The Securities and Exchange Commission charged Home Solutions of America Inc.'s former executives Frank Fradella, Jeff Mattich and Tampa businessman Brian M. Marshall with fraudulently inflating the stock price to reap financial rewards.
Marshall, founder of Fireline, became a director and president of Home Solutions, which has been based in New Orleans since July 2008.
Fradella, Mattich, who was chief financial officer, and Marshall "engaged in a series of revenue-inflation schemes, booking millions of dollars of bogus revenue by invoicing and recording receivables on work that never occurred," states the SEC.
is accused of engaging in a separate revenue-inflation scheme at Fireline
by booking more than $9 million of fake construction revenue from undisclosed, related-party contracts with entities he
controlled, said the SEC
Even before Home Solutions acquired Fireline in July 2006, Marshall allegedly assisted Home Solutions in generating bogus revenues by awarding a contract to HSOA to perform work on Vista Royale, a Vero Beach condominium project on Florida's east coast damaged by a hurricane, the SEC said.
never performed work on Vista Royale, yet it sent $8.4 million in invoices to Marshall
, according to the SEC complaint.
Based on those invoices, HSOA
recorded $8.4 million in bogus revenue for the second quarter of 2006.
In turn, Home Solutions
sent checks for about $2.7 million to Marshall
for subcontractors that reportedly worked on Vista Royale, states the complaint.
About $1.3 million was paid to entities controlled or managed by Marshall
Beginning in December 2006, Marshall
began a scheme to inflate Fireline's revenue by causing private companies he
controlled to enter into contracts for construction work.
then directed Fireline
Vice President Thomas Davis and other employees to create documents and make accounting entries to make it appear Fireline was performing the work, states the complaint.
During 2006 and 2007, Marshall
to enter into at least 10 related-party contracts, including a $4 million contract for the construction of Marshall's home.
To perpetuate the scheme, Marshall
had Craft, his partner at Craftmar Construction
, provide a false confirmation letter of the work to KMJ Corbin & Co.
accounting firm, the complaint states.
, Fradella and Mattich are charged with violations of the antifraud, reporting, books and records and internal control provisions of the federal securities laws.