Former Vice President of Home Solutions of America Charged With Securities Fraud in Revenue Inflation Scheme
Defendant was Also President of Fireline Restoration Inc., a Subsidiary of Home Solutions
|U.S. Attorney’s Office May 29, 2012|
DALLAS—Brian Marshall, 48, of Tampa, Florida, appeared this morning before U.S. Magistrate Judge Renée Harris Toliver and pleaded not guilty to securities-fraud charges as outlined in a recently unsealed indictment returned by a federal grand jury in Dallas earlier this month. Marshall had previously surrendered to federal authorities in Tampa and was released on bond. Today’s announcement was made by U.S. Attorney Sarah R. Saldaña of the Northern District of Texas.
According to the indictment and other publicly-filed documents, Marshall was a vicepresident and member of the board of directors of Home Solutions of America, a NASDAQ-traded company that was based in Dallas before relocating to New Orleans, Louisiana, in July 2008. Home Solutions was in the business of construction and restoration, including new construction and restoration following natural disasters such as hurricanes. Home Solutions conducted some of its business through its largest subsidiary, Fireline Restoration Inc., which was based in Tampa. Marshall was the president of Fireline.
Marshall is the second executive at the now defunct Home Solutions to be indicted in the Northern District of Texas. In May 2011, Home Solutions’ former CEO and Chairman of the Board, Frank J. Fradella, 56, of Covington, Louisiana, was indicted by a federal grand jury and charged with two counts of securities fraud, one count of insider trading, two counts of false certification, and one count of making false and misleading statements to auditors and accountants.
With respect to Marshall, the indictment alleges that from approximately December 2006 to May 2008, he engaged in a scheme to defraud investors by fabricating false and fictitious revenue, operating income, and costs that purported to be from Fireline construction projects. As a result of the fraudulent scheme, Marshall caused Home Solutions to disclose false and fraudulent revenue, cost, and income figures in its first- and second-quarter SEC quarterly reports in 2007.
The indictment alleges that as part of the scheme, Marshall caused Fireline to enter into construction contracts with private companies in Tampa, e.g., Villas of Tampania LLC; Miller Mac LLC; Villas of Humphrey’s LLC; Villas of Himes LLC; and North A Town Homes LLC. In addition, Marshall caused Fireline to enter into a $4 million contract for the construction of his personal residence on Davis Island. To support Fireline’s false and fraudulent accounting records, he caused employees of Fireline to create and backdate false and fraudulent contracts and invoices on each of the projects.
Marshall also caused Fireline to issue press releases announcing these contracts, but Marshall failed to disclose that each contract was with an entity that he controlled. The press releases also exaggerated the amount of work and revenue that Fireline had during the period. Marshall also caused Fireline to create fraudulent invoices to support its accounting of these projects, but the invoices significantly overstated and fabricated true costs incurred and the physical progress of the projects. In fact, even though Fireline’s reported revenues and income on the projects were false, because little, if any, of the work had actually been performed, Marshall caused Home Solutions to report this bogus information to public investors in its 2007 first- and second-quarter SEC quarterly reports.
The indictment charges Marshall with two counts of securities fraud. If convicted, each count carries a maximum statutory sentence of 25 years in prison and a $250,000 fine. Restitution could also be ordered. In addition, the indictment includes a forfeiture allegation which would require the defendant, upon conviction, to forfeit any proceeds or property traceable to the offense.
An indictment is an accusation by a federal grand jury, and a defendant is entitled to the presumption of innocence unless proven guilty.
This law enforcement action is part of President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch and, with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
The investigation is being conducted by the FBI. Assistant U.S. Attorney J. Nicholas Bunch is in charge of the prosecution.