U.S. Securities and Exchange Commission
Litigation Release No. 18364 / September 26, 2003
Accounting and Auditing Enforcement
Release No. 1874 / September 26, 2003
SEC v. Thomas A. Sebastian, LACV 03-6909 SVW (FMOx) (C.D. Cal.)
SEC AND JUSTICE DEPARTMENT BRING CIVIL AND CRIMINAL ACTIONS CHARGING
FORMER CFO OF COMPANY THAT ENGAGED IN FRAUDULENT BARTER DEALS WITH
HOMESTORE
Defendant charged with scheme to overstate revenues to meet analyst
expectations
The Commission, the United States Attorney's Office in Los Angeles,
and the Federal Bureau of Investigation jointly announced the filing
of civil and criminal complaints against Thomas A. Sebastian, the
former chief financial officer of L90, Inc., a former internet
advertising firm now known as MaxWorldwide, Inc. The civil and
criminal actions allege that Sebastian participated in a scheme to
generate fraudulent revenues through advertising barter transactions
with other Internet companies in order to meet securities analysts'
revenue estimates.
At the time of the offenses, L90 was based in Santa Monica and Marina
del Rey, California, and its stock was traded on the NASDAQ National
Market System.
According to the allegations in the Commission's complaint and the
criminal complaint, L90, through its subsidiary webMillion.com,
engaged in a series of advertising barter transactions with other
Internet companies, swapped checks with those companies for the
purported "value" of the bartered advertising, and fraudulently
recorded those amounts as revenue without disclosing that they
resulted from barter transactions. Frequently, L90 inserted a sham
third party into the check swap in order to hide the true nature of
the barter transaction from its auditors and the investing public.
Sebastian concealed the use of the third party from L90's auditor and
made false representations to the auditor about L90's financial
statements. He also signed L90's Form 10-K and Forms 10-Q that were
filed with the Commission containing false and misleading financial
information. Furthermore, Sebastian made false and misleading
statements concerning L90's revenue numbers on quarterly conference
calls with analysts and investors.
Through the fraudulent barter transactions, L90 overstated its
SNIPPETS:
U.S. Securities and Exchange Commission
SEC v. Thomas A. Sebastian,
SEC AND JUSTICE DEPARTMENT BRING CIVIL AND CRIMINAL ACTIONS CHARGING FORMER CFO OF COMPANY
Defendant charged with scheme to overstate revenues to meet analyst expectations
The civil and criminal actions allege that Sebastian participated in a scheme to generate
At the time of the offenses, L90 was based in Santa Monica and Marina del Rey, California,
According to the allegations in the Commission's complaint and the criminal complaint, L90,
L90 inserted a sham third party into the check swap in order to hide the true nature of the
Sebastian made false and misleading statements concerning L90's revenue numbers on quarterly
The criminal complaint, which was filed September 24, 2003, in United States District Court
The Commission's complaint, which was filed September 25, 2003, in United States District
; the record-keeping provisions of Exchange Act Rule 13b2-1; the internal control provisions of
John C. Bohan, L90's former CEO, president, and board member; Mark D. Roah, L90's former
The Commission also previously ordered MaxWorldwide, Inc., formerly known as L90, Inc., to
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