Risk & Compliance

TV Azteca Execs Propose Settlement

The SEC lawsuit was reportedly the first brought under Sarbanes-Oxley against an executive of a foreign company.
Stephen Taub and Dave CookMay 30, 2006

TV Azteca, Mexico’s second-largest broadcaster, has proposed a settlement to a Securities and Exchange Commission lawsuit filed last year over allegations of improper self-dealing.

The SEC lawsuit was the first brought under Sarbanes-Oxley against an executive of a foreign company, reported The Wall Street Journal.

In January 2005, the SEC alleged that TV Azteca chairman Ricardo Salinas Pliego, executive Pedro Padilla Longoria, and another executive engaged in a scheme to conceal Salinas’s role in a series of transactions through which he personally profited by $109 million.

Specifically, reported Bloomberg, Salinas and a partner purchased $325 million of debt owed by then-Azteca subsidiary Unefon to Nortel Networks, paying only $107 million. Three months later, according to the wire service, Unefon repurchased the debt at full value, netting Salinas and his partner $109 million each.

At the time, according to Reuters, TV Azteca traded as American Depositary Shares. Salinas has since withdrawn those ADRs as well as U.S.-traded stock of two other companies he controls, reportedly to avoid further SEC scrutiny.

The SEC complaint also alleged that Salinas and Padilla sold millions of dollars of TV Azteca stock while Salinas’s self-dealing remained undisclosed. In addition, the commission alleged that Salinas and others caused TV Azteca or Azteca Holdings to file periodic reports that did not disclose Salinas’s involvement in the related-party transactions involving Unefon.

The proposed settlement — which would affect only Salinas and Padilla and not TV Azteca, the company stressed — is expected to be reviewed by the SEC during the next 90 days.