Homestore Fraud:Accounting / reporting omissions and misstatements

Homestore Fraud

During the latter half of the year 2006 , the former chief executive and founder of the online real estate listings company , Homestore Inc , was sentenced to fifteen years in prison . Moreover , he was ed to pay a fine worth 5 million for devising a scheme that was meant to defraud investors . The man was convicted for insider trading , for false statements to company accountants as well as federal regulators , and for conspiracy in a scheme that falsely inflated advertisement revenues in to fool investors (Homestore .com

Homestore did not

only disturb its investors after it was found that the persons running the business were engaged in fraudulent accounting practices . The company was a partner to America Online in addition to Cedant and other important e-commerce organizations . All of Homestore 's partners found regulators scrutinizing their own books in the wake of the discovery of the Homestore fraud (Regan , 2005 Shareholders lost at least 100 million in market value around the same time (Taub , 2006

The Homestore fraud was publicized for the first time in the year 2001 . The following year , the Sarbanes-Oxley Corporate Act of 2002 was introduced to check corporate fraud . Indeed , Homestore found itself in the company of Worldcom , Enron , Global Crossing and Arthur Anderson that had all failed to meet the American expectations of straightforward transparency in financial affairs (Whalen , 2003 . Fortunately for investors , the U .S . Securities and Exchange Commission considered distributing the civil penalty paid by Homestore 's CEO among the shareholders of the company under the Fair Funds provision of the Sarbanes-Oxley Act soon after it was introduced (SEC s , 2002

HOMESTORE FRAUD

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Homestore was known as one of the very best Internet portals for real estate services and other related services . In 2002 , however , the SEC reported the following

The Commission 's complaint charges Giesecke (Homestore 's former chief operating

officer , Shew (former chief financial officer , and DeSimone (former vice president of

transactions ) with arranging fraudulent "round-trip " transactions for the sole purpose of

artificially inflating Homestore 's revenues in to exceed Wall Street analysts

expectations . The defendants circumvented applicable accounting principles and lied to

Homestore 's independent auditors about these transactions . While the fraud was ongoing , the

defendants exercised stock options at prices ranging between approximately 21 and 32 per

share , reaping profits ranging from approximately 169 ,000 to approximately 3 .2 million (SEC s

The complaint made by the SEC claimed that during the years 2000 and 2001 , Homestore 's ad revenue was one of its primary sources of revenue The company engaged in various barter transactions ' in to inflate its revenues and thereby meet the estimates of Wall Street Homestore was actually recognizing its cash as its revenue in this process . In particular , the company was paying inflated sums of money to several sellers of products and services . The sellers , in turn invested the sums paid to them in ads with two media companies . Those media companies bought ads from Homestore , and the latter...