Homestore is the Enron of real estate. While former Enron CFO Andrew Fastow sings like a canary against CEO Ken Lay, and the Enron board of directors that they all knew exactly what kind of fraudulent antics he was up to as the company's chief accountant, it's poetic justice that Homestore's former executive vice president of business development is singing the same song about his former CEO Stuart Wolff. (Whether or not Homestore's board members had any knowledge of Peter and the Wolff's fraud has yet to be determined.)

U.S. Department of Justice prosecuting attorney Doug Fuchs calls the Homestore-AOL "round trip" fraud transactions that led to criminal charges and civil suits against the corporations and the officers in charge at the time "one of the more significant corporate fraud cases of the last five years."

Fuchs says, "We believe Dr. Wolff is guilty, and it's important that he be convicted and held to account for his crimes, and to send a message to other CEOs that cooking the books isn't to be tolerated."

The whole ugly story came out when Homestore and Time Warner restated their earnings for fourth quarter 2000 through 2002, to the shock and subsequent loss of millions of dollars in shareholder value, which brought on SEC investigations and subsequent settlements in the millions. Meanwhile, Wolff, Tafeen and others were greedily selling their shares of Homestore as fast as they could, pocketing millions of dollars.

But they won't get to hang on to that money. There are also civil suits, which were consolidated into a class action shareholder suit with the California State Teachers' Retirement System, also known as CalSTRS, as lead plaintiff. Homestore paid $13 million in cash and issued 20 million new shares of Homestore common stock to members of the class.

At the least, Tafeen (and later, Wolff) will have to settle with the SEC in the Homestore case and with the private civil class action plaintiffs. Any settlement monies goes to injured parties. Judging by how hard CALPERS was on the "new" Homestore, they know how to slap a wrist with a ruler. The Homestore hotshots won't get off lightly.

Then there's the AOL side of the problem yet to come. Three days after Time Warner finalized their terms of agreement with the SEC, including a $300 million settlement payable to the US government, Wolff and Tafeen were indicted.

What's interesting is this statement -- that the charges included "abetting" fraud at three other companies, including Homestore, and that beginning in 2000, AOL "effectively funded its own online advertising revenue" by indirectly giving customers like Homestore fraudulent funds to pay for ads they wouldn't have purchased (or had the money to purchase) otherwise. While these other charges didn't impact Homestore or the case against Wolff and Tafeen, it's clear that Tafeen and Wolff's exposure to further fines and retribution is far from over. Cases against AOL officers are still pending, which means that Wolff and Tafeen could become defendants in those cases, too.

If Peter and the Wolff come out of this with any money left at all, it will be a miracle.

Tafeen has pled guilty to federal fraud charges, which makes things easier for the DOJ to pursue Dr. Wolff. "It means that he (Tafeen) is now convicted of a crime, so there's no chance he might have been acquitted. By pleading guilty, we can get another witness against Dr. Wolff, and we can focus on Dr. Wolff at the trial."

Tafeen will be sentenced on August 28, 2006, where the court will take into consideration a Pre-sentencing Report prepared by the U.S. Probation office, which recommends a sentence to the court based on relative culpability, as well as any fines, restitution, and perhaps other conditions appropriate to impose. Right now, says Fuchs, there are 10 people to be sentenced.

If Wolff pleads guilty, it might step up the sentencing, if he pleads innocent, it could push back the date. "We've invested a lot of time," says Fuchs, "and this case has garnered national attention. It's a significant case to me, and to the corporate world."