$4.6 MILLION TO BE REPAID HOMESTORE EXECS MAY FACE PRISON.

Byline: Gregory J. Wilcox Staff Writer

WESTLAKE VILLAGE - Three former executives of the Internet real estate company Homestore.com Inc. will repay $4.6 million they netted through insider trading and will plead guilty next month to securities fraud charges, authorities said Wednesday.

All three face the possibility of prison time as a result of the joint probe by the Securities and Exchange Commission, the Federal Bureau of Investigation and the U.S. Attorney's Office for the Central District of California.

The company's former chief operating officer, John Giesecke, and chief financial officer, Joseph J. Shew, will plead guilty next month of conspiracy to commit securities fraud. Giesecke also agreed to plead guilty of wire fraud. Former Vice President John DeSimone will plead guilty to insider-trading charges, Attorney General John Ashcroft said at a Justice Department news conference in Washington.

Giesecke, a Malibu resident, faces a minimum prison sentence of 27 years, and Shew, of Westchester, Pa., faces a minimum sentence of 24 years and three months, said Thom Mrozek, a U.S. attorney spokesman in Los Angeles.

DeSimone, of Hermosa Beach, faces a minimum of 21 months behind bars, Mrozek said.

Prison terms could be reduced at the time of sentencing, though, especially if the three cooperate in the government's ongoing probe into corporate wrongdoing.

``At this time there is no promise made by us. It's at the government's discretion whether or not to recommend a reduced sentence to the court based on their cooperation,'' Mrozek said.

Attorneys for all three men issued statements that their clients will fully cooperate with the government.

Also on Tuesday, a lawyer for the Securities and Exchange Commission said the SEC settled its civil case against the three men and would not take any action against the Westlake Village-based company.

Giesecke has a year to pay a $360,000 fine and repay $3.45 million in illegal profits, said Thomas Zaccaro, the SEC's regional trial counsel. Shew has 180 days to repay $1,050,000. Each has been barred from serving as an officer or director of a public company; nor can they work in an accounting capacity for a public company, Zaccaro said.

DeSimone must repay $175,000 in 180 days, and he is prohibited from serving as an officer or director of a public company for 10 years.

The money, proceeds from exercising stock options, will go into a fund that will be used to reimburse shareholders who lost money in the company. The company's stock reached a high of $122 in January of 2000. It closed Wednesday at 38 cents, down 5 cents.

The high-profile nature of the announcement was the government's not-so-subtle way of telling corporate America it pays to cooperate with investigations of this nature.

Homestore is not facing any sanctions because of cooperation with government investigators.

``Their cooperation was exemplary, and it warranted us treating them differently than we may treat other companies that engage in similar misconduct,'' Zaccaro said. ``Companies that cooperate can expect that.''

The scheme was discovered by a Homestore employee who brought it to the attention of the audit committee made up of company directors. Homestore conducted its own probe and contacted the SEC.

``The board should be commended for its diligence and swift action. The audit committee ... upheld its corporate governance obligations vigorously and worked closely with the SEC, following the SEC's guidelines meticulously,'' company Chief Executive Officer Mike Long said in a printed statement.

Wednesday's announcement may result in ramifications for the federal probe of accounting practices at AOL Time Warner Inc.'s America Online unit.

Homestore struck a deal with AOL in May 2000 to be the exclusive provider of home and moving content for AOL members.

Government statements on the case don't mention AOL by name but refer to a plan devised by Homestore to use a major media company in what are called round-trip transactions.

The New York Times reported in a story for today that federal investigators are looking at Homestore's former vice president of business development and advertising sales, Peter Tafeen, who worked closely with counterparts at AOL to devise complicated deals between the companies.

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(color) Homestore.com Inc., based in Westlake Village, cooperated in the investigation of three former executives who will plead guilty next month to securities fraud charges, authorities said Wednesday.

Michael Owen Baker/Staff Photographer

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SOURCE: Daily News research