The chief executive of Beazer Homes USA Inc. will forfeit millions of dollars in bonus pay and stock profits he received while the homebuilder was committing accounting fraud, a U.S. securities regulator said.
Under a settlement with the U.S. Securities and Exchange Commission, Chief Executive Ian McCarthy will reimburse Beazer $6.48 million of cash, 40,103 restricted stock units and 78,763 restricted shares.
The total reimbursement, known as a clawback, represents McCarthy's entire incentive bonus for Beazer's 2006 fiscal year and is required under the Sarbanes-Oxley corporate governance law, the regulator said in a statement Thursday.
McCarthy did not admit wrongdoing and was not personally charged with misconduct. His lawyer Sandy Winer, a partner at Foley & Lardner LLP, declined to comment.
Beazer said it restated financial statements in May 2008 for its six prior fiscal years after finding irregularities in its mortgage lending practices.
In July 2009, the Atlanta-based company agreed to pay $5 million to the federal government and as much as $48 million to private homeowners to settle mortgage fraud claims, and avoid possible prosecution, the U.S. Department of Justice said.
Michael Rand, Beazer's chief accounting officer in the 2006 fiscal year, was charged last August with fraud and obstruction of justice in an 11-count federal indictment.
The SEC said Sarbanes-Oxley requires McCarthy to reimburse Beazer for incentive-based pay and stock sale profits while the fraud was going on, even though he was not personally charged.
"Incentive compensation and stock sale profits for CEOs and CFOs is subject to a clawback if received while a company was deceiving its shareholders about financial results," SEC enforcement chief Robert Khuzami said in a statement.
"This provides an important incentive for senior executives to be vigilant in preventing misconduct and ensuring that companies comply with financial reporting requirements."
Sarbanes-Oxley requires chief executives to certify the accuracy of financial statements in periodic SEC filings.
According to court papers filed by the SEC, Rand improperly established reserves that were used to artificially boost Beazer's earnings upon being eliminated.
The SEC said Rand also entered a secret agreement that let Beazer report profit from alleged home "sales" and then share in profits when the homes were later sold to third parties.
Rand has also been charged in an SEC civil lawsuit. His lawyers did not immediately return a call seeking comment.
In afternoon trading, Beazer shares were up 12 cents at $4.73 on the New York Stock Exchange.
The case is SEC v. McCarthy, U.S. District Court, Northern District of Georgia.
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