Hurricane Restoration Company and Executives Settle SEC Accounting Fraud Charges
Litigation Release No. 24357 / November 20, 2018
Securities and Exchange Commission v. Home Solutions of America, Inc., et al., No. 09-CV- 2269 (N.D. Tex. filed Nov. 30, 2009)
USA v. Brian Marshall, No. 12-CR-138 (N.D. Tex. filed May 22, 2012)
USA v. Frank Fradella, No. 12-207 (E.D. La. filed May 29, 2012)

The former CEO and CFO of a now-defunct Dallas and New Orleans-based disaster remediation and construction business have agreed to pay disgorgement and penalties to settle accounting fraud charges brought by the Securities and Exchange Commission. In addition, the SEC has asked the Court to convert the injunctive relief previously ordered against the company, Home Solutions of America, Inc. (HSOA) into a final judgment.

The SEC charged HSOA, its former CEO, Frank J. Fradella, and its former CFO, Jeffrey M. Mattich, four other former executives, and a business partner in 2009 with fraud for lying about non-existent business deals in the 2005-2008 time period and inflating the company’s revenues and stock price. To settle the SEC’s charges, Fradella agreed to pay $1 million in disgorgement, a lifetime bar from serving as an officer or director of a public company, and to be permanently prohibited from violating the antifraud provisions of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, the books-and-records provisions of Section 13(b)(5) of the Exchange Act and Rules 13b2-1 and 13b2-2 thereunder, and the certification provision of Rule 13a-14 of the Exchange Act. In addition, he agreed to be permanently prohibited from aiding and abetting violations of the reporting provisions of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13 and the books-and-records provisions of Sections 13(b)(2)(A) and (B) of the Exchange Act.

Mattich agreed to pay disgorgement of $86,620 and a civil penalty of $50,000, and agreed to be permanently prohibited from violating the antifraud provisions of Section 17(a)(2) and (3) of the Securities Act, the books-and-records provisions of Section 13(b)(5) of the Exchange Act and Rules 13b2-1 and 13b2-2 thereunder, and the certification provision of Rule 13a-14 of the Exchange Act. He also agreed to be permanently prohibited from aiding and abetting violations of the reporting provisions of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13 and violations of the books-and-records provisions of Sections 13(b)(2)(A) and (B) of the Exchange Act.

The settlements are subject to court approval. The court’s entry of the proposed final judgments will resolve this litigation in its entirety.

The SEC also obtained final judgments against three executives and the business partner shortly after filing charges. In 2011, the SEC obtained a default judgment against the fourth executive, Brian Marshall, the former president of an HSOA subsidiary, which ordered him to pay disgorgement and interest of $111,168 and a civil penalty of $90,238, barred him for life from serving as an officer or director of a public company, permanently prohibited him from violating the antifraud provisions of Section 17(a) the Securities Act of 1933 and Section 10(b) the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and the books-and-records provisions of Section 13(b)(5) of the Exchange Act and Rules 13b2-1 and 13b2-2 thereunder. It also permanently prohibited him from aiding and abetting violations of the books-and-records provisions of Sections 13(b)(2)(A) and (B) of the Exchange Act and Rules 13b2-1 and 13b2-2 thereunder and the reporting provisions of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13 thereunder.

In parallel criminal actions, Marshall pleaded guilty to one count of securities fraud and was sentenced to 48 months in prison, and Fradella pleaded guilty to one count of false certification of financial reports by a corporate officer (in addition to an unrelated count) and was sentenced to one year in prison.