SEC charges Hurricane Katrina firm with accounting fraud

A post-hurricane restoration company and several of its executives have been charged by US regulators for inflating the company's stock price after Hurricane Katrina hit New Orleans.

The SEC alleges that the executives have fraudulently booked deals to boost its results and inflate its stock price before selling their shares.

Executives from Home Solutions of America including CFO Jeff Mattich, then CEO Frank Fradella, president of subsidiary Fireline Brian Marshall, booked millions of dollars of bogus revenue.

"The company’s financial results were largely fabricated and its public statements were intended to deceive,” said Rose Romero, director of the SEC’s Fort Worth Regional Office.

“Simply put, instead of rebuilding New Orleans and other hurricane-stricken areas, they constructed a fantasyland of fraud.”

Four others charged by the SEC simultaneously agreed to settle on the following terms, without admitting or denying the allegations in the complaint, including: former Home Solutions CFO and COO, Rick O’Brien, who consented to a permanent injunction and a $130,000 (£79,000) penalty; and former Fireline controller Stephen Gingrich, who consented to a permanent injunction, a $25,000 penalty, and an administrative order barring him from practicing before the commission as an accountant for at least three years.

Further reading:

View the SEC's full statement