A U.S. District Court judge ruled that former Homestore CEO Stuart Wolff, who was convicted in June for his role in a multimillion-dollar accounting fraud, is not a flight risk and can remain out of federal custody as he pursues an appeal of his conviction.

A panel of judges for the 9th Circuit U.S. Court of Appeals found that Wolff raised a “‘substantial question’ of law or fact” in his challenge to overturn a U.S. District Court judge’s custody order and stay out of federal prison.

And U.S. District Court Judge Percy Anderson, who presided over Wolff’s trial and had earlier denied Wolff’s bail pending appeal, found that Wolff is not likely to flee or pose a danger to the community as he pursues the appeal.

Wolff, sentenced in October, faces a 15-year prison term, $5 million fine and $8.6 million order of restitution. He is currently out on bond. He is subject to “an asset freeze order, a $4 million cash bond secured by his residence, private securities and a portion of the equity in his parent’s Oklahoma residence,” according to court documents.

Wolff served as CEO and chairman for Homestore (now called Move Inc.) from 1997-2002, when he resigned during an internal investigation. The accounting scandal nearly ruined the company, which operates Realtor.com and other property-search Web sites.

Wolff was convicted for 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. Eleven other former Homestore officials have been convicted for their participation in illegal schemes that included fraudulent “circular” advertising deals and inflated earnings reports.

Anderson stated in a Jan. 8 filing, “The court remains concerned that given the length of the sentence, the defendant’s access to substantial amounts of what the jury found were illegally obtained funds, his ability to establish a residence in Switzerland, and his refusal to accept responsibility for his crimes, that there is a serious question whether the defendant is likely to flee.” Wolff reportedly has family ties to Switzerland.

“However, the court concludes that while it is a close question, the defendant has met his burden and finds that he is not likely to flee during appeal or pose a danger … to the community, and that his appeal is not for the purpose of delay,” Anderson stated.

Wolff was scheduled to begin serving a prison sentence on or before Dec. 13, though his lawyers filed a motion to keep him out of prison pending his appeal, and stated that the appeal would “raise the highly ‘substantial’ question whether the trial judge — the Honorable Percy Anderson — should have presided over the matter in the first place,” court documents state.

Anderson had “acknowledged that he owned AOL stock and recognized that he had a ‘financial interest in AOL,’ ” the court documents state, and fraudulent transactions involving Homestore and AOL were relevant to the lawsuit against Wolff, though a separate judge had earlier considered — and denied — a motion by Wolff’s lawyers to dismiss Anderson from the case. The motion also raised other issues about witnesses and evidence presented in Wolff’s trial.

Lawrence E. Barcella, one of the lawyers representing Wolff, said Thursday that the next step is to file a court brief related to Wolff’s appeal. A hearing will be held to determine the conditions of Wolff’s release pending the appeal. Barcella also said that there has been a hold placed on the order for Wolff to pay fines and forfeitures related to his sentence.

Assistant U.S. Attorney Michael R. Wilner, who is representing the government in the case against Wolff, said the government “will likely seek to have the court continue its asset freeze over Wolff’s assets” as the court considers terms of release for Wolff.

Written briefs on the merits of Wolff’s appeal will likely be filed in April and May, Wilner said.

The U.S. Securities and Exchange Commission and U.S. Justice Department in April 2005 filed criminal and civil cases against Wolff and Peter Tafeen, the company’s former executive vice president of business development from 1997 to 2001.

Tafeen pleaded guilty to one count of securities fraud and was sentenced to 30 months in federal prison and three years of supervised release. As a part of his plea agreement, Tafeen testified against Wolff.

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