KB Home in Criminal Probe
Over Backdated Stock Options

KB Home is under criminal investigation by the U.S. Attorney's Office in Los Angeles over so-called options backdating that triggered the resignation of the home builder's longtime chief executive, Bloomberg reported Friday, citing people familiar with the matter.

In a regulatory filing last month, KB Home said the Securities and Exchange Commission was formally investigating its stock-option granting practices.

Backdating involves granting options to an executive or company insider on an advantageous date when a stock's price is low, in order to maximize the potential profit. Regulators have cracked down on the practice, and many companies are under investigation.

A spokeswoman for Los Angeles-based KB Home declined to comment on the Bloomberg story. A spokesman for the U.S. Attorney's Office in Los Angeles didn't immediately return a call Friday morning.

In August, the company said it and the SEC were reviewing options granted to ex-CEO Bruce Karatz, after reports surfaced that he made millions from cashing out options dated when KB Home shares were trading at relative lows. Karatz, a 34-year veteran of the firm and its chief executive since 1986, resigned in November and agreed to pay the company about $13 million.

KB Home has previously acknowledged it used incorrect measurement dates for financial-reporting purposes regarding some option grants. It dismissed Gary Ray head of human resources, saying it was Ray who with Karatz selected the grant dates.

KB Home's shares lost 1.4% to $51.83 late Friday morning.

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