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 News Around the Republic of Mexico | January 2005 
SEC Sues Mexican Television Executives
 Washington Post
 Regulators yesterday filed civil fraud charges against Mexico's second-biggest broadcast television company and its longtime chairman, accusing them of hiding the executive's role in a series of self-dealing transactions that earned him $109 million.
The charges are the latest example of increasing cooperation between U.S. regulators and foreign authorities against securities fraud. The U.S. Securities and Exchange Commission has jurisdiction over TV Azteca SA because the Mexico City-based media company trades its U.S. depositary receipts on the New York Stock Exchange.
Regulators are seeking unspecified civil money penalties against Chairman Ricardo B. Salinas Pliego and former chief executive Pedro Padilla Longoria for their role in the alleged fraud. A third official, board member Luis Echarte Fernandez, settled SEC charges yesterday by agreeing to pay $200,000. He did not admit or deny wrongdoing.
In the past few years, the SEC has brought civil charges against Italian milk producer Parmalat Finanziaria SpA and Dutch grocer Royal Ahold NV, saying they carried out financial schemes that hurt shareholders in the United States.
But in the TV Azteca case, the SEC did not allege an underlying fraud designed to increase the company's earnings or hide losses. Instead, regulators said the three officials at TV Azteca failed to disclose in public filings Salinas's dealings with subsidiary Unefon SA and a separate company he secretly owned, known as Codisco Investments.
Salinas purchased $325 million in debt at Unefon "at a steep discount," according to the SEC complaint, at a time when he knew that Unefon was negotiating with an unnamed company for a substantial cash infusion. Three months later, when those negotiations successfully concluded, Salinas profited by $109 million on the deal after Unefon paid back the debt at full price.
Regulators said Salinas and other officials refused to clarify his role in securities filings and public statements from June 2003 to January 2004, despite urging from outside lawyers at Akin Gump Strauss Hauer & Feld. That law firm resigned in December 2003, arguing that it had a duty to quit under the Sarbanes-Oxley Act, which tightened disclosure requirements on outside lawyers who become aware of potentially fraudulent conduct.
Even after the lawyers resigned, the three co-defendants continued to hide information from board members, and Salinas and Padilla signed false certifications of the company's financial reports under the Sarbanes-Oxley Act, the SEC alleged. |
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