Property website chiefs admit fraud

John Ashcroft: Announced charges

The drive to clean up corporate America has claimed three further scalps, as former bosses at the country's largest property website agreed to plead guilty to fraud charges.

The admissions by former executives at Homestore.com followed findings that the firm had fraudulently reported about $46.4m in bogus revenue.

And it came after a Department of Justice (DoJ) investigation involving internet giant AOL.

'Appropriate' accounts

While AOL, part of the AOL Time Warner empire, said it had for "many months" co-operated with justice officials, it stood by its own bookkeeping procedures.

"From AOL's perspective, our transaction with Homestore was appropriate and our accounting for that was also appropriate," AOL spokesperson John Buckley said.

In August, AOL Time Warner said AOL might have improperly accounted for three advertising deals totalling $49m in revenue.

But a source told news agency Reuters AOL had been involved in the Homestore probe as a witness rather than potential target.

Cash 'recycling'

US attorney general John Ashcroft said the charges against the former Homestore chiefs involved a process known as "round tripping", in which the company's own funds were used to inflate revenues.

"By this scheme, the defendants admitted using Homestore's own money to buy revenue by circulating funds out of Homestore through various middlemen and back into the company, which would then claim the funds as new revenue," Mr Ashcroft said.

Homestore entered into one agreement which saw it rewarded in advertising for passing on advertisers to a "major media company", a DoJ statement said.

Mr Ashcroft declined to mention the firm referred to in the statement.

Bosses charged

His announcement came as the Securities and Exchange Commission, the US financial watchdog, filed civil charges in the case.

Two executives, former chief operating officer John Giesecke and former financial officer Joseph Shew, agreed to plead guilty to a variety of charges, and to assist government investigations.

Former Homestore vice-president John Desimone was charged on one count of insider trading, Mr Ashcroft said.

But the company itself was to be spared charges after co-operating with investigators.