LOS ANGELES (CN) – Bruce Karatz, the former CEO of KB Home, agreed to pay more than $7 million to settle the Securities and Exchange Commission’s claims that he hid his involvement in a backdating stock options scheme.
Karatz, 62, left the Los Angeles-based housing company in 2006 after the SEC began an investigation into backdating at the company. Karatz was accused of issuing stock options on strategically chosen dates when stock was trading at lower prices without disclosing his actions to shareholders.
The SEC claims he backdated grant dates from 1999 through 2005, even after the Sarbanes-Oxley Act of 2002 tightened reporting requirements. Karatz signed reports filed with SEC that stated that the options were granted at market price on the day of the grant. He personally benefitted $6 million by backdating, receiving 2.86 million shares in backdated stock option awards.
Karatz left KB Home as one of the highest-paid executives in the nation, making more than $232 million in the last three years of his 30-year long employment, a large chunk of which came from cashing in stock option grants.
Karatz, who denied liability on the claims, will pay close to $6.7 million in compensation and interest to KB Home along with a $480,000 penalty to the U.S. Treasury.
The SEC filed its complaint Monday, and Karatz settled that same day.