Homestore Exec’s Trial Underway
Stuart Wolff, former chief executive of Homestore Inc., inflated sales at the online home sale and rental listing company by $67 million in 2001 using so-called round-trip deals that generated no money, prosecutors said Thursday.
Wolff is accused of falsifying Homestore’s books and filings with the Securities and Exchange Commission and lying to company auditors, artificially inflating advertising sales to meet Wall Street’s expectations.
His trial began Thursday in U.S. District Court in Los Angeles.
“His role was to approve the scheme and to put it in motion,” Assistant U.S. Atty. Michael Wilner said in his opening statement.
In the first three quarters of 2001, Homestore through intermediary vendors agreed in effect to pay companies including America Online and Cendant Corp. to buy advertising on its website, Wilner said. Shares of Westlake Village-based Homestore plunged when the round-trip transactions were made public in 2002, costing investors as much as $100 million.
Wolff’s lawyer said in his opening statement that the executive was in the dark about alleged illegal activities that people in Homestore’s finance department were engaged in.
“He hired people to do things that he didn’t know how to do himself,” attorney Lawrence Barcella told the jurors. “He was let down by them.”
Peter Tafeen, Homestore’s former vice president of business development, pleaded guilty this month to orchestrating the transactions. Tafeen was the 10th former company executive to plead guilty in the accounting fraud.
PricewaterhouseCoopers last year agreed to pay $17.5 million to settle a class-action lawsuit brought by investors over the accounting firm’s audits of Homestore in 2000 and 2001. Homestore in 2003 settled an investors’ suit over the transactions for $93 million in cash and stock.
Wolff, who has a doctorate in electrical engineering from Princeton University, joined Homestore.com, as the company was then known, in November 1996. He moved from TCI Interactive, a unit of TCI Communications Inc., where he was vice president of business services. Before that, he was an engineer at IBM Corp. and AT&T; Bell Labs.
Wolff resigned from Homestore in January 2002, a week after the company announced it had overstated 2001 revenue.
