SEC Institutes Three Administrative Proceedings Against Former Top Executives Charged in Mexico-Based Homebuilder's $3.3 Billion Accounting Fraud

ADMINISTRATIVE PROCEEDING
File Nos. 3-20601, 3-20602, and 3-20603

September 27, 2021 - The Securities and Exchange Commission today instituted administrative proceedings against three former senior officers of Mexico-based homebuilding company Desarrolladora Homex S.A.B. de C.V. who were previously charged for their role in the company's $3.3 billion accounting fraud. The SEC's orders temporarily suspend Homex's former Chief Financial Officer, Carlos Moctezuma, former Controller, Ramón Lafarga, and former manager in the company's operations department, Noe Corrales, from appearing or practicing before the Commission as accountants.

On June 29, 2021, the U.S. District Court for the Southern District of California in Securities and Exchange Commission v. Gerardo de Nicolás, et al., Civil Action Number 17-cv-02086 (S.D. Cal.) ("SEC v. de Nicolás") entered an Order of Default Judgment against each of Moctezuma, Lafarga, and Corrales, as well as against Homex's former CEO, Gerardo de Nicolás Gutiérrez. The judgments enjoined Moctezuma, Lafarga, and Corrales from violating Section 17(a) of the Securities Act of 1933, Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 and Rules 10b-5 and 13b2-1 thereunder. The judgments also enjoined Moctezuma, Lafarga, and Corrales from aiding and abetting violations of Sections 13(a), 13(b)(2)(A) and (B) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-16 thereunder. The judgments further enjoined Moctezuma from violating Rules 13b2-2 and 13a-14 under the Exchange Act.

The SEC v. de Nicolás complaint alleged that Homex's annual reports for 2010 through 2012, which were filed with the SEC, portrayed the company as productive and financially sound, and that de Nicolás and Moctezuma so certified them, despite knowing Homex was in a dire financial state. The complaint also alleged that de Nicolás and Moctezuma caused Homex to enter into loan agreements with at least 13 Mexican banks, which they knew Homex was able to repay only by additional bank borrowing, in check-kiting fashion. The complaint further alleged that de Nicolás and Moctezuma hid the true nature of these loans from Homex's investors and mischaracterized them to Homex's auditors. Also according to the complaint, Corrales, at Lafarga's direction, created a false second set of books, through which the fraud - which involved falsely recognizing revenue from the purported sale of over 100,000 homes that, in fact, were neither built nor sold - was perpetrated.

The SEC's investigation was conducted by Benjamin D. Brutlag, Andrew M. Shirley and Juan M. Migone, and supervised by J. Lee Buck II; and the SEC v. de Nicolás litigation was led by Richard Hong.