Washington (Sept. 27, 2002) -- The Securities and Exchange Commission filed charges this week against three former executives at real estate Web portal Homestore Inc., for allegedly inflating the company's online advertising revenues in 2001 in an effort to impress Wall Street.
The complaint charges the company's former chief operating officer, John Giesecke Jr., its former chief financial officer Joseph J. Shew, and John DeSimone, its former vive president of transactions, with overstating ad revenues by a whopping $46 million for the first three quarters of 2001.
The action was brought in coordination with the U.S. Attorney's Office for the Central District of California, which simultaneously announced related criminal charges against the three defendants. Giesecke, Shew and DeSimone have each agreed to settle the Commission's lawsuit, to plead guilty to the criminal charges and to cooperate with the government.
The trio apparently arranged fake "round-trip transactions" in order to inflate revenues, and lied to the company's independent auditors about the transactions. During this period, the three all exercised stock options which reaped them profits ranging from $169,000 to more than $3.2 million.
"This fraud misled the public by creating the illusion that Homestore's revenues were growing at a time when many dot-com companies were in decline or had failed," said Randall R. Lee, regional director of the SEC's Pacific Regional Office. "Corporate executives who participate in the creation of accounting fiction will suffer severe consequences. We have worked closely with the criminal authorities to bring this action expeditiously, and, in coordination with them, will continue to investigate others who may have participated in this fraud."
-- Electronic Accountant Newswire staff
