The Security and Exchange Commission’s investigation on Homestore has expanded into the company’s dealings with real estate and travel company Cendant, people involved in the investigation said late last week. Homestore has acknowledged overstating revenue in the first nine months of last year by more than 30 percent.

People involved in the inquiry said that three former Homestore executives - including its chief financial officer and chief operating officer at the time of its overstatements - told securities regulators and federal prosecutors that in 2000 and 2001, their company counted increasingly on bogus deals with both Cendant and AOL Time Warner to help Homestore meet its quarterly revenue projections.

(via New York Times)