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Former KB Home Exec Guilty of Conspiracy

Posted by: Chris Palmeri on December 15, 2008

The Justice Dept. announced today that Gary Ray the former head of human resources at KB Home has pleaded guilty to obstruction of justice for tyring to cover up an options backdating scandal at the big home builder.

KB’s former chairman and ceo Bruce Karatz agreed to pay $7 million in penalties in September for what the Securities and Exchange Commission said was scheme to award stock options retroactively based on the lowest price the stock had traded at.

According to today’s press release: “Ray has admitted that he and the CEO agreed that they would collaborate in causing KB’s general counsel to prepare and to submit a false and misleading report on KB’s historical option granting practices to KB’s Audit Committee and other KB managers, who relied on the false report in making disclosure decisions with respect to required SEC filings.”

Ray faces a maximum sentence of five years in prison.

Reader Comments


December 19, 2008 11:43 AM

So typical of the crooks running American business nowadays. What ever happened to business ethics? Only 5 years?? What a serious joke..he will be out in 2 and working at another builder in 3 years. I bet he got a bonus for setting up this scheme and taking the fall for the CEO-(Criminal Extraordinaire Officer)

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BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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