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Ex-Homestore CEO Wasn't Involved in Fraud, Lawyer Says

June 21, 2006|From Bloomberg News

Former Homestore Inc. Chief Executive Stuart Wolff, on trial for a $67-million accounting fraud at the online home-listings company, was wrongly implicated by other executives seeking to avoid prison, his lawyer said.

Wolff became the focus of a U.S. investigation into so-called round-trip transactions after three colleagues agreed to plead guilty and cooperate with prosecutors, defense attorney Jeff Ifrah told jurors Tuesday during closing arguments in Los Angeles federal court.

Prosecutors claim that Wolff, 43, used sham transactions in 2001 to artificially inflate sales at the company by $67 million in an effort to meet Wall Street expectations.

Charged with conspiracy, securities fraud, making false Securities and Exchange Commission filings and lying to auditors, he faces up to 185 years in prison if convicted on all counts.

"Mr. Wolff wasn't involved in that," Ifrah said of the fraud. "He was a victim of the fraud. Mr. Wolff initiated Homestore's internal investigation."

The prosecution argued that in the first three quarters of 2001, Homestore agreed to pay companies including America Online Inc. and Cendant Corp. to buy advertising on its website through intermediary vendors. The company booked the advertising as sales without disclosing the true nature of the transactions to auditors and investors.

Shares of Westlake Village-based Homestore plunged when the transactions were made public in 2002, costing investors as much as $100 million.

Peter Tafeen, Homestore's former vice president of business development, pleaded guilty this year to orchestrating the transactions.

Tafeen was the 10th former company executive to plead guilty in the accounting fraud.

Former Chief Financial Officer Joseph Shew and former Chief Operating Officer John Giesecke pleaded guilty in September 2002 and testified for the government at Wolff's trial.

The defendant chose fraud, "driven by greed and ego," Assistant U.S. Atty. Doug Fuchs said during his closing statement. "He deceived Wall Street, he deceived investors ... and he almost destroyed this company."

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