Homestore Executives Expected To Be ChargedSep 25, 2002 | The Washington Post
The Justice Department will file criminal charges, possibly as early as today, against three Homestore.com Inc. executives in connection with accounting improprieties at the real estate Web site, according to people familiar with the matter.
Federal prosecutors in Los Angeles are expected to name Joseph Shew, Homestore's former chief financial officer; John Giesecke, former chief operating officer; and John DeSimone, former director of finance, with masking Homestore's financial condition. Shew will face one count of conspiracy; Giesecke, one count of conspiracy and one count of wire fraud; and DeSimone, one count of insider trading, sources said.
The pending charges were first reported on the Wall Street Journal's Web site.
Homestore, based in Westlake Village, Calif., began an internal investigation of accounting problems last December. Earlier this year, the company disclosed that it had overstated its revenue by millions of dollars by booking money from deals that should have been considered barter exchanges. The deals involved companies including America Online Inc., the Internet arm of AOL Time Warner Inc.
The Homestore executives will cooperate with ongoing investigations by federal prosecutors and the Securities and Exchange Commission, sources said. The SEC is likely to file its own set of civil charges against the three men.
Testimony from the executives could help shed light on unconventional business deals at AOL, which are the focus of a separate investigation by federal prosecutors in Virginia, the sources said.
Homestore shared revenue with AOL from advertising sold on Homestore's house and garden areas within AOL's online network. Sources have said that executives in AOL's business services division directed financial analysts to inflate Homestore's share of revenue from that deal by $2 million. AOL has acknowledged that it generated a report that attributed revenue from certain other advertisers to Homestore but said it later corrected it.
The expected charges against the Homestore officials stem from the way the company handled revenue from joint ad and marketing programs on its books.
"Mr. Giesecke deeply regrets his past mistakes and will cooperate fully to bring this matter to a swift conclusion," said Jan L. Handzlik, his attorney.
Lawyers representing Shew and DeSimone did not return calls seeking comment late yesterday. A spokesman for Homestore could not be reached.