A small West Hollywood billboard company is suing Regency Outdoor Advertising Inc. alleging the industry giant is using unfair business practices that prevent competition from penetrating or expanding in the Los Angeles market.

Valley Outdoor Inc. alleges in a suit filed in U.S. District Court in Los Angeles that Regency has for years been purchasing so-called "ghost permits" for space near its billboards and leaving them vacant of advertising in order to prevent other companies from using the space.

State law requires permit holders to utilize their billboard space.

"The complaint alleges a pattern of conduct that exhibits little if any respect for the law," said Eliot Disner, a partner in Van Etten Suzumoto & Becket LLP, which represents Valley Outdoor. "There are a lot of profits in billboards if you are just allowed to build them."

The suit also accuses two Caltrans employees, as well as an L.A. city transportation employee, of taking bribes in the form of cash and consumer products in exchange for helping Regency to get non-conforming permit approvals.

Caltrans launched an investigation into the allegations against its employees after they were made public and transferred the employees to other positions within the agency.

"We are aware of the allegations and take them very seriously," said Deborah Harris, a spokeswoman for Caltrans. "The allegations are currently under an ongoing investigation. They have been relieved of duties in the outdoor advertising program and given duties in other areas of the department while the investigation is proceeding."

It was not clear which agency the city employee works for. Officials at the Los Angeles Department of Public Works' bureau of street services, which issues permits for billboards, did not return calls, nor did the city's Department of Transportation.

Similar allegations made by Valley Outdoor in August 2003 were thrown out of Los Angeles County Superior Court last year.

"Regency regards the allegations as defamatory claims of ex-associates seeking a financial windfall," Regency said in a prepared statement. "These allegations by a disgruntled former employee were repeatedly raised and rejected in state court where two judges weighed these claims and found no merit to them."

Valley Outdoor owner Keith Stephens and some-time company lawyer Paul Fisher are former employees of Regency.

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