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Monday, Nov 20, 2017
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Former KB Home chief convicted in scam

LOS ANGELES - The former head of construction giant KB Home was convicted Wednesday of four felony counts in a stock option backdating scam. A federal jury in Los Angeles found Bruce Karatz guilty of two counts of mail fraud, one count of lying to company accountants and one count of making false statements in reports to the Securities and Exchange Commission. Karatz was acquitted on 16 other counts, including three counts of securities fraud. The 64-year-old former CEO showed no emotion as the verdicts were read. He remains free on bail and faces up to 80 years in prison when he is sentenced Sept. 8.
Defense attorney John Keker said he was disappointed at the four convictions despite his client's acquittal on the other charges. He planned to file a motion for a new trial. "The jury got 80 percent of it right," he said. "We will continue to fight those counts because he's innocent of them. We are planning on Mr. Karatz's eventual vindication of the last 20 percent of this case." Prosecutors claimed Karatz made some $6 million by illegally backdating stock options between 1998 and 2005 while he was chairman and chief executive of Los Angeles-based KB Home. The counts Karatz was convicted of stem from mid-2006, when prosecutors say he concealed and lied about his role in the backdating. A stock option allows an employee to purchase a company's stock at a preset price at a future date. Karatz retroactively tied the exercise price of his options to dates when the stock was selling for a low price, which increased his profit when he sold the shares. The maneuver is legal if it is properly accounted for and disclosed to investors; otherwise, it can allow companies to overstate profit and underpay taxes.
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