HOMESTORE FALTERS 2002 LOCAL BUSINESS: ONE-TIME TECH HIGH FLIER NOW IN RED.

Byline: Gregory J. Wilcox Staff Writer

WESTLAKE VILLAGE - For Homestore Inc., 2002 will likely be remembered as the year of the executive rap sheet rather than the beleaguered balance sheet.

Phrases like securities and wire fraud, insider trading and FBI probe became common in discussing the big Internet portal that became ensnared in an accounting scandal that swept the business world.

This was a year in which Homestore, once a technology high-flier, found itself awash in red ink, weighed down by lawsuits filed by angry shareholders and cooperating with a federal investigation.

The company did not return a call seeking comment for this story about a year that started on a sour note indeed.

Just seven days into 2002, Stuart Wolff, co-founder and top executive at the company, resigned and directors brought in a new management team.

Wolff's resignation as chairman and chief executive officer came less than a week after the company said it had overstated revenues for the first three quarters of fiscal 2001 by as much as $95 million - noting that some advertising transactions should have been accounted for as barter deals because they stemmed from the company's purchases of goods and services.

By late February, the company would conclude that accounting errors resulted in revenue for the first three quarters of 2001 being overstated by $113 million and that 2000 revenues were overstated by $39 million.

Three former executives would eventually plead guilty to securities fraud charges and agree to repay $4.6 million netted through insider trading.

They all could face jail time when sentenced next April, said a spokesman for the U.S. Attorney's Office in Los Angeles.

That, and the tech sector implosion, contributed to why the company still finds itself in a deep financial hole.

In April, Homestore said it lost $1.1 billion, or $9.51 a share, in the 2001 final quarter versus a loss of $53.6 million, or 65 cents, in the corresponding period a year before.

Surprisingly, this was no revelation for analysts who follow the company.

``The announcement was pretty much in line with expectations and not a big surprise,'' Safa Rashtchy, analyst with U.S. Bancorp Piper Jaffray in Menlo Park, said at the time.

By mid-November the balance sheet had improved, though the company was still seeing red.

For the year's third quarter, Homestore reported a net loss of $39.8 million, equal to 34 cents a share, an improvement from the $138.3 million, or $1.25 a share, lost during the year-ago period.

By year's end the company had practically fallen off the radar of Wall Street analysts.

Just one analyst responded to Thomson Financial/First Call's request for an estimate of next quarter's earnings. That estimate is 25 cents a share versus 73 cents a share in the year-ago period.

And the company's stock, which once traded at above $100 a share, plunged to 14 cents during the last 12 months from a high of $3.65.

It is now trading at just above $1.