SEC accuses Mexican firm of fraud

The US Securities and Exchange Commission (SEC) has accused Mexico’s second-largest broadcaster of involvement in a massive fraud.

The SEC has said TV Azteca’s executives violated US laws on debt, with one executive alleged to have made more than $100m (£53.18m).

The firm’s shares fell more than 9% in the US and Mexican markets on the news.

TV Azteca’s chairman Ricardo Salinas Pliego has denied the charges, describing them as “discriminatory.”

The SEC suit alleges that in 2003 investment company Codisco bought a $325m debt for $107m from Canada’s Nortel Networks.

Azteca’s mobile phone subsidiary Unefon had owed the money to Nortel Networks.

Codisco, which is 50% owned by Mr Salinas Pliego, made a profit of $218m (£116.3m) when Unefon paid the debt in full.

According to the SEC, Mr Salinas Pliego, Azteca’s chief executive Pedro Padilla Longoria and the chief financial strategist Luis Echarte Fernandez were “engaged in an elaborate scheme to conceal Salinas’ role in a series of transactions through which he personally profited by $109m.”

The US regulator also accused Mr Salinas Pliego and Mr Padilla of selling stock in the company before it became clear that Mr Salinas Pliego owned part of Codisco.

The SEC wants Mr Salinas Pliego to return the money he made from the debt.

It also wants to fine TV Azteca and to ban Mr Salinas Pliego and Mr Padilla from serving as officers or directors of any public company trading securities in the US.

According to analysts, this is the first time that US regulators have charged a Mexican company since stricter financial reporting standards were introduced under the Sarbanes-Oxley Act of 2002.

“Geographic boundaries will not serve to protect those who seek to defraud investors,” said Spencer Barasch, head of the SEC in Fort Worth, Texas.

The Mexican National Banking and Securities Commission has also been investigating TV Azteca, although a spokesman for the Mexican regulator told Reuters news agency that this is a separate investigation.

TV Azteca, which also has interests in the US market through its network of affiliate channels, has said it will defend itself against the charges.

“It’s absurd for the SEC to use a Mexican company and Mexican citizens to try to impose US regulations in an extraterritorial manner, unilaterally ignoring international laws and the Mexican legal framework. In my view, they are trying to politically compensate for their deficiencies in supervising US companies in the past,” said Mr Salinas Pliego.