Three former Homestore executives agreed last month to plead guilty to fraudulently inflating revenue via "round-trip" transactions. With those deals, the firm wound up funneling money back to itself through "a major media company," widely reported to be AOL. Both have been forced to restate prior earnings.
Now Cendant -- a multi-faceted operation that provides rental car, fleet management, real estate, and hospitality services -- has entered the picture. The Times story says the three Homestore execs told prosecutors their firm had "counted increasingly on bogus deals with both Cendant and AOL Time Warner to help Homestore meet its quarterly revenue projections" in 2000 and 2001. Those deals are said to have passed advertising or license fees between the three in circular transactions that inflated revenue but generated no profit.
Cendant denies knowledge of an investigation and says it hasn't received revenue from Homestore since 1999.
If the allegations are true, however, the news is particularly troubling for its shareholders. In 1998, Cendant lost more than half its value after accounting irregularities were uncovered. Today, with the stock down 9% in early trading, investors must be scratching their heads, asking, "Will they never learn?"