Daily Journal reports that the former CEO of KB Home was convicted on four of 20 counts, including mail fraud and making false statements to accountants and shareholders for backdating stock options to boost his pay.
A federal jury on Wednesday 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. He was found not guilty of 16 other counts.
Backstory: Karatz was accused of making $6 million by backdating stock options and then trying to hide the practice. Stock options allow employees to buy stock at a certain price, usually the closing price on the date they're granted. If the stock options are backdated to a date when the stock price was lower, they can be more valuable. Backdating is not illegal as long as the practice is disclosed. Prosecutors allege that KB Home did not make the required disclosures. Karatz did not testify at the trial, but the defense had Eli Broad and Richard Riordan as character witnesses.
From the LAT:
Karatz was considered one of the most prominent executives in the United States to stand trial in the government's five-year crackdown on options backdating. Revenues at KB Home soared under his watch, reaching a record $11 billion in 2006. Prosecutors have had mixed results with prosecutions dealing with backdating. In December, a federal judge in Orange County dismissed felony charges against Broadcom Corp. co-founders Henry Samueli and Henry T. Nicholas III and the company's former chief financial officer, William J. Ruehle, accusing prosecutors of a "shameful" campaign to intimidate witnesses and obtain unjustified convictions.