Grupo Salinas Announces Plans to Withdraw Listings for Three Subsidiaries from New York Stock Exchange

SourceMex Economic News & Analysis on Mexico, June 15, 2005 | Go to article overview

Grupo Salinas Announces Plans to Withdraw Listings for Three Subsidiaries from New York Stock Exchange


Mexican entrepreneur Ricardo Salinas Pliego has taken steps to remove all three of his enterprises from the New York Stock Exchange (NYSE). On June 1, Salinas announced that stockholders had voted to delist his three companies, television network TV Azteca, retailing and banking unit Grupo Elektra, and wireless telephone company Grupo Iusacell, from the NYSE.

Sources for holding company Grupo Salinas said the three companies would remain on the NYSE board while arrangements are being made to compensate stockholders and comply with the delisting regulations established by the NYSE. Owners of stock in the three companies will be given the option to exchange their holdings on the NYSE for stock in the three companies on the Bolsa Mexicana de Valores (BMV).

Company says decision not tied to stock-fraud investigation

The decision to abandon the NYSE comes as Salinas is facing charges of stock fraud. In January of this year, the US Securities and Exchange Commission (SEC) filed a civil lawsuit in a US federal court charging TV Azteca, Salinas, and two other executives with defrauding investors in the US and Mexico by concealing a complex debt scheme and reaping huge profits (see SourceMex, 2005-01-19).

Company officials, however, denied that the decision to exit the US financial markets had anything to do with TV Azteca's legal problems. "[The decision] has nothing to do with the SEC investigation and the legal battle," said Luis Nino de Rivera, a spokesman for Grupo Salinas.

The move would have deep repercussions for Ricardo Salinas' ability to operate in the US. The SEC legal challenge, among other things, seeks to bar Salinas from heading or serving on the board of any company that trades publicly in the US.

In mid-May, TV Azteca filed a motion in a US Federal District Court requesting that the SEC lawsuit be dismissed. The court has yet to respond to the motion, but regulators believe the Salinas group's chances of success are minimal. "Defendants in lawsuits filed by the SEC very rarely succeed in getting them dismissed at this early stage," said John Sturc, a former SEC enforcement official now in private practice at the Gibson, Dunn & Crutcher law firm in Washington, DC.

Mexican authorities also took action against Salinas on charges similar to those presented by the SEC. In late April, the Comision Nacional Bancaria y de Valores (CNBV) levied a fine of US$2.3 million against Ricardo Salinas and another high-level official for violations of Mexican securities laws.

The CNBV has also asked the Procuraduria General de la Republica (PGR) to file criminal charges against Salinas for unlawful use of privileged information.

Salinas not only appealed the CNBV fine, but also responded with a public campaign on TV Azteca against Finance Secretary Francisco Gil Diaz, whose ministry oversees the CNBV. The network asked the PGR to investigate allegations that Gil Diaz had attempted to censor a series that called into question the finance secretary's role in a scandal involving the defunct savings protection fund (Fondo de Proteccion al Ahorro Bancario, FOBAPROA). …

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