USA: AOL Implicated in Alleged Homestore Grift

27 September 2002

More worms have emerged from the can at America Online, the interactive unit of the globe’s largest media group AOL Time Warner.

As with most of the deals currently under investigation at AOL, the latest vermiform to wriggle into the light involves the ad sales department. It relates to the association of former number two AOL dealmaker Eric Keller (37) with – a Californian operator of real estate websites.

Three senior Homestore executives were indicted Wednesday, both by the Securities and Exchange Commission and the US attorney’s office in Los Angeles, on charges of inflating revenues during 2001 to the tune of $46 million. Insiders close to the probe say the indicted trio not only pleaded guilty to the charges but admitted knowledge of certain deals struck with AOL and Keller.

The threesome have agreed to cooperate with prosecutors and are expected to testify that AOL actively abetted Homestore in putting together complex financial transactions that, charges the government, were little more than figments of the imagination.

Keller, lieutenant to AOL’s aggressive former deal-making supremo David Colburn (fired in August after the group admitted it may have improperly booked $49 million as revenue: WAMN, 15-Aug-02) was known to emulate his boss’s testosterone-charged negotiating style. He [Keller] was dismissed a year earlier after an internal inquiry into agreements concocted with Homestore plus another now-bankrupt dotcom, PurchasePro.

Insists AOL TW: “AOL’s deal with Homestore was appropriate and accounted for appropriately. We've cooperated fully in the investigations into Homestore.”

Data sourced from: The Wall Street Journal Online; additional content by WARC staff