The U.S. Securities and Exchange Commission on Jan. 4 charged Mexican broadcaster TV Azteca and its chairman, Ricardo Salinas Pliego, with fraud, saying he swindled $109 million by conducting business
NEW YORK (The Hollywood Reporter) -- The U.S. Securities and Exchange Commission on Jan. 4 charged Mexican broadcaster TV Azteca and its chairman, Ricardo Salinas Pliego, with fraud, saying he swindled $109 million by conducting business debt deals secretly.
Two other executives have also been charged by the SEC: former TV Azteca director and chief executive Pedro Padilla Longoria and director Luis Echarte Fernandez.
A filing by the SEC said the defendants "engaged in an elaborate scheme to conceal Salinas' role in a series of transactions through which he personally profited." The complaint also alleges that Salinas and Padilla Longoria sold millions of dollars of TV Azteca stock while Salinas' "self-dealing remained undisclosed to the marketplace."
The SEC claims that Salinas and TV Azteca filed periodic reports that did not disclose his involvement in transactions between mobile phone operator Unefon, a subsidiary of TV Azteca, and a private company "secretly" co-owned by Salinas, called Codisco. Salinas is charged with buying debt from Unefon in 2003 at a large discount before selling it back to the company at full value.
Salinas, who owns 46.5% in Unefon through TV Azteca, is said to have "publicly denied any connection to Codisco" in response to press questioning about conflicts of interest. The complaint says in filings from June 2003 through January 2004, TV Azteca and its management discussed the Unefon debt transactions while failing to disclose Salinas' involvement or falsely denying his involvement.
In a statement released late Jan. 4, Salinas said he "stood behind" the transactions in question because they were beneficial to Unefon, TV Azteca and their shareholders. TV Azteca said it was confident that its officers and directors acted "in full compliance" with applicable laws and vowed to fight the SEC charges.
The SEC is also seeking court orders to bar Salinas and Padilla from serving in any U.S.-traded public company. Echarte, director of TV Azteca since 1999 and president and CEO of Azteca America, has already settled the action against him, without admitting or denying wrongdoing, and will pay a civil fine of $200,000.
Such charges from the SEC are the first against a Mexican company, say analysts, who are pointing to the higher level of reporting standards under the Sarbanes-Oxley Act of 2002.
"Enhanced global cooperation among securities regulators has significantly changed the ways in which the SEC investigates and prosecutes conduct that crosses international borders," said Spencer Barasch, head of enforcement for the SEC's Fort Worth, Texas, office.
"Geographic boundaries will not serve to protect those who seek to defraud investors," he said.