U.S. government prosecutors have asked a panel of judges to reconsider a ruling that dismisses the conviction and sentencing of the former CEO for Realtor.com operator Homestore Inc., now known as Move Inc.

Stuart Wolff, who served as CEO and chairman for Homestore from 1997 until his resignation during the company’s internal investigation in 2002, was convicted in June 2006 on 18 counts, including conspiracy to commit securities fraud, falsifying company books and records, lying to accountants and engaging in illegal insider trading. He was sentenced to 15 years in prison and ordered to pay a $5 million fine and $8.6 million in restitution to shareholder victims.

That conviction was scrapped by a panel of three judges from the U.S. 9th Circuit Court of Appeals, who ruled in January that the judge in the Wolff trial should have been removed from that case because of a financial interested in America Online, a company that had engaged in transactions with Homestore that were a focus of the trial. The ruling sends the case back to U.S. District Court for an entirely new trial, unless the panel’s ruling is reversed in a rehearing.

In the financial transactions between Homestore, AOL and other companies — dubbed "triangular" deals or "round-trip" transactions by prosecutors — Homestore channeled money to other companies and some of that money eventually returned back to the company and was recorded as advertising revenue. Prosecutors charged that Homestore participated in about 23 of these deals involving about $67 million in revenue, and that AOL participated in about 17 deals.

In their request for a rehearing, filed Feb. 27, federal prosecutors stated that Judge Percy Anderson, who presided over the Wolff trial, "voluntarily disclosed his financial interest" in AOL, and later allowed an independent judge to consider whether he should be recused, or removed from the case based on this financial interest.

Anderson, the 9th Circuit Court of Appeals panel found, did acknowledge that he owned AOL stock but did not specify the date of purchase, amount of stock held or whether he had engaged in any subsequent transactions involving the stock.


***


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