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Former CEO of KB Home to plead not guilty

Bruce Karatz, accused of backdating millions of stock options for himself and others at the house builder, puts up his home for bail.

March 27, 2009|William Heisel

The former head of KB Home put up his Bel-Air mansion as bail Thursday and indicated he would plead not guilty to charges that he defrauded investors by backdating millions of stock options over six years and then lying about it.

At a hearing in downtown Los Angeles, Bruce Karatz, 63, agreed to hand over his passport to federal court officials by the end of today and to pledge his home as collateral to cover $750,000 in bail.

Karatz was charged March 5 by U.S. Atty. Thomas P. O'Brien with 20 counts of fraud and making misleading statements. He manipulated stock option grants for himself and others at KB Home for a more favorable price and then hid those changes from the company's board, shareholders and regulators, the indictment says.

Karatz attended the hearing at the federal courthouse with Lilly Tartikoff, widow of Brandon Tartikoff, the former head of NBC's entertainment division. He spoke only briefly and declined to answer questions from reporters afterward.

His attorney, John Keker of Keker & Van Nest in San Francisco, told U.S. Magistrate Judge Paul L. Abrams that Karatz intended to plead not guilty. Karatz is scheduled to appear in court Monday to enter his plea. If convicted, he faces as much as 415 years in prison.

Karatz bought the 7,246-square-foot home in 2001 for $7.4 million, according to property records. The court will take out a lien on the house, and if Karatz flees, the Justice Department will foreclose on the property and collect $750,000.

Karatz is credited with making Westwood-based KB Home one of the country's biggest home builders.

He served as chief executive for 20 years.


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