Bruce Karatz may be facing prison time, but he was the one doing the comforting before his bail hearing in federal court last week.
The former chief executive of KB Home rubbed the shoulders of his visibly upset fiancee, Lilly Tartikoff, whispering in her ear and consoling her. By all appearances, you might not know that he was the one being forced to turn in his passport and pledge a Bel-Air mansion as collateral to make bail.
Karatz, 63, is set to be arraigned today on charges that he committed fraud in manipulating stock options in a case that one FBI agent says illustrates "avarice and dishonesty at its core."
He is one of just six executives to face criminal charges in the nationwide stock option manipulation scandal. What's more, among those six -- and among more than 70 other executives who have settled or still face civil complaints -- Karatz is one of the few alleged to have cooked the books mainly to benefit himself and not underlings, federal authorities and legal experts said.
Karatz, who pulled in $232 million in compensation for the three years ending in 2005, boosted his pay because of the illegal actions, authorities say.
"Here you have a case where the head of the company was already making a lot of money, and he's accused of fiddling with stock options to get more," Rosalind Ramsey Tyson, regional director for the Securities and Exchange Commission in Los Angeles, said of Karatz.
An entirely different picture of Karatz emerges from his friends and associates, who include former Los Angeles Mayor Richard Riordan and billionaire philanthropist Eli Broad, co-founder of KB Home.
"In the 35 years I have known him, I can't think of any instance where he did anything unlawful, unethical or improper, even though he was always aggressively building the company," Broad said.
In 1986, Broad handpicked Karatz to lead the company, then known as Kaufman & Broad Home Corp. A graduate of Boston College and USC Law School, Karatz joined the Westwood home builder in 1972 as a staff attorney, then made his mark by running the firm's fledgling operations in France.
In his 20 years as chief executive, Karatz won acclaim as a marketing genius. In 2006, Fortune magazine named KB Home the country's "most admired" home builder. The firm's market capitalization increased more than 1,200% from 1995 to 2005.
