The Court of Chancery of the State of Delaware has ruled that Homestore must pay former company executive Peter Tafeen all reasonable attorney’s fees and costs in connection with the Securities and Exchange Commission and U.S. Justice Department investigations and civil lawsuits that have been filed against Tafeen for his purported role in a scheme to inflate Homstore’s revenues.

The Court said Tafeen also is entitled to payment of his attorney’s fees for bringing the lawsuit against Homestore.

Homestore in a statement said it is analyzing the ruling and considering its options, including a possible appeal of the decision.

The amount of legal fees Homestore will be required to pay is undetermined at this time, but the company speculated in a previous investor conference call that it could cost as much as $3 million, according to Homestore spokesperson Erin Campbell.

Tafeen, who was a marketing and business development executive at Homestore, left the company in the fall of 2001, when accounting irregularities were reported along with other alleged improprieties. Tafeen was a hard-charging young executive brought into Homestore from Pointcast by former Homestore CEO Stuart Wolff.

The accounting irregularities of 2000 and 2001 led to the restatement of several quarterly earnings reports and prompted an SEC investigation, federal fraud charges against a number of former Homestore executives and a class-action shareholder lawsuit.

Homestore settled the shareholder suit with lead plaintiff, the California State Teachers Retirement Fund, in March for about $93 million. However, the pension fund still has claims pending against Stuart Wolff, Homestore’s former CEO, and Tafeen. The CalSTRS suit accused Homestore and individual defendants of falsifying financial statements and engaging in accounting irregularities, and was set to begin trial in June but was delayed.

In October 2003, Tafeen filed a lawsuit against Homestore, claiming the online real estate company owes him $2 million for expenses already incurred, plus unstated sums of future expenses in connection with the federal investigations and lawsuits. The lawsuit was filed in Delaware Chancery Court in New Castle County.

***

Send tips or a Letter to the Editor to jessica@inman.com or call (510) 658-9252, ext. 133.

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