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March 08, 2017 at 01:13 PM
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.
