"Altruistica": Seeking a return to full financial disclosure and regulatory oversight. A financial market analysis blog for "entertainment purposes" only by an experienced CFA seeking new hedge fund engagements for investment writing and analysis. The author has experience investing internationally, running a hedge fund, making angel investments, and helping launch five startup companies. Investors should do their own due diligence.

26 January 2007

KBH FINALLY Subject to an SEC Probe-'bout time

So we wrote about this KB Homes outrage in November and now CNBS's Steve Liesman is humping a story that Commerce Dept reported new home sales were up 4.8% in December. But these phony numbers are "seasonally" adjusted and don't adjust for that pesky 45% cancellation rate. All one can say is that these numbers are a bad joke. The warm weather in December got the homies building busily in a normally weak month. So the seasonal adjustment was HUGE !

SEC steps up KB Home options probe
NEW YORK (Reuters) - KB Home (NYSE:KBH - News), whose long-time chief stepped down following an internal probe into stock-options awards, said on Friday that U.S. regulators have opened a formal investigation into its options practices. The company, the No. 5 U.S. home builder, received notice of an informal inquiry in August. It said in a regulatory filing on Friday that it was notified on January 19 that the U.S. Securities and Exchange Commission is now conducting a formal investigation.

In a formal probe, the SEC has the power to subpoena documents and other information from a company. KB Home "has cooperated with the SEC regarding this matter and intends to continue to do so," the company said in the filing. In November, CEO Bruce Karatz retired after 34 years with KB following an internal report that showed the company used incorrect measurement dates for stock option grants from 1998 to 2005. Karatz agreed to repay about $13 million in gains he received from mispriced options.

Karatz, like other heads of publicly traded home-building companies, saw his compensation soar in recent years thanks to the U.S. housing boom. He took in nearly $45.6 million in the fiscal year ended November 30, 2005, including base pay, bonuses, restricted stock and stock option grants, up about 29 percent from $35.3 million in 2004, according to, a compensation specialist.

The U.S. housing market has slowed markedly in the past year.

KB is among more than 160 U.S. companies that are the focus of government investigations or are undertaking internal probes into options practices. The focus is on options that were backdated to increase their value to recipients, mostly top executives.

KB said in December that it expects to restate financial results for 2003 through 2005 and the first half of 2006 because of options pricing errors. It has said it expects a noncash expense of about $41 million spread over several years.


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