Kb Home

Bruce Karatz, who rode the housing boom to become one of the highest-paid executives in the country, was indicted by a federal grand jury Thursday on charges of manipulating stock options -- becoming one of the few executives to face criminal charges in the nation's options backdating scandal. Karatz, 63, served as chairman and chief executive of Westwood-based KB Home from 1986 to 2006, when he resigned under fire.

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.

Former KB Home Chief Executive Bruce Karatz pleaded not guilty in federal court Monday to charges that he secretly backdated stock options to enrich himself, then concealed the scheme from regulators and investors. Karatz, 63, entered the plea during a brief court appearance before U.S. District Magistrate Judge Jeffrey W. Johnson in Los Angeles. Johnson scheduled a trial date for May 19.

Westwood-based home builder KB Home said Robert L. Johnson, founder of Black Entertainment Television and chairman of RLJ Cos., was added as a director.

KB Home, one of the nation's largest home builders, is under investigation by the Securities and Exchange Commission "regarding possible accounting and disclosure issues." The investigation opens a fresh round of scrutiny of the company. Its former chief executive, Bruce Karatz, is awaiting trial on federal charges he fraudulently manipulated stock options. In 2006, Karatz resigned after an internal investigation found he had backdated his own stock option grants to increase his pay. In 2008, Karatz agreed to pay more than $7 million to settle SEC charges but didn't admit wrongdoing.

Shares of KB Home plunged 9% on Tuesday to a six-year low after the Los Angeles home builder reported a bigger-than-expected fiscal fourth-quarter loss of $773 million. Wall Street had expected a loss of $1.34 a share, according to a Bloomberg survey of analysts. Instead, the company reported a loss of $9.99 a share for the quarter ended Nov. 30.

As home prices soared higher earlier this decade, the buying frenzy was fueled in part by what real estate industry experts now claim were exaggerated -- or outright fraudulent -- appraisals. A lawsuit filed by two couples this week adds a new twist: It claims that Los Angeles builder KB Home and a unit of lender Countrywide Financial Corp. pumped up appraisals in their Sacramento-area development to sell homes at higher prices.

Home builder KB Home said Friday that it would stop building in Chicago, the mid-Atlantic region and Albuquerque, N.M., after finishing houses under construction in those regions. KB Home, based in Westwood, has five communities under development in Albuquerque, four in the Chicago area and five in the mid-Atlantic, which encompasses Virginia and Maryland, spokeswoman Lindsay Stephenson said. Homes under construction in those areas will be completed, she said.

Forced to cut home prices amid sluggish sales, Westwood-based developer KB Home posted a $268.2-million quarterly loss Friday, a surprise result that was more than twice as large as analysts had projected. KB Home lost $3.47 a share in the first quarter, which ended Feb. 29, compared with a profit of $27.6 million, or 34 cents, a year earlier. A Bloomberg survey of analysts had predicted a loss of $1.33 a share. Shares of KB Home fell $1.25 on Friday, or 4.8%, to $24.

KB Home shareholders rejected a labor union proposal to tie executive pay to company performance and approved a measure to limit severance payments. The decision on executive pay was a victory for the Westwood-based builder, which came under fire for giving a multimillion-dollar pay package to its chief executive last year after the stock had fallen by more than half. The votes were taken at KB Home's annual shareholder meeting Thursday and confirmed by company spokeswoman Lindsay Stephenson.