Ex-KB Home exec, SEC settle options allegations - Los Angeles Times
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Ex-KB Home exec, SEC settle options allegations

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KB Home’s former head of human resources agreed Thursday to pay $550,000 to settle Securities and Exchange Commission allegations stemming from an options backdating scheme at the Westwood home builder.

The SEC alleged that Gary A. Ray, 50, violated federal securities laws by backdating stock options to illegally benefit himself, other company executives and employees. Backdating options involves selecting past grant dates on which a company’s stock closed at low prices, ensuring a high return when the option is exercised.

In December, Ray pleaded guilty in U.S. District Court in Los Angeles to conspiring in 2006 with then-Chief Executive Bruce Karatz to obstruct a probe of backdating at KB Home. He faces up to five years in prison and is awaiting sentencing in that criminal case.

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Ray did not admit or deny the allegations in his settlement with the SEC. He will pay $500,000 to return ill-gotten profits with interest, and will pay a penalty of $50,000.

“Ray used hindsight to pick advantageous grant dates to enrich himself and others at KB Home, while depriving investors of accurate information about executive compensation at the company,†said Rosalind R. Tyson, director of the SEC’s Los Angeles office.

The SEC said Ray received backdated annual stock option awards amounting to 380,000 shares of KB Home and made more than $480,000 from exercising many of these options.

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Mark Beck, Ray’s attorney, said, “Gary Ray has done his best to put these issues behind him and is paying a $50,000 fine to resolve the litigation with the SEC.â€

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