In today’s edition of “They just made the numbers up,” the SEC has charged Home Solutions of America, Inc. with inflating revenues based on phantom business deals related to restoration projects after Hurricane Katrina and other weather-related disasters.
According to the Commission’s complaint, Home Solutions issued several “materially false press releases” bragging about their kick ass results after doing work related to the damage caused by Katrina.
The scheme wasn’t exactly rocket science, as the former, CEO, CFO and one Director created phony invoices in order to record fake accounts receivable. They also decided that cash basis accounting was more their speed, expensing bonuses when they were paid rather than earned, in order to inflate their earnings.
All this hocus-pocus led to a run up in the stock price, which in turn, resulted in the former CEO, Frank Fradella selling over $6 million in shares based on the inflated price. The stock later tanked after massive insider stock sales, the filing of the lawsuit alleging fraud, and the Company’s announcement that they had to restate their financial statements.
And because we know you’re wondering, the most recent auditor we can find for Home Solutions is KMJ Corbin & Company LLP. We left a voicemail seeking comment but so far our calls have gone unreturned.
SEC Charges Hurricane Restoration Company and Executives in Post-Katrina Accounting Fraud [SEC Press Release]
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