Stuart Wolff, the former CEO of Homestore (now Move Inc.) was convicted in U.S. District Court in Los Angeles today on charges relating to a $67 million accounting fraud at the online property listings company, prosecutors said.
Wolff, 43, was found guilty of conspiracy, filing false statements with the Securities and Exchange Commission, lying to accountants, fraudulent insider trading, and falsification of corporate books and records. He faces a maximum statutory sentence of 175 years in federal prison for the crimes.
Federal prosecutors charged that Wolff was driven by “his ego and his greed” to artificially inflate the company’s revenue numbers and deceive investors by creating sham transactions in 2001.
Financial accounting problems led Homestore to restate its earnings for parts of 2000 and 2001 and caused its stock to drop to pennies per share, nearly being de-listed, amidst the scandal. Homestore, now re-branded as Move Inc., has since rebounded from the financial problems. The company operates Realtor.com, Homebuilder.com and other real estate listings sites.
Wolff’s attorneys had argued during trial that Wolff was wrongly accused by other executives who were seeking to avoid prison.
The SEC and U.S. Justice Department in April 2005 announced criminal and civil cases against Wolff, who served as Homestore’s CEO and chairman of the board from 1997 to January 2002, when he resigned during an internal investigation.
Peter Tafeen, Homestore’s former executive vice president of business development in March pleaded guilty to one count of securities fraud and orchestrating transactions by which Homestore agreed to pay companies to buy advertising on its Web site through third-party vendors. In the so-called round-trip transactions, Homestore booked the advertising as sales and kept the true nature of the deals from its auditors and investors.
Tafeen served at Homestore from 1997 to November 2001 and faces up to 10 years in federal prison. The former executive testified against Wolff as part of his plea agreement. Tafeen’s sentencing is scheduled for late August.
Ten former Homestore employees have also pleaded guilty to criminal charges related to so-called “round-trip” fraudulent transactions that created a circular flow of money and appeared to inflate the company’s revenues. A number of those employees also testified during the trial.
Wolff has been on criminal trial in Los Angeles since March, and testified last week in court in his own defense. His sentencing is scheduled for September 11.
For more Inman News coverage of the Stuart Wolff trial, see “Wolff testifies in his own defense,” “Defense takes turn in Wolff trial,” “Former Homestore CFO testifies against Wolff,” “Chickenpox delays Wolff trial,” “Sixth witness testifies in Stuart Wolff trial,” “Ex-Homestore CFO testifies against Wolff,” and “Trial begins for former Homestore exec.”