Fraud Allegations for Restoration Company
Feds investigate disaster Restoration execs Fireline Restoration founder faces bankruptcies, fraud allegations
Tampa Bay Business Journal
by Janet Leiser - Staff Writer
TAMPA - In 2006, it sounded like an inspiring success story: Local businessman makes good, sells disaster restoration contracting business for $50 million to up-and-coming Texas public company.
But now after a year of investigation, federal authorities allege the story was not as it seemed.
Rather it was part of a "fantasyland of fraud" aimed at inflating the stock price of Dallas-based Home Solutions of America, then traded as HSOA on the Nasdaq, according to the Securities and Exchange Commission.
Tampa's Fireline Restoration Inc. founder Brian M. Marshall and three of his associates, Thomas Davis, Stephen Gingrich, Jeffrey Craft, are among seven businessmen named in a Nov. 30 fraud lawsuit brought by the SEC in U.S. District Court's Northern District of Texas.
The others are former Home Solutions CEO Frank Fradella, CFO Jeff Mattich and Rick O'Brien.
Home Solutions' dealings also are under investigation by the U.S. Department of Justice, which has not yet reached a finding, said a source familiar with the case.
In the SEC investigation that began about a year ago, authorities found irregularities in the financial dealings of Home Solutions as far back as 2004, said agency trial attorney Howard J. Loftin Jr. of Fort Worth.
Rise and fall
Other than dogged complaints by subcontractors that Fireline wasn't paying its bills, Marshall seemed to be flying high after he hooked up with Home Solutions' Fradella in 2006.
The men flew Marshall's private jet around the country, including a trip to Las Vegas with New Orleans Mayor Ray Nagin as guest. The Times-Picayune reported on that trip and Nagin's relationship with Fradella following Hurricane Katrina.
Marshall bought a condominium in New Orleans. He already owned a Harbour Island condo, and he paid $2.8 million for a Davis Islands waterfront home he razed in 2007.
In 2006, the year Home Solutions bought Fireline, Marshall, Gingrich and Davis booked more than $9 million of fake revenue on undisclosed, related-party transactions between Fireline and other companies controlled by Marshall, the lawsuit states.
Bogus revenue, along with other illicit maneuvers by Fradella, bolstered Home Solutions financial statements, sending HSOA's price up to more than $13 a share, the SEC said in a lawsuit.
Fradella dumped about $6.8 million in stock at the peak in 2006.
The company's accounting firm, KMJ Corbin & Co., questioned Home Solutions' financial statements and eventually resigned.
In late 2007, the company admitted it needed to restate numerous financial statements. In January 2008, the stock was delisted from the Nasdaq. In February, Marshall resigned.
He also evicted Fireline from his Tampa office building at 107 S. Willow Ave.
Last month, eight of Marshall's companies, including Initech Restoration, sought to reorganize under Chapter 11 bankruptcy.
At about the same time, Marshall assigned the assets of some of his companies - BMJC LLC, Fortune Property Group LLC, Miller Mac LLC and Unit 307 LLC - to Michael Phelan, Hillsborough public records show.
Those assets include 4.9 acres at 590 Miller Mac Road, Apollo Beach; property at 1119-1123 N. Florida Ave., Tampa; and a New Orleans condominium.
He has asked the bankruptcy court to authorize his bi-weekly pay of $14,807 as president, secretary and treasurer of Initech.
Calls to Marshall's bankruptcy attorney, Richard McIntyre of Tampa, weren't returned prior to deadline.
INFO
Contractor Brian M. Marshall's companies in bankruptcy:
Marshall Aviation LLC
MTM Enterprises Inc.
Initech Restoration Inc.
BMJC LLC
Marshall Investments LLC
Unit 308 LLC
North A Properties LLC
Villas of Tampania LLC