Beazer Homes CEO to pay back $6.5M as settlement in fraud case
Published: March 4, 2011
Time posted: 3:25 pm
Tags: Beazer Homes, Ian McCarthy, Securities and Exchange Commission
The CEO of Beazer Homes will pay $6.5 million to reimburse the company for bonuses and stock profits he received while the company was committing accounting fraud, the Securities and Exchange Commission said.
The SEC said a settlement was reached Thursday with Ian McCarthy. The Atlanta-based company has built homes in the Charlotte area.
McCarthy had failed to reimburse Beazer Homes for bonuses, other incentive- or equity-based compensation and profits from Beazer stock sales that he received during the 12-month periods after his company filed fraudulent financial statements during fiscal 2006, according to the SEC’s complaint filed Thursday in federal court in Atlanta.
While not charged in the case, McCarthy is still required under Section 304 of the Sarbanes-Oxley Act to reimburse the company for incentive-based compensation and stock sale profits received during the period in which the fraud was committed, the SEC said.
“Today’s action makes clear that incentive compensation and stock sale profits for CEOs and CFOs is subject to a clawback if received while a company was deceiving its shareholders about financial results,” Robert Khuzami, director of the SEC’s Division of Enforcement, said in a statment. “This provides an important incentive for senior executives to be vigilant in preventing misconduct and ensuring that companies comply with financial reporting requirements.”
Rhea Kemble Dignam, director of the SEC’s Atlanta Regional Office, said McCarthy “was receiving millions of dollars in bonuses and other incentive compensation while Beazer was misleading investors and fraudulently overstating its income.”
Without admitting or denying the allegations, McCarthy has agreed to reimburse Beazer $6.47 million in cash, 40,103 restricted stock units or its equivalent and 78,763 shares of restricted stock or its equivalent. The reimbursement represents McCarthy’s entire fiscal 2006 incentive bonus — $5.7 million in cash and 40,103 in restricted stock units — $772,232 in stock sale profits and 78,763 shares of restricted stock granted in 2006, the SEC said.
Beazer settled an SEC enforcement action in September 2008, and the SEC charged its former chief accounting officer, Michael T. Rand, in July 2009.
The litigation against Rand is still ongoing.
The settlement with McCarthy is subject to court approval.