Real estate portal Homestore Inc. can scratch club direct marketer MemberWorks from a list of troubles that began when Homestore reported accounting problems at the start of this year.
The two said that they settled the lawsuit MemberWorks filed against Homestore in March. In the suit, MemberWorks claimed it sold an Internet property called iPlace.com to Homestore last year mainly for stock in Homestore, and then was unable to sell the stock while watching it plummet 95 percent amid reports of the questionable booking of ad revenue on Homestore.com.
Under the settlement, Homestore will pay $23 million out of $58 million it was ordered to put in a trust account pending resolution of the suit.
Homestore, which has recorded a $23 million liability against its operating results, will get the remaining $35 million from the trust.
“We determined that an expedited settlement of this case was in the interest of Homestore's customers, employees and shareholders,” Mike Long, CEO, Homestore, Westlake Village, CA, said in a statement.
MemberWorks earlier this year tried to stop Homestore from selling ConsumerInfo.com, iPlace.com's consumer credit reporting division, to credit reporting giant Experian, but a federal court in March ruled that the sale could proceed if Homestore put $58 million from the sale in a trust account. Homestore sold ConsumerInfo.com to Experian in April for $130 million.
Of Homestore's $23 million payout, MemberWorks will get $19.2 million. Other unnamed iPlace.com shareholders get the other $3.8 million.
“As a result of this settlement, our net gain from the sale of iPlace Inc. is now approximately $51 million,” Gary Johnson, president/CEO of Stamford, CT-based MemberWorks, claimed in a statement.
In other news, Homestore reported a net loss of $52.3 million, or 44 cents per share, for the second quarter of 2002 compared with a net loss of $120.9 million for the same quarter of 2001. The company said revenue for the second quarter was down 11 percent from the first quarter.
Homestore said its second-quarter results include the $23 million charge stemming from its settlement with MemberWorks and a $10.2 million gain from discontinued operations resulting from the sale of ConsumerInfo.com to Experian.
“I am extremely proud of the Homestore team's work over the past six months to gain control of our expense structure,” Long said in a statement. “We continue to believe that Homestore's results from operations, excluding non-cash stock-based charges, depreciation and amortization will be positive for December. However, we are not making any forecasts with respect to 2003, and no inference from 2002 should be drawn.”