The civil and criminal actions allege that the defendants structured and negotiated fraudulent "round-trip" transactions for the purpose of artificially inflating Homestore's online advertising revenues to exceed Wall Street analysts' expectations, even though these transactions had no economic substance. These defendants also participated in misleading Homestore's outside auditors to prevent discovery of the true nature of the round-trip transactions, including altering Web sites and press releases of vendor companies to eliminate incriminating information, preparing and backdating documents, and using false addresses for related businesses, according to the SEC. Several salespeople charged personally profited from the illegal transactions by accepting "kickbacks" from vendors or by engaging in insider trading in Homestore's stock, the SEC said. In one case, a former Homestore salesperson routed payment of a kickback through offshore bank accounts in Lebanon and Uganda in an effort to avoid detection.

The SEC also announced the filing of civil charges against the former CEO and CFO of a Homestore vendor for assisting in the fraudulent scheme at Homestore. The SEC has now charged a total of 11 individuals for their roles in a financial fraud scheme at Homestore, seven of whom have been criminally charged by the United States Attorney in Los Angeles.

Previously in this matter, Homestore's former Chief Operating Officer, John Giesecke, former Chief Financial Officer Joseph Shew, former Vice President of Transactions John DeSimone and former Finance Department Manager Jeffrey Kalina, pleaded guilty to criminal charges brought by the Department of Justice and settled SEC actions. The civil case is the product of an ongoing investigation by the SEC. The criminal investigation by the Federal Bureau of Investigation also is ongoing.