The Sound Of Silence from Home Solutions of America

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“Fraud and falsehood only dread examination. Truth invites it.”    Samuel Johnson

As this week marks the 5 year anniversary of Sarbanes Oxley, it is interesting to watch the executives at Home Solutions commit fraud on the investing public on a daily basis. This fraud is being perpetuated by the naïve and incestuous group at Sanders Morris Harris. This report will bring to light some new revelations about Home Solutions and put forth some suggestions as to what is happening to this mysterious company.

Is Home Solutions of America Under SEC Investigation?

Citron finds it intriguing that between January 29th and May 31st the company released 10 “new contract” press releases. This is a rate of one every week and a half….but since May 31, nothing.  Citron suggests that this could be because the company was contacted by a regulatory body regarding the need to verify the news that they previously announced.  We do not believe this is a formal SEC investigation (yet), but we are inclined to believe that the company has had communication with regulatory bodies about their disclosure practices. The noticeable silence of the company speaks volumes.
http://www.hsoacorp.com/index.php/new_section/news

Rodman Renshaw

Just today, Rodman Renshaw put a positive note on Home Solutions.  Ironically enough, the only other times that Rodman and Renshaw has covered a Citron stock is when they had buys on Telkonet and Nitromed, both stocks are now at all time lows.

Analyst Joe Giamiachael has done zero work in understanding this company as evident through his note. He presents a map with dots that are supposed to be Home Solutions offices when in reality they are nothing more than 1 man carpet cleaning franchises.  Furthermore, he shows us no color on any receivables or go forward contracts.  It appears as if he just mimics the same rhetoric as told by the company.  That being said, this is what we found to be most interesting in his note.  HOME SOLUTIONS TO MISS EARNINGS AGAIN.  According to the model put foward by Giamiachael, the company will end this quarter with $4.8 million in cash and revenues at the low end of $44 million.  Is this analyst note a way for the company to cover up another abysmal quarter with cashless earnings and mysterious revenues?

New Business Model

The company has found a new way to make money:  by not paying their subcontractors. This practice was recently profiled in the Tampa Business Journal. http://www.bizjournals.com/tampabay/stories/2007/07/30/story5.html

But is seems that this problem is just not limited to Tampa. Look what we found is going on in New Orleans under the watch of Roy Marshall:  http://www.pier8condos.com/updates.php   (read the July 20th entry)

“Effective Monday July 16th, the Board of Directors of Pier 8 terminated the services of RG America and Fireline. The reason was due to their ability to pay vendors working at Pier 8. The Board will not tolorate the issue of unpaid vendors in the future.”

Fireline not paying its vendors has already translated to lawsuits. As we can see from this link to the Hillsborough County Courts, this month alone Fireline became the defendant to 2 new lawsuits. This liquidity crunch can not be ignored by investors.

http://207.156.115.81/oridev/criminal_pack.ap?pcSearchMode=NS&pnPidm=6173754&pcCaseId=07-CC-021552&pnCnt=1&pcFirst=&pcLast=FIRELINE%20RESTORATION%20INC&pcMi=&pcSuf=&[email protected]&pcByear=&pcPtyp=D001&pcDefStat=Opened&pdInit=24-JUL-07&pcCaseStat=Opened&pcCtyp=OT&pcLocn=TA&pcPref=&pcWarrant=&pcCaseDscr=OTHER&pcDiv=H&pcCourtType=&pnCaseYrFr=1970&pnCaseYrTo=2007&pcCtypCL=ALL&pcLocnCL=ALL

It is the opinion of Citron that Fireline is not paying its vendors in order to masquerarde a potentially devastating quarter for the company. This practice would not be unheard of from a company that seems to have more problems than a 10th grade math book. Many of the problems that are not in yet documented in the public domain were recently released in a piece by the New York Post.

http://www.nypost.com/seven/07242007/business/retorer_business_roddy_boyd.htm

On June 6th, Citron put forward a list of ten questions that the company owes to shareholders to answer. Since that time, the stock price has been down 35% and the company has only answered one question.  YES, they are keeping Brian Marshall’s plane for $70k a month.

http://citronresearch.com/index.php/2007/06/05/

Citron still holds the firm belief that the company is committing FRAUD on the investing public, as neither Home Solutions, David Yuschack of Sanders Morris, Rodman Renshaw, the auditors, nor any journalist can answer:

  • where the receivables are coming from
  • who is paying them $100 million for the New York project
  • (and our favorite is) the whereabouts of the Tampa project, which we will now put in the same category as the Loch Ness Monster and Bigfoot. They are all merely legends that some swear by but no one can prove.

Shareholders should be outraged that the company has not disclosed the location of its Tampa project. We only hope that they boys all have good defense attorneys. To recap all of the indiscretions at Home Solutions would take too long. To get a decent recap one can read the revised class action lawsuit that was just filed on July 20th.For the rest of the story, we believe one day someone will have a long time to tell it.Š