Using a Different View to Expose Homex’s $3.3B Fraud

A recent SEC investigation has shone a spotlight on Mexican homebuilding company, Desarrolladora Homex S.A.B. de C.V, to reveal an impressive $3.3 billion accounting fraud case.

But what is most interesting about this revelation isn’t necessarily the amount involved – but how it was discovered.

After Homex, one of Mexico’s largest homebuilding companies at the time, reported fake sales of over 100,000 homes and inflated revenues by 355 per cent, the SEC turned to a new perspective to expose the fraud in a probe last year.

The SEC revealed that it used satellite imagery to prove that Homex “had not even broken ground on many of the homes for which it reported revenues” over the three years, including a project site in Guanajuato, Mexico. It was here that the company had claimed every planned home was build and sold by the end of 2011 – a claim the SEC rejected with the help of images from March 2012 to show that the area was still largely undeveloped.

This use of technology by the SEC is an exciting method, moving away from just the numbers and taking to the skies to find physical evidence. The results have naturally been more than just a slap on the wrist.

Mexico’s National Bank and Securities Commission, who also worked with the SEC during the investigation, had previously awarded Homex with a 12 million peso ($613,977) fine in October 2015 for improperly preparing its financial statements.

This week, Homex has agreed to settle the SEC’s charges without admitting or denying the charges, consenting to a final judgement and agreeing to be prohibited from offering securities in US markets for a minimum of five years. Shares in the company have also been suspended until March 17 according to the SEC on a separate charge, due to ‘a lack of adequate and accurate information’ in the company’s annual reports.

It’s unlikely that satellite imagery will act as much of a deterrent to other potential swindlers, but it’s just another case of the SEC thinking out of the box and using technology in the fight to crack down on fraud – an example everyone can learn from.

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