CalSTRS Seeks Lead in Homestore.com Suits
The California State Teachers’ Retirement System filed a motion Monday to be named lead plaintiff in nearly 20 consolidated lawsuits against Homestore.com Inc. and several former executives.
The move is another example of pension funds seeking to spearhead efforts to recover damages from companies alleged to have used phony accounting to attract investors. Major pension funds also are aggressively seeking damages from Enron Corp.
CalSTRS, the nation’s third-largest public pension fund, said it lost an estimated $9 million on more than 431,000 Homestore shares from May 4, 2000, to Dec. 21, 2001, the time period cited in the lawsuits. The stock collapsed after the online home-listings company warned that its results would fall short of expectations.
The suits claim that Westlake Village-based Homestore tried to prop up its stock for much of last year by issuing a false picture of company finances, and that executives sold at least $28 million of personal stock while the price was high. The suits also allege accounting irregularities.
Homestore has warned in recent weeks that it would be restating financial results for 2000 and 2001. Company founder Stuart H. Wolff resigned Jan. 7.
Jack Ehnes, chief executive of CalSTRS, said he believes Homestore’s chances of survival--and the fund’s chances of recovering its losses--are slim. “At this point it’s unlikely [the fund] will regain its original investment,” he said.
Nonetheless, he said, the fund wants to send a message, demonstrating that “there are those who are ready to step up to ensure fair dealings” in financial markets. The fund’s motion will be heard March 25 in U.S. District Court in Los Angeles.
Meanwhile, Homestore’s stock is facing delisting by Nasdaq because the firm’s plans to restate results for 2000 and 2001 have caused it to miss filing timely financial statements.
Trading in Homestore shares resumed Friday after being halted Feb. 13 while Nasdaq sought more information. On Monday the stock fell 7 cents to 78 cents.
A Homestore spokesman said the company will formally request a hearing before a Nasdaq panel this week.
The firm said it expects to file revised financial statements before Nasdaq is required to take further action to delist the stock.
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Diane Wedner
