September 15, 2008
Former KB Home CEO Settles Backdating Charges
The SEC filed settled civil fraud charges against Bruce E. Karatz, the former chairman and CEO of Los Angeles homebuilder KB Home, Inc., for his participation in a multi-year scheme to backdate stock options to himself and other KB Home officers and employees. The Commission's complaint, filed in federal court in Los Angeles, alleges that from at least 1999 through 2005, Karatz enriched himself and others at KB Home by using hindsight to pick advantageous grant dates for KB Home's annual stock option grants. The complaint alleges that Karatz continued to use hindsight for stock option grant dates even after the Sarbanes-Oxley Act of 2002 imposed stricter reporting requirements on officers of public companies. Karatz received backdated annual stock option awards amounting to 2,860,000 shares of KB Home stock and profited more than $6 million from exercising many of these options.
Karatz agreed to settle the Commission's charges without admitting or denying the allegations in the complaint. Under the settlement, Karatz is required to pay $6,714,819.27 in disgorgement and interest and a civil penalty of $480,000 and is barred from serving as an officer or director of a public company for five years.
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