Evidence gathering continues in the pre-trial stages of the criminal case filed by the federal government against former Homestore executives Stuart H. Wolff and Peter B. Tafeen. The jury selection process is scheduled to begin Jan. 17, though lawyers say the start date could be postponed.

The U.S. Securities and Exchange Commission and U.S. Justice Department in April announced criminal and civil cases against Wolff, the former CEO of Homestore, and Peter Tafeen, the company’s former executive vice president of business development. The pair allegedly participated in a scheme to inflate Homestore’s online advertising revenues through fraudulent “round-trip” transactions.

Wolff, of Westlake Village, Calif., served as Homestore’s CEO and chairman of the board from 1997 to January 2002, when he resigned during an internal investigation. Tafeen, 36, of Parkland, Fla., served at Homestore from 1997 to November 2001.

Both men allegedly misled investors and analysts about the company’s financial condition and blamed Sept. 11 terrorist attacks, in part, for the company’s financial nosedive. Homestore, a public company that operates the Realtor.com home-search Web site for the National Association of Realtors and other home-search sites, has only recently recovered from its past problems to turn a profit.

The trial is scheduled in the U.S. District’s Court’s Central District of California, Western Division, in Los Angeles, with Judge Percy Anderson presiding.

Douglas M. Fuchs, an assistant U.S. Attorney prosecuting the case, said Tuesday that lawyers for Wolff and Tafeen have sought to postpone the trial’s start date, though the court did not approve the request.

Lawrence Barcella, a lawyer who is representing Wolff, said the case is so far proceeding very quickly. “It’s faster, by a good margin, than most cases like this,” he said Tuesday.

The U.S. Securities and Exchange Commission has sued more than a dozen individuals for their alleged roles in the Homestore scheme. Wolff and Tafeen face charges including: conspiracy to file false statements in quarterly SEC reports, falsifying corporate books and records, lying to accountants and committing securities fraud.

Fuchs said that the lawsuit is still in its discovery phase, in which parties to the case request documents and other evidence. The federal government has “been producing a lot of information to defendants” through the discovery process, he said.

Wolff and Tafeen’s lawyers requested information from AOL – a company that had dealings with Homestore during the former exec’s tenure at Homestore – though AOL has sought to quash the subpoenas requesting information. Judge Anderson excused himself from considering this aspect of the case because of his “financial interest in AOL,” according to court documents. Barcella said the judge apparently owns stock in AOL.

Homestore, which has already paid out about $4.2 million to support Tafeen’s legal defense, last month announced that it has reached an agreement that could force the company to pay up to $11 million more to pay for Wolff’s legal costs. Homestore had fought in court to deny Tafeen’s request that the company extend money for his legal defense. And Homestore has received requests from Tafeen and Homestore’s former general counsel, David Rosenblatt, to provide an additional $700,000 apiece for their legal costs.

***

Send tips or a Letter to the Editor to glenn@inman.com or call (510) 658-9252, ext. 137.

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