Nathan Simmons is a developer and operator of billboards in Alabama and

Georgia. He lives in rural southern Alabama and works out of his home. He has been in the

outdoor advertising business for over 22 years. He has no employees, and does everything

himself or hires independent contractors as needed.

78. In the summer of 2001, Simmons identified several prime locations for billboards

along CSX railroad rights of way in Savannah, Georgia, and two on Interstate 65 north of


KC-1324836-4 - 19 -

Montgomery, Alabama. He contacted the railroad and was told he needed to apply through

CSX’s agent, CBS. Both CBS’s Philadelphia office (the former TDI) and CBS’s Atlanta office

handle portions of CSX’s business. Simmons was concerned by the fact that CBS was the agent

for CSX because Simmons realized that CBS was also his competitor in the billboard business,

and he was uncomfortable disclosing to CBS the locations he had identified.

79. As directed by CSX, early in August 2001 Simmons phoned CBS’s Philadelphia

office from his mother-in-law’s home in Savannah, Georgia, and spoke to Bob Orlando.

Simmons told Orlando that he had located some good billboard locations on the CSX Railroad,

but that he was uncomfortable disclosing them to CBS, his competitor. Simmons raised with

Orlando his concern that CBS might take his billboard locations if he disclosed them to Orlando.

Orlando assured him that he had nothing to worry about. Orlando explained that the

Philadelphia office acted as the agent for the railroads and was separate from the billboard

leasing agents that worked in the other CBS offices across the country. Orlando told Simmons

that as long as he was the first to identify a location, he would be allowed to build the billboard,

so long as it met the railroad’s requirements. Orlando said the only thing Simmons had to worry

about was that the local CBS leasing agent or some other competitor might apply for the site

first. Simmons understood this as the “first-come, first-served” policy. What Orlando said

encouraged Simmons to identify his sites quickly. Over the next few months, Simmons worked

almost exclusively on identifying places to put additional billboards on railroad property.

80. In reliance upon what Orlando told Simmons in their conversation, Simmons

started to gather the information needed to make applications. Simmons spent considerable time

investigating these sites, confirming the local zoning, taking detailed measurements and

photographs, staking the positions of the proposed billboards, deciding on the spots which


KC-1324836-4 - 20 -

satisfied the railroads’ criteria, and drawing up the maps of the locations for use in the

application process.

81. On August 6, 2001, Orlando faxed Simmons a blank TDI application form, which

Simmons completed. Typically, Simmons would fax to CBS – Philadelphia an application as a

“placeholder” and then send the original application with photographs attached in the United

States mails or in a FedEx package. First, Simmons faxed and mailed to CBS’s Philadelphia

office applications for several sites near the Savannah International Airport.

82. On August 16, 2001, Orlando sent Simmons a letter by mail about the Savannah

sites advising him that “we have already either obtained permits or applied for GA DOT permits

on all of said sites with the exception of I-516 at International Paper . . . .” This appeared to

Simmons to be a result of the “first-come, first-served” policy. Thus, Simmons initially assumed

that CBS actually had obtained permits on the Savannah sites Simmons had identified.

83. The next time Simmons was in the Savannah area he made a point of stopping by

the local Georgia Department of Transportation office to check on the CBS applications Orlando

had referenced. There weren’t any applications for permits filed with the Georgia DOT for the

sites Simmons had identified. Shortly thereafter, Simmons called CBS’s Philadelphia office and

spoke either with Bob Orlando or Tom Rende. He told Orlando or Rende that he had found that

there were no competing applications in Savannah pending with the Georgia DOT. Simmons

asked if he could apply again for those same sites. Orlando or Rende told Simmons to re-file his

applications, which he did.

84. Because of what Orlando had told Simmons about the importance of being the

first to apply for railroad billboards, Simmons made a determined effort to identify more places

to erect billboards on railroad property. Over the next several weeks, Simmons spent most of his


KC-1324836-4 - 21 -

time scouting out locations, checking zoning regulations, taking measurements and pictures, and

doing all those things necessary to apply for railroad billboard sites. As he identified more

railroad billboard applications on CSX and Norfolk Southern tracks in Georgia and Alabama, he

submitted them to CBS’s office in Philadelphia, Pennsylvania, by fax (interstate phone lines) and

the mail or FedEx. Occasionally Simmons would call Philadelphia to check on the status of his

applications. At some point late in 2001, Orlando left the company and Simmons started

exchanging phone calls and messages with Tom Rende.

85. On November 5, 2001, Simmons mailed to CBS’s Philadelphia office applications

for a total of seven sites along CSX right-of-way – one in Calera, Alabama, along Interstate 65;5

five sites near the Savannah, Georgia, International Airport along Highway 21 (identified as Port

Wentworth, Georgia); and one site in Montgomery, Alabama. Simmons also applied for one site

in Jessup, Georgia, on Norfolk Southern track. CBS affixed application numbers to the

Savannah/Port Wentworth applications of CSX 6874-78. The Calera site was labeled CSX 6872,

the Montgomery site was labeled CSX-6879, and the Jessup site was labeled NS-6880. Through

the end of the year, Simmons continued to submit applications, and CBS continued to supply

numbers for his sites. Ultimately, Simmons submitted applications for at least 18 different

locations to CBS as the agent for the railroads.

86. On January 17, 2002, Tom Rende mailed to Simmons permit authorization letters

on his applications numbered CSX-6890(E), -6891(E), -6892(E), and -6894(E), so that Simmons

could gather the necessary permits on these sites. In these letters, Rende identified CBS “as the

authorized agent of CSX Transportation sign program . . . .”

5 Simmons has no complaint about the handling of this site along Interstate 65 in Calera, Alabama.


KC-1324836-4 - 22 -

87. Simmons called Rende via the interstate telephone lines multiple times during the

winter and early spring of 2002. Neither Rende nor anyone else at Viacom Outdoor ever told

Simmons that CBS had adopted a policy of reviewing every billboard application submitted by

independent companies to see if CBS wanted that site for itself, and that CBS planned to take

good sites that fit CBS’s market needs. If Rende or anyone else at CBS had told Simmons that

was CBS’s policy, he would have never submitted any application to CBS. If Simmons had

already submitted an application, he would have immediately located nearby sites on private

property to “space out” the sites he had identified to CBS.

88. Toward the end of March 2002, Simmons received a phone call from Tom Rende

over the interstate phone lines. Rende told Simmons that nearly all of his pending applications

would be denied because "another applicant" already had applied for those locations. Simmons

took this unhappy result as enforcement of the “first-come, first-served” policy.

89. Simmons did not receive a letter from Rende confirming the denial of his

applications. He did receive a fax from Rende with some of his applications and the word

“Denied” in handwriting at the top of each page. Simmons had no further communication with

Mr. Rende concerning these billboard applications.

90. CBS’s employee Orlando lied to Simmons when Orlando said that CBS operated

on a “first-come, first served” basis and when Orlando wrote in his letter of August 16, 2001,

that CBS had already applied for permits on the Savannah sites. CBS’s employee Rende lied to

Simmons when Rende failed to disclose that CBS would review Simmons's sites and take the

good ones for CBS, and when Rende told Simmons that someone else had applied first for the

sites Simmons had identified.


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ALLEGATIONS RELEVANT TO PLAINTIFF HERRON

91. Herron & Company is a small outdoor advertising company in Olathe, Kansas. It

was created by Donald F. Herron to own and operate a billboard on Burlington Northern Santa

Fe Railroad Company property southwest of the intersection of West 119th Street and Interstate

35 in Olathe, Kansas (“the Olathe site”). This billboard was intended to provide a retirement

income for Donald F. Herron’s wife Patricia Herron,who was not actively involved in the

business.

92. Donald F. Herron passed away in February 2004. After his death, two of Mr.

Herron’s sons, Mark and Donald P. Herron, assisted their mother with the operation of this

billboard.

93. In March of 2004, David Gilley of CBS’s Atlanta office notified Herron via

United States mail that the Herron lease associated with the Olathe site would be cancelled.

Subsequent communications between Gilley and Herron, however, resulted in Herron making

additional payments and Gilley agreeing not to cancel the lease.

94. In July of 2004, Herron & Company notified Gilley that it wanted to make some

modifications to the Olathe site to ensure compliance with city, state, and/or railroad regulations

Herron requested that Gilley forward the proposals to Burlington Northern for engineering

approval.

95. Almost two months passed before Gilley responded to Herron & Company’s

request for railroad approval. Gilley finally responded on September 16, 2004, via e-mail,

saying that the railroad wanted the license cancelled. Although his e-mail was vague, Gilley said

the reason for the cancellation was because the location of the sign was in conflict with the

original application.


KC-1324836-4 - 24 -

96. A few days later, Gilley wrote Herron & Company an e-mail stating that CBS is

rescinding its earlier agreement to not cancel the lease. Gilley also stated that the railroad

wanted Herron & Company’s billboard removed and that the billboard violated local ordinances.

97. Upon information and belief, at the discretion of CBS, Gilley was misrepresenting

the facts to Herron & Company in order to free up Herron & Company’s billboard site for CBS’s

own use or to eliminate Herron & Company as a competitor in an area in which CBS had its own

billboards. On October 12, 2004, Herron & Company e-mailed Gilley and asked, “Do you think

you can deal with us in good faith or do you have a conflict of interest in representing [CBS’s]

interests and the Railroads [sic] interests?”

98. Gilley responded to Herron & Company’s October 12th e-mail with a response e-

mail stating, “The office acts in a fiduciary role with all of the railroads that we serve. It is both

our policy and procedure not to disclose any information to any operating department of [CBS]

that may create any such conflict of interest.”

99. Herron & Company was forced to remove its billboard from the Olathe site by

October 20, 2004, thereby eliminating one of CBS’s competitors in the area.

ALLEGATIONS RELEVANT TO PLAINTIFF FRANKLIN

100. Franklin Outdoor Advertising (Franklin) based in Albertville, Minnesota builds

and rents billboards in northern Minnesota as far south as the suburbs of the Twin Cities. Steve

Anderson is the Leasing Manager of Franklin.

101. In October of 2001 and February of 2002, Franklin applied for a total of five

billboard sites along Burlington Northern (“BNSF”) right-of-way in Minnesota. Franklin’s

experience with railroad billboards is that they are handled on a “first-come, first-served” basis,

and that it typically takes about 60-90 days to obtain approval. An employee of CBS’s Atlanta


KC-1324836-4 - 25 -

office, which was the agent of the Burlington Northern Railroad Company, confirmed that

applications were handled on a “first-come, first-served” basis. Anderson had repeated contact

via the interstate phone lines with CBS’s employee Joyce Johnson in Atlanta.

102. After Franklin’s applications were sent to CBS using the U.S. Mails, Anderson

contacted Ms. Johnson repeatedly over the last three and one-half years using the interstate

telephone lines to ask her why Franklin’s applications were delayed. She generally said she

would have to look into that. She claimed she did not know the reason for the delay.

103. Ms. Johnson never explained to any agent or employee of Franklin that there was

a new policy that required pending applications to be reviewed to see if CBS was interested in

taking for itself the sites for which Franklin applied. She never suggested that there was any

kind of dispute with BNSF that would delay the routine handling of Franklin’s applications.

104. Ms. Johnson consistently told Anderson that she would check into why there was

a delay in approval of Franklin’s applications, but then she would never call back and explain the

delay. Anderson became frustrated with CBS, and concluded that CBS was just stalling my

applications for its own secret purposes.

105. CBS has a “Pending Applications” spreadsheet that lists the five sites Franklin

applied for in 2001-02, including three in Becker, Minnesota. In November of 2002 – 14 months

after Franklin applied for its sites – CBS itself applied for one of the same railroad billboard sites

in Becker, Minnesota. BNSF could not both award Franklin’s site to Franklin and award CBS’s

later-applied for site to itself because local zoning ordinances require greater spacing between

billboards. Thus, CBS was attempting to take one or two of the Becker signs for which Franklin

applied in 2001.


KC-1324836-4 - 26 -

106. If Franklin would have known that CBS was reviewing small outdoor advertising

companies’ applications to take locations CBS wanted for itself, Franklin would not have applied

for those sites with CBS. Franklin would have looked to build on adjacent property or other

nearby locations.

107. As a result of the defendants’ conduct, Franklin was deprived of the opportunity

to construct, at a minimum, five outdoor advertising structures.

ALLEGATIONS RELEVANT TO PLAINTIFF SIGNX

108. J.D. Basler is the General Agent and Professional Engineer for Signx LLC, which

develops outdoor advertising in the Claremore, Oklahoma area.

109. Basler was familiar of the practices of CBS, including CBS’s “first-come, first-

served” policy, because Basler had applied for billboard sites in Claremore, Oklahoma in 2001.

110. On March 14, 2002, Basler, General Agent and Professional Engineer, developed

Signx to operate his business of developing outdoor advertising locations.

111. After developing Signx LLC, Basler identified and applied for over twenty

billboard sites (with multiple faces at each site) with CBS. CBS’s agents never informed Basler

or any other Signx LLC agent that CBS would be reviewing all billboard sites identified by small

outdoor advertising companies to see if CBS wanted the sites for itself.

112. CBS has never responded to Signx LLC’s application and identification of

multiple billboard sites. Because of CBS’s delay, Signx LLC and the railroad have lost

significant revenue opportunities. Moreover, the zoning regulations in the area have changed,

precluding billboards from being built on some of the locations that Signx LLC would have

developed had it not relied on Joyce Johnson’s promise that these locations would have been

approved.


KC-1324836-4 - 27 -

THE ENTERPRISES

113. CBS itself was the enterprise used by the defendants to pursue their racketeering

activity, which resulted in the fraudulent theft of the sites, which should rightfully have been

awarded to the plaintiffs.

114. Alternatively, at all relevant times, defendant CBS formed an association-in-fact

with CBS’s client railroad, Burlington Northern/Santa Fe Railroad, for the purpose of defrauding

the plaintiffs and other small billboard businesses and their owners. This association-in-fact was

an “enterprise” within the meaning of RICO, 18 U.S.C. § 1961(4).6 While CBS’s client railroad

was a part of the association-in-fact, it was a victim of the defendant coconspirators, not a

coconspirator itself.

115. At the same time, defendant CBS formed a second association-in-fact with CBS’s

client railroad, Kansas City Southern Railroad, for the purpose of defrauding the plaintiffs and

other small billboard businesses and their owners. This association-in-fact was an “enterprise”

within the meaning of RICO, 18 U.S.C. § 1961(4). While CBS’s client railroad was a part of the

association-in-fact, it was a victim of the defendant coconspirators, not a coconspirators itself.

116. Defendant CBS formed a third association-in-fact with CBS’s client railroad,

CSX, for the purpose of defrauding the plaintiffs and other small billboard businesses and their

owners. This association-in-fact was an “enterprise” within the meaning of RICO, 18 U.S.C.

§ 1961(4). While CBS’s client railroad was a part of the association-in-fact, it was a victim of

the defendant coconspirators, not a coconspirator itself.

6 This Court, in CBS II, Case No. 4:04-cv-00074-DW, held that CBS could not form an association-in-fact that

would constitute an “enterprise” under the RICO statutes with innocent railroad companies. Plaintiffs have addressed this issue as part of their pending cross-appeal in the United States Court of Appeals for the Eighth Circuit. If the Eighth Circuit affirms this Court’s ruling on this issue, plaintiffs will voluntarily dismiss Count II of their Complaint, which claims CBS’s relationship with the various railroad companies constituted an association-in-fact and/or enterprise under the RICO statutes.


KC-1324836-4 - 28 -

117. These associations-in-fact had the common or shared purpose of leasing property

owned by the railroad to outdoor billboard businesses and on information and belief were

governed by contracts between CBS and its client railroads.

THE PREDICATE ACTS OF RACKETEERING

118. As alleged above, defendants Kelly, Gustin, and Gross concocted, directed, and

supervised a scheme to defraud small outdoor advertising companies out of valuable billboard

locations. In directing and supervising this scheme, defendants Kelly, Gustin, and Gross had to

use the mail and interstate wires to communicate with subordinates within the CBS enterprise

(and it was reasonably foreseeable that they would have to use the mail and interstate wires to

implement their scheme). In fact, the mail and interstate wires were used hundreds of times,

either directly by Kelly, Gustin, or Gross or indirectly by their subordinates in accomplishing the

goals of their scheme.

119. The defendants, acting through their enterprises, committed numerous violations

of the criminal laws of the United States. Specifically, the defendants violated 18 U.S.C.

§ 1343—which prohibits the use of the telephone and other wires to execute a scheme or artifice

intended to defraud another or to obtain money or property by means of false statements,

omissions, and concealments—when they made, or caused others to make, telephone calls and/or

to send facsimile messages:

a. Defendants Kelly, Gustin, and Gross had to use wire communications to

communicate with CBS employees in offices around the country. Kelly was in

Phoenix, Gustin was in the New York area, Tolleson was in Phoenix, Gross was

in New York, Tom Rende was in Philadelphia, Randy Romig and David Gilley

were in Atlanta, and other employees were located across the country. Wire

communications were used by defendants to let other employees know that all


KC-1324836-4 - 29 -

applications from small outdoor advertising companies should be sent to George

Gross for review to see if CBS wanted the sites for itself. CBS’s agents, in turn,

used wire communication to communicate with small outdoor advertising

companies, inducing them to identify sites by submitting applications to CBS and

failing to tell them that CBS would be reviewing the applications for sites it

wanted to keep for itself. The following is a list of examples of wire fraud

predicate acts committed directly and indirectly by defendants. This list merely

represents a small sample of the numerous predicate acts committed by

defendants.

i. On August 6, 2001, Rende faxed instructions from Philadelphia to

Simmons in Alabama explaining how to apply for billboard sites without

mentioning the possibility that CBS might review Simmons’ application to

see if CBS wanted Simmons’ sites for itself.

ii. On January 11 and 12, 2002, Gilley sent e-mails to Gustin regarding travel

arrangements for the January, 2002, meeting in which Kelly explained that

all applications from small outdoor advertising companies would now be

reviewed by CBS to see if any local CBS office wanted the sites

identified. Kelly would have known when he called the January, 2002,

meeting regarding the scheme that the interstate wires would be used to

communicate with persons in other offices about that meeting. These

communications helped to further defendants’ scheme.

iii. On February 11, 2002, Kelly, who lives in Phoenix, Arizona, sent an e-

mail, which travels via the interstate wires, to Gustin and Gross in New


KC-1324836-4 - 30 -

York reemphasizing CBS’s new official policy of reviewing all of the

applications from small outdoor advertising companies to see CBS wanted

to take the sites for itself.

iv. Gustin responded via e-mail the same day to Kelly’s February 11th

message, telling Kelly that Tom Rende in CBS’s Philadelphia office was

on board with the new review policy.

v. On April 2, 2002, Gustin sent an e-mail to Kelly and Tolleson apologizing

for Tom Rende not following along with the scheme and telling Kelly that

Gustin was, “awaiting [Kelly’s] decision on the sites [applied for by small

outdoor advertising companies] to be used for [CBS] in Atlanta.”

vi. On April 15, 2002, Rende sent an e-mail to Gustin in which Rende

provided the addresses of small outdoor advertising companies that had

submitted applications for sites that CBS was considering taking for itself.

vii. On May 3, 2002, Tolleson sent an e-mail to Gustin explaining that they

had reviewed many sites identified by small outdoor advertising

companies and some of those sites could be “released” back to the smaller

companies.

viii. In August of 2002, Kelly Pendergast in CBS’s New York office faxed

David Hyatt in CBS’s Kansas City office copies of Ad Trend’s

applications for sites West of Highway 71 along Highway 150. This

communication via interstate wires, like so many others, was a direct or

indirect result of the scheme contrived by defendants and served to further

the purpose of that scheme.


KC-1324836-4 - 31 -

ix. On December 12, 2002, Avjean sent a facsimile to Rende, Gilley, Gross,

and Gustin, requesting that Gilley and Rende send Avjean a list of

applications submitted by small outdoor advertising companies.

x. On March 12, 2003, Rende sent a facsimile to the Kansas City Southern

Railroad Company requesting approval of the sites Ad Trend identified.

xi. On March 14, 2003, Rende sent a facsimile to Pendergast in New York

with Ad Trend’s applications for the Highway 150 sites.

xii. On April 24, 2003, Gustin sent a facsimile to Avjean asking if CBS’s

wants Ad Trend’s Highway 150 site for itself.

xiii. On April 29, 2003, Rende sent an e-mail to Hyatt and Gustin asking if

CBS is going to build on the sites Ad Trend identified.

xiv. On April 30, 2003, Gustin sent an e-mail to Rende, Hyatt, and Avjean

asking if CBS is going to build on the sites Ad Trend identified. In this e-

mail Gustin also notes that both Ad Trend and Masterpiece Media, another

small outdoor advertising company, want the sites.

xv. On May 1, 2003, Avjean sent an e-mail to Gustin, Rende, Hyatt, and

Mitch Matson in CBS’s Chicago office telling them that CBS needs to

decide about the Highway 150 sites to protect its contract with the

railroads and avoid legal situations with the small outdoor advertising

companies.

xvi. On December 3, 2004, Joyce Johnson, an administrative assistant in

CBS’s Atlanta office, sent an e-mail to Gustin discussing applications

submitted by Signx LLC before September of 2002 for sites in Oklahoma.


KC-1324836-4 - 32 -

b. Additionally, CBS’s agents’ induced small outdoor advertising companies to

identify sites by submitting applications to CBS. Every time a small outdoor

advertising company (including one of the plaintiffs) sent an application to CBS

via facsimile or e-mail, these communications constituted use of the interstate

wires to execute defendants’ scheme to defraud. Defendants could have readily

foreseen that the wires would be used in this way to allow small outdoor

advertising companies to identify sites that CBS would then take for itself. Any

telephone calls made by small outdoor advertising companies (including

plaintiffs) were also uses of the interstate wires that defendants’ knew would help

them execute their scheme to defraud.

120. In addition, the defendants violated 18 U.S.C. § 1341—which prohibits the use of

the mails of the United States to execute a scheme or artifice intended to defraud another or to

obtain money or property by means of false statements, omissions, and concealments—when

they sent, or caused others to send, letters through the mail:

a. Defendants Kelly, Gustin, and Gross had to use the mails of the United States to

communicate with CBS employees in offices around the country. Kelly was in

Phoenix, Gustin was in the New York area, Tolleson was in Phoenix, Gross was

in New York, Tom Rende was in Philadelphia, Randy Romig and David Gilley

were in Atlanta, and other employees were located across the country.

Defendants used the mails of the United States to let other employees know that

all applications from small outdoor advertising companies should be sent to

George Gross for review to see if CBS wanted the sites for itself. CBS’s agents,

in turn, used the mails of the United States to communicate with small outdoor


KC-1324836-4 - 33 -

advertising companies, inducing them to identify sites by submitting applications

to CBS and failing to tell them that CBS would be reviewing the applications for

sites it wanted to keep for itself. The following is a list of examples of mail fraud

predicate acts committed directly and indirectly by defendants. This list merely

represents a small sample of the numerous predicate acts committed by

defendants.

i. On August 16, 2001, Bob Orlando in CBS’s Philadelphia office mailed a

letter to Simmons explaining that the sites Simmons had identified were

already taken. This letter was sent to further the purpose of taking sites

identified by Simmons for CBS’s own purposes.

ii. On October 19, 2001, Joyce Johnson mailed a letter to Franklin telling

Franklin that CBS would submit Franklin’s sites to the railroad for

approval.

iii. On April 1, 2002, Rende mailed a memorandum to Gustin telling Gustin

that defendants’ new policy of reviewing the applications of each small

outdoor advertising company to see what sites CBS wants for itself will

cause a severe decline in the number of applications and increase the

number signs built on property adjacent to railroad property.

iv. On April 4, 2002, Gross mailed a memorandum to Gustin and Kelly

regarding applications from small outdoor advertising companies that CBS

is reviewing under defendants’ policy.

v. On April 5, 2002, Gross mailed a memorandum to Gustin and Kelly with

more applications from small outdoor advertising companies attached.


KC-1324836-4 - 34 -

Gross informed Gustin and Kelly that these applications would be

reviewed in accordance with defendants’ policy.

vi. On April 11, 2002, Gustin mailed a memorandum to Gross and Kelly

regarding a list of sites submitted by small outdoor advertising companies

to be reviewed under defendants’ policy. The list of sites included in this

correspondence included billboard sites in Georgia and Alabama.

vii. On May 2, 2002, Tolleson and Avjean mailed a memorandum to Kelly

reporting on sites in Atlanta and Minneapolis that are being reviewed

under defendants’ policy.

viii. On August 21, 2002, Gustin mailed to Gross, Kelly, and Avjean a list of

applications submitted by small outdoor advertising companies. The sites

identified in the applications were to be reviewed in accordance with

defendants’ fraudulent policy.

ix. On August 30, 2002, Avjean mailed a memorandum to Gustin, Gross, and

Kelly stating that CBS’s Chicago office wanted the sites in Kansas City

identified by Ad Trend.

x. On September 12, 2002, Hyatt mailed a memorandum to Pendergast in

CBS’s New York office with information about the sites Ad Trend

identified.

xi. On October 21, 2002, Gustin mailed Avjean, Kelly, and Gross a letter

containing twenty applications submitted by small outdoor advertising

companies. These applications were to be reviewed by CBS to see if the

local CBS offices wanted to take these sites for their own use.


KC-1324836-4 - 35 -

xii. On January 2, 2003, Rende mailed a memorandum to Gustin asking if

Hyatt wanted the sites Ad Trend identified.

xiii. On April 1, 2003, Gilley mailed a memorandum to Kelly, Gustin, and

Gross stating that he understands defendants’ policy is to review

applications submitted by small outdoor advertising companies to see if

CBS wants any of the sites identified for itself.

xiv. On December 1, 2004, Gustin mailed a letter to Ad Trend denying Ad

Trend’s applications for the Highway 150 sites because “other companies

applied first.”

b. Additionally, CBS’s agents’ induced small outdoor advertising companies to

identify sites by submitting applications to CBS. Every time a small outdoor

advertising company (including one of the plaintiffs) sent an application to CBS

via U.S. Mail, FedEx, UPS, or other mail carrier, these communications

constituted use of the mails to execute defendants’ scheme to defraud.

Defendants could have readily foreseen that the mails would be used in this way

to allow small outdoor advertising companies to identify sites that CBS would

then take for itself.

121. In furtherance of, and to conceal their racketeering activity, the defendants also

violated 18 U.S.C. § 1503, which prohibits obstructing or impeding the due administration of

justice when they did threaten, direct others to threaten, or conspired to threaten David Gilley

with the loss of his job should he testify truthfully in his deposition in CBS I as described more

fully above. CBS impeded and obstructed the fair administration of justice by obstructing

discovery in CBS I. This obstruction was not just aimed at undermining the private civil


KC-1324836-4 - 36 -

litigation instituted by Massood, but was also intended to shield the defendants from any federal

criminal investigation which might have been prompted by their admission of their fraudulent

conduct.

122. In their continuing effort to shield their scheme from discovery, the defendants,

including defendant Kelly, have sought to silence David Gilley in violation of 18 U.S.C.

§ 1512(b). Specifically, defendant Kelly, in concert with and pursuant to a joint scheme with the

other defendants, offered Gilley financial rewards to keep the truth regarding the racketeering

scheme a secret from both federal law enforcement authorities and the plaintiffs. After Gilley

sent a letter to CBS’s superiors within the CBS organization in the fall of 2002 reporting on what

he thought were various examples of the illegal and fraudulent activity outlined in this

Complaint, he received a call from defendant Kelly. Defendant Kelly asked Gilley to tell him

what kind of salary would make Gilley happy. Gilley felt that this was an attempt to buy his

silence. In response Gilley asked for a 60% increase in his income, a far greater increase than he

had ever received from CBS in any previous year. Defendant Kelly granted him the increase he

requested and added $5,000 more. In addition, he made the salary increase retroactive to the

previous June.

123. The defendants also threatened David Gilley with the loss of his employment in

violation of 18 U.S.C. § 1512(c) in an effort to prevent him from revealing the scheme to the

plaintiffs and federal law enforcement authorities as described in more detail above. This

conduct was intended to further the racketeering scheme.

124. When the defendants feared their criminal efforts to silence Gilley would fail,

they engaged in another violation of federal criminal law and retaliated against him in violation

of 18 U.S.C. § 1513 by attempting to transfer him to a position in New York in early 2003. The


KC-1324836-4 - 37 -

Defendants knew that because of family obligations Gilley would not be willing to accept the

transfer and that this act would effectively terminate Gilley. The defendants took this action in

direct retaliation for Gilley’s refusal to promise that he would continue to cover-up the

racketeering scheme.

125. Also in furtherance of, and to conceal their racketeering activity, the defendants

violated 18 U.S.C. § 1503 when they attempted to influence or change the testimony of David

Gilley through their in house counsel David Posy and their counsel in CBS II, Robert Walters, of

the law firm Vinson & Elkins. Both Mr. Posy and Mr. Walters told Mr. Gilley that Mr. Walters

would represent him at his deposition in CBS II. In each conversation Mr. Gilley refused such

representation, demanded separate counsel, and eventually hired his own counsel. Mr. Walters's

effort to impose himself as counsel on Mr. Gilley was a blatant effort to “obstruct the fair

administration of justice” not simply because his conduct violated the Rules of Professional

Conduct governing attorney’s at law, but because he attempted to bully or force Mr. Gilley into

changing his testimony.

126. During each conversation with Mr. Posy and Mr. Walters, Mr. Gilley was told

that he had to be represented by Mr. Walters. As the court found in CBS II, this conduct violated

the Rules of Professional Conduct governing attorneys as Mr. Gilley had claimed status as a

whistle-blower, repeatedly demanded separate counsel, and, ultimately, hired his own

counsel. Specifically the CBS II court found that Rules 4-1.7 and 4-4.2 Missouri Rules of

Professional Conduct which prohibit a lawyer from representing a person with whom he has a

conflict of interest, and which prohibit lawyers from communicating directly with persons who

are already represented by counsel were violated.


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127. Mr. Posy and Mr. Walters imposed ever-increasing pressure on Mr. Gilley to

change his testimony and to alter the facts as he remembered them. Even when Mr. Gilley

reminded Mr. Walters in person that he was represented by counsel, Mr. Walters refused to

contact that counsel and insisted in representing Mr. Gilley at the deposition. Mr. Walters

attempted to get Mr. Gilley to change statements he had made under oath in an affidavit filed in

CBS II asserting misconduct by these defendants and others employed by CBS at the time, just

prior to his testimony. During his deposition, and particularly during breaks in that

deposition, Mr. Gilley felt that Mr. Walters was seeking to limit his testimony and to prevent him

from answering the questions truthfully.

128. After the deposition was complete, Mr. Posy sent Mr. Gilley an agreement in

which CBS offered to pay $15,000 in fees for the attorney Mr. Gilley had hired—but CBS and

its counsel had ignored—in an exchange for Mr. Gilley releasing CBS from any claims he might

have against the company. Mr. Posy and Mr. Walter’s efforts to silence Mr. Gilley and to

change his testimony were an effort to obstruct justice in CBS II in violation of 18 U.S.C.

§ 1503. Mr. Posy’s “settlement offer” was an additional effort to buy Mr. Gilley’s silence. Each

of these interactions were separate predicate acts making up part of the pattern of racketeering

conduct engaged in by these defendants.

129. Defendants also endeavored corruptly to influence, obstruct, and impede the due

administration of justice in CBS II by attempting to purchase the cooperation and favorable

testimony of CBS's former employee Tom Rende by promising him and his company valuable

billboard assets if he cooperated with CBS, concealed and withhold evidence unfavorable to

CBS and testified favorably to CBS, all in violation of 18 U.S.C. §§ 1503 and 1512.


KC-1324836-4 - 39 -

130. Finally, the defendants have traveled in interstate commerce and used facilities in

interstate commerce with the intent to distribute the proceeds of their unlawful activities and to

promote their racketeering scheme to steal billboard locations from the plaintiffs and to devalue

their competitors so that they can purchase them at a reduced value, all in violation of 18 U.S.C.

§ 1952.

PATTERN OF RACKETEERING ACTIVITY

131. The defendants’ scheme is an ongoing pattern of racketeering involving numerous

criminal acts, as alleged above, committed to further the scheme and to conceal it from its

victims and federal and state law enforcement authorities.

132. Each of the predicate acts alleged above are related to each other and were

committed to further the racketeering scheme. For example, the wire fraud and mail fraud were

used to fraudulently obtain property from the plaintiffs while the obstruction, bribery, and

retaliation predicate acts were all committed to conceal the scheme from its victims and from

local, state, and federal law enforcement authorities. As such, the racketeering activity

constitutes a pattern as required by the RICO statute.

133. This scheme, by its nature, projects into the future and presents a threat of

repetition. The threat of repetition is caused both by the ongoing nature of CBS’s duties as

leasing agent and the coconspirators’ desire to keep the truth of the scheme from their victims

and from local, state, and federal law enforcement authorities.

134. The defendants have been engaged in these schemes since at least 1998 and the

conduct continues through the date of the filing of this Complaint. This conduct is the official,

albeit unwritten, policy of CBS as alleged above. As a result, it is certain to continue and CBS is

certain to continue fraudulently to obtain billboard locations from unsuspecting small billboard

companies.


KC-1324836-4 - 40 -

135. In addition to the plaintiffs, the defendants have victimized numerous other small

businesses in a similar or identical manner. This conduct is the officially sanctioned policy of

CBS, and there are many other victims of the defendants who are not aware of the fraud that has

been committed against them.

EFFECT ON INTERSTATE COMMERCE

136. The racketeering activity and the scheme pursued by the defendants have had a

direct impact on interstate commerce. Through their racketeering the defendants have

successfully eliminated outdoor advertising competitors by devaluing their businesses and then

purchasing them. Moreover, they have defrauded the plaintiffs out of billboard sites in Alabama,

Kansas, Minnesota, Oklahoma, and many other states. This conduct has directly impacted the

billboard market in major metropolitan areas within these states and, as a result, has had an effect

on interstate commerce.

137. In addition, it has impacted interstate commerce by affecting the cost of

advertising for companies located throughout the country who wish to advertise in the above

mentioned states.

INJURY TO PLAINTIFFS’ PROPERTY CAUSED BY RICO VIOLATIONS

138. The plaintiffs and others were injured as a result of the conduct of the defendants

by failing to obtain the billboard sites they had a right to obtain. This loss caused their

businesses to be devalued as they lost income from the billboard sites which they were prevented

from obtaining, all in an amount to be proved at trial.

139. The plaintiffs were all injured as a result of the competitive edge CBS received

over the plaintiffs because of the conduct of the defendants.

140. Plaintiffs’ injuries were caused by reason of the RICO violations alleged herein.


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COUNT I

VIOLATION OF 18 U.S.C. § 1962(c) CONDUCTING, OPERATING, ORGANIZING, AND DIRECTING

AN ENTERPRISE THROUGH A PATTERN OF RACKETEERING ACTIVITY

141. Plaintiffs re-allege each of the preceding allegations as if fully set forth herein.

142. At all relevant times, plaintiffs Simmons, Herron, Franklin, and Signx were

“persons” within the meaning of RICO, 18 U.S.C. §§ 1961(3) and 1964(c).

143. At all relevant times, defendants Kelly, Gustin, and Gross were “persons” within

the meaning of RICO, 18 U.S.C. §§ 1961(3).

144. At all relevant times, CBS was an “enterprise” within the meaning of RICO, 18

U.S.C. § 1961(4).

145. At all relevant times, the CBS enterprise was engaged in, and its activities

affected, interstate and foreign commerce within the meaning of RICO, 18 U.S.C. § 1962(c).

146. At all relevant times, defendants Kelly, Gustin, Gross, and other conspirators

known and unknown to the plaintiffs, associated with the enterprise and conducted or

participated, directly or indirectly, in the conduct of the enterprise’s affairs through a “pattern of

racketeering activity” within the meaning of RICO, 18 U.S.C. § 1961(5), in violation of RICO,

18 U.S.C. § 1962(c).

147. Specifically, at all relevant times, defendants Kelly, Gustin, Gross, and the other

conspirators engaged in “racketeering activity” within the meaning of 18 U.S.C. § 1961(1) by

engaging, directly or indirectly, in the Predicate Acts set forth above. As alleged above, these

acts constitute a violation of one or more of the following statutes: 18 U.S.C. §§ 1341 (mail

fraud); 1343 (wire fraud); 18 U.S.C. § 1503 (obstruction of justice); 18 U.S.C. § 1512 (tampering

with a witness); 18 U.S.C. § 1513 (retaliation against a witness); and 18 U.S.C. § 1951


KC-1324836-4 - 42 -

(interfering with interstate commerce). Defendants Kelly, Gustin, and Gross each committed,

directly or indirectly, the commission of two or more of these acts of racketeering activity.

148. The acts of racketeering activity referred to in the previous paragraph constituted

a “pattern of racketeering activity” within the meaning of 18 U.S.C. § 1961(5). The acts alleged

were related to each other by virtue of common participants, similar victims, a common method

of commission, and the common purpose and common result of defrauding the plaintiffs. This

fraudulent scheme began in 1998, and perhaps earlier, and continues through the filing of this

Complaint.

149. Each of the defendants knowingly and willfully conducted or participated,

directly or indirectly, in the conduct of the affairs of the enterprise through a pattern of

racketeering activity, as described in detail above.

150. The defendants continue to operate the enterprises and continue in their pattern of

racketeering activity in violation of 18 U.S.C. § 1962. As a result, the plaintiffs are unable to

obtain leases from new locations for their billboards if those locations are on property belonging

to one of the railroads for which CBS is the leasing agent. To apply for a new location would

simply permit the defendants to steal yet another location.

151. CBS’s tremendous market power in this industry intimidates small billboard

operators and others from coming forward and reporting its wrongdoing for fear of retaliation.

152. As a result of the conduct of defendants Kelly, Gustin, and Gross, the plaintiffs

lost lucrative billboard locations, the necessary leases, and had their companies’ value reduced.

153. As a result of the conduct of defendants Kelly, Gustin, and Gross, through the

CBS enterprise, each of the plaintiffs suffered a competitive injury because of the benefits the

defendants obtained as a result of their fraudulent misrepresentations and omissions.


KC-1324836-4 - 43 -

154. Finally, each of the plaintiffs also lost opportunities to apply for new sites upon

discovery of the scheme and continues to suffer this injury today.

155. Pursuant to 18 U.S.C. § 1964(c), plaintiffs are entitled to recover three times the

actual damages they suffered as a result of this violation of the RICO statute and for the cost of

this lawsuit, including reasonable attorneys’ fees.

156. On February 24, 2004, various small outdoor advertisers (other than plaintiffs)

filed a lawsuit against defendants Kelly and Gustin alleging that these defendants violated 18

U.S.C. 1962(c). This lawsuit was filed in the United States District Court for the Western

District of Missouri and assigned Civil Case Number 4:04-cv-00074-DW.

157. The following allegations from the February 24, 2004, lawsuit are identical to

allegations found in Count I of this lawsuit: (1) CBS was an enterprise (as defined under the

RICO statute) that affected interstate and foreign commerce; (2) Kelly and Gustin were persons

(as defined under the RICO statute); (3) Kelly and Gustin were associated with or employed by

CBS; (4) Kelly and Gustin knowingly engaged in a pattern of racketeering activity; and (5) Kelly

and Gustin knowingly conducted or participated in the conduct of CBS through a pattern of

racketeering activity.

158. On July 26, 2005, a jury entered a verdict finding that (1) CBS was an enterprise

(as defined under the RICO statute) that affected interstate and foreign commerce; (2) Kelly and

Gustin were persons (as defined under the RICO statute); (3) Kelly and Gustin were associated

with or employed by CBS; (4) Kelly and Gustin knowingly engaged in a pattern of racketeering

activity; and (5) Kelly and Gustin knowingly conducted or participated in the conduct of CBS

through a pattern of racketeering activity.


KC-1324836-4 - 44 -

159. Before the jury’s July 26, 2004, verdict, Kelly and Gustin had a full and fair

opportunity to be heard regarding all claims against them. Trial on these claims lasted from July

11, 2005, to July 26, 2005.

160. The Court issued a final judgment on the merits in Case Number 4:04-cv-00074-

DW on July 18, 2006. The case is currently pending on appeal before the United States Court of

Appeals for the Eighth Circuit.

161. Therefore, Kelly and Gustin should be estopped from denying the following

elements of plaintiffs’ RICO actions: (1) CBS was/is an enterprise (as defined under the RICO

statute) that affected interstate and foreign commerce; (2) Kelly and Gustin were/are persons (as

defined under the RICO statute); (3) Kelly and Gustin were associated with or employed by

CBS; (4) Kelly and Gustin knowingly engaged in a pattern of racketeering activity; and (5) Kelly

and Gustin knowingly conducted or participated in the conduct of CBS through a pattern of

racketeering activity.

COUNT II7

VIOLATION OF 18 U.S.C. § 1962(c): CONDUCTING, OPERATING, ORGANIZING, AND DIRECTING

AN ENTERPRISE THROUGH A PATTERN OF RACKETEERING ACTIVITY


163. This Count is plead in the alternative to Count I.

164. At all relevant times, plaintiffs Simmons, Herron, Franklin, and Signx were

“persons” within the meaning of RICO, 18 U.S.C. §§ 1961(3) and 1964(c).

165. At all relevant times, defendants CBS, Kelly, Gustin, and Gross were “persons”

within the meaning of RICO, 18 U.S.C. §§ 1961(3).

7 See footnote 4 above.


KC-1324836-4 - 45 -

166. At all relevant times, defendant CBS formed an association-in-fact with CBS’s

client railroad, Burlington Northern/Santa Fe Railroad, for the purpose of defrauding the

plaintiffs and other small billboard businesses and their owners. This association-in-fact was an

“enterprise” within the meaning of RICO, 18 U.S.C. § 1961(4). While Burlington Northern was

a part of the association-in-fact, it was a victim of the defendant conspirators, not a conspirator

itself.


client railroad, Kansas City Southern Railway, for the purpose of defrauding the plaintiffs and

other small billboard businesses and their owners. This association-in-fact was an “enterprise”

within the meaning of RICO, 18 U.S.C. § 1961(4). While Kansas City Southern was a part of

the association-in-fact, it was a victim of the defendant conspirators, not a conspirator itself.


client railroad, CSX Railroad, for the purpose of defrauding the plaintiffs and other small

billboard businesses and their owners. This association-in-fact was an “enterprise” within the

meaning of RICO, 18 U.S.C. § 1961(4). While CSX was a part of the association-in-fact, it was

a victim of the defendant conspirators, not a conspirator itself.

169. Each of these associations-in-fact had the common or shared purpose of leasing

property owned by the respective railroads to outdoor billboard businesses.

170. At all relevant times, these enterprises was engaged in, and their activities

affected, interstate and foreign commerce within the meaning of RICO, 18 U.S.C. § 1962(c).

171. At all relevant times, defendants Kelly, Gustin, Gross, and other conspirators

known and unknown to the plaintiffs, associated with the enterprises and conducted or

participated, directly or indirectly, in the conduct of the enterprises’ affairs through a “pattern of


KC-1324836-4 - 46 -

racketeering activity” within the meaning of RICO, 18 U.S.C. § 1961(5), in violation of RICO,

18 U.S.C. § 1962(c).

172. Specifically, at all relevant times, defendants Kelly, Gustin, Gross, and the other

conspirators engaged in “racketeering activity” within the meaning of 18 U.S.C. § 1961(1) by

engaging, directly or indirectly, in the Predicate Acts set forth above. As alleged above, these

acts constitute a violation of one or more of the following statutes: 18 U.S.C. §§ 1341 (mail

fraud); 1343 (wire fraud); 18 U.S.C. § 1503 (obstruction of justice); 18 U.S.C. § 1512 (tampering

with a witness); 18 U.S.C. § 1513 (retaliation against a witness); and 18 U.S.C. § 1951

(interfering with interstate commerce). Defendants Kelly, Gustin, and Gross each committed,

directly or indirectly, the commission of two or more of these acts of racketeering activity.

173. The acts of racketeering activity referred to in the previous paragraph constituted

a “pattern of racketeering activity” within the meaning of 18 U.S.C. § 1961(5). The acts alleged

were related to each other by virtue of common participants, similar victims, a common method

of commission, and the common purpose and common result of defrauding the plaintiffs. This

fraudulent scheme began in 1998, and perhaps earlier, and continues through the filing of this

Complaint.

174. Each of the defendants knowingly and willfully conducted or participated,

directly or indirectly, in the conduct of the affairs of the enterprise through a pattern of

racketeering activity, as described in detail above.

175. The defendants continue to operate the enterprises and continue in their pattern of

racketeering activity in violation of 18 U.S.C. § 1962. As a result, the plaintiffs are unable to

obtain leases from new locations for their billboards if those locations are on property belonging


KC-1324836-4 - 47 -

to one of the railroads for which CBS is the leasing agent. To apply for a new location would

simply permit the defendants to steal yet another location.

176. CBS’s tremendous market power in this industry intimidates small billboard

operators and others from coming forward and reporting its wrongdoing for fear of retaliation.

177. As a result of the conduct of defendants Kelly, Gustin, and Gross, the plaintiffs

lost lucrative billboard locations, the necessary leases, and had their companies’ value reduced.

178. As a result of the conduct of defendants Kelly, Gustin, and Gross, through the

CBS enterprise, each of the plaintiffs suffered a competitive injury because of the benefits the

defendants obtained as a result of their fraudulent misrepresentations and omissions.

179. Finally, each of the plaintiffs also lost opportunities to apply for new sites upon

discovery of the scheme and continues to suffer this injury today.

180. Pursuant to 18 U.S.C. § 1964(c), plaintiffs are entitled to recover three times the

actual damages they suffered as a result of this violation of the RICO statute and for the cost of

this lawsuit, including reasonable attorneys’ fees.

COUNT III

FRAUDULENT MISREPRESENTATIONS


182. Defendants represented to the plaintiffs and/or their predecessors and agents, as

alleged in detail above, that they needed to reveal the locations of their proposed billboard sites

in order to apply for the location and that the information would be used to determine if there had

been another application for that site.


KC-1324836-4 - 48 -


alleged in detail above, that their efforts to obtain railroad sites through the application process

would be dealt with on a “first-come, first-serve” basis.


alleged in detail above, that there had been another applicant for their proposed sites and denied

their applications on that basis, or represented that the application was “stalled” by the railroad

and/or various other circumstances, when the defendants had no intent of ever granting the

applications.

185. These representations were false and the defendants knew that they were false.

186. These representations were material to the plaintiffs’ decisions to reveal the

proprietary information about the location of the proposed billboard sites.

187. As a direct result of these representations the plaintiffs and/or their agents did

reveal the location of their proposed billboard sites and CBS used this information to make

application for those sites and built or plan to build billboards for its own account on those

locations. In some cases the plaintiffs’ applications were denied or never acted upon to prevent

the plaintiffs from gaining a competitive edge and/or to devalue the plaintiffs to permit CBS to

purchase those companies and/or to eliminate them as competitors. Plaintiffs were damaged as a

result of the loss of these billboard locations.

188. As a direct and proximate result of the fraudulent misrepresentations by

defendants—discussed in detail above—plaintiffs were neither able to lease the sites they had

identified nor were they able to secure contracts for the lease of valuable advertising space at any

of these sites. Plaintiffs have suffered substantial damages in excess of $75,000, including


KC-1324836-4 - 49 -

diminution in the value of their companies, loss of billboards, loss of revenue, and loss of

competitive position.

189. Defendants’ conduct was willful and outrageous and they engaged in malice,

aggravated and egregious fraud, wantoness, and oppression. Defendants’ conduct was also

consciously indifferent, recklessly indifferent, and deliberately disregarded the rights of

plaintiffs. Thus, defendants’ conduct justifies an award of punitive damages in such an amount

as will serve to punish defendants and to deter them and others from like conduct.

COUNT IV

FRAUDULENT OMISSIONS / CONCEALMENTS / SUBMISSIONS


191. Defendants have admitted that the historical practice in the outdoor advertising

industry is that the first outdoor advertising company to identify a billboard site is the company

who has the first right to build on that site, assuming the site is in accordance with local

ordinances and the railroad’s wishes. This practice was employed by CBS and its predecessors

and was referred to as the “first-come, first-served” policy.

192. Defendants failed to inform plaintiffs when they abandoned the first come, first

served policy and started reviewing all small outdoor advertising companies’ applications for

billboard locations to see if CBS wanted to take any of the sites identified for itself. Defendants

had a duty to inform plaintiffs of this material change in defendants’ practice.

193. The failure to inform described in the immediately preceding paragraph was

crucial to defendants’ scheme because, if defendants would have told plaintiffs that CBS would

be reviewing all applications submitted by the smaller companies to see if CBS wanted any of


KC-1324836-4 - 50 -

the sites, the smaller companies would never have disclosed the locations to CBS in the first

place.

194. Defendants’ failure to inform plaintiffs that the first come, first served policy was

no longer in effect was a material omission intended to defraud plaintiffs of the valuable

billboard locations they identified in their applications.

195. As a direct result of these fraudulent omissions, the plaintiffs and/or their agents

were induced to reveal the location of their proposed billboard sites and CBS used this

information to make application for those sites and built or plan to build billboards for its own

account on those locations. In some cases the plaintiffs’ applications were denied or never acted

upon to prevent the plaintiffs from gaining a competitive edge and/or to devalue the plaintiffs to

permit CBS to purchase those companies and/or to eliminate them as competitors. Plaintiffs

were damaged as a result of the loss of these billboard locations.

196. As a direct and proximate result of the fraudulent omissions by defendants—

discussed in detail above—plaintiffs were neither able to lease the sites they or their predecessors

had identified nor were they able to secure contracts for the lease of valuable advertising space at

any of these sites. Plaintiffs have suffered substantial damages in excess of $75,000, including









KC-1324836-4 - 51 -

COUNT V

TORTIOUS INTERFERENCE WITH BUSINESS EXPECTANCIES


199. Because plaintiffs were the first to identify the sites for which they filed or

attempted to file applications, CBS’s “first-come, first-served” leasing policy or procedure

presented plaintiffs with a valid business expectancy in: (a) leasing the sites from the railroad

landowner, and/or (b) securing contracts for the lease of valuable advertising space at each of the

sites.

200. CBS, as the exclusive leasing agent for the railroads, had knowledge that the

plaintiffs and/or their predecessors expected to lease the sites they applied for and/or to collect

advertising revenues from these sites. CBS was responsible for administering CBS’s “first-

come, first-served” policy or procedure and knew that these leases and/or the advertising

revenues produced by the sites would be substantial.

201. Defendants intentionally interfered with and breached the plaintiffs’ business

expectancies in one or more of the following respects:

(a) Defendants knowingly and falsely represented that an earlier applicant had

already applied for the sites or made other false statements or falsely represented

that the application was permanently stalled, as alleged above;

(b) CBS abandoned its stated “first-come, first-served” licensing policy or

procedure by appropriating the sites identified by plaintiffs for itself;

(c) Defendants misappropriated the sites the plaintiffs identified for CBS;

(d) Defendants concealed, suppressed, or omitted the material fact that CBS

had secured the sites for itself after being led to the sites by the plaintiffs.


KC-1324836-4 - 52 -

202. Defendants’ interference was without justification because it employed wrongful

means in obtaining the billboard sites:

(a) With regard to the actions directed against Simmons, defendants employed

unlawful trade practices in violation of Ala. Code § 8-19 et seq.

(b) With regard to the actions directed against Herron, defendants employed

deceptive acts and practices and/or willfully concealed, suppressed, omitted, or

failed to state a material fact in violation of Kan. Stat. Ann. § 50-626 et seq.

(c) With regard to the actions directed against Franklin, defendants employed

deceptive trade practices in violation of Minn. Stat. Ann. § 325D.44 et seq.

(d) With regard to the actions directed against Signx LLC defendants

employed unlawful practices in violation of Okla. Stat. Ann. § 753 et seq.

(e) Defendants made fraudulent misrepresentations, omissions, suppressions,

and concealments that caused plaintiffs damage as more fully described above.

(f) Defendants violated 18 U.S.C. § 1962, as alleged more fully above.

203. As a direct and proximate result of the foregoing interference by defendants,

plaintiffs were neither able to lease the sites they or their predecessors had identified nor were

they able to secure contracts for the lease of valuable advertising space at any of these sites.

Plaintiff Herron was forced by defendants to take her billboard down. Plaintiffs have suffered

substantial damages in excess of $75,000, including diminution in the value of their companies,

loss of billboards, loss of revenue, and loss of competitive position.





KC-1324836-4 - 53 -



COUNT VI

UNFAIR COMPETITION


206. Defendants represented to plaintiffs Simmons, Franklin, and Signx, as alleged in

detail above, that they needed to reveal the locations of their proposed billboard sites in order to

apply for the location and that the information would be used to determine if there had been

another application for that site.

207. Each of the locations the plaintiffs revealed constituted a “trade secret” as each

was intended to be used to create economic gain for plaintiffs by placing a billboard on each site.

208. The defendants, as agents for CBS’s client railroads, owed a duty of confidence to

the plaintiffs as the owners of these trade secrets. The defendants created circumstances and

made statements that led the plaintiffs to reasonably conclude that the disclosure would be

confidential and not shared with competitors. Without the assurance that the information would

be treated as confidential these plaintiffs or other small billboard companies would not have

revealed the locations to CBS.

209. Knowing that they were acquiring the plaintiffs’ trade secrets and fraudulently

stating that the trade secrets were being requested for the application, the defendants improperly

acquired the locations for CBS’s own use and/or delayed leasing the sites, thereby preventing

plaintiffs from improving their competitive position in the marketplace.


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210. With regard to plaintiff Herron, defendants made her dismantle and remove her

billboard in order to reduce competition for CBS billboards on Interstate 35 in Johnson County,

Kansas.

211. As a direct and proximate result of the foregoing conduct by defendants, plaintiffs

were neither able to lease the sites they identified nor were they able to secure contracts for the

lease of valuable advertising space at any of these sites. In plaintiff Herron’s case, she suffered

substantial expenses in removing her billboard and loss of income from outdoor advertising it

generated. Plaintiffs have suffered substantial damages in excess of $75,000, including








WHEREFORE, plaintiffs pray this Court award the plaintiffs actual damages in the

amount shown by the evidence, treble damages for their injuries, attorneys’ fees, and the costs of

prosecuting this action, and award the plaintiffs punitive damages.


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Respectfully submitted,

s/ Floyd R. Finch, Jr. Floyd R. Finch, Jr. MO #28377 Michael E. Callahan MO #49552 BLACKWELL SANDERS PEPER MARTIN LLP 4801 Main Street, Suite 1000 Kansas City, Missouri 64112 Phone: (816) 983-8000 Facsimile: (816) 983-8080 [email protected] [email protected] Attorneys for Plaintiffs


Case 4:06-cv-00863-DW Document 1-1 Filed 10/19/06 Page 1 of 2

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CBS Lawsuit TDI 2006

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