SEC Cases: Whistleblower Awarded Over $1M, Lawyers Accused in Microcap Fraud, and Former Executives Are Charged in $3.3B Accounting Fraud Involving Homex

Latest Whistleblower Award Raises Total Granted to $162M
The US Securities and Exchange Commission has awarded a whistleblower over $1M for providing “new information and substantial corroborating documentation” that allowed the regulator to bring a successful enforcement action. The securities violation involved a registered entity and had affected retail investors.

This latest award means that the SEC has now awarded over $162M to 47 whistleblowers since the awards program went into effect in 2013. Whistleblowers who give the Commission unique and “credible” information resulting in a successful enforcement case are eligible to receive 10-30% of the funds collected when the monetary sanction imposed is over $1M.

Attorneys Accused of Involvement in Microcap Fraud Scam
The SEC is accusing James M. Schneider and Andrew H. Wilson of involvement in a microcap fraud that involved more than 20 blank check companies that were sold in reverse mergers. Now, the regulator wants ill-gotten gains, civil penalties from the two lawyers, and other relief. A related criminal fraud case has also been brought against Schneider.

The regulator is accusing Schneider of knowing that he was preparing “at least 40 false opinion letters.” He also allegedly referred buyers to the owners of the shell companies. Wilson is accused of providing “at least five opinion letters” that illegally “called” for at least three issuers’ restricted securities to be sold. Wilson also is accused of noting the shares as unrestricted when he knew they were secretly controlled by others. Those men have already been convicted in the criminal cases against them. They also were charged by the SEC.

Ex-Desarrolladora Homex Executives Accused in $3.3B Accounting Fraud
Former Desarrolladora Homex CEO Gerardo de Nicolás Gutiérrez, ex-CFO Carlos Moctezuma Velasco, former Controller Ramón Lafarga Bátiz, and ex-manager Noe Corrales Reyes are now facing SEC charges over their alleged involvement in the company’s accounting fraud accusing them of playing key roles in a $3.3B scheme. According to the regulator’s complaint, even though Moctezuma and de Nicolás knew that Homex was in big financial trouble, yearly reports submitted to the SEC from 2010 through 2012 portrayed the Mexico-based homebuilding company as in good financial health.

The two men are accused of causing Homex to get into loan agreements with over a dozen Mexican banks. The company paid back those plans but had to borrow more funds to do so, in what the SEC describes as “check-kiting fashion.” The two ex-executives are accused of concealing the loans’ “true nature” from investors and mischaracterizing them to auditors. The Commission said it was Lafarga who instructed Corrales to set up a fake set of accounting books for the fraud.

In 2014, Homex went into bankruptcy proceedings in Mexico, during which time Moctezuma and Homex included the allegedly fraudulent financial reports in the post-bankruptcy business plan. The plan was distributed to investors.

It was earlier this year that Homex settled SEC charges accusing the company of reporting bogus sales of over 100,000 homes to increase revenue over the last few years. The company did not, however, deny or admit to the regulator’s findings.

At The SSEK Partners Group, we represent investors in helping them recover their fraud losses. Contact our securities law firm today.

The SEC Complaint in its case against the Homex homebuilders (PDF)

SEC Charges Mexico-Based Homebuilder In $3.3 Billion Accounting Fraud, SEC, March 3, 2017

The SEC Order for the Whistleblower Award (PDF)

Lawyers Charged with Assisting a Microcap Fraud Scheme, SEC, October 11, 2017

More Blog Posts:
Jury Rules Against Former F-Squared CEO in SEC’s ETF Fraud Case, Institutional Investor Securities Blog, October 16, 2017

Barclays Fights $31B Residential Mortgage-Backed Securities Fraud Lawsuit, Institutional Investor Securities Blog, October 11, 2017

FINRA Goes After Two Brokers for Variable Annuity Replacement Fraud, Stockbroker Fraud Blog, October 18, 2017

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