The cloud hanging over Move…
…just got a little darker: Homestore CEO’s fraud conviction overturned.
Investors can’t appreciate the prospects of a new trial.
About the Author: Dustin Luther
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Dustin,
MOVE spent $11M on Wolff’s defense so far. It’s unclear to me whether they have to continue to pay for his defense in the case of a retrial. Maybe you can do some snooping around and let us all know…
This is from MOVE’s 10-K:
In July 2005, Stuart Wolff (“Wolff”), the Company’s former chairman and chief executive officer, filed a suit against the Company in the Delaware Chancery Court in New Castle County. The complaint sought advancement of expenses (including attorneys’ fees) purportedly incurred and to be incurred by Wolff in connection with the SEC and the United States Department of Justice (“DOJ”) investigations and certain civil actions filed against Wolff. Effective September 28, 2005, the Company entered into a settlement agreement to reimburse Wolff $11.0 million for expenses incurred in his defense. The Company has no further financial obligations to Wolff. The Company recorded legal costs associated with Wolff of approximately $8.0 million and $3.0 million for the years ended December 31, 2005 and 2004, respectively, which have been reflected in general and administrative expense.
Spencer: The way I read the story, it seems pretty clear that Move worked a deal out with him that caps their legal fees at $11M. I could send a message to try to confirm, but I doubt I’ll hear a response.
I think the bigger impact of a new trial wouldn’t be on the company’s legal fees, but rather on the impact that a flood of new bad press would have on the stock price. My guess is there are more than a few investors who don’t like the idea of owning stock in a company where the former CEO is on trial (again) for fraud.
Dustin, I did some more digging and it looks like MOVE’s exposure on legal costs is indeed capped at the $11M they’ve already spent. Bummer for Stuart Wolff, huh?
Yes, I agree though, a retrial will still be bad news for MOVE due to the distraction and bad press which will surely follow.
No doubt it is a bummer for Stuart… but given the choice between no retrial and paying for one, I can only imagine he is happy with the outcome.