Executives at Homestore reportedly have told federal prosecutors that phantom deals with Cendant and media giant AOL Time Warner were created to prop up Homestore's sagging balance sheet during 2000 and 2001. The alleged transactions involved passing revenue from licensing and advertising between the three firms.

Cendant today issued a statement challenging reports of an investigation into its conduct in the matter, saying, "There is no basis for, nor is there any indication of an investigation by the Securities Exchange Commission or other authorities into Cendant with regard to the alleged activities at Homestore.com." The company also stated that allegations of "round-trip" transactions "have no basis in fact."