sec-litreleases litigation_release 66 KB 4,654 chars

SEC v. Jeffrey M. Kalina, No. LR-17924, Central District of California — Press Release

raw: Jeffrey Kalina

Jeffrey Kalina, No. LR-17924

Caption: SEC v. Jeffrey M. Kalina

summary

Former Homestore M&A manager Jeffrey M. Kalina agreed to settle SEC civil charges and plead guilty to criminal securities fraud for orchestrating $46 million in round-trip transactions to inflate revenues in 2001, resulting in a $74,348 disgorgement, a permanent injunction, SEC suspension, and a potential five-year prison sentence.

paragraph

Jeffrey M. Kalina, former senior manager of mergers and acquisitions at Homestore, Inc., pleaded guilty to criminal securities fraud and settled SEC civil charges for his role in a $46 million round-trip fraud scheme during 2001 that artificially inflated advertising revenues by 64% and total revenues by up to 15%. He coordinated sham transactions with no economic substance, concealed them from auditors, and violated GAAP, leading to false filings in Homestore’s Form 10-Q reports. As part of his settlement, Kalina agreed to disgorge $74,348 in stock option gains, accept a permanent injunction from future securities law violations, be suspended from practicing before the SEC, and cooperate with the government’s investigation, while facing up to five years in prison and a $250,000 fine.

narrative

Jeffrey M. Kalina, former senior manager of mergers and acquisitions at Homestore, Inc., agreed to settle SEC civil charges and plead guilty to criminal securities fraud for his central role in a $46 million round-trip revenue fraud scheme during 2001. He coordinated fraudulent transactions with no economic substance, using Homestore’s own cash to generate fake advertising revenues, thereby misleading investors and violating GAAP. Kalina actively concealed these transactions from the company’s independent auditors and assisted senior executives in falsifying financial reports filed with the SEC, causing Homestore to misstate revenues by up to 15% across its first three quarterly reports. As part of his civil settlement, he agreed to disgorge $74,348 in profits from exercised stock options, accept a permanent injunction barring future violations of securities laws, and be suspended from practicing before the SEC. In the criminal case, he admitted to aiding the fraud, faces a maximum penalty of five years in prison and a $250,000 fine, and is cooperating with the ongoing government investigation. This case follows guilty pleas from three other former Homestore executives—John Giesecke, Joseph Shew, and John DeSimone—who collectively paid nearly $5 million in disgorgement and penalties. Homestore, then a leading real estate portal operator, was at the center of a broader accounting scandal that exposed systemic fraud in its financial reporting practices.

Enriched metadata

Scheme: financial-fraud (100%)
Court: Central District of California
Outcome: pleaded
Settlement: $5,000,000
Disgorgement: $74,348
Civil penalty: $250,000
Entity: Jeffrey M. Kalina
Ticker: HOMS

Classified financial-fraud(confidence 100%). EDGAR detection: forms 10-K/10-Q/8-K/NT 10-K· recall 67% / precision 23%. detection rule →

Extracted insights

Dollar amounts 4

$46.00M $46 million $10M–$100M
$5.00M $5 million $1M–$10M
$250K $250,000 $100K–$1M
$74K $74,348 $10K–$100K

Entities 3

scheme_term criminal securities fraud charge
person jeffrey m. kalina
agency the united states securities and exchange commission

Triples 14

Jeffrey M. Kalina Agrees To Settle The Commission's lawsuit
Jeffrey M. Kalina Agrees To Plead Guilty Criminal securities fraud charge
The United States Securities and Exchange Commission Announced Filing Of Charges Civil and criminal charges against Jeffrey M. Kalina
Jeffrey M. Kalina Participated In Financial fraud scheme involving 'round-trip' transactions
Jeffrey M. Kalina Assisted Senior Executives In Inflating revenues during 2001 through round-trip transactions
Homestore Overstated Advertising Revenues By $46 million (64 percent) for the first three quarters of 2001
Jeffrey M. Kalina Knew That Round-trip transactions had no economic substance
Jeffrey M. Kalina Assisted Management In Implementing the scheme and concealing parts of the transactions from the auditors
The Commission Charged Jeffrey M. Kalina With Securities fraud, falsifying Homestore's books and records, and aiding and abetting Homestore's reporting and record-keeping violations
Jeffrey M. Kalina Agreed To Entry Of An Order Permanently enjoining him from committing future violations of Section 17(a) of the Securities Act of 1933 and Sections 10(b), 13(a), 13(b)(2)(A), and 13(b)(5) of the Exchange Act of 1934 and Rules 10b-5, 12b-20, 13a-13, 13b2-1, and 13b2-2 thereunder
Jeffrey M. Kalina Agreed To Entry Of An Order Requiring him to disgorge $74,348, including interest, from the exercise of his Homestore stock options during his involvement in the fraudulent scheme
Jeffrey M. Kalina Agreed To Entry Of A Public Administrative Proceeding Suspending him from practicing or appearing before the Commission as an accountant
Jeffrey M. Kalina Admitted That He coordinated the efforts of Homestore sales staff in connection with the fraudulent transactions
The Charge Against Jeffrey M. Kalina Carries A Maximum Possible Penalty Of Five years in prison and a $250,000 fine

View original SEC litigation releasesec.gov

Extracted body text (4,654c)

Former Homestore mergers and acquisitions manager agrees to settle with the SEC; Defendant agrees to plead guilty to criminal securities fraud charge The United States Securities and Exchange Commission and the United States Attorney's Office for the Central District of California today announced the filing of civil and criminal charges against another former executive of Homestore, Inc. The Commission's complaint charges Jeffrey M. Kalina, Homestore's former senior manager of mergers and acquisitions, with participating in a financial fraud scheme involving "round-trip" transactions in which Homestore used its own cash to generate revenues and thereby meet Wall Street expectations. Kalina, 31, of Woodland Hills, California, has agreed to settle the Commission's lawsuit, to plead guilty to criminal charges, and to cooperate with the government in its investigation. The Commission's civil complaint and the Department of Justice's criminal charges, which were both filed this morning in United States District Court in Los Angeles, allege that Kalina assisted senior Homestore executives in a scheme to inflate revenues during 2001 through the round-trip transactions that had no economic substance and to conceal the improper conduct from the company's independent auditors. As a result of the fraudulent scheme, Homestore overstated advertising revenues by $46 million (64 percent) for the first three quarters of 2001 and total revenues by up to 15 percent, causing the company to report false and misleading financial information to shareholders and to the public in its Form 10-Q quarterly reports. The Commission's complaint further alleges that Kalina knew that the round-trip transactions had no economic substance and that Homestore's reporting of revenues from these transactions violated generally accepted accounting principles (GAAP). Nevertheless, he assisted management in implementing the scheme and concealing parts of the transactions from the auditors. The Commission charged Kalina with securities fraud, falsifying Homestore's books and records, and aiding and abetting Homestore's reporting and record-keeping violations, as well as Homestore management's lying to an accountant violations. Kalina settled the Commission's lawsuit without admitting or denying the allegations in the complaint. Kalina agreed to the entry of an order that (1) permanently enjoins him from committing future violations of Section 17(a) of the Securities Act of 1933 and Sections 10(b), 13(a), 13(b)(2)(A), and 13(b)(5) of the Exchange Act of 1934 and Rules 10b-5, 12b-20, 13a-13, 13b2-1, and 13b2-2 thereunder; and (2) requires him to disgorge $74,348, including interest, from the exercise of his Homestore stock options during his involvement in the fraudulent scheme. These funds will be paid to the benefit of Homestore shareholders. Additionally, Kalina has agreed to the entry of a public administrative proceeding pursuant to Rule 102(e) of the Commission's Rules of Practice, suspending him from practicing or appearing before the Commission as an accountant. In the related criminal case, Kalina has agreed to plead guilty to a one-count information charging him with securities fraud. In a plea agreement also filed this morning, Kalina admitted that he coordinated the efforts of Homestore sales staff in connection with the fraudulent transactions, thereby causing false and misleading statements to be made to the investing public about Homestore's revenues. The criminal case closely mirrors the allegations made in the Commission's complaint. The charge against Kalina carries a maximum possible penalty of five years in prison and a $250,000 fine. The Commission and the U.S. Attorney's office previously charged three other former executives for their involvement in the round-trip scheme. John Giesecke, Jr., Homestore's former chief operating officer; Joseph J. Shew, the company's former chief financial officer; and John DeSimone, Homestore's former vice president of transactions, have all pleaded guilty to criminal charges, settled the Commission's civil charges, and agreed to collectively pay almost $5 million in disgorgement and civil penalties. At the time of the violations, Homestore was one of the top Internet portals for real estate and related services. Homestore, Inc. (formerly Homestore.com Inc.) is based in Westlake Village, California. Homestore provides Internet real estate listings on Realtor.com and related websites. This civil case is the product of an ongoing investigation by the Securities and Exchange Commission. The criminal case was investigated by the Federal Bureau of Investigation.

OCR text (4,654c · plain-text · 99% conf)