Former CEO of Crown Farm developer found guilty of stock fraud - Gazette.Net, 23 April 2010

http://bit.ly/aZgA96

The former CEO of a development company involved with the Crown Farm
project in Gaithersburg was convicted this week in Los Angeles of four
felony counts related to a stock option backdating scheme.

Bruce Karatz, 64, who headed Los Angeles-based KB Home, was found guilty
of two counts of mail fraud, one count of making false statements in a
quarterly report to the Securities and Exchange Commission and one count
of making false statements to KB's outside accounting firm, the U.S.
Attorney's Office in Los Angeles said.

Karatz could face up to 80 years in prison.

He is scheduled to be sentenced Sept. 8.

The Attorney's Office said Karatz used backdating, a process where
Karatz purchased KB stock options at a pre-set price. But instead of
paying the higher price listed when the option was actually purchased,
Karatz paid the price listed at a prior date, when it was cheaper.

"After KB commenced an internal investigation into its option-granting
practice in May 2006, Karatz concealed that he had backdated KB's stock
option grants during the preceding seven years," the office said in a
statement.

Officials from KB Home did not immediately return calls for comment.

After bankruptcy reorganization in December, KB Home is no longer the
leading partner in the Crown Farm development project, but they are
still involved.

Sunbrook Partners, a division of Los Angeles-based Westbrook Partners,
is the majority partner and managing member.

Officials from Sunbrook Partners were not immediately available for
comment.

A property deal and annexation agreement with the city signed in 2006
promised to bring 2,250 homes, as well as retail, office space, roads,
public art, a school and other amenities to the 181-acre property near
Interstates 270 and 370 at Fields Road.

Sunbrook Partners bought the property in December 2009. The joint
venture deal helped to settle bankruptcy protection filings by original
buyers KB Home and Centex Homes and lawsuits filed in three states by
original developers Lebling Development LLC and Jerunazargabr LLC of
Potomac.

Ryland Homes recently bought into the joint venture for $5.7 million.
Ryland will help KB Home Maryland LLC and Pulte Homes of Maryland to
bring 2,250 planned residences and 320,000 square feet of retail to the
hilly farmland near Washingtonian Center.