Mexico-based homebuilder Homex settles SEC’s $3.3 billion accounting probe

Posted by on March 3, 2017 8:11 pm
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Linus Unah – Fourth Estate Contributor

Washington, DC, United States (4E) – Mexico-based homebuilder Desarrolladora Homex S.A.B. de C.V. has agreed to settle charges that it reported fake sales of more than 100,000 homes, the U.S. Securities and Exchange Commission (SEC) said Friday.

The SEC said the company reported fake sales to boost revenues in its financial statements during a three-year period.

The federal securities regulator added that it used satellite imagery to uncover the accounting scheme and show its allegation that Homex hadn’t started many of the homes for which it reported revenues.

The SEC alleged that Homex, one of the largest homebuilders in Mexico at the time, inflated the number of homes sold during the three-year period by about 317 percent and overstated its revenue by 355 percent (about $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 former chief executive officer and then chief financial officer were placed on unpaid leave since May 2016.

Homex has since taken remedial efforts and cooperated with the SEC’s investigation.

“As alleged in our complaint, Homex deprived its investors of accurate and reliable financial results by reporting key numbers that were almost completely made up,” Stephanie Avakian, acting director of the SEC’s enforcement unit, said in a statement.

“The settlement takes into account that the fraud occurred entirely under the watch of prior ownership and management, the company’s new leaders provided critical information regarding the full scope of the fraudulent conduct, and the company continues to significantly cooperate with our ongoing investigation.”

The SEC separately issued a trading suspension in the securities of the firm

Homex did not admit or deny the allegations in the SEC’s complaint filed in a California federal, but agreed to be prohibited from offering securities in the U.S. markets for at least five years.

The settlement is subject to court approval.

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