SEC headquarters in Washington. (Photo: National Law Journal)

The Securities and Exchange Commission announced that the Mexico-based homebuilding company Desarrolladora Homex has agreed to settle charges that it reported fake sales of more than 100,000 homes to boost revenues in its financial statements during a three-year period. 

The SEC used satellite imagery to help uncover the accounting scheme and illustrate its allegation that Homex had not even broken ground on many of the homes for which it reported revenues.

“We used high-resolution satellite imagery and other innovative investigative techniques to unearth that tens of thousands of purportedly built-and-sold homes were, in fact, nothing but bare soil,” Melissa Hodgman, associate director of the SEC’s Enforcement Division, said in a statement.

The SEC alleges that Homex, one of the largest homebuilders in Mexico at the time, inflated the number of homes sold during the period by approximately 317% and overstated its revenue by 355% (approximately $3.3 billion).  

According to the SEC’s complaint, Homex filed for the Mexican equivalent of bankruptcy protection in April 2014 and emerged in October 2015 under new equity ownership. The company’s then-CEO and then-CFO have been on unpaid leave since May 2016. Homex has since undertaken significant remedial efforts and cooperated with the SEC’s investigation.

The SEC separately issued a trading suspension in the securities of Homex.

SEC Fines Promoters of Points-Based Pyramid Scheme

Two promoters agreed to settle charges that they conducted a pyramid scheme in Southern California, according to the SEC.

The SEC alleges that Renato Rodriguez of Downey, Calif.ornia, and Gutemberg Dos Santos of Las Vegas operated a business called Vizinova, secured investments from at least 100 investors, and proceeded to spend $1.4 million of investor funds on personal expenses, including the purchase of a home and a Lamborghini.

The SEC says their alleged scheme centered on a promise that investors would earn “points” that would yield a certain rate of return, typically $5,000 on an investment of $3,200. Rodriguez and Dos Santos allegedly conducted live presentations to investors and emphasized recruitment of other investors within their ethnic communities.

According to the SEC’s complaint, very few products actually existed for purchase or sale, and the accumulated points were irredeemable and worthless. Rodriguez and Dos Santos allegedly sold the points they accumulated to other investors.

Rodriguez and Dos Santos agreed to settle the SEC’s charges. Without admitting or denying the allegations in the SEC’s complaint, they agreed to pay $1.4 million in disgorgement plus penalties of $160,000 each. The settlement is subject to court approval.

SEC Obtains Final Judgment Against Former Senior Executive of BOK Financial Unit

The SEC obtained a final judgment on March 3 against Marrien Neilson, a former senior vice president at a subsidiary of Oklahoma-based BOK Financial, BOKF, NA, ordering her to pay $55,000 in monetary relief and never again to engage in corporate trust work related to municipal securities.

 

The SEC’s complaint – filed in federal court in New Jersey on Sept. 9 – alleged that Neilson was chiefly responsible for the failures of the bank’s corporate trust department while overseeing what turned out to be a series of fraudulent bond offerings managed by Christopher F. Brogdon, an Atlanta-based businessman. Brogdon was previously charged with fraud and ordered by the court to repay more than $86 million to investors. The SEC’s complaint charged Neilson with aiding and abetting Brogdon.

The SEC previously entered a cease-and-desist order requiring BOKF to pay more than $1.6 million to settle charges that it concealed numerous problems and red flags from investors in the Brogdon bond offerings.

Massachusetts Resident Gets 15 Months in Prison for Bilking Numerous BDs

Nathanial D. Ponn, a defendant in an ongoing SEC litigation, was sentenced on March 1 to 15 months imprisonment for orchestrating a three-year scheme that defrauded numerous brokerage firms, according to the SEC.

In addition, the court ordered Ponn to pay more than $20,000 in restitution to three brokerage firms for losses caused by his fraudulent conduct.

The SEC previously charged Massachusetts resident Ponn with conduct arising from the same facts underlying the criminal charges. According to the SEC’s complaint, Ponn defrauded numerous brokerage firms through bogus bank transfers to newly opened brokerage accounts that created the false appearance the brokerage accounts would have cash available upon the settlement of Ponn’s purchases of stocks and mutual fund shares.

According to the SEC, Ponn used temporary credits from the bogus transfers to purchase stock and mutual fund shares, which he repeatedly attempted to cash out or transfer to other financial institutions before the brokerages discovered that Ponn did not have actual money to fund the bank transfers.

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