A U.S. District Court judge on Thursday sentenced Stuart Wolff, the former CEO of Homestore Inc. (now doing business as Move Inc.), to 15 years in federal prison. He was also ordered to pay a $5 million fine and restitution to victims of a financial scheme that artificially inflated revenues and nearly collapsed the company.
In June, U.S. District Court Judge Percy Anderson found Wolff, 43, guilty of conspiracy, filing false statements with the U.S. Securities and Exchange Commission, lying to accountants, fraudulent insider trading, and falsification of corporate books and records. Wolff is appealing the conviction and sentencing.
He faced a maximum statutory sentence of 175 years in federal prison for the crimes.
Assistant U.S. Attorney Michael R. Wilner said that Wolff spoke briefly during the sentencing proceedings Thursday but did not acknowledge any guilt. “He apologized that essentially the fraud occurred on his watch by his subordinates. Wolff maintained his innocence and refused to admit or accept responsibility,” Wilner said.
According to a statement from the U.S. Attorney’s office for the Central District of California, Judge Anderson said, “There was no excuse for this” in light of Wolff’s education, skills and wealth. The court said a substantial sentence was warranted because Wolff had not accepted responsibility and because it would serve as a deterrent to other executives who may be considering illegal conduct that can have a devastating impact on investor-victims.
Lawrence Barcella Jr., a lawyer representing Wolff, said that Wolff told the court “he never intended any harm to the company, to the shareholders and to the employees … he was very, very sorry for what happened under his leadership.”
Barcella said that he had sought a sentence of two to six years for Wolff, while government lawyers had sought a sentence in excess of 20 years.
The Federal Bureau of Prisons requires that inmates must serve at least 85 percent of a sentence before they can be eligible for release.
Wilner said the judge “has considerable discretion” in sentencing. “He came to a very fair and very reasonable judgment about what was an appropriate sentence here. We are very satisfied with the court’s ruling,” he said.
Following his conviction in June, Wolff reportedly spent five weeks in custody and has since been confined to his home with electronic monitoring.
The court has imposed a freeze on Wolff’s assets, Wilner said. Wolff faces possible restitution payments of up to $8.6 million.
Barcella said the court has put off the fines as the case will be appealed. “We’ve articulated that we believe there are significant numbers of errors that occurred during the course of the trial,” he said. A panel of three judges for a U.S. Federal Circuit Court will consider the appeal.
Wolff served as Homestore’s CEO and chairman of the board from 1997 to January 2002, when he resigned during an internal investigation. Peter Tafeen, the company’s former executive vice president of business development who served at Homestore from 1997 to November 2001, faced similar charges to Wolff and pleaded guilty in March to one count of securities fraud for his participation in a scheme to artificially inflate company revenues.
As a part of his plea agreement, Tafeen testified against Wolff. The U.S. Securities and Exchange Commission and U.S. Justice Department filed criminal and civil cases Wolff and Tafeen in April 2005.
Ten other individuals connected with past illegal practices at Homestore – now known as Move Inc. – are scheduled for sentencing later this month and in October. Tafeen is scheduled for sentencing Nov. 16.
As a part of the rules of his probation after release, the judge ordered that Wolff must not be involved in any business related to Internet advertising, Wilner said.
The illegal deals at Homestore, which has operated property-search Web sites including Realtor.com, involved multi-million-dollar “round-trip” transactions with AOL and other companies in which Homestore essentially paid itself by routing money through other companies and disguising the true nature of the transactions.
For more Inman News coverage of the Stuart Wolff trial, see “Stuart Wolff found guilty in accounting scandal,” “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.”
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