LOS ANGELES — Stuart Wolff, the former CEO of Homestore (now Move Inc.), appeared in court here yesterday to defend himself against charges of conspiracy, filing false statements with the Securities and Exchange Commission, circumvention of internal auditing controls, fraudulent insider trading and falsification of corporate books and records.
In his hours-long testimony, which began Wednesday, Wolff portrayed the company’s former COO and then-CFO John Giesecke as an unhappy and power-hungry second-in-command; claimed that post-merger confusion and internal politics at AOL Time Warner poisoned Homestore’s relationship with that company; and suggested that certain meetings, telephone calls and e-mail messages presented in court concerned overdue accounts payable, not fraudulent advertising deals with AOL. He also implied that he hadn’t authorized a wire transfer that’s at issue in the trial, hadn’t written two e-mail messages that prosecutors had introduced into evidence and wasn’t aware of accounting problems that later forced the company to restate earnings for parts of 2000 and 2001.
In the first portion of his testimony, he said he’d never discussed accounting rules with Homestore’s auditors or employees in the company’s financial department; that he’d favored the nomination of Barbara Alexander, who had a “passionate interest in governance issues,” to Homestore’s board; and that he’d asked for a report on internal audit functions at other dot-com companies with a view toward setting up such a function at Homestore.
He then recalled an off-site management session at which, he said, Giesecke had “teed up” the idea that he should be named president of the company. Wolff said he told Giesecke he didn’t support that idea and didn’t think the other senior managers of the company would support it either. A conversation on the subject during the meeting turned “ugly” and became “very heated” when Peter Tafeen, Homestore’s former VP of business development, accused Giesecke of lacking the necessary “integrity” to hold the position of company president, Wolff testified.
E. Lawrence Barcella Jr., a partner with Paul Hastings who is representing Wolff, then asked his client about Homestore’s dealings with AOL. Wolff said his attention with regard to that company was focused on two disputes, which concerned a “shortfall” in Internet traffic on AOL’s Homestore-sponsored House and Home channel and the timing of payments that AOL owed Homestore.
Barcella then asked Wolff about a 2001 press release in which Homestore reported quarterly earnings that disappointed Wall Street analysts and attributed the poorer-than-anticipated results to the Sept. 11 terrorist attacks.
“Did you use 9/11 as an excuse?” Barcella asked.
“It was one reason among several reasons that explained why our numbers weren’t what we thought we were going to do,” Wolff replied.
The former CEO, attired in a medium-gray suit, white shirt and patterned purple tie, testified with confidence, seeming every bit the powerful executive he was five years ago. He appeared self-assured and in command of his own responses. His testimony was peppered with such zippy bits of corporate-speak as “ad spend,” “strategic partnership,” “financial metrics,” “Q2 and Q3,” “media footprint,” “business affairs group” and “cash collection issue.”
The jurors appeared to be attentive, puzzled or bored during the defendant’s jargon-laden testimony.
Prosecutors objected to a PowerPoint presentation that Wolff’s attorneys wanted to introduce into evidence. After discussion, Judge Percy Anderson allowed only the first and last pages of the presentation, which featured warrior images taken from “The Book of Five Rings,” to be shown to the jury.
U.S. attorney Douglas Fuchs also objected to testimony in which Wolff mentioned his own children. Barcella argued that his client’s comment had been in the context of a meeting with former Homestore CEO Joseph Shew, during which Shew had mentioned his own child’s serious illness along with other subjects. That argument didn’t convince the judge, who characterized Wolff’s comment as a “sympathy ploy,” warned Barcella not to elicit such testimony and even threatened to call a new trial if Wolff’s family were mentioned again.
Ten former Homestore employees, including Giesecke, Shew and Tafeen, have pleaded guilty to various criminal charges and violations of SEC regulations and testified for the prosecution in the trial.
Among the dozen visitors in the courtroom Thursday were Wolff’s wife, two of Tafeen’s attorneys and a paralegal who has monitored the entire trial on behalf of Move Inc.
Wolff more than likely will be the last person called to testify. After cross-examination and closing arguments, the case will be handed to the jury for its deliberations and decision as to whether the defendant is guilty or innocent of the charges.
Marcie Geffner is a real estate reporter in Los Angeles.
For more Inman News coverage of the Stuart Wolff trial, see “Defense takes turn in Wolff trial,” “Former Homestore CFO testifies against Wolff,” “Chickenpox delays Wolff trial,” “Sixth witness testifies in Stuart Wolff trial,” “Ex-Homestore CFO testifies against Wolff,” and “Trial begins for former Homestore exec.”
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