In the Matter of Home Solutions of America, Inc.
On Nov. 30, 2009, the Commission announced the institution of an administrative proceeding against Home Solutions of America, Inc. pursuant to Section 12(j) of the Securities Exchange Act of 1934 (the Exchange Act). Home Solutions is a Delaware corporation headquartered in New Orleans, Louisiana. The purpose of the proceeding is to determine whether the registration of Home Solutions' common stock should be suspended for a period not to exceed twelve months or revoked. The Division of Enforcement (the Division) alleges that Home Solutions failed to comply with Section 13(a) of the Exchange Act and Exchange Act Rules 13a-1 and 13a-13, by failing to file any periodic reports since August 2007, when it filed a Form 10-Q for the period ending June 30, 2007.
A hearing will be scheduled before an administrative law judge to take evidence on the Division's allegations, to afford Home Solutions the opportunity to establish defenses to the allegations, and to determine whether the registration of Home Solutions' common stock should be suspended for a period not to exceed twelve months or revoked.
The Commission ordered that the Administrative Law Judge in these proceedings issue an initial decision not later than 120 days from the date of service of the order instituting proceedings. (Rel. 34-61076; File No. 3-13699)
Securities and Exchange Commission Orders Hearing on Registration Revocation or Suspension Against Eight Public Companies for Failure to Make Required Periodic Filings
On Nov. 30, 2009, the Commission instituted public administrative proceedings to determine whether to revoke or suspend for a period not exceeding twelve months the registration of each class of the securities of eight companies for failure to make required periodic filings with the Commission:
In this Order, the Division of Enforcement (Division) alleges that eight issuers are delinquent in their required periodic filings with the Commission.
In this proceeding, instituted pursuant to Exchange Act Section 12(j), a hearing will be scheduled before an Administrative Law Judge. At the hearing, the judge will hear evidence from the Division and the Respondents to determine whether the allegations of the Division contained in the Order, which the Division alleges constitute failures to comply with Exchange Act Section 13(a) and Rules 13a-1 and 13a-13 or 13a-16 thereunder, are true. The judge in the proceeding will then determine whether the registrations pursuant to Exchange Act Section 12 of each class of the securities of these Respondents should be revoked or suspended for a period not exceeding twelve months. The Commission ordered that the Administrative Law Judge in this proceeding issue an initial decision not later than 120 days from the date of service of the order instituting proceedings. (Rel. 34-61077; File No. 3-13700)
SEC Charges Hurricane Restoration Company and Executives in Post-Katrina Accounting Fraud; Four Individuals Settle
The Securities and Exchange Commission today filed a civil injunctive action in the U.S. District Court for the Northern District of Texas charging a Dallas and New Orleans-based hurricane restoration company and several executives for lying about non-existent business deals in the wake of Hurricane Katrina, and fraudulently inflating the company's stock price before the company's CEO sold millions of dollars in company shares.
The SEC alleges that Home Solutions of America, Inc. recorded millions of dollars in bogus revenue and issued a series of materially false press releases boasting robust financial results following Katrina and other weather-related disasters, thus inflating the company's stock price. The stock price later plummeted after large insider stock sales, the filing of private securities lawsuits alleging fraud, and the company's public announcement that it would restate its financial statements. Home Solutions then-CEO Frank Fradella, who is among seven individuals charged by the SEC in the scheme, dumped approximately $6.8 million worth of stock into the inflated market.
The SEC's complaint charges Home Solutions, Fradella, Brian Marshall (who became a Home Solutions director and president of its largest subsidiary, Fireline Restoration Inc., after its acquisition by Home Solutions) and former CFO Jeffrey Mattich with violating Section 17(a) of the Securities Act of 1933 (Securities Act) and Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder. The complaint also charges Home Solutions with violating, and Fradella, Marshall and Mattich with aiding and abetting Home Solutions' violations of, Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13. The complaint further charges Fradella and Mattich with violating Section 13(b)(5) of the Exchange Act, Rules 13a-14, 13b2-1, and 13b2-2 thereunder and Section 304 of the Sarbanes-Oxley Act of 2002; and Marshall with violating Section 13(b)(5) of the Exchange Act and, Rules 13b2-1, and 13b2-2 thereunder, and aiding and abetting Home Solutions' violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.
The complaint seeks permanent injunctive relief and financial penalties against Home Solutions, Fradella, Marshall and Mattich, as to all the individuals, full disgorgement with interest and officer and director bars, and as to Fradella and Mattich, reimbursement of bonuses and stock sale profits under Section 304 of the Sarbanes-Oxley Act.
Four others charged today by the SEC simultaneously agreed to settle on the following terms, without admitting or denying the allegations in the complaint.
The SEC's investigation is continuing. [SEC v. Home Solutions of America, Inc., Frank J. Fradella, Brian M. Marshall, Jeffrey M. Mattich, Rick J. O'Brien, Stephen C. Gingrich, Thomas L. Davis and Jeffrey T. Craft, Civil Action No. 3:09-cv-02269 (DCG) (N.D. Tx.)] (LR-21314; AAE Rel. 3071)
Second Circuit Court of Appeals Affirms Jury Verdict and Judgment Against Former Majority Leader of Connecticut State Senate
The Securities and Exchange Commission announced today that on Nov. 25, 2009, the United States Court of Appeals for the Second Circuit rejected an appeal brought by William A. DiBella, the former Majority Leader of the Connecticut State Senate, and his consulting firm, North Cove Ventures, L.L.C. DiBella and North Cove had sought to overturn a jury verdict and judgment against them for their involvement in a fraudulent scheme relating to investments by the Connecticut state pension fund. In its decision, the Second Circuit held that there was substantial evidence to support the jury verdict and that the District Court for the District of Connecticut did not abuse its discretion in imposing a judgment requiring DiBella to pay disgorgement and civil penalties.
In the underlying civil injunctive action, the SEC had alleged that, in November 1998, Paul J. Silvester, then Treasurer of the State of Connecticut, had requested that Thayer Capital Partners, a Washington, DC-based private equity firm, hire DiBella. Thayer, through its chairman, Frederic V. Malek, agreed to retain DiBella and to pay him a percentage of the state pension fund's total investment with Thayer, even though DiBella had no prior involvement with the transaction. The SEC had also alleged that Silvester had increased the amount of the investment with Thayer by at least $25 million (to a total of $75 million) solely to secure a larger fee for DiBella.
On May 18, 2007, after a seven-day trial, a jury found DiBella and North Cove liable for aiding and abetting Silvester's intentional violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and the negligent violations by Malek, Thayer and its affiliates of Section 206(2) of the Investment Advisers Act of 1940. In her decision of March 13, 2008, Honorable Ellen Bree Burns, United States District Judge, reaffirmed the jury's findings and entered a judgment imposing sanctions against DiBella and North Cove. The court ordered DiBella to disgorge $374,500 (the amount of his ill-gotten gains from the scheme) and to pay $307,127.45 in prejudgment interest. In addition, the Court imposed a penalty of $110,000. On Oct. 3, 2007, the district court denied the defendants' motion for a new trial and for judgment as a matter of law. (SEC v. DiBella, et al. LR-20498, LR-20133, LR-18829; Thayer Capital Partners, Rel. No. 33-8457, IA-2276, File No. 3-11585; SEC v. Silvester et al., LR-16759, LR-16834, LR-18436, LR-18460, LR-18461, LR-19241, LR-19566, LR-19583, LR-20027, 34-49377, 34-50300, and 34-54774) [SEC v. William A. DiBella and North Cove Ventures LLC, No. 08-1673-CV(L); 08-3797-CV(CON)) (2d Cir.)] (LR-21315)
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