AOL, Cendant added to Homestore suit
SACRAMENTO, Calif., Nov 17 (Reuters) - AOL Time Warner Inc. <AOL.N> and Cendant Corp. <CD.N> were among 16 companies that contributed to the financial collapse of online real estate firm Homestore.com, a California teachers retirement fund has alleged.
The companies were added as defendants in a securities class action suit brought by the California State Teachers' Retirement System, the third largest U.S. public pension fund, against Homestore, a once high-flying dot-com, and its top officers, the group said in a statement on Saturday.
The amended complaint, filed in U.S. District Court in Los Angeles last week, said the parties falsified revenues to maintain the myth of Homestore Inc.'s <HOMS.O> inflated success story on Wall Street.
AOL and Cendant could not be immediately reached for comment on the suit.
According to the complaint, the defendants' schemes included intricate "round-trip" transactions. Homestore signed deals with the companies for money to flow from Homestore to the firms, then back to Homestore.
The round-trip transactions enabled Homestore to illegally recognize revenue to meet its Wall Street targets and keep the stock price climbing, according to the complaint.
"The Homestore financial fraud was based on a simple concept: Since the company was not able to meet the expectations of Wall Street through the production of legitimate revenues, Homestore resorted to 'buying revenues,'" the complaint alleged.
The teachers' retirement system sued Homestore.com last summer, alleging it engaged in revenue-boosting schemes with third-parties, including America Online.
At that time, the suit did not name AOL as a defendant but alleged the Internet giant was part of the types of deals that caused Homestore to restate results for much of 2000 and 2001 after determining revenue for those two years had been overstated by more than $500 million.
The California State Teachers' Retirement Systems said it bought 431,123 Homestore common shares between May 2000 and December 2001, for a total cost of more than $13 million. It said losses on its Homestore investments were more than $9 million.
Shares of Homestore trade at $1.02 Friday on Nasdaq. The stock hit a high of $138 in January 2000.
The amended complaint also named L90, Dorado Corp., Akonix Systems, Internet Pictures, CityRealty.com, Classmates Online, CornerHardware.com, GlobeXplorer, Privista, PromiseMark, RevBox, SmartHome, WizShop.com and Top Producer Systems.
AOL Time Warner has been the subject of several shareholder lawsuits, as its stock has plunged as much as 60 percent this year. The company has been hit by slowing advertising and subscriber growth at its America Online unit and federal probes into accounting practices at the Internet division.
11/17/02 13:54 ET |
