In This Economy?

Like slap bracelets, Hypercolor T-shirts and cocaine before it, fraud seems to be the hottest new fad to hit the scene. Especially amongst the high-ranking corporate dickhead set.

The latest to adopt this exciting new trend is Bruce Karatz, former CEO of KB Home.

Now I have to admit, compared to some of the other shitheads I have written about on this site, this dude is pretty small time. I mean his fraud charges only add up to millions instead of billions. Weak sauce, Bruce. Weak sauce. BUT, because I don’t want to leave any stone unturned in the world of corporate douche-baggery, I’m going to give him his due. (But he’s definitely not trading card worthy…not yet, anyway)

Ok, let’s move on. Mr. Karatz’s alleged method of fraud was something called a stock option backdating scheme. Basically, this is where someone changes the grant date on stock options to a date when the stock was trading at a cheaper level. That part is legal, as long as you report it. Mr. Karatz didn’t report it, however, which served to hide the actual value of stock-based compensation that KB was awarding him and other executives. It, like most fraud, is a little confusing.

Basically, to sum it all up: The dude stole money.

The amount he allegedly got away with is around $6 million according to the SEC.

Now, in a post-Madoff world, I can understand the SEC maybe being a little more reactionary than usual. After all, they did have people warning them about King Shithead for decades and did nothing. What I’m saying is that upon reading the headlines about Bruce Karatz I wasn’t as quick to pass judgement. I thought maybe this guy could be innocent. They can’t all be guilty, right?

But then I kept reading:

Strike #1: Last month, an ex-KB executive named Gary A. Ray pleaded guilty to conspiring with Karatz to obstruct justice by causing KB Home to file a false report on its option-granting practices in a bid to avert an SEC probe. Yeah, that doesn’t look real good.

Strike #2: Back in September, Brucey agreed to pay $7.2 million to settle civil charges of backdating stock options. Eek.

Strike #3: Mr. Karatz, Mr. Ray and another executive were forced to step down in 2006 after KB discovered that the chief executive benefited from favorably dated option awards between 1998 and 2005. He agreed to repay the company $13 million. Aw shit.

Bruce, you’re out.

But damn that fraud looks good on you.

Tags: bernie madoff, Bruce Karatz, cocaine, fraud, KB Home, SEC

This entry was posted on Friday, March 6th, 2009 at 11:30 AM and is filed under Bad News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.