The Securities and Exchange Commission obtained a settlement
with Beazer Homes USA Inc. (BZH) Chief Executive Ian J. McCarthy
that resulted in the reimbursement of "several millions of dollars"
in bonus compensation and stock profits that he received while the
company was committing accounting fraud.
According to the SEC's complaint filed Thursday in an Atlanta
federal court, McCarthy previously failed to reimburse the home
builder for bonuses, other incentive-based or equity-based
compensation and profits from Beazer stock sales that he received
during the 12-month period after his company filed fraudulent
financial statements during fiscal 2006.
While McCarthy wasn't personally charged for the misconduct, he
was still required under the government's Sarbanes-Oxley Act to
reimburse the company for profits received during the fraudulent
period.
Robert Khuzami, director of SEC's Division of Enforcement, said
the action highlights the use of clawbacks if executives profit
while a company was deceiving its shareholders about financial
results.
Without admitting or denying the SEC's allegations, McCarthy
agreed to reimburse Beazer $6.5 million in cash, 40,103 restricted
stock units and 78,763 shares of restricted stock. A company
representative wasn't immediately available to comment on the
settlement.
Beazer had understated its income between 2000 and 2005 by
setting aside a reserve or rainy-day fund for land development and
house construction costs, according to the SEC. When home sales
slowed in 2006, Beazer tapped into those reserves and improperly
boosted its slumping earnings, the agency said. The SEC also said
Beazer cut side deals with investors in model homes to evade
auditors and book additional profit.
In September 2008, the builder entered into a settlement with
the commission--without admitting or denying wrongdoing--to resolve
the investigation.
Meanwhile, McCarthy received a Wells notice in late 2009 from
the SEC over his incentive pay. The notice recommended the SEC
bring a civil action against McCarthy to clawback the incentive
compensation.
Beazer's shares were up 2.6% to $4.73 in recent trading.
-By John Kell, Dow Jones Newswires; 212-416-2480;
john.kell@dowjones.com
--Dawn Wotapka contributed to this article.