SECURITIES EXCHANGE ACT OF 1934
Release No. 47427 / February 28, 2003

ACCOUNTING AND AUDITING ENFORCEMENT
Release No. 1725 / February 28, 2003

ADMINISTRATIVE PROCEEDING
File No. 3-11052


JEFFREY M. KALINA, 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 Jeffrey M. Kalina ("Respondent" or "Kalina") 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. Kalina was the Senior Manager of Mergers and Acquisitions Transactions of Homestore, Inc. ("Homestore") from February 2001 through December 2001 at which time he was promoted to Director of Operations Planning. He was terminated in November 2002. During 2001, he was responsible for performing due diligence in connection with acquisition transactions, valuation analysis, and making recommendations on potential accounting issues. He is a Certified Public Accountant in the State of Illinois, but does not hold a license. He is 31 years old and lives in Woodland Hills, California.

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 the National SmallCap Market System.

3. On January 8, 2003, the Commission filed a complaint against Kalina in SEC v. Jeffrey M. Kalina, in the United States District Court for the Central District of California (the "Court") (Civil Action No. 03-0147 WMB(RZx)). On February 18, 2003, the Court entered a Final Judgment of Permanent Injunction and Other Relief Against Defendant Jeffrey M. Kalina ("Judgment") which (a) permanently enjoins Kalina from future violations of Section 17(a) of the Securities Act of 1933 and Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 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; and (b) orders Kalina to pay $69,802 in disgorgement plus $4,546 in prejudgment interest. Kalina consented to the entry of the Judgment without admitting or denying any of the allegations in the complaint.

4. The Commission alleged that Kalina participated in a fraudulent scheme to inflate 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 Kalina 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 Kalina helped implement the scheme and took steps to hide the true nature of these round-trip transactions from Homestore's auditors.

IV.

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

Accordingly, IT IS HEREBY ORDERED, effective immediately, that:

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

By the Commission.

Jonathan G. Katz
Secretary

Footnotes

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.