U.S. Securities & Exchange Commission
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U.S. Securities and Exchange Commission

United States of America
before the
Securities and Exchange Commission

Securities Exchange Act of 1934
Release No. 46623 / October 8, 2002

Accounting And Auditing Enforcement
Release No. 1645 / October 8, 2002

Administrative Proceeding
File No. 3-10913


In the Matter of

JOSEPH J. SHEW, CPA

Respondent.


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ORDER INSTITUTING PUBLIC ADMINISTRATIVE PROCEEDINGS PURSUANT TO RULE 102(e) OF THE COMMISSION'S RULES OF PRACTICE, MAKING FINDINGS, AND IMPOSING REMEDIAL SANCTIONS

I.

The Securities and Exchange Commission ("Commission") deems it in the public interest that public administrative proceedings be, and hereby are, instituted against Joseph J. Shew ("Respondent" or "Shew") pursuant to Rule 102(e)(3) of the Commission's Rules of Practice.1

II.

In anticipation of the institution of these proceedings, Respondent has submitted an Offer of Settlement (the "Offer") which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission, or to which the Commission is a party, and without admitting or denying the findings herein, except as to the Commission's jurisdiction over him and the subject matter of these proceedings and the findings contained in Section III.3. below, which are admitted, Respondent consents to the entry of this Order Instituting Public Administrative Proceedings Pursuant to Rule 102(e) of the Commission's Rules of Practice, Making Findings, and Imposing Remedial Sanctions ("Order"), as set forth below.

III.

On the basis of this Order and Respondent's Offer, the Commission finds that:

1. Shew was the Chief Financial Officer ("CFO") of Homestore, Inc. ("Homestore") from February 2001 until he was terminated as a result of Homestore's internal investigation in January 2002. Shew, as Homestore's CFO, was responsible for the preparation of accurate financial statements. Shew signed Homestore's Forms 10-Q for the first three quarters of 2001 filed with the Commission. He is a Certified Public Accountant in the State of Pennsylvania. His license was inactive during the time he was CFO of Homestore and remains inactive. He is 36 years old and lives in West Chester, Pennsylvania.

2. Homestore is, and at all relevant times was, a Delaware corporation with its principal place of business in Westlake Village, California. Homestore is an Internet provider of residential real estate listings and related content. Homestore's common stock is registered with the Commission pursuant to Section 12(g) of the Securities Exchange Act of 1934 ("Exchange Act") and trades on Nasdaq.

3. On September 25, 2002, the Commission filed a complaint against Shew in SEC v. John Giesecke Jr., Joseph Shew, and John DeSimone, in the United States District Court for the Central District of California (the "Court") (Civil Action No. 02-7471SVW). On September 26, 2002, the Court entered a Final Judgment Of Permanent Injunction And Other Relief Against Defendant Joseph J. Shew ("Judgment") which (a) permanently enjoins Shew from future violations of Section 17(a) of the Securities Act of 1933 and Sections 10(b) and 13(b)(5) of the Exchange Act and Rules 10b-5, 13b2-1, and 13b2-2 thereunder and aiding and abetting violations of Sections 13(a) and 13(b)(2)(A) of the Exchange Act and Rules 12b-20 and 13a-13 thereunder; (b) orders Shew to pay $1,004,825 in disgorgement plus $48,926.64 in prejudgment interest; and (c) bars Shew from serving as an officer or director of a reporting company. Shew consented to the entry of the Judgment without admitting or denying any of the allegations in the complaint.

4. The Commission alleged that Homestore and Shew fraudulently inflated Homestore's revenue throughout the first three quarters of 2001. The complaint alleged that Homestore engaged in round-trip sales transactions that were improperly recognized as revenue. Specifically, Homestore, through Shew and others, overstated revenue in the first quarter by $15,000,000, or 16%, by $22,445,000, or 21%, in the second quarter, and by $8,965,000, or 8%, in the third quarter. The complaint further alleged that Shew took extensive steps to hide the true nature of these round-trip transactions from Homestore's auditors. The complaint further alleges that Shew made material misrepresentations to the auditors related to the round-trip transactions.

IV.

In view of the foregoing, the Commission deems it in the public interest to impose the sanction agreed to in Respondent Shew's Offer.

Accordingly, IT IS HEREBY ORDERED, effective immediately:

Shew is suspended from appearing or practicing before the Commission as an accountant.

By the Commission.

Jonathan G. Katz
Secretary

1 Rule 102(e)(3) provides, in relevant part, that:

The Commission, with due regard to the public interest and without preliminary hearing, may, by order, . . . suspend from appearing or practicing before it any . . . accountant . . . who has been by name . . . permanently enjoined by any court of competent jurisdiction, by reason of his or her misconduct in an action brought by the Commission, from violating or aiding and abetting the violation of any provision of the Federal securities laws or of the rules and regulations thereunder.

 

http://www.sec.gov/litigation/admin/34-46623.htm


Modified: 10/09/2002