SEC Charges Former Healthcare Executive in Fraudulent Scheme to Inflate Financial Results
Sept. 6, 2019
File No. 3-19426
The Securities and Exchange Commission today announced that Abner Silva, former chief operating officer of DS Healthcare Group, Inc., agreed to settle charges for his role in a fraudulent scheme to inflate DS Healthcare's revenues.
According to the SEC's order, during the first three quarters of 2015, Silva, a resident of Miami, Florida, acted to overstate DS Healthcare's reported revenues. In particular, Silva caused DS Healthcare to recognize fictitious revenue for products it never sold. The order also alleges that Silva caused DC Healthcare to significantly overbill a customer, which it later credited back to the customer, in order to improperly recognize revenue. Silva also authorized improper sales practices, including shipping products at the end of quarters with no reasonable expectation of payment and consignment sales that recognized revenue at the time of shipment even though collectability was not assured. The SEC's order also found that Silva selectively disclosed material non-public information relating to DS Healthcare's earnings, sales and revenue forecasts, and pending and future acquisitions to a broker-dealer and to certain DS Healthcare shareholders. According to the SEC's order, Silva also misled DS Healthcare's auditor about the accuracy of the company's financial statements. When some of the above conduct was discovered in early 2016, DS Healthcare terminated Silva's employment.
The SEC's order finds that Silva willfully violated the antifraud provisions of Sections 17(a)(1) and 17(a)(3) of the Securities Act of 1933 ("Securities Act") and Section 10(b) the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder, the internal controls and books and records provisions of Section 13(b)(5) of the Exchange Act and Rule 13b2-1 thereunder, and the lying to auditors provision of Rule 13b2-2 of the Exchange Act. The order also finds that Silva willfully aided and abetted and caused a DS Healthcare principal's violations of the antifraud provisions of Securities Act Sections 17(a)(1) and 17(a)(3) and Exchange Act Section 10(b) and Rule 10b-5 thereunder and that Silva willfully aided and abetted and caused DS Healthcare's violations of the periodic reporting provisions of Exchange Act Section 13(a) and Rules 12b-20 and 13a-13 thereunder, the internal controls and books and records provisions of Exchange Act Sections 13(b)(2)(A) and 13(b)(2)(B), and Regulation FD. The order also finds that Silva engaged in conduct subject to Section 4C of the Exchange Act and Rule 102(e)(1)(iii) of the Commission's Rules of Practice. Without admitting or denying the SEC's findings, Silva consented to a cease-and-desist order and agreed to a five year officer and director bar, an $80,000 civil penalty, and the issuance of an order suspending him from appearing or practicing before the SEC as an accountant. The SEC's order permits Silva to apply for reinstatement as an accountant after five years.
The investigation was conducted by John Houchin, Kathleen Strandell, and Shelly-Ann Springer-Charles and supervised by Eric Busto and Glenn Gordon. Russell Koonin provided litigation counsel.