Posted by: Chris Palmeri on July 06, 2006
There was a period of time when Stuart Wolff was a powerful and much-listened to man in the real estate world.
As founder and CEO of Homestore.com he led the National Association of Realtors’ efforts to put their home listings online. When I first met him six years ago, Wolff was enmeshed in controversy. The Justice Dept. was looking into Homestore’s practice of signing exclusive contracts with local listing services, cutting out competition in the emerging online real estate marketplace. Nothing ever became of that investigation, but my conversations with Wolff at the time would forever stick in my mind. Wolff was a Princeton-educated scientist, with a Ph.d. in electrical engineering and semiconductor patents to his name. He was obviously smart, perhaps to a fault. I remember him telling me that America’s business heroes, men like Bill Gates and Sam Walton, often skated on the edge of what was right and what was wrong. Later, as the dot.com boom began to bust, Wolff likened the marketplace to a Darwinian forest. In nature, he said, the deer population can swell to the point where it exceeds the food supply. Then the weaker deer die-off.
In late June Wolff was convicted of conspiracy and insider trading. He'd been accused of orchestrating a massive fraud, wherein Homestore bought advertising on Web sites such as AOL.com and then had a portion of the cash cycled back to buy ads on its own sites. These "round-trip" transactions propped up Homestore's revenues and stock price, even as they depleted its cash reserves. All the while, Wolff and other execs were selling their shares in the company. Ten of them pled guilty, Wolff was the only one who stuck it out and went to trial. After the verdict, the judge put him immediately in custody, citing the "overwhelming" evidence against him. He now faces 175 years in prison, a huge blow for a 43 year-old with a wife and young children. At some point the hyper-intelligent Wolff must have thought he'd figured out how to play the game. Pump up revenues in the short run, stay alive in the forest and eventually business would pick up to the point where no one would notice. That calculus didn't work out though and he was obviously was too proud to admit he'd gotten the formula wrong. Homestore's still in business. It's now called Move Inc. They'd moved on. Stuart Wolff hadn't.
BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.