Former Homestore Inc. chairman and CEO Stuart Wolff has agreed to pay $11.9 million in restitution to settle allegations that he and other company officers fraudulently inflated revenue to pump up Homestore’s stock.

Wolff’s consent agreement with the U.S. Securities and Exchange Commission could be the final chapter in a scandal that nearly brought down operator Homestore, which has since rebranded as Move Inc.

A decade ago, at the height of the dot-com boom, Wolff and other Homestore executives created a complex structure of "round-trip" transactions using various third-party companies for the sole purpose of generating false advertising revenue for Homestore, the SEC alleged in a 2005 complaint.

When Homestore restated its earnings for the disputed period, it acknowledged inflating revenue by nearly $200 million, according to court documents in another lawsuit filed on behalf of Homestore investors in December 2001.

Wolff pleaded guilty in January in a separate criminal case to one count of conspiracy to commit securities fraud. In sentencing Wolff to 4 1/2 years in prison in April, U.S. District Judge Gary Feess agreed to postpone a decision on how much restitution he would be required to pay in that case.

Although Wolff’s attorneys agreed with U.S. Department of Justice prosecutors that he would spend three to five years in prison in exchange for his guilty plea, they were unable to come to terms on the issue of restitution.

Prosecutors in Wolff’s criminal case estimated that Homestore investors lost $1.6 billion after the round-trip advertising deals were made public.

They maintained that Wolff was still worth more than $8 million, thanks at least in part to having netted more than $8.6 million from sales of Homestore stock between April and August of 2001.

Wolff’s attorneys argued that prosecutors’ estimate of Homestore investors losses was based on an oversimplified analysis of the decline in the company’s share price.

In any event, Wolff’s lawyers maintained that he would be unable to pay more than $5 million in restitution because the value of his Westlake Village home had fallen by 20 percent, and his hedge-fund investments were worth 60 percent less than previously reported.

In agreeing to settle with the SEC for an amount that exceeds the value of his reported assets, Wolff did not admit or deny the allegations brought by the government in its civil case.

Wolff and his wife Ursula reported $10.7 million in assets as of June 30, including $4.25 million in investments, and a home in Westlake Village valued at $2.5 million. The couple, who have three children, also reported $1.35 million in personal property, including artwork valued at $1.22 million.

Under the terms of the consent agreement with the SEC, Wolff is to pay $2.5 million once the agreement becomes final, and another $2 million within a year of that date. The rest of the money is to be paid in seven quarterly installments of $150,000, with the remaining $6.35 million due three years after the judgment becomes final.

An SEC attorney filed Wolff’s consent agreement on Dec. 2 for final approval by the court. The next day Feess, the judge in Wolff’s criminal case, issued an order stipulating that his restitution in the criminal case be set in accordance with the final judgment in the SEC case.

Given the amount of restitution to be paid, Wolff will not be subjected to additional criminal penalties, Feess said.

At his first criminal trial in 2006, Wolff was convicted of more than a dozen criminal charges and sentenced to 15 years in prison and a $5 million fine, with the issue of restitution left up in the air.

That conviction was reversed on appeal, because the judge presiding over the trial owned stock in America Online — one of the companies that allegedly served as a third-party intermediary in the circular advertising deals.

All told, a dozen defendants were convicted in the case, including executives at companies that participated in the circular advertising deals that allegedly helped Homestore inflate its earnings.

Former Homestore executive vice president Peter Tafeen was previously sentenced to 27 months in prison, while former Homestore chief operating officer John Giesecke received 12 months and chief financial officer Joseph Shew six months.

The SEC won a $2.67 million judgment against Tafeen in 2006, which Tafeen paid before reporting to prison in January 2007.

Attorneys for Homestore investors have collected more than $120 million in damages through settlements with Homestore, PricewaterhouseCoopers, and others. Wolff is the lone remaining defendant in that suit, which is scheduled to go to trial on Jan. 25.

In the wake of the SEC settlement, Wolff’s attorneys have requested a mandatory settlement conference in the civil suit by Homestore investors. U.S. District Court Judge Ronald Lew has ordered the parties to set a date for the conference.

Lew said Wolff may participate in the conference by phone from the Federal Correctional Institution, Lompoc, where he has been imprisoned since June 21.

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