One of California's highest-paid executives, KB Home chief Bruce Karatz, was ousted Sunday, becoming the latest casualty in a national scandal over the manipulation of lucrative stock option grants.
The Los Angeles-based home-building company said an internal investigation by its board concluded that from 1998 to 2005, Karatz had a direct role in setting "incorrect" dates for stock option grants that inflated their value for himself and other executives.
Karatz, 61, has reaped hundreds of millions of dollars running the fifth-biggest U.S. home builder, much of which came in recent years from cashing in stock options awarded for his performance during the recently ended housing boom. Last year, he took in $155 million, mostly from options, on an annual salary of $1 million. On Sunday, KB Home said Karatz had agreed to repay the company $13 million and retire effective immediately.
Karatz becomes one of the highest-profile executives to be fired in the option scandal. More than 150 U.S. companies are under internal or external investigations of alleged efforts to inflate the value of option grants, which are often used by companies to provide top performers a chance to profit from rises in a company's stock price.
Many of the probes have focused on so-called backdating, in which the dates on grants are timed to coincide with low points in the stock price. Doing so increases the potential profit for the recipient.
The company was careful to say that the investigation didn't reach any conclusion about whether there was intentional wrongdoing on Karatz's part.
KB Home on Sunday named Jeffrey T. Mezger, 51, the company's chief operating officer, to succeed Karatz. It also fired another executive, and a third executive resigned.
The Karatz ouster ends the career of one of the Southland's longest-serving corporate leaders, who directed the transformation of a mid-size regional firm into a national powerhouse. The firm, formerly named Kaufman & Broad, also was an instrumental player in the suburbanization of Southern California, building affordable tract homes throughout the region.
A 34-year veteran of the company, Karatz had served as CEO since 1986.
"I am extremely proud of everything that the entire KB team and I have accomplished over the past 20-plus years," Karatz said in a statement. He declined to comment further.
