It's over the apparent backdating of the homebuilder's stock option grants - and what led to the ouster of long-time KB Chairman and CEO Bruce Karatz. This would rachet up what was earlier described as an informal inquiry. The company said in a filing that it's cooperating with the SEC. In dispute are four grants to Karatz between 1998 and 2001 that were dated when the stock was priced at low points. Karatz has agreed to pay back $13 million - covering gains on options he should not have received. Meanwhile, LABO has learned that prominent white collar defense attorney John Keker has recently joined the Karatz defense team, leading to speculation on whether the fed's investigation could be heating up. Keker, as you might recall, represented Enron CFO Andrew Fastow. KB also faces both federal and state shareholder lawsuits, which are going through the early rounds in court.