The Securities and Exchange Commission
settled with Beazer Homes USA (BZH)
Chief Executive Ian McCarthy this week, forcing the home building executive to fork over millions in compensation and stock benefits.
The regulator said McCarthy received the incentive-based compensation at a time when the company's accounting officials were misleading investors about the firm's true income.
"Today's action makes clear that incentive compensation and stock sale profits for CEOs and CFOs is subject to a clawback if received while a company was deceiving its shareholders about financial results,” said Robert Khuzami, director of the SEC’s division of enforcement. "This provides an important incentive for senior executives to be vigilant in preventing misconduct and ensuring that companies comply with financial reporting requirements."
While McCarthy has not been charged with misconduct, the SEC has charged the corporation's former chief accounting officer for causing the scandal. The SEC has the power under the Sarbanes-Oxley Act to force McCarthy to reimburse the Atlanta-based home builder for incentive-based compensation and profits received while the financial fraud was in play.
McCarthy agreed to repay about $6.5 million in cash and profits earned on nearly 78,800 shares of restricted stock. These returns will cover his entire 2006 executive compensation package.
The SEC said at the time of McCarthy's 2006 executive compensation payout, the company was misleading investors by overstating income. The regulatory agency claims Beazer Homes manipulated accounting figures related to land development deals, house cost-to-complete accounts and the recording of model home financing transactions. These measures were taken to increase the firm's income, according to the SEC.
Write to Kerri Panchuk