In a court brief, federal prosecutors oppose an appeal by former Homestore CEO Stuart Wolff for a new trial.

Wolff, who was convicted in June 2006 for his role in a multimillion-dollar accounting fraud that nearly collapsed Homestore, now known as Move Inc., was sentenced to a 15-year prison term and ordered to pay a $5 million fine and an additional $8.6 million in restitution. Homestore operated and other property-search Web sites.

Wolff’s lawyers have appealed his conviction with the 9th Circuit U.S. Court of Appeals, which will consider whether Wolff is entitled to a new trial.

The U.S. Securities and Exchange Commission and U.S. Department of Justice in April 2005 filed criminal and civil cases against Wolff and Peter Tafeen, the company’s former executive vice president of business development. Wolff served as CEO and chairman for Homestore from 1997-2002. He resigned from the company during an internal investigation.

The government, in its brief, states that Wolff’s court brief appealing the conviction raises issues that “are exceedingly minor in light of the tremendous evidence of (his) guilt.”

Wolff’s lawyers questioned in a court brief supporting the appeal whether the judge that presided over Wolff’s trial should have been allowed to preside in the case because he owns stock in AOL — one of the parties to so-called “roundtrip” financial transactions that Homestore officials used to artificially inflate revenues.

But federal prosecutors stated in their response that the judge “clearly had no financial interest in the subject of the case,” and an independent district judge who considered the issue “did not abuse his discretion in finding that the trial judge’s ownership of an unknown amount of stock in a large company with deals with Homestore could not have been affected by the outcome of the criminal case against Homestore’s CEO.”

E. Lawrence Barcella Jr., a lawyer who represents Wolff, said that the court brief filed by the government “is replete with errors and overstatements which can’t be the product of merely negligence.” Barcella also said that a reply to the government brief will be filed in court next week.

Michael R. Wilner, a federal prosecutor, said that the reply by Wolff’s lawyers will represent the final brief considered by the Court of Appeals judge before a decision is made on whether to proceed with a new trial. “Once the final brief comes in from the defense it will be up to the 9th Circuit to figure out what to do,” Wilner said.

Wolff remains out of custody on house arrest with electronic monitoring. He was convicted by a jury of one count of conspiracy, three counts of filing false quarterly reports with the SEC, five counts of falsifying corporate books and records, four counts of lying to accountants, and five counts of insider trading.

At the core of the accounting fraud were advertising deals Homestore had entered into with other companies, such as AOL and Cendant, that effectively circulated money back to Homestore.

Homestore fraudulently reported the returning money as advertising revenue, according to the court brief. Also, the brief states, “The trial evidence demonstrated that Homestore improperly recorded approximately $67 million in revenue from fraudulent transactions during the first three quarters of 2001.”

Wolff profited from the sale of about $8.6 million worth of Homestore stock in 2001 “on the basis of inside information about Homestore’s inflated financial results,” the government brief states.

The trial lasted about three months, during which the government called 19 witnesses and Wolff’s lawyers called 13 witnesses, the court document states. Several former Homestore executives, including Tafeen, testified against Wolff during the trial.

In the brief supporting Wolff’s appeal, his lawyers had stated that the jury was denied access to some information that was not allowed in the trial and took issue with other information that was allowed, while the government’s response states that the court “did not abuse its discretion” in considering what information and testimony to allow.

“By convicting defendant on all charges, the jury apparently disbelieved defendant’s testimony in which he flatly denied any involvement in the fraud at his company,” the government brief states.

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