Finally the much-awaited news is out! The US Securities and Exchange Commission (SEC) has officially started its investigation into the stock options awards of KB Home. The preliminary investigations into this case were completed in August.
KB Home, the fifth largest home building firm in the US, gave this information during a regulatory filing. According to them, SEC had informed them about the investigation on January 19, 2007. During the investigations, SEC is free to obtain details about the company’s transactions and documentary evidences connected with this case.
KB Home has long been under the scanner. The U. S Government reports revealed that like KB Home, there are more than 160 companies in U.S, which are being investigated in cases relating to options practices. All these companies have used improper measurement dates in order to show an increase in their value so that the top executives can reap rich benefits.
In this context, KB Home CEO Bruce Karatz was compelled to resign from his post when the internal reports alleged that he gained handsome profits due to mispriced options. Karatz has finally agreed to pay back $13 million that he had acquired as compensation. Thanks to the recent boom in the U.S real estate business, in 2005 Karatz was able to walk away with almost $45 million in the form of base pay, bonus, stock option grants and restricted stock. This amount was more than 29 percent gains in terms of his income in 2004.
