LAWFUEL – Law News Network – Law Jobs – The former chief executive officer and chairman of the board of Homestore.com, Inc. was sentenced today to 15 years in federal prison for piloting a scheme that artificially inflated the company’s on-line advertising in an attempt to make the company appear to be more profitable to Wall Street analysts.
Stuart Wolff, 43, of Westlake Village, was sentenced this afternoon by United States District Judge Percy Anderson in Los Angeles. In addition to the prison term, Judge Anderson ordered Wolff to pay a $5 million fine.
In sentencing Wolff, Judge Anderson said, “There was no excuse for this” in light of Wolff’s education, skills and wealth. The court said a substantial sentence was warranted because Wolff had not accepted responsibility and because it would serve as a deterrent to other executives who may be considering illegal conduct that can have a devastating impact on investor-victims.
In June, following a three-month trial, Wolff was found Wolff guilty of conspiracy, five counts of insider trading, three counts of filing false reports with the Securities and Exchange Commission, five counts of falsifying corporate records and four counts of lying to company auditors.
Wolff was the eleventh former Homestore employee convicted of federal charges in relation to the scheme. Wolff was Homestore’s CEO and chairman from 1997 until he resigned in January 2002 during an internal investigation into the fraudulent scheme.
United States Attorney Debra Wong Yang, who is a member of the President’s Corporate Fraud Task Force, stated: “Malfeasance in the executive suites and board rooms of publicly traded companies has a particularly corrupting effect on the market. The lengthy sentence handed out to Mr. Wolff should serve as a warning to other business leaders who may be tempted to cook their books in order to please market analysts.”
Wolff and the other 10 Homestore employees prosecuted in this case participated in a scheme to execute fraudulent “round-trip” transactions to artificially inflate Homestore’s revenue in 2001. The evidence presented during Wolff’s trial showed that Wolff knew that the transactions fraudulently generated a circular flow of money in which Homestore recognized its own cash as revenue and that Wolff participated in concealing the scheme from the company’s auditors. Wolff misled investors and analysts about Homestore’s true financial condition and used the September 11, 2001 terrorist attacks as a pretense for Homestore’s financial decline. Wolff exercised stock options during the course of the fraudulent scheme, obtaining millions of dollars in proceeds, which formed the basis for the insider trading counts.
Homestore shareholders suffered losses of at least $100 million when the company’s stock price dropped precipitously in 2001 after news of an investigation into accounting irregularities became public.
Wolff is due back in court on November 13 for a hearing on whether he can remain free on bond while his anticipated appeal in pending and a hearing on whether he will have to pay restitution to the victims of the insider trading scheme.
The other defendants in the case are scheduled to be sentenced over the next several months.
Homestore.com is now known as Move, Inc. and provides real estate listings and related services on the Internet. The company fully cooperated in the investigation, which was conducted by the Federal Bureau of Investigation.
CONTACT: Assistant United States Attorney Douglas M. Fuchs
Assistant United States Attorney Michael R. Wilner
Release No. 06-139