Former KB Home CEO Bruce Karatz Sentenced

[Guest guest]

Former KB Home CEO Bruce Karatz SentencedJudge gives Karatz five years of

probation, including eight months of house arrest.

By:

_Alison Rice_

(http://www.builderonline.com/find-articles.aspx?byline=Alison Rice)

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Former KB Home CEO Bruce Karatz, _who was convicted by a federal jury in

April_

(http://www.builderonline.com/legal-issues/breaking-news-kb-home-ceo-found-guilt\

y-in-stock-option-backdating-case.aspx) for lying about

stock-option backdating at KB Home, received his sentence Wednesday in a Los

Angeles

courtroom.

(http://www.latimes.com/business/la-fi-karatz-sentence-20101111,0,5675215.story)

_U.S. District Judge Otis D. II sentenced Karatz to five

years of probation_

(http://www.latimes.com/business/la-fi-karatz-sentence-20101111,0,5675215.story)

, including eight months of house arrest. He also said

that Karatz would be required to pay a $1 million fine and complete 2,000

hours of community service.

The sentence is significantly less than the maximum penalty, which could

have sent Karatz to prison for up to 80 years. Karatz was found guilty of

four felonies by the jury: two counts of mail fraud, one count of lying to KB

Home accountants, and one count of making false statements to the

Securities and Exchange Commission (SEC). The jury found him innocent of 16

other

charges, including securities fraud.

(http://www.builderonline.com/legal-issues/kb-homes-karatz-settles-with-sec.aspx\

)

(http://www.builderonline.com/legal-issues/kb-homes-karatz-settles-with-sec.aspx\

) Prosecutors had _recommended sending Karatz to prison for

six-and-a-half years_

(http://online.wsj.com/article/SB10001424052748703514904575602940961837762.html)

, arguing that a lighter sentence would suggest

Karatz was receiving special treatment not available to less affluent

defendants. According to _reports in the New York Times, Judge Otis forcefully

rejected their proposal_

(http://dealbook.nytimes.com/2010/11/11/judge-slams-backdating-prosecutors-in-ka\

ratz-case/) , which he said was “mean-spirited and

beneath this office.â€

(http://dealbook.nytimes.com/2010/11/11/judge-slams-backdating-prosecutors-in-ka\

ratz-case/) Karatz worked for KB Home for 34 years. _He resigned in

2006_

(http://www.builderonline.com/options-and-upgrades/forced-retirement.aspx)

after KB’s board determined he and other top executives had timed the

granting of stock options to essentially raise Karatz’s compensation, which

was partially based on stock options. He was one of the industry’s highest

paid executives, _receiving total compensation of $135.53 million in 2006,

according to Forbes._ (http://www.forbes.com/lists/2006/12/O29G.html)

_Karatz settled a related regulatory stock-option case with SEC in 2008_

(http://www.builderonline.com/legal-issues/kb-homes-karatz-settles-with-sec.as

px) , paying $7 million and neither admitting or denying the charges.

(http://www.forbes.com/lists/2006/12/O29G.html)

(http://www.builderonline.com/options-and-upgrades/forced-retirement.aspx)

Alison Rice is senior editor, online, at BUILDER magazine.

And from Homeowners of Better Builders 2005, Most investigated homebuilder

_HomeOwners for Better Building - KB Homes_

(http://www.hobb.org/content/view/582/260/)