L90 Fingers Homestore, Could Restate

Los Angeles-based online ad network L90 said that federal regulators are questioning it concerning its past reporting of revenues, specifically transactions with troubled Web real estate play Homestore.com .

L90 said in early February that the Securities and Exchange Commission had begun an investigation into its finances, but declined to go into specifics. That investigation, during which federal regulators subpoenaed records and at least one member of L90’s board of directors, related in part to two barter advertising transactions with Homestore.com in the second and third quarters of 2001.

In addition to ironing out the details of its transactions with Homestore — which is embroiled in its own lurid accounting fiasco — L90 said it would also examine any barter transactions in which it was involved to determine whether its own revenues were misstated.

L90 said its board of directors has retained an outside accountant to assist in an internal investigation, concurrent with the SEC’s inquiry. The internal investigation should be concluded in two to three weeks, it said.

Meanwhile, Nasdaq said it would resume trading in L90 on Wednesday, after having halted trading on Monday.

The new developments come less than a day after the departure of L90 Chief Executive Officer John Bohan and the apparent firing of Chief Financial Officer Tom Sebastian. Last week, L90 co-founder Mark Roah, a member of the company’s board of directors and a one-time sales executive at the firm, resigned citing personal reasons.

L90 also has said the SEC is investigating the surprise resignation earlier this year of the company’s vice president of finance, Lucrezia Bickerton.

On Monday, Web publisher eUniverse also terminated its proposed buyout of L90, citing concerns for its shareholders’ well-being. eUniverse management did not rule out the purchase of a portion of L90’s assets sometime in the future.

Things are looking grim for L90, a once well-regarded firm that first began to show signs of trouble last year, when it sold its online ad serving technology unit to larger competitor DoubleClick . At the time, Bohan told InternetNews.com that the sale meant L90 could operate more effectively with fewer lines of business.

At any rate, L90’s shareholders are no doubt hoping that the matter doesn’t devolve into a situation like that facing Homestore, which said earlier this year that an internal investigation had found it had inappropriately counted barter revenue — that is, ad inventory sold in return for ad inventory on another site — as normal revenue.

Because of the findings, Homestore said it would have to restate results from all of 2000 and for the first three quarters of 2001. Coupled with some smaller discrepancies in how it accounted for non-advertising revenue, the firm said it could strike as much as $158 million in revenue from the seven quarters.

Homestore.com’s restated results are expected sometime this month.

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