LOS ANGELES — Stuart Wolff isn’t yet out of the woods. U.S. prosecutors intend to retry Wolff, the former Homestore CEO whose conviction and 15-year prison sentence related to an accounting scandal was tossed out last year by a three-judge panel.
"There will be a new trial. Where we are is essentially as if the original trial had never happened," Assistant U.S. Attorney Michael R. Wilner told Inman News.
Wolff has been newly accused of conspiracy, filing false statements with the Securities and Exchange Commission, lying to accountants, fraudulent insider trading, and falsification of corporate books and records in connection with an alleged accounting scandal nine years ago at the online property listings company now known as Move Inc.
The company and its predecessor have operated the Realtor.com search site, a top destination for for-sale home searches that is affiliated with the National Association of Realtors trade group.
A hearing will be held here Feb. 12 to consider several motions and determine a new trial date. The case has been reassigned to Judge Gary A. Feess.
A number of Homestore employees who pled guilty in connection with the case and testified against Wolff have served time in federal prison, according to Wilner. Former Homestore executive vice president of business development Peter Tafeen, former Chief Operating Officer John Giesecke and former Chief Financial Officer Joseph Shew have all been to prison, served time and been released, Wilner said.
"All of (them) are going to be witnesses, and all of them are willing to assist. Their testimony is expected to be the same as what they testified to originally," he said.
Wolff was represented in the first trial by attorneys at the Paul Hastings law firm, who argued that their client had been wrongly accused by fellow executives. Attorney Lawrence Barcella Jr. did not reply to an e-mail request for information about the status of the case.
Wilner said Wolff was represented by a second law firm on appeal and will be represented by a third law firm in the new trial. A spokesperson for that firm did not reply to a request for confirmation or comment on the case.
Wolff was convicted on 18 counts in June 2006, sentenced to 15 years in prison and three years of supervised release, and ordered to pay a $5 million fine and an additional $8.6 million in restitution to shareholders who’d been victimized by the accounting fraud.
However, a panel of appellate-court judges dismissed the conviction and sentencing in January 2008. The judges ruled that the trial judge should have been removed due to a financial conflict of interest. Specifically, they found that U.S. District Court Judge Percy Anderson’s financial interest in America Online (AOL) should have disqualified him from presiding over the case.
AOL was one of several companies that allegedly participated in "triangular" or "roundtrip" advertising deals that allowed Homestore to create a circular flow of money and recognize about $67 million in inflated revenue. The government charged that Homestore participated in 23 of these transactions, 17 of which allegedly involved AOL.
"What the court of appeals, in its ruling, said, was that the independent judge had made a mistake by letting Judge Anderson hear the case — do it again. So we are going to do it again," Wilner explained.
Eleven former Homestore employees pleaded guilty to criminal charges related to the roundtrip transactions. The company, which operates Realtor.com and other real estate Web sites, was forced to restate its earnings for parts of 2000 and 2001 due to the fraudulent accounting.
Wolff was Homestore’s CEO and chairman from 1997 to January 2002, when he resigned during an internal investigation.
Wolff was required to submit to electronic home monitoring from from late 2006 through mid-2008, though monitoring has since been lifted. Under court-imposed conditions Wolff is not allowed to travel outside of California unless travel is preapproved for visits with lawyers. His bond is set at $2 million, and that bond is secured by a lien on his home in Thousand Oaks, Calif.
Marcie Geffner is a freelance reporter and former managing editor of Inman News.
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