 Stuart Wolff |
Howard Privette, a Los Angeles lawyer who is representing former Homestore Inc. CEO Stuart Wolff, said he believes that Wolff will be cleared of wrongdoing, and that accounting personnel have pointed the finger at Wolff to lessen their punishment.
The U.S. Securities and Exchange Commission and U.S. Justice Department last week filed criminal and civil lawsuits against Wolff and Peter Tafeen, the company's former executive vice president of business development, for allegedly participating in a scheme to artificially inflate the company's Internet advertising revenues.
The civil and criminal cases, the result of several years worth of investigations, also allege that Wolff and Tafeen misled analysts about Homestore's financial condition, and both men exercised stock options during the course of the alleged scheme, obtaining millions of dollars in proceeds.
Privette, a lawyer for the Los Angeles office of the Paul Hastings law firm who has represented Wolff for over two years, said that Wolff has no professional background in finance or accounting.
"This has been an extremely long-running investigation," Privette said in a prepared statement. "Unfortunately, it appears to be a prime example of the pendulum swinging too far in one direction in the post-Enron world. Reading through the indictment, over 90 percent of what the government is describing is a 'conspiracy' to conduct business.
"What they talk about are things like signing checks and talking to investors, which business executives throughout America do legitimately every day. And the other 10 percent is a gloss from people who worked in Homestore's accounting department who have cut deals with the government and now have an interest in pointing fingers at other people in an effort to lower their sentences," Privette also stated.
"So even though this is an accounting case, now the government is focusing on a CEO who has no finance or accounting background and who trusted his accounting personnel to handle the company's books in an honest and accurate way. We are confident that when reasonable jurors hear all of the evidence, Mr. Wolff will be vindicated."
The grand jury indictment released last week charges Wolff and Tafeen with conspiracy to violate the securities laws, insider trading, creating false books and records and lying to Homestore's accountants. Each defendant is charged with 19 counts, and each defendant faces a maximum possible sentence of 185 years in federal prison.
The SEC charged Wolff and Tafeen with violating or aiding and abetting violations of numerous provisions of the federal securities laws, including antifraud, reporting, record-keeping, internal controls and lying to the auditors provisions. The SEC is seeking permanent injunctions, penalties, disgorgement of ill-gotten gains and prejudgment interest and an order permanently barring Wolff and Tafeen from serving as an officer or director of a public company.
Nine defendants previously have pleaded guilty to criminal charges related to the fraudulent "round-trip" transactions, and two defendants have admitted in plea agreements that Homestore shareholders suffered losses of at least $100 million when the company's stock price dropped precipitously in 2002 when news of an investigation into accounting irregularities became public.
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