Former Homestore.com chairman and CEO Stuart Wolff was sentenced to 4 1/2 years in prison Monday after a judge rejected a plea by his lawyers for a lighter sentence.
A plea agreement Wolff signed in January called for him to spend between three and five years in prison for his role in a scheme that artificially inflated Homestore’s revenue in 2001. Wolff pleaded guilty to one count of conspiracy to commit securities fraud.
Wolff’s attorneys maintained that he should receive the lightest possible sentence possible under the agreement because he signed off on the scheme but did not initiate it.
Homestore, which operates Realtor.com, rebranded as Move Inc. after other top executives were convicted of engineering circular advertising deals that the company later admitted inflated the company’s revenue by nearly $200 million.
In sentencing Wolff, U.S. District Judge Gary Feess said the Homestore scheme caused "widespread injury to untold numbers of people in the stock market," and was a "calculated deception of the public."
Former Homestore executive vice president Peter Tafeen was previously sentenced to 27 months in prison; former Homestore chief operating officer John Giesecke received 12 months; and chief financial officer Joseph Shew 6 months.
Before Monday’s sentencing hearing, Wolff’s attorneys argued that he was merely in a position to "green light" the fraud, while Tafeen was "the admitted master-mind and architect of the scheme" and Shew "the day-to-day implementer."
Prosecutors said the relatively lenient sentences handed down to Shew, Giesecke, and Tafeen reflected their willingness to cooperate with the government in efforts to prosecute Wolff and others. Shew and Giesecke, they noted, entered guilty pleas and accepted responsibility for their actions eight years ago.
A total of 11 defendants had previously been convicted in the case, including executives at companies that participated in the circular advertising deals that helped Homestore inflate its earnings.
At a previous trial in 2006, Wolff, now 46, was convicted of more than a dozen criminal charges and sentenced to 15 years in prison.
An appeals court reversed the conviction, saying the judge presiding over the trial should have recused himself because he owned stock in America Online, one of the companies that allegedly served as third-party intermediaries in the circular advertising deals.
In the leadup to Wolff’s retrial, his new defense team claimed it had uncovered evidence that employees of Homestore’s accounting firm, PricewaterhouseCoopers, modified or destroyed evidence in the case.
The accounting firm has said its employees "complied with professional standards," but prosecutors acknowledged "inconsistencies" in statements by the accounting firm and dropped four counts of the 23-count indictment pending against him (see story).
The eight-year investigation and legal battles have "been draining emotionally and physically and will almost if not entirely wipe (Wolff) out financially," his attorneys said in a March 31 filing outlining their case for a light sentence.
The notoriety and length of the case mean a three-year sentence would be a sufficient deterrent to others considering similar crimes, Wolff’s lawyers argued, and also provide the punitive punishment called for by the law.
Wolff’s criminal conviction, "reported in the press and forever available in this Internet age, effectively brands him a pariah for the rest of his life," his attorneys said.
Wolff’s defense team submitted letters from relatives, colleagues and friends describing his conduct as "out of character" with his values and his "humble and caring upbringing."
Wolff, who founded the company that would become Homestore at age 33, "is truly sorry for his actions, takes full responsibility for his conduct, realizes and feels devastated by the harms caused, and knows that he likely will live the rest of his life making amends for his misconduct," his attorneys said. …CONTINUED