Former KB Home CEO Bruce Karatz pleads not guilty to Backdating - 31 Mar 2009
Former KB Home CEO Bruce Karatz pleads not guilty
is accused of backdating stock options for personal profit. If
convicted on all 20 felony charges, he could face 415 years in prison.
Former KB Home Chief Executive Bruce Karatz
pleaded not guilty in federal court Monday to charges that he secretly
backdated stock options to enrich himself, then concealed the scheme
from regulators and investors.
Karatz, 63, entered the plea
during a brief court appearance before U.S. District Magistrate Judge
Jeffrey W. Johnson in Los Angeles. Johnson scheduled a trial date for
May 19.Karatz, who declined to comment after the
hearing, could face a maximum sentence of 415 years in prison if
convicted on all 20 felony charges. Regulators say Karatz personally
netted more than $7 million from the backdating of options at
Westwood-based KB Home. He served as chairman and chief executive from
1986 to 2006, when he resigned under fire.
He is one of just
six executives nationwide to face criminal charges in the
stock-option-manipulation scandal and one of the few accused of
backdating options to enrich himself.
Free on $750,000 bond
secured by his Bel-Air mansion, Karatz appeared in court with attorney
John Keker of the San Francisco law firm of Keker & Van Nest. Keker
declined to comment after the hearing.
According to an indictment returned earlier this
month, Karatz first tried to get KB Home to give him stock options
valued at $1, ensuring a huge profit, in 1998.
When the company
balked, the indictment says, he worked closely with former KB human
resources executive Gary Ray to backdate options repeatedly from 1999
to 2006.
Karatz then concealed the backdating from KB Home's
board of directors, its compensation committee, its shareholders and
the SEC, according to the indictment.
Ray was charged
separately from Karatz. He pleaded guilty in February to conspiring
with Karatz to thwart an SEC investigation. Now he is cooperating with
prosecutors.
Stock options typically are granted to employees
with an exercise price tied to the date of the grant. Companies can
legally backdate stock options, making them more valuable, but they
must account for them properly, pay taxes accordingly and report the
backdating to shareholders.
KB Home did not disclose the backdating until nearly a decade after it
more...http://www.latimes.com/business/la-fi-karatz31-2009mar31,0,1500323.story
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