[1] Stirling Homex misled investors by inflating its reported revenue, stating in its consolidated financial statements that the value of completed housing modules which were assigned to contracts were counted as revenue and asserting that said contracts were backed by the United States Department of Housing and Urban Development.
In reality, most contracts were not backed by the federal department and revenue was reported for homes which were not paid for and which had not been turned over to customers.
[3] On July 7, 1972, ten banks demanded Stirling Homex pay off $38.8 million in loans early, citing company deviations from the terms of their credit agreements.
[5] In 1975 the company's executives were charged with fraud and conspiracy and in 1977 four of them were sentenced to short prison terms by federal judge Marvin E.
[citation needed] The SEC also took punitive action against the company's auditor, Peat Marwick, banning the firm from obtaining new corporate clients for six months and requiring it to review its auditing methods.