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An Azteca crusade

SEC charges Mexican conglom with fraud

NEW YORK — The SEC slapped Mexico’s media giant TV Azteca, its high-profile chairman and controlling shareholder Ricardo Salinas Pliego and two directors with civil fraud charges for allegedly funneling to Salinas more than $100 million in personal profits through related company transactions — and for publicly lying about it.

A TV Azteca spokesman said the company was expected to issue a statement later Tuesday evening.

The Securities and Exchange Commission lawsuit, filed in federal district court in Washington, D.C., also alleges that Salinas and Pedro Padilla Longoria, a board member and former CEO, sold millions of dollars in TV Azteca stock while Salinas’ self-dealing remained undisclosed to the marketplace.

Luis Echarte Fernandez, CEO of Azteca America, the conglom’s U.S. arm, agreed to pay a $200,000 fine without admitting or denying wrongdoing.

Lawyers for the company and the three execs didn’t immediately return calls.

Mexico’s second largest broadcaster disclosed in August that execs including Salinas had been notified that the SEC was planning to file civil charges against them.

Salinas has scoffed at the investigation, calling it a “case of discrimination” against Mexicans.

Still, the blow was tangible as TV Azteca stock dropped more than 9% in New York to close at $9.14. The shares also slumped in Mexico, slamming the main market index there.

The commission said it’s seeking “disgorgement of Salinas’ and Padilla’s ill-gotten gains” plus pre-judgment interest and wants Salinas and Padilla barred from serving as officers or directors of any publicly traded company. TV Azteca is traded on the New York Stock Exchange as well as the Mexican bourse.

Parent company charged

Salinas, 49, is also chairman-CEO of Azteca Holdings, the parent company of TV Azteca, which is also charged with fraud.

Padilla was CEO through July, when he was named CEO of Grupo Salinas, a holding company for various Salinas interests. Echarte is chief financial strategist for Grupo Salinas.

The charges involve financial transactions between TV Azteca wireless telco subsid Unefon and Codisco, a private company owned by Salinas. In 2003 Codisco paid a steeply discounted $107 million to take over $325 million in debt Unefon owed its chief supplier Nortel Networks. Codisco made a $218 million profit after Unefon paid the debt in full, using proceeds from the sale of spectrum capacity.

In other words, the SEC claims Salinas knew full well when Codisco bought Unefon’s debt on the cheap that the telco would likely be able to pay it off in full. Commission noted that none of the companies involved disclosed that Codisco was half-owned by Salinas — and half by Unefon chairman Moises Saba, who hasn’t been charged by the SEC.

TV Azteca has subsequently spun off its stake in Unefon.

Complaint could expand

Harold Degenhardt, district administrator of the SEC’s Fort Worth office, which brought the charges, said that as discovery proceeds the commission always reserves the right to amend — or expand — its complaint. The office’s head of enforcement, Spencer Barasch, said cooperation with Mexico’s national stock market regulator — the Comision Nacional Bancaria y de Valores — was instrumental in the probe that led to Tuesday’s charges.

“Securities regulators share a strong and mutual resolve to combat fraud; geographic boundaries will not serve to protect those who seek to defraud investors,” he said in a statement.

The SEC’s field office in Fort Worth is one of 11.