The company also announced that it has reached a settlement to pay up to $11.9 million to support legal costs for Peter Tafeen, the company’s former executive vice president of business development who is facing federal fraud charges related to an alleged advertising fraud scheme in 2000 and 2001 to inflate the company’s revenue.
Homestore officials in September announced that the company will pay up to about $15.2 million in fees and expenses related to the legal expenses of Stuart Wolff, the company’s former chairman and CEO who resigned in 2002 amid an internal investigation.
Wolff is also named in a civil lawsuit and criminal indictment filed by federal authorities, which alleges that Tafeen and Wolff participated in executing fraudulent “round-trip” transactions to artificially inflate Homestore’s revenue in order to exceed Wall Street analysts’ expectations.
They allegedly knew that the transactions fraudulently generated a circular flow of money in which Homestore recognized its own cash as revenue and concealed the scheme from the company’s auditors, according to court documents. The accounting mistakes caused the company to restate its financial results.
The settlement with Tafeen requires Homestore to reimburse Tafeen up to a maximum of $11.85 million, inclusive of $6.4 million already advanced, through January 2006.
“An additional payment of approximately $5.5 million will be made in February into a trust account for future reimbursements to Tafeen, at which time Homestore will have no further liability to Tafeen,” according to the announcement.
“In exchange for this limit on Homestore’s liability, Homestore has agreed to not seek repayment of the funds if it should subsequently be determined Tafeen is not entitled to indemnification. In the event Tafeen ultimately incurs less than $11.85 million, the remaining amount in trust will be returned to Homestore.”
Homestore announced that it will take an additional charge of $5.9 million in the fourth quarter to fully reflect the Tafeen settlement.
Homestore also announced plans to change the company’s name to Move Inc. “to coincide with an expanded commitment to offering consumers comprehensive real estate listings, decision support tools, and access to qualified move-related service providers. This enhanced consumer focus will enable Move to create even more effective advertising venues for a broader range of advertisers.”
The re-branded company will have three consumer offerings: Realtor.com, Move and Welcome Wagon. “The new name unifies the company’s strategy of providing a platform for connecting consumers with Realtors, home builders, rental property owners and other move-related advertisers before, during and after a move,” according to the announcement.
Along with the new brand, Homestore will launch an all-new real estate search engine site, Move.com. The company also announced that it has acquired Moving.com, a provider of consumer moving tools and access to qualified moving services.
“The new Move.com Web site will replace Homestore.com, HomeBuilder.com and RENTNET in the second quarter, and will serve as a comprehensive move and real estate listing search engine. The site will give consumers the most extensive selection of real estate listings available by providing access to Realtor.com listings, along with new home and rental listings from all over the Web,” the company announced.
With the launch of Move.com, the company will expand the Realtor.com business model for the company’s new home and apartment industry customers, Homestore officials announced. This will include free basic property listings and a paid product for customers who want to enhance their property listings, the announcement states.
Mike Long, Homestore’s CEO, said in a statement today, “We are excited to introduce a new brand – Move – that perfectly complements our ongoing goal of serving as an essential resource for both consumers and advertisers in and around a move.
“This focus on consumer needs is the next step in our evolution; from providing software and technology to the early adopters within the online real estate category, to becoming the real estate industry’s trusted partner for efficiently reaching consumers. These changes will also enable us to extend Realtor.com’s position as the most visited real estate site on the Internet.”
Homestore is holding a “corporate strategy and product review” conference call today to discuss its technology plans with investors.
Homestore officials announced plans to launch new mapping technologies at the Move.com and Realtor.com sites that will allow consumers to view property locations on digital maps. These maps will allow users to scroll, zoom in, zoom out and choose from aerial images, graphical maps or a hybrid view that combines both elements.
Allan P. Merrill, executive vice president of strategy and corporate development at Homestore, said during a Wednesday conference call with investors that the company will be adding community features to the Realtor.com site that will enable Realtors and community residents to post neighborhood information. The new community features will also include online resources about schools and community demographics.
Merrill said the community pages will provide for “viral interaction” while providing local content.
Realtor.com will also be adding enhanced property listings to its search results that can be purchased on a cost-per-click basis. Realtor.com will also allow free virtual tour distribution for those customers that purchase enhanced showcase listings, and the site will roll out a comparative market analysis product to generate leads for agents.
Homestore also announced plans to formally launch a cost-per-lead business for agents who subscribe to Top Producer 7i, a real estate lead management system. Merrill said that subscribers to the Top Producer system will be offered real estate leads at a cost of about $25 to $30 per lead.
“Participation will be on a month-to-month basis with customers setting the number of leads they would like to receive.”
The company’s acquisition of Moving.com, which cost about $9 million, allows the company to reach consumers with offers from movers, truck rental and self-storage providers. The company also plans to switch to a mortgage rates directory that was acquired in the Moving.com purchase.
Long said of the name change, “It’s not everyday a company decides to change its name, so this is a big day for our company.” The new brand “unifies our efforts to provide a platform for connecting consumers with the resources they need before, after and during a move,” he said.
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