I had circled last week on my 2010 editorial calendar as a reminder to check back on a story that began more than a decade ago. It had profound national ramifications — real estate and technology analysts even labeled it a microcosm of the "tech wreck" — yet the first questions were raised in local multiple listing associations.
The story is the retrial of Stuart Wolff — the former Homestore chief executive who in 2006 was convicted of 15 counts of illegal insider trading and securities fraud — which was set to begin last month in Los Angeles.
He was granted the appeal because the original presiding judged failed to recuse himself from the trial because he owned stock in a company that was involved in the various transactions Wolff helped to negotiate.
A month ago, Wolff agreed to a plea-bargain that could send him to prison for three to five years when he is sentenced in April. Wolff agreed to plead guilty to one count of conspiracy to commit securities fraud.
He also must pay restitution, the amount of which is to be determined soon by the court. The climax came as a surprise. Just about everyone who followed the one-time wonder boy was stunned he did not fight to the bitter end.
"I’m rather pleased to see he’s finally going to jail," said Jack Johnson, the retired CEO and president of the Kirkland-based Northwest Multiple Listing Service. "I believed the guy was a crook."
In 1998, Wolff had the national residential real estate industry talking about him and his Realtor.com. He was the brains behind the operation — and he knew it.
But a few key multiple listing services — including the NWMLS — were not buying in to his deal of placing property listings on his system for cash. At that time, who actually owned the listing information was a hot topic.
The NWMLS was the only major broker-agent group in the country not to subscribe to Realtor.com because it was not certain brokers should be given money for listings. Realtor.com would then leverage those listings to advertisers.
"I just wasn’t sold on how it was going to benefit our members," said Johnson, who recently recalled Wolff’s presentation to the NWMLS board of directors. "He was quite snippy and felt we were crazy for not buying into his plan."
Wolff served as Homestore’s CEO and chairman of the board from 1997 to January 2002, when he resigned during an internal investigation. The company was accused of overpaying vendors and then having that money returned in the form of advertising.
He co-founded the company (then known as RealSelect Inc.) that became the parent of Realtor.com and now Move.com, the official Web site of the 1 million-member National Association of Realtors, which is the largest trade association in the U.S. At one time, his personal stake in Homestore shares was an estimated $100 million.
The NWMLS is owned by its 30,000 members and brokers. Unlike many MLS associations around the country, it is not owned by the local board of Realtors and operates with a more independent mindset. It does not march to NAR’s drummer. Sometimes that has been a help; sometimes a hindrance. …CONTINUED
Wolff was bubbling when he told reporters gathered for NAR’s 1998 annual convention in Anaheim, Calif., how consumers had viewed 1 billion homes on his site in fewer than two years.
"We have more than 450 multiple listing services nationwide placing listings on the Realtor.com system," Wolff then said. "We have 95 percent of all existing homes listed for sale in the country and that is approximately 1.3 million now.
"I call it a national resource, one that everyone can benefit from."
Then, a couple of questions seemed to burst Wolff’s bubble.
"What’s it going to take to get all the major (multiple listing services) to join Realtor.com," a reporter asked.
"What do you mean?" Wolff scoffed. "We have more than 450 … Oh, I see you’re from the Seattle area," Wolff nervously laughed. "Things are a little skewed in your corner of the world."
Five years ago, the U.S. Securities and Exchange Commission and U.S. Justice Department said it would bring civil and criminal charges against Wolff and his former executive vice president, Peter Tafeen.
More than 10 defendants, including Tafeen, pleaded guilty to a variety of charges. Another important player, John Giesecke, the company’s former COO and CFO, pleaded guilty in 2002 to securities fraud that had ultimately inflated Homestore’s stock price.
Wolff definitely had his own way of doing things — beginning with his ubiquitous black-and-orange outfits to his never-had-a-bad-idea persona. He was bright enough not to depend solely on advertising revenue, which shot down many online-only companies. He often said no investment was risk-free and that if something appeared to be, it was probably worthless.
This one was worth "three to five."
Tom Kelly’s book "Cashing In on a Second Home in Mexico: How to Buy, Rent and Profit from Property South of the Border" was written with Mitch Creekmore, senior vice president of Houston-based Stewart International. The book is available in retail stores, on Amazon.com and on tomkelly.com.
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