Slap on the wrist for Bruce Karatz?

Probation officials are recommending that the former KB Home CEO receive five years' probation and eight months of home confinement. That's right folks, they're saying that the guy should spend zero time behind bars. Prosecutors have objected, noting that home detention in this case would be served "in defendant's 24-room Bel-Air mansion." From the LAT:

The probation office's report is not public. Prosecutors, in their motion, said probation officials made the "lenient recommendation" because they felt Karatz's criminal misconduct "did not cause any losses to the victim of his crime." But prosecutors alleged that KB Home had suffered a financial loss and that Karatz had made $6 million in restitution to the company to cover "illicit gains he received through KB Home's stock option award program."

Well yeah, but the point is Karatz knowingly committed fraud - in this case illegal backdating of stock options. That's not a capital offense, to be sure, but it is a blatant example of someone very wealthy and powerful pissing on the rules and regulations that everyone else manages to abide by. And what's amazing is that the amount of money involved in the swindle - a few million bucks - pales next to the tens of million of dollars that he was receiving in legitimate executive compensation. John Coffee, professor at Columbia Law School, said the proposed sentencing would be enough to infuriate any prosecutor, not to mention most everyone else. "The public at large is likely to see the law as tilted in favor of the powerful and privileged who, even if convicted, still get no jail time," Coffee told the Times. A federal district judge is scheduled to sentence Karatz next month.


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Mark Lacter
Mark Lacter created the LA Biz Observed blog in 2006. He posted until the day before his death on Nov. 13, 2013.
 
Mark Lacter, business writer and editor was 59
The multi-talented Mark Lacter
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