Industry reacts to DOJ charges against ex-Homestore execs
April 29, 2005
Federal indictment seen as a positive for the company
The latest federal indictments handed out today related to Homestore's accounting scandal that rocked the real estate industry netted positive reactions from industry insiders.
The Securities and Exchange Commission and the U.S. Justice Department have filed criminal and civil cases against Stuart Wolff, the former CEO of Homestore, and Peter Tafeen, the company's former executive vice president of business development, for their alleged participation in a scheme to inflate the company's online advertising revenues. The two former company officials were named in an indictment returned yesterday by a federal grand jury in Los Angeles.
A former Homestore employee said the news made him happy for himself and for Homestore.
"I can't see this as being anything but a win for Homestore," said Denis Pepin, who is now vice president of client services for Realigent. Pepin worked at Homestore in the Top Producer division for nine and a half years, leaving in October 2004.
"Like many others, I invested in the employee stock purchase plan but also as an outside investor, and lost quite a bit. Although I won't regain any money back, if the prosecution is successful, I'll feel vindicated," Pepin said. "There is some satisfaction in knowing that the deviousness of the individuals in charge (at the time) is being punished," Pepin said.
"What comes around goes around," Pepin said.
The former employee emphasized that he feels Homestore has a good product and that the news means the company can put the past behind it.
"It would put closure to a bad era for the organization. The company is a strong company in that it offers the industry, technology-wise, a great benefit," Pepin said.
Homestore responded to the news with a statement on its Web site, noting that the legal actions "relate solely to (Wolff and Tafeen) and do not implicate Homestore nor impact the company's current ongoing operations."
The statement said that in September 2002, both the U.S. Attorney's Office and the SEC announced that no charges would be brought against Homestore. According to Homestore, the SEC stated at that time that it wouldn't bring any enforcement action against Homestore because of its cooperation in the investigation.
"Homestore will continue to cooperate fully with the government in these matters," the statement concluded.
Saul Klein, a real estate Internet pioneer who worked as a consultant for the Realtor Information Network, a predecessor to Realtor.com, said he is surprised it took this long for criminal charges to be brought against Tafeen and Wolff. Klein now serves as president and co-founder of Internet Crusade, a real estate education, publishing and Internet services company.
Klein said that while Tafeen and Wolff were employed at Homestore, he considered a business deal with them but backed away. "Our company was looking at putting together an agreement with them back then to be the supplier of (Internet) domains, because one of the things we do is sell domains. The negotiations got prolonged -- they got real complicated. We decided not to do business with them."
It's surprising that the charges against Wolff and Tafeen resurface now, several years after they left the company, he said. "It has been under everybody's radar and in many cases forgotten about. To see something come down at this point is really a surprise." Klein also said that the pair who now face criminal charges made a lot of money, adding, "If they did something wrong then they should have to pay back that money."
The charges against Tafeen and Wolff "revive that bad taste in peoples' mouths" about former problems at Homestore, Klein said, and that can be a problem for the current managers of the company. "Homestore and Realtor.com, they really do the best they can, trying to create products in the marketplace. They have to deal with (these) repercussions, and it's a shame."
Copyright 2005 Inman News