LAWFUEL – Law News Network – The former chief executive officer and chairman of the board of Homestore.com, Inc. was convicted today of 18 felony charges for orchestrating a scheme to inflate the company’s on-line advertising revenues in 2001 through a series of fraudulent, “round-trip” transactions.
Stuart Wolff, 43, of Westlake Village, was found 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.
Following the verdicts, United States District Judge Percy Anderson revoked Wolff’s bond and remanded him into custody, commenting that the evidence presented during a nearly three-month trial was “overwhelming.”
Wolff becomes 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, said: “This conviction clearly demonstrates our commitment to pursue fraud wherever it may occur on the corporate ladder, including the very top rung.”
Wolff and the other Homestore employees, some of whom cooperated and testified against Wolff as government witnesses, participated in a scheme to execute fraudulent “round-trip” transactions to artificially inflate Homestore’s revenue in order to exceed Wall Street analysts’ expectations. The evidence presented during the 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 when news of an investigation into accounting irregularities became public.
Wolff is scheduled to be sentenced by Judge Anderson on September 11. At sentencing, Wolff faces a maximum statutory sentence of 175 years in federal prison.
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. 06-082