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U.S. Securities and Exchange Commission

Litigation Release No. 18726 / May 25, 2004

Accounting and Auditing Enforcement Release No. 2022 / May 25, 2004

SEC v. Thomas A. Sebastian, LACV 03-6909 R (FMOx) (C.D. Cal.)


The Securities and Exchange Commission announced that on April 1, 2004, United States District Judge Manuel Real of the Central District of California entered a Final Judgment against Thomas A. Sebastian, former chief financial officer of L90, Inc., a former Internet advertising firm now known as MaxWorldwide, Inc., pursuant to Sebastian's consent. The Judgment resolves the Commission's claims against Sebastian in a civil action filed on September 25, 2003. As part of the settlement, Sebastian is ordered to pay approximately $415,000.

In its complaint, the Commission alleged that Sebastian participated in a scheme to generate fraudulent revenues through advertising barter transactions with other Internet companies, including Homestore.com, Inc., in order to meet securities analysts' revenue estimates. Through the fraudulent barter transactions, L90 overstated its revenues in the third quarter of 2000 through the third quarter of 2001 by at least $4.3 million, or 7.9 percent overall, and by as much as 29 percent in one quarter. As a result, L90 was able to meet analysts' revenue estimates in all but one of these quarters.

Sebastian consented, without admitting or denying the allegations in the Commission's complaint, to the entry of the judgment, which permanently enjoins him from violating the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; the reporting provisions of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13 thereunder; the record-keeping provisions of Exchange Act Rule 13b2-1; the internal control provisions of Section 13(b)(5) of the Exchange Act; and the lying-to-the auditors provisions of Exchange Act Rule 13b2-2. The Judgment also imposes an officer and director bar against Sebastian and requires him to pay disgorgement and prejudgment interest totaling $265,972.65 and a civil penalty of $150,000.

On March 8, 2004, in a related criminal matter, Sebastian pled guilty in federal court to conspiracy to commit securities fraud. He is scheduled to be sentenced in June by United States District Judge Percy Anderson.

For further information, see LR-18100 (Apr. 23, 2003) and LR-18364 (Sep. 26, 2003).



Modified: 05/25/2004