Homestore ex-CEO wins appeal

Homestore Inc.’s former chief executive, Stuart Wolff, won a reversal of his conviction for directing a $67-million fraud at the online home-listings company because of a conflict by the trial judge.

The U.S. 9th Circuit Court of Appeals in San Francisco threw out Wolff’s conviction and 15-year prison sentence Monday, ruling that U.S. District Judge Percy Anderson, who owned stock in Time Warner Inc.’s America Online unit, should have removed himself from the case. Prosecutors claimed AOL was a party to most of the fraudulent transactions with which Wolff was charged.

A three-judge panel said Anderson’s ownership of AOL stock constituted a “financial interest in the subject matter in controversy,” and should have disqualified himself.

The appeals court sent the case back to the District Court in Los Angeles to be reassigned to a new judge for a possible retrial.

The appeals panel also threw out a $5-million fine and $8.6 million in restitution that were part of the sentence. Wolff had been free on bail pending the appeal, his lawyer Lawrence Barcella said.

“We are prepared to retry Mr. Wolff,” said Thom Mrozek, a spokesman for U.S. Atty. Thomas O’Brien in Los Angeles. Prosecutors may ask the appeals court to rehear the case, Mrozek said.

“We’re looking forward to trying this case in front of a different judge,” Barcella said.

Wolff was sentenced by Anderson in October after a federal jury in Los Angeles found him guilty of 18 felony counts related to the fraud.

Prosecutors claimed Homestore, which ran an online real estate site now known as Move.com, used intermediary vendors to pay companies including AOL to buy advertising on Homestore’s website. Homestore improperly recorded revenue from the deals without disclosing them to investors and regulators, prosecutors claimed.

Ten former Homestore employees pleaded guilty in connection with the alleged fraud. Their convictions probably won’t be affected by Monday’s ruling, Barcella said.