L90 Sued Over Homestore.com Transactions
The lawsuit was filed March 20 in U.S. District Court for the Central District of California on behalf of Couchman Partners LP and purchasers of L90's common stock between July 26, 2001, and March 12, 2002. It also names former president/CEO John Bohan and former chief financial officer Thomas Sebastian.
The lawsuit seeks unspecified damages and a jury trial.
Neither Bohan nor Sebastian could be reached for comment. No one from L90 was available to comment.
On March 10, Bohan resigned as L90 president/CEO and Sebastian was placed on administrative leave. Sebastian resigned March 19. L90 named Mitchell Cannold, formerly with Space.com, as president/CEO to replace Bohan.
The complaint alleges that as part of its effort to boost its stock price, L90 misrepresented its financial health to conceal its improper dealings with Homestore.com.
"In order to overstate revenues and assets in its second and third quarters of 2001, L90 violated Generally Accepted Accounting Principles and SEC rules by engaging in improper 'round-trip' transactions with Homestore.com and its customers," the lawsuit alleges. "These transactions had the effect of dramatically overstating revenues and assets." A round-trip trade is when a security is purchased and then sold during the same transaction.
L90 said March 12 that it hired an accountant to review its books in relation to its dealings with Homestore.com. The move came days after the company's merger with eUniverse Inc. was called off because of regulatory scrutiny into L90's finances.
The accountant is looking into two transactions conducted with Homestore.com in the second and third quarters of 2001. The company also said the accountant will look into any barter transactions involving L90 to determine whether its revenues may have been overstated or misstated during the two quarters.