UPDATE: Beazer CEO Receives Wells Notice From SEC

Shares of home builder Beazer Homes USA (BZH) fell Monday, following a disclosure that Chief Executive Ian J. McCarthy received a Wells notice from the Securities and Exchange Commission over his incentive pay.

The commission's staff has "preliminarily determined to recommend" that the SEC bring a civil action against McCarthy "to collect certain incentive compensation and other amounts allegedly due," under a section of the Sarbanes-Oxley Act of 2002.

It does not allege any "lack of due care" by McCarthy in connection with financial statements or other disclosures. Beazer, the nation's ninth-largest builder by annual closings, is not named.

According to the company, the SEC took the position in a recently filed civil action against the chief executive officer of another company - which wasn't named - that the commission need not allege misconduct by a CEO to maintain such an action.

The SEC offered McCarthy an opportunity to make a submission explaining why no such action should be filed. McCarthy intends to respond, according to the filing.

The company was not immediately available for comment.

In September 2008, the Atlanta-based company settled with the commission - without admitting or denying wrongdoing - that resolved an investigation into the financial-statement matters subject of an independent investigation conducted by the builder's audit committee, according to the filing.

Beazer understated its income between 2000 and 2005 by setting aside a reserve or rainy-day fund for land development and house construction costs. When home sales slowed in 2006, Beazer tapped into those reserves and improperly boosted its slumping earnings, the agency has previously said. In May, it agreed to refund $2.5 million to more than 1,000 North Carolina borrowers, as part of a settlement over mortgage point fees with the state's Office of the Commissioner of Banks.

"In the last couple of years, they've certainly been under a cloud," said Joe Snider, vice president and senior credit officer with Moody's Investors Service. Beazer has the lowest credit rating of the 13 publicly traded builders the firm covers.

Shares of Beazer recently were down 6.2% at $5.15, compared with a 1.65% gain for the Dow Jones US Home Construction Index.

- By Dawn Wotapka, Dow Jones Newswires; 212-416-2193; dawn.wotapka@dowjones.com

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