SEC Charges Former Homebuilding Company Employees with Fraud

The SEC charged several former officers and employees (collectively, "the employees") of a Mexico-based homebuilding company in relation to alleged participation in large-scale accounting fraud.

The Complaint was filed in the U.S. District Court for the Southern District of California. The employees are accused of engaging in fraud that involved the overstatement of Desarrolladora Homex S.A.B. de C.V.'s ("Homex") revenue by approximately $3.3 billion. According to the SEC, the accounting scheme was perpetrated to conceal significant losses from investors and auditors. Homex settled SEC charges in March by accepting a five-year prohibition against offering securities in the U.S. markets (see previous coverage). The SEC utilized satellite images accessed through Google Earth to help uncover the misconduct. The images revealed that a project, which supposedly had been completed and sold, in fact remained largely undeveloped.

The employees charged are former Homex (i) CEO Gerardo de Nicolás, (ii) CFO Carlos Moctezuma, (iii) operations manager Noe Corrales, and (iv) Controller Ramón Lafarga. The employees all are charged with violations in relation to the creation of false annual reports and other books and records, the concealment of fraudulent conduct, and other related misconduct.