Ex-Homestore CEO to admit securities fraud conspiracy in scheme to inflate revenue

Ex-Homestore executive to admit fraud conspiracy

LOS ANGELES — The former CEO and chairman of Homestore.com on Thursday agreed to plead guilty to conspiring to commit securities fraud in a scheme to inflate the company’s revenue to win over Wall Street analysts.

Stuart Wolff faces a prison sentence of three to five years, according to the U.S. Attorney’s Office. The 46-year-old is scheduled to enter his guilty plea on Monday in U.S. District Court in Los Angeles.

The plea agreement will close a case that resulted in the convictions of 11 other defendants and caused Homestore shareholders to lose more than $100 million when the company’s stock price tanked in 2001 on news of the federal investigation into irregular accounting practices.

A jury convicted Wolff in 2006 of more than 12 criminal charges stemming from the complex fraud scheme and he was sentenced to 15 years in prison. However, the 9th U.S. Circuit Court of Appeals overturned the conviction, ruling that the trial judge should have been recused.

During Wolff’s trial, prosecutors said the scheme involved Homestore paying some vendors extra for their products or services and the vendors would then use the money to buy advertising from two media companies.

The media companies, in turn, would buy advertising from Homestore, whose officials would improperly list the revenue on the company’s financial statements in order to exceed Wall Street analysts’ expectations.

Wolff’s lawyers blamed other employees, including many of the executives who pleaded guilty in the case, for the scheme and questioned whether Wolff knew of the dealings.

Prosecutors argued that Wolff must have known about the $86 million in deals.

Wolff headed Homestore, which provides real estate listings and related services on the Internet, from 1997 until he resigned in January 2002. The company has since changed its name to Move Inc.