Ian McCarthy, the chief executive of Beazer Homes, a popular homebuilder in the US, will fork over close to $6.5 million in bonuses and profits that were generated from company stock sales during a time federal regulators say the Atlanta-based firm was engaging in fraudulent accounting activities.
The SEC March 4 announced a settlement with McCarthy, who agreed to give back $6,479,281 in cash and stock, which was reflected in McCarthy’s compensation for the fiscal year of 2006.
According to the commission, Beazer forged some home-financing transactions while tampering with results that show an inflation of profits for the recorded year.
‘McCarthy was receiving millions of dollars in bonuses and other incentive compensation while Beazer was misleading investors and fraudulently overstating its income,’ says Rhea Kemble Digname, director of the SEC’s Atlanta regional office.
While the CEO was not personally charged, the case was brought under the Sarbanes-Oxley law of 2002 which allows companies to ‘claw back’ compensation issued to top level executives during the period in which the firm breached financial reporting rules.
‘The SEC can claw back for the company incentive cash and equity-based compensation and stock profits earned by the company's CEO, even if he did not engage in the misconduct,’ Beazer said in a statement to the Associated Press. ‘In resolving the claim against Mr. McCarthy, the SEC did not personally charge him with engaging in the underlying misconduct or allege that he otherwise violated the federal securities laws.’
SEC Enforcement Director Robert Khuzami said the agency's clawback provision ‘provides an important incentive for senior executives to be vigilant in preventing misconduct and ensuring that companies comply with financial reporting requirements.’
According to the federal watchdog, this is one of the many suits brought against Beazer Homes, which settled a separate enforcement action in 2008.
