A former KB Home executive who became a key prosecution witness in the stock-manipulation trial of the company's former chief executive was sentenced Wednesday to three years' probation.
Gary A. Ray, KB's former vice president of human resources, had pleaded guilty to conspiring with former CEO Bruce Karatz to obstruct justice. U.S. District Judge Otis D. Wright II in Los Angeles also sentenced Ray to four months of home detention and 600 hours of community service and fined him $10,000.
Ray testified that Karatz told him to backdate stock options and to keep the practice secret from others, including the compensation committee at the Westwood home builder.
Backdating options to when the price of a company's stock was low makes them more valuable to recipients and is supposed to be disclosed to other shareholders. Ray testified that he knew he was doing something improper, although he initially told the FBI he didn't think he had done wrong. Karatz's lawyers made that inconsistency a key part of their defense.