The options backdating scandal continues to haunt the markets today as KB Homes CEO Bruce Karatz resigned as head of the company amid an internal options investigation. A preliminary report found that the home construction company had incorrectly reported around $50 million in options grants, which the CEO agreed to repay. Several other members of the company were also found guilty, which prompted the board to fire HR head Gary Ray and encourage the resignation of VP and chief legal officer Richard Hirst. The board found that Mr. Karatz and Mr. Ray had selectively chosen grant dates under the company's stock option plan for personal gain.

According to an 8K filed by the company today:

"On November 12, 2006, the Company announced that a subcommittee of the Audit and Compliance Committee of the Board of Directors and its independent legal counsel conducting an investigation into the Company’s past stock option practices have concluded that the Company used incorrect measurement dates for financial reporting purposes for annual stock option grants during the period from 1998 to 2005. The Company expects that the incremental non-cash compensation expense arising from these errors is not likely to exceed an aggregate of $50 million, spread over the vesting periods of the options in question. The errors may also require an increased tax provision. The Company is evaluating, with its independent auditors, whether a restatement of certain previously-filed financial statements will be required. The Company has cooperated and will continue to cooperate with the inquiry of the SEC and other government agencies." (Read More)

This latest investigation has again pushed the bounds of these investigation to companies outside of the tech sector, which was hit especially hard. Although the number of investigations has slowed as of recent, there continues to be many new instances while older cases are just beginning to be settled by the SEC. So far, only a handful of executives have faced criminal charges.

Mentioned Companies
KB Home (NYSE:KBH)