SEC v. MICHAEL T. RAND, No. 1:09-CV-1780, Northern District of Georgia (July 1, 2009) — Complaint

FILED IN CLERK'S OFFICE 
U.S.D.C. Atlanta 
JUL 012009 
IN THE UNITED STATES DISTRICT COURT 
FOR THE NORTHERN DISTRICT OF GEORGIA 
ATLANTA DIVISION 
JAM~.N. ~ATTEN, Clerk 
131); d.-ftV'J Deputy Clerk 
SECURITIES AND EXCHANGE 
COMMISSION, 
Plaintiff,	 
Civil Action 
File No. 
v. 
1 09· r, V.1 780 
MICHAEL T. RAND, 
·Defendant. 
COMPLAINT FOR INJUNCTIVE AND OTHER RELIEF 
The Securities and Exchange Commission ("Commission") files this 
Complaint for Injunctive and Other Relief and alleges 
as follows: 
INTRODUCTION 
1. This case involves a fraudulent earnings management scheme 
perpetrated at Beazer Homes USA, Inc. ("Beazer"), an Atlanta-based homebuilder 
and public issuer. Between January 2000 and April 2007, Michael T. Rand 
("Rand"), initially as Corporate Controller, then as Chief Accounting Officer 
of 
Beazer, fraudulently manipulated Beazer's reported quarterly and annual income in 

order to meet_or exceed analysts' expectations for Beazer's diluted earnings per 
share (EPS) and maximized yearly bonuses 
of certain officers and senior 
employees. Aspart 
ofhismisconduct,Randtookaffirmative.stepstoconcealthe 
fraud from Beazer's outside auditors and certain internal·Beazer accountants. 
2. Rand caused Beazer to fraudulently decrease its reported net income 
during fiscal years 2000 through 2005, a period 
of strong growth and financial 
performance, by recording improper reserves and/or liabilities (collectively 
"reserves"). Then, beginning in the first quarter 
of fiscal year 2006, to offset its 
declining financial performance, Rand caused Beazer to reverse these iinproper 
reserves, thereby fraudulently inflating Beazer's income. Additionally, during 
fiscal2006 and the first quarter 
of fiscal 2007, Beazer improperly recognized 
revenue from the sale and leaseback 
of certain model homes. Cumulatively, 
Beazer fraudulently understated its income 
by $63 million during fiscal years 2000 
to 2005 ($37 million after income taxes), representing over 7% 
of Beazer's 
cumulative actual restated net income 
of$955 million for the period (4% after 
income tax effect). During fiscal year 2006 and the first two quarters of fiscal year 
2007, Rand caused Beazer to overstate its income by approximately $47 million 
($30 million after income taxes), representing 20% 
ofBeazer's cumulative restated 
net income 
of$232 million for the period (13% after income tax effect). 
2
 

3. Beazer'simproper manipulation ofreserves involved principally two 
categories: (i) land acquisition and development inventory accounts (collectively 
"land inventory accounts"), 
i.e., expenses necessary to develop and complete 
subdivisions as it pertains to the land surrounding individual home lots; and (ii) 
house costs-to-complete accounts, 
i.e., contingencies to cover specific costs (e.g., 
cabinetry, driveway repairs, etc.) expected to be incurred within four to nine 
months after Beazer and its customer had closed on the purchase 
of the home.. 
Beazer's improper sale-leaseback accounting involved recognizing revenue upon 
the sale 
of model homes to, and those homes' leaseback from, third-party 
investors, while retaining a financial interest in profits obtained when the investors 
.I 
subsequently sold the homes to homebuyers. 
4. Defendant Rand has engaged in, and unless restrained and enjoined 
by 
this Court, will continue to engage in, acts and practices which constitute and will 
constitute violations 
of Section 17(a) ofthe Securities Act of 1933 ("Securities 
Act") [15 U.S.C. § 77q(a)] 
and; Sections 10(b) and 13(b)(5) of the Securities 
Exchange Act 
of 1934 ("Exchange Act") [15 U.S.C. §§ 78j(b) and 78m(b)(5)] and 
Rules 10b-5, 13b2-1 and 13b2-2 promulgated thereunder [17 C.F.R. 
§§ 240.10b-5, 
240.13b2-1, 240. 13b2-2], and acts and practices that aided and abetted violations 
of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act [15 U.S.C. §§ 
3
 

78m(a), 78m(b)(2)(A) and 78m(b)(2)(B)] and Rules 12b-20, 13a-l, 13a-ll and 
13a-13 promulgated thereunder [17 C.F.R. 
§§ 240.12b-20, 240.13a-l, 240.13a-ll 
and 240.13a-13]. 
JURISDICTION AND VENUE 
5. The Commission brings this action pursuant to Section 20(b) ofthe 
Securities Act 
[15 U.S.C. § 77t(b)] and Section 21(d) ofthe Exchange Act [15· 
U.S.C. § 78u(d)]. 
6. This Court has jurisdiction ofthis action pursuant to Sections 20(b) 
and 22(a) 
of the Securities Act [15 U.S.C. §§ 77t(b) and 77v(a)] and Sections 21(d) 
and 27 
ofthe Exchange Act [15 U.S.C. §§ 78u(d) and 78aa]. 
7. Defendant Rand, directly and indirectly, has made use ofthe mails, 
the means and instruments 
of transportation and communication in interstate 
commerce, and the means and instrumentalities 
of interstate commerce, in 
connection with the transactions, acts, practices and courses 
of business alleged in 
this Complaint. 
8. Venue lies in this Court pursuant to Section 22(a) ofthe Securities Act 
[15 U.S.C.§ 77v(a)] and Section 27 
of the Exchange Act [15 U.S.C. § 78aa] 
because Beazer was based in this district, many 
of the acts constituting the scheme 
occurred within this district, and the defendant resides in this district. 
4
 

THE DEFENDANT
 
9. Michael T. Rand, 47, of Sandy Springs, Georgia, is a CPA licensed in 
Georgia. He began his career at Beazer in November 1996 
as its Vice President­
Operational and Controls and thereafter was promoted to Vice President-Corporate 
Controller (June 1998), Senior Vice President-Corporate Controller (October 
2002), and Senior Vice President-Chief Accounting Officer (August2004). At all 
relevant times, Rand served as Beazer's Principal Accounting Officer. On June 27, 
2007, he was terminated. Prior to Beazer, from 1984 to 1996, Rand was employed 
by KPMG Peat Marwick, leaving as a senior manager. 
ISSUER INVOLVED 
10. Beazer Homes USA, Inc. is a Delaware corporation headquartered in 
Atlanta, Georgia. During the relevant conduct, Beazer engaged in the business 
of 
homebuilding through approximately 30 regional divisions. Since March 1994, 
Beazer's common stock has been registered with the Commission pursuant to 
Section 12(b) 
of the Exchange Act and listed on the New York Stock Exchange 
under the symbol BZH. At all relevant times, Beazer's independent auditor has 
been Deloitte 
& Touche LLP ("Deloitte"). Beazer filed various reports with the 
Commission during the relevant period on Forms 8-K, 10-Q and 10-K, and 
registration statements on Forms S-3, S-4 and S-8. The registration statements 
5
 

were filed in conjunction with the issuance of various stock or debt, and the Forms 
8-K included press releases related to Beazer's results of operations, and/or various 
financial statements and information. 
Manipulation of Land Inventory Accounts 
11. As part of its home building and sale operations, Beazer purchased 
parcels ofland upon which it constructed houses to form subdivisions. Beazer 
recorded the acquired land, along with costs for the common development 
ofthe 
parcel-such as sewer systems and streets-as an asset on Beazer's balance sheet 
in the land inventory accounts. 
12. As subdivisions were built, Beazer allocated the costs accumulated in 
the land inventory accounts to individual home lots, which were then offered for 
sale. When the home sale was recorded in Beazer's books, all associated 
homebuilding costs, including allocated costs recorded in the land inventory 
accounts, were expensed as a cost 
ofthe sale, with a corresponding reduction, or 
credit, in the land inventory account. 
13. Because Beazer sold houses within a subdivision as the development 
of that subdivision progressed, the land inventory expense recorded for any 
particular house sale was necessarily an estimate. The setting 
of inventory credits 
was done by each division based on estimates 
of costs to acquire, develop and 
6
 

complete subdivisions plus an added amount for contingencies. Once established, 
divisions needed approval from Rand, who reviewed the reserves on a monthly 
basis, to make adjustments. 
14. As additional houses in a subdivision were sold, the land inventory 
account continued to be decreased (credited) by amounts representing the land 
acquisition and development costs allocated to each individual house. 
If costs had 
been allocated properly, then shortly after the final house in a development had 
been sold, the balance in the land inventory account should have been at or near 
zero. 
15. During all four quarters in fiscal year 2000, all four quarters in fiscal 
year 2001, all four quarters in fiscal year 2002, the first three quarters in fiscal year 
2003, all four quarters in fiscal year 2004, and all four quarters in fiscal year 2005, 
Rand manipulated the amounts recorded in the land inventory accounts 
by over­
allocating land inventory costs in material amounts. 
16. During 
fiscal year 2000 (beginning October 1, 1999), these land 
inventory costs were overstated by approximately $902,000 in the first quarter 
(ending December 31, 1999); $791,000 in the second quarter (ending March 31, 
2000); $727,000 in the third quarter (ending June 30, 2000); and $987,000 in the 
fourth quarter (ending September 30, 2000). 
7
 

17. During fiscal year 2001, these land inventory costs were overstated by 
approximately $1,455,000 in the first quarter; $584,000 in the second quarter; 
$1,322,000 in the third quarter; and $2,571,000 in the fourth quarter. 
18. During fiscal year 2002, these land inventory amounts were overstated 
by approximately $1,827,000 in the first quarter; $2,761,000 in the second quarter; 
$1,270,000 in the third quarter; and $2,586,000 in the fourth quarter. 
19. During fiscal year 2003, these land inventory amounts were overstated 
by approximately $2,440,000 in the first quarter; $1,422,000 in the second quarter; 
and $1,086,000 in the third quarter. 
20. During fiscal year 2004, these land inventory amounts were overstated 
by approximately $3,996,000 in the first quarter; $4,253,000 in the second quarter; 
$5,963,000 in the third quarter and $2,227,000 in the fourth quarter. 
21. During fiscal year 2005, these land inventory amounts were overstated 
by approximately $3,388,000 in the first quarter; $4,443,000 in the second quarter; 
$5,122,000 in the third quarter and $4,469,000 in the fourth quarter. 
22. For example, in order to reduce its first quarter fiscal 2002 earnings, 
which had exceeded analysts' EPS expectations, Rand fraudulently increased the 
land inventory expense recorded for homes sold during the quarter. 
23. On January 
8, 2002, after the end of the first quarter, Rand emailed a 
8
 

target earnings amount to the relevant financial personnel in numerous Beazer 
divisions, including Northern California, Southern California, Arizona and Las 
Vegas, with instructions not to exceed the target 
by a certain amount. The 
distributed target for each division was less than each division's previously 
expected quarterly results. 
24. Rand advised the divisions to review their land inv.entory accounts in 
order to increase expenses and reduce earnings. In one particular email, Rand 
instructed the Florida 
qivision to provide "more than adequate land allocations in 
communities closing out this year" as a means to reduce their earnings. 
25. On January 10, 2002, Rand, via emails, directed certain divisions to, 
"[s]et aside all the reserves you reasonably can
....the quarter is too high." This 
was followed 
by a series of emails in which Rand specified the amounts by which 
certain divisions should increase their reserves, along with targets for their EBIT 
(Earnings Before Interest and Taxes). 
26. The divisions substantially carried out his directions, and Rand was 
able to reduce Beazer's quarterly EPS from $2.60 to $2.47 a share, which exceeded 
analysts' consensus 
of $2.00 per share. In total, Beazer recorded approximately 
$1.827 million in excess land inventory costs for that quarter, or approximately 8% 
of its reported net income. 
9 

27. By increasing land inventory expenses, Rand caused ~eazer to 
understate its net income by a total 
of $56 million ($33 million after tax 
effect)(approximately 5% 
ofreported net income) between fiscal years 2000 and 
2005. 
28. Beginning in the first quarter 
of2006, Rand began to reverse the 
reserves existing in the land inventory accounts, which increased then-current 
period earnings. The credit balances in land inventory accounts were debited, 
i.e., 
zeroed out, and a cost of sales expense credited, i.e., reduced. These reversals 
improperly reduced expenses and increased Beazer's earnings. During all four 
quarters 
of 2006, Rand caused Beazer to release these land inventory reserves, 
boosting then-current period earnings by approximately $100,000 in the first 
quarter of2006, approximately $301,000 in the second quarter 
of2006, 
approximately $14,278,000 in the third quarter of2006, and approximately 
$10,816,000 in the fourth quarter of2006. 
29. During 2006, Beazer overstated its net income by approximately $16 
million by "zeroing out" credit balances in its land inventory accounts. These 
journal entries were made 
by the divisional financial managers acting at Rand's 
specific direction. For example, in the second quarter 
of2006, Rand directed the 
reversalofa creditbalance of$3.1 millioninthelandinventoryaccounts ofthe 
10
 

Las Vegas division. On April 1, 2006, just prior to the close ofBeazer's second 
quarter 2006, a senior Beazer Corporate Controller, acting with Rand's knowledge, 
directed the Las Vegas division, by e-mail, to "takedown $3.1 million in land 
reserves." 
30. The Las Vegas Finance VP complied with the request. A total 
of 
$3.1 million ofpreviously expensed land·inventory costs were reversed from 
Beazer's general ledger system. Included in the reversal was over $2 million 
of 
excess land inventory costs that had been held open in Beazer's general ledger 
from two Las Vegas subdivisions that had closed in August and September 2004. 
This entry added approximately $2 million to Beazer's quarterly net income after 
income taxes, which in tum added approximately $0.05 to Beazer's reported 
quarterly earnings per share 
of $2.35, thereby allowing Beazer, along with other 
improper accounting entries, to exceed analyst EPS expectations. 
Manipulation of "House Cost to Complete" Reserves 
31. Under its accounting policies, Beazer recorded revenue and profit on 
thesale 
ofa houseaftertheclose ofthesale ofthathousetoa homebuyer. Inthe 
journal entries to record the sale, Beazer typically reserved a portion 
ofits profit 
earned on the house. This reserve, called a "house cost-to-complete" reserve, was 
established to cover any unknown expenses that Beazer might incur on the sold 
11
 

house after the close, such as minor repairs or final cosmetic touchups. Although 
the amount 
of this reserve varied by region, it was typically $1,000 to $4,000 per 
house. 
32. Beazer's policy was to reverse any unused portion 
of the house cost­
to-complete reserve within four to nine months after the close, taking any unused 
portion into income at that time. Although creation 
of such a house cost-to­
complete reserve is  proper, Rand fraudulently utilized these reserves to manage 
Beazer's earnings. As specified below, in various quarters between,2000 and 
2005, Rand over-reserved house cost-to-complete expenses in order to defer profit 
to future periods. Rand then took steps to maintain these reserves beyond the 
typical four to nine months and until increased earnings were required in future 
periods. 
33. In fiscal year 2000, the cost-to-complete expense was over-reserved 
by approximately $610,000 in the second quarter; $5,000 in the third quarter; and 
$2,288,000 in the fourth quarter. 
34. In fiscal year 2001, the cost-to-complete expense was over-reserved 
by approximately $1,138,000 in the first quarter; and $543,000 in the second 
quarter. 
35. In fiscal year 2002, the cost-to-complete expense was over-reserved 
12
 

· by approximately $2,184,000 in the first quarter; and $813,000 in the second 
quarter. 
36. In fiscal year 2003, the cost-to-complete expense was over-reserved 
by approximately $1,380,000 in the first quarter. 
37. In fiscal year 2004, the cost-to-complete expense was over-reserved 
by approximately $1,057,000 in the first quarter; $1,137,000 in the third quarter; 
and $2,051,000 in the fourth quarter. 
38. In fiscal year 2005, the cost-to-complete expense was over-reserved 
by approximately $805,000 in the second quarter; and $1,427,000 in the third 
quarter. 
39. Forexample,at theend 
ofthefourthquarter offiscal2000,Rand 
instructed the Virginia division to decrease their EBIT for the quarter to $5.2 
million. Rand suggested, among other methods, that the balance in the house cost­
to-complete accounts be increased. There was no reasonable accounting basis for 
recording these increased amounts. 
40. By the end 
of the first quarter of fiscal 2001, Beazer had excess house 
cost-to-complete reserves 
of approximately $3 million spread out over various 
divisions. On other occasions, Rand took steps to maintain these reserves beyond 
the four to nine month period until increased earnings were required in future 
13
 

periods. 
41. Near the end 
of the first quarter of fiscal 2001, Rand instructed the 
Virginia division to defer reducing house cost-to-complete reserves greater than 
nine months old, so the division would not exceed its targeted quarterly EBIT. 
42. Beginning in 2006, 
Beazer-requiring additional income­
manipulated its house cost-to-complete reserve to increase its profits. First, during 
the first quarter of2006, Rand caused Beazer to begin reversing some 
of the excess 
cost-to-complete reserves that it had previously recorded. As a result 
of Rand's 
directives, Beazer reduced its cost 
of sales expense by approximately $1.5 million 
by reducing the cost-to-complete reserve to zero on a number 
of houses. 
43. In the first quarter 
of fiscal year 2006, the reversal of excess cost-to­
complete reserves previously recorded fraudulently added $183,000 to earnings for 
that period. 
44. In the third quarter 
of fiscal year 2006, the reversal of excess cost-to­
complete reserves previously recorded fraudulently added $2,130,000 to earnings 
for that period. 
45. In the fourth quarter 
of fiscal year 2006, the reversal of excess cost-to­
complete reserves previously recorded fraudulently added $209,000 to earnings for 
14
 

that period. 
46. In the first quarter 
offiscal year 2007, the reversal ofexcess cost40­
complete reserves previously recorded fraudulently added $1,549,000 to earnings 
for that period. 
47. Additionally, at Rand's instruction, certain Beazer divisions in order 
to report more income failed to establish a house cost-to-complete reserve on 
house sales closing during the quarter. Beazer's Las Vegas division failed to 
record any cost-to-"complete reserve for approximately 
85 houses sold during 
December 2005. This resulted in an improper recognition, in violation 
ofGAAP, 
ofmore than $200,000 ofincome for the period. 
48. Combined, the additional income due to this misconduct added 
approximately $0.03 to Beazer's EPS. 
The Fraudulent Sale-Leaseback Transactions 
49. Beginning in the first quarter offiscal 2006, Rand intentionally 
recorded certain lease transactions involving approximately 360 Beazer model 
homes as sale-Ieasebacks, with full knowledge that the transactions did not qualify 
for such accounting treatment under GAAP. This misconduct caused Beazer to 
report improperly approximately $22 million 
ofpre-tax income, or 4% of 
15 

consolidated net income, during fiscal 2006. Specifically, Beazer overstated 
income 
by approximately $8,306,000 in the first quarter of fiscal year 2006, 
$4,179,000 in the second quarter 
of fiscal year 2006, $1,583,000 in the third 
quarter 
of fiscal year 2006, and $8,341,000 in the fourth quarter of fiscal year 
2006. 
50. Beazer retained a continuing interest in the potential appreciation 
of 
the model homes based upon terms contained in side agreements with certain 
investor pools purchasing the model homes. These pools were organized by a 
subsidiary 
of GMAC, LLC. Pursuant to GAAP, this continuing interest required 
the transactions to be treated as financing transactions. Continl,ling involvement 
includes an obligation 
by the buyer-lessor to share with the seller-lessee any 
portion
oftheappreciation oftheproperty, orwhenthesellerretains aninterestin 
future profits 
of the leased asset. 
51. The sale-leaseback transactions included continuing involvement by 
the seller-lessee (Beazer) and should have been accounted for as a financing or by 
the deposit method, with no revenue recognition. Rand nevertheless recorded them 
as sale-Ieasebacks, recognizing sales revenue at the inception 
of the lease. 
52. Beazer's auditor, Deloitte and certain internal Beazer accountants 
16 

reporting to Rand, specifically advised Rand via email that Beazer's appreciation 
rights in the homes represented a continuing interest that, pursuant to GAAP, 
precluded Beazer from recognizing revenue when the homes were sold to GMAC. 
53. In an attempt to circumvent GAAP, and to deceive Deloitte and 
certain Beazer internal accountants, Rand caused the final, written versions 
ofthe 
sale-leaseback agreements to omit any reference to Beazer's continuing profit 
participation. Rand then directed, 
by email, his subordinates to record revenue at 
the time the model homes were initially sold to the GMAC investor pools. In order 
to deceive Deloitte and certain internal Beazer accountants involved in the 
transactions, Rand provided Deloitte with copies 
of the sale-leaseback agreements 
which intentionally omitted the provisions relating to the continuing profit 
participation by Beazer. Rand also failed to disclose the side agreements to 
Deloitte and certain Beazer internal accountants. 
54. Additionally, on January 18, 2006, Rand provided to Deloitte and 
certain Beazer internal accountants a memo which specifically stated that Beazer 
would 
not "participate in the appreciation" ofthe leased assets (model homes).· 
Based on Rand's concealment and misrepresentations, Deloitte agreed that 
immediate revenue recognition was proper. 
17 

55. As a result of the improper accounting practices described above, 
Beazer's books and records and financial statements were materially inaccurate 
beginning in the first quarter 
of fiscal year 2000 and continuing at least through the 
second quarter of fiscal year 2007. 
Fraudulent Reports and Other Filings 
56. The inaccurate results described above were included in financial 
statements in Beazer's periodic reports on Form 10-Q filed shortly after the 
respective 
quartf;r ends, beginning at least with Beazer's Form 10-Q for the quarter 
ended December 31, 1999, filed on February 14, 2000 and continuing at least until 
Beazer's quarterly report on Form 10-Q for the quarter ended March 31, 2007, 
filed on April 26, 2007. Rand was aware at all times that the results would be 
included in such reports. 
57. The inaccurate results described above were included in Beazer's 
annual reports on Forms 10-K filed with the Commission after the ends 
ofthe 
respective fiscal years, as described below. Rand was aware at all times that the 
results would be included in such reports. The various Forms 10-K were signed by 
Rand. 
58. Beazer's Form 10-K for the fiscal year ended September 30,2000, 
18
 

filed on December 22, 2000, understated its pre-tax income for the fiscal year by 
approximately $6,199,000 as the result ofRand's fraudulent overstatement of land 
inventory and cost-to-complete reserves. 
59. Beazer's Form 10-K for the fiscal year ended September 30,2001, 
filed on December 21, 2001, understated its pre-tax income for the fiscal year by 
approximately $6,057,000 as the result 
ofRand's fraudulent overstatement of land 
inventory and cost-to-complete reserves. 
60. Beazer's Form 10-K for the fiscal year ended September 30,2002, 
filed on December 20, 2002, understated its pre-tax income for the fiscal year 
by 
approximately $9,627,000 as the result of Rand's fraudulent overstatement of land 
inventory and cost-to-complete reserves. 
61. Beazer's Form 10-K for the fiscal year ended September 30, 2003, 
filed bn December 19,2003, understated its pre-tax income for the fiscal year 
by 
approximately $3,207,000 as the result ofRand's fraudulent misstatement of land 
inventory and cost-to-complete reserves. 
62. Beazer's Form 10-K for the fiscal year ended September 30,2004, 
filed on December 7,2004, understated its pre-tax income for the fiscal year by 
approximately $20,094,000 as the result 
of Rand's fraudulent overstatement of 
19
 

land inventory and cost-to-complete reserves. 
63. . Beazer's Form 10-K for the fiscal year ended September 30, 2005, 
filed on December 9,2005, and its amended annual report on Form 10-K for year 
ended September 30,2005, filed on May 25,2006, understated its pre-tax income 
for the fiscal year 
by approximately $18,219,000 as the result ofRand's fraudulent 
overstatement 
of land inventory and cost-to-complete reserves. 
64. Beazer's Form 10-K for the fiscal year ended September 30, 2006, 
filed on December 
8, 2006, overstated Beazer's pre-tax income by approximately 
$49,923,000 as the result 
of Rand's use of previously misstated land inventory and 
cost-to-complete reserves and his fraudulent recording 
ofsale-leaseback 
transactions. 
65. Beazer's current report on Form 8-K dated January 19,2006, filed on 
January 19,2006, reported First Quarter 2006 EPS 
of'$2.00, up 27%. The Report 
further stated that "Beazer announced results for the quarter ended December 31, 
2005, reporting a record for quarterly earnings per share. Highlights of the quarter, 
compared to the same period 
of the prior year, are as follows ..... Net income of 
$89.9 million, or $2.00 per diluted share (up 29.0% and 27.4%, respectively)." 
66. In fact, Beazer's pre-tax income was overstated 
by at least $8,306,000 
20
 

as a result ofdefendantRand's fraudulentrecoding ofmodelsale-leaseback 
transactions. 
67. Beazer's current report on Form 8-K dated April 27, 2006, filed on 
April 27, 2006 announced net income of$104.4 million, and " 
... Record Second 
Quarter 2006 EPS 
of $2.35." 
68. In fact, Beazer's pre-tax income for the second quarter 
of fiscal year 
2006 was overstated 
by at least $4,480,000 as a result ofRand's improper use of 
Land Inventory reserves and his recording of model sale-leaseback transactions. 
69. Beazer's current report on Form 8-K dated July 27,2006, filed on July 
27,2006, announced third quarter 2006 net income of$102.6 million, or $2.37 per 
diluted share, compared to net income of$112.7 million, or $2.50 per diluted share 
in the prior year's third quarter. 
70. In fact, Beazer's pre-tax income for the third quarter 
of fiscal year 
2006 was overstated by approximately $17,991,000 
as a result ofRand's 
fraudulent use 
ofthe land inventory reserve and the cost-to-complete reserve and 
his fraudulent recording 
of model sale-leaseback transactions. 
71. Beazer's current report on Form 8-K dated November 7,2006, filed 
on November 7,2006, announced fourth quarter and FY 2006 financial results 
21
 

including net income for the quarter of $91.9 million, or $2.19 per diluted share, 
compared to net income of$164.4 million, or $3.61 per diluted share in the prior 
year's fourth quarter. For the year ended September 30, 2006, Beazer reported net 
income of$388.8 million, or $8.89 per diluted share, compared to reported net 
income of$262.5 million, or $5.87 per diluted share, and adjusted net income 
of 
$392.8, or $8.72 per diluted share in FY 2005. 
72. In fact, Beazer's pre-tax income for the fourth quarter 
of fiscal year 
2006 was overstated by approximately $19,366,000 as a result 
ofRand's 
fraudulent use 
ofthe land inventory reserve and the cost-to-compete reserve and 
his fraudulent recording 
ofmodel sale-leaseback transactions. Beazer's pre-tax 
income for the fiscal year was overstated 
by approximately $50,143,000 as the 
result 
ofRand's scheme. 
73. Beazer's current report on Form 8-K dated January 25,2007, filed on 
January 25,2007, announced financial results for the quarter ended December 31, 
2006, which included a reported net loss 
of $(59.0) million, or $(1.54) per share, 
including charges related to inventory impairments and abandonment 
of land . 
option contracts of$119.9 million on a pre-tax basis, compared to net income 
of 
$89.9 million, or $2.00 per diluted share in the first quarter ofthe last fiscal year. 
22
 

Excluding charges for inventory impairments and abandonment of land option 
contracts, adjusted net income was reported at $15.9 million, or $0.41 per diluted 
share. 
74. In fact, Beazer's pre-tax income for the quarter ended December 
31 
included $1,549,000 of improper income resulting from Rand's fraudulent use of 
the cost-to-complete reserve. 
75. Beazer's current report on Form 8-K dated April 26, 2007, filed on 
April 26, 2007, announced financial results for the quarter ended March 31, 2007, 
which included a reported net loss of$(43.1) million, 
or $(1.12) per share, 
including charges related to inventory impairments, impairments fromjoint 
ventures, and abandonment 
of land option contracts totaling $86.9 million on a 
pre-tax basis. Excluding charges for inventory impairments, impairments 
of 
investments in joint ventures and abandonment of land option contracts, adjusted 
net income was reported to be $11.2 million, or $0.30 per diluted share. For the 
second quarter 
ofthe prior year, net income was $104.4 million, or $2.35 per 
diluted share. 
76. In fact, Beazer's pre-tax income for the quarter ended March 31, 2007 
included approximately $2,544,000 
of income improperly recorded as a result of 
23
 

Rand's fraudulent use ofthe land inventory and cost-to-complete reserves. 
77. Beazer's registration statement on Form S-3, filed on August 
4,2004, 
in connection with the sale of4 5/8% Convertible Senior Notes due 2024 and 
Common Stock Issuable Upon Conversion 
of the Notes, incorporated by reference 
Beazer's Form 10-K for the fiscal year ending September 
30,2003 and Forms 10­
Q for the quarters ending December 31, 2003, March 31, 2004 and June 30, 2004. 
78. Beazer's registration statement on Form 8-4, filed on January 23, 
2004, which registered the exchange 
of $200 million of6 1/2% Notes due 2013 for 
like notes not previously registered, incorporated 
by reference Beazer's Form 10-K 
for fiscal year ending September 30, 2003. 
79. Beazer's amendment no. 1 registration statement on Form S-4, filed 
on March 16,2004, and amendment no. 2, filed 
on March 30, 2004, and 
Amendment 
No.3, filed on April 7, 2004, and Amendment No.4, filed on April 9, 
2004,all 
ofwhichregisteredtheexchange of$200million of6 1/2%Notesdue 
2013 for like notes not previously registered, incorporated by reference Beazer's 
Form 
10...K for the fiscal year ended September 30,2003, Beazer's Form 10-Q for 
the quarter ended December 31, 2003 and Beazer's Form 8-K dated January 27, 
2004 and filed January 27, 2004. 
24
 

80. Beazer's registration statement on Form S-4, filed on August 3, 2005, 
. which registered the exchange of$350 million of6.875% Notes due 2015 for like 
notes not previously registered, incorporated 
by reference Beazer's Form 10-K for 
the fiscal year ended September 30,2004, and its Forms 10-Q for the quarters 
ended December 31, 2004, March 31, 2005 and June 30, 2005. 
81. Beazer's registration statement on Form S-4, filed on August 15, 
2006, which registered the exchange 
of $275 million of8.125% Notes due 2016 
for like notes not previously registered, included financial statements for the three 
years ended September 30,2005 and financial statements for quarters ended June 
30, 2005 and 2006. 
82. Beazer Homes USA, Inc. registration statement on Form S-8, filed on 
November 12,2002, registering the offer of2,875,000 shares 
ofBeazer common 
stock, incorporated by reference Beazer's Form 10-K for the fiscal year ending 
September 30,2001, its Form 10-Q for the quarters ending December 31,2001, 
March 31, 2002 and June 30, 2002, and Forms 8-K or amendments dated April 4, 
2002, April 17, 2002, July 23,2002, August 
8, 2002, and November 5, 2002. 
83. Beazer also issued numerous press releases announcing the misstated 
financial results throughout the scheme, including releases dated July 23, 2002, 
25
 

August 8, 2002, November 5,2002, April 22, 2003, July 22,2003, November 5, 
2003, January 27,2004, April 22, 2004, July 29,2004, November 5,2004, January 
27,2005, April 28, 2005, July 28,2005, November 2,2005, January 19,2006, 
April 27, 2006, July 27, 2006, November 7,2006, January 25,2007 and April 26, 
2007. 
84. With his extensive accounting knowledge, defendant Rand knew, or 
was severely reckless in not knowing, that the method for accounting for the land 
inventory reserves, the cost-to-complete reserves, and the model sale-Ieasebacks, 
was fraudulent and did not conform to·GAAP. 
85. Defendant Rand signed the fraudulent Forms 10-K and registration 
statements listed above. At the time that he signed the documents, Rand knew, or 
was severely reckless in not knowing, that his actions resulted in the inclusion 
of 
false and misleading information. 
86. Defendant Rand shared responsibility to keep Beazer's books, records 
and accounts, and establish and maintain its internal accounting controls. 
Defendant Rand failed 
to implement accounting controls sufficient to provide 
reasonable assurances that transactions were recorded 
as necessary to permit the 
preparation 
of financial statements in conformity with GAAP and to maintain 
26
 

accountability for assets. Defendant Rand lmowingly caused transactions to be 
recorded improperly and in a manner which caused the financial statements 
to be 
inconsistent with GAAP. 
Rand's Stock Sales 
87. During the course of the fraud, Rand sold at least 47,355 shares of 
Beazer common stock for gross proceeds of over $3 million. Additionally, he 
received bonuses under the Company's Value Created Incentive Plan of over $1.7 
million. 
CLAIMS 
FOR RELIEF 
COUNT I--FRAUD 
Violations 
of Section 17(a)(l) of the Securities Act [15 U.S.C. § 
77g(a)(lU 
88. Paragraphs 1  through 87 are hereby realleged and are incorporated 
herein by reference. 
89. Defendant Rand, in connection with the offer or sale of securities 
described herein, by the use 
of the means and instruments of interstate commerce 
27
 

and by use of the mails, directly and indirectly, employed devices, schemes, and 
artifices to defraud. 
90. Defendant Rand knowingly, intentionally or with severe recklessness, 
engaged in the aforementioned devices, schemes and artifices to defraud. In 
engaging in such conduct, Defendant acted with scienter, that is, with an intent 
to 
deceive, manipulate and defraud or with a severe reckless disregard for the truth. 
91. By reason 
of the foregoing, Defendant Rand, violated and unless 
enjoined, will continue to violate and cause the violation 
of Section 17(a)(1) of the 
Securities Act 
[15 U.S.C. § 77q(a)(1)]. 
COUNT II~-FRAUD 
Violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act ~ 
U.S.C. § 77g(a)(2) and 77g(a)(3U 
92. Paragraphs 1  through 
87 are hereby realleged and are incorporated 
herein by reference. 
93. Defendant Rand, in connection with the offer or sale 
of securities 
described herein, by the use 
of the means and instruments of interstate commerce 
and by use 
of the mails, directly and indirectly: 
28 

(a) obtained money or property by means of untrue statements of 
material facts and omissions of material facts necessary in order to 
make the statements made, in light 
of the circumstances under which 
they were made, not misleading; and 
(b) engaged in transactions, practices, and courses 
of business 
which operated and would operate 
as a  fraud or deceit upon the 
purchasers 
of securities, all as more particularly described in the 
paragraphs above. 
94. By reason 
of the foregoing, Defendant Rand, violated and unless 
enjoined, will continue to violate and cause the violation 
of Sections 17(a)(2) and 
17(a)(3) 
ofthe Securities Act [15 U.S.C. § 77q(a)(2) and 77q(a)(3)]. 
COUNT III--FRAUD 
Violations 
of Section 10(b) of the Exchange Act lIS. U.S.C. § 78j(b)l..ill!!! 
Rule 10b-S thereunder [17 C.F.R. § 240.10b-Sl 
95. Paragraphs 1  through 87 are hereby realleged and are incorporated 
herein by reference. 
96. Defendant Rand, 
III connection with the purchase and sale of 
29
 

securities described herein, by the use of the means and instrumentalities of 
interstate commerce and by use of the mails, directly and indirectly: 
a) employed devices, schemes, and artifices to defraud; 
b) made untrue statements 
of material facts and omitted to state 
material facts necessary in order to make the statements made, in light 
of the circumstances under which they were made, not misleading; 
and 
c) engaged in acts, practices, and courses 
ofbusiness which would 
and did operate 
as a  fraud and deceit upon the purchasers of such 
securities, all 
as more particularly described in the paragraphs above. 
97. Defendant Rand intentionally, or with severe 
reckl~ssness engaged in 
the aforementioned conduct. 
98. In engaging in such conduct, Defendant acted with scienter, that is, 
with an intent to deceive, manipulate and defraud or with a  severe reckless 
disregard for the truth. 
99. By reason 
of the foregoing, Defendant Rand, violated and unless 
enjoined, will continue to violate Section 10(b) 
of the Exchange Act [15 U.S.C. § 
78j(b)] and Rule 10b-5 thereunder 
[17 C.F.R. § 240.10b-5]. 
30 

COUNT IV-REPORTING PROVISIONS 
Aiding 
and Abetting Beazer's Violations of Section 13(a) of the 
Exchange Act [15 U.S.C. § 78m(a)) and Rules 12b-20, 13a-l, 13a-ll and 13a­
13 
thereunder [17 C.F.R. §§ 240.12b-20, 240.13a-l, 240.13a-ll and 240.13a­
ill 
100. Paragraphs 1  through 87 are hereby realleged and are incorporated 
herein by reference. 
101. Defendant Rand aided and abetted Beazer's violations 
of Section 
13(a) 
of the Exchange Act [15 U.S.C. § 78m(a)] and Rules 12b-20, 13a-l and 13a­
13 thereunder [17 C.F.R. §§ 240.12-20, 240.13a-l and 240.13a-13], which 
occurred when Beazer filed annual, current and periodic reports that contained 
financial statements that were not prepared in conformity with GAAP and 
contained material misstatements. 
102. Through the conduct described in the above paragraphs, the 
Defendant knowingly or with severe recklessness substantially assisted Beazer's 
violations 
ofthis section and rules. 
103. By reason 
of the foregoing, Defendant Rand, aided and abetted and 
unless enjoined, will continue to aid and abet violations 
of Section 13(a) of the 
Exchange Act 
[15 U.S.C. § 78m(a)] and Rules 12b-20, 13a-l and 13a-13 
31
 

thereunder [17 C.F.R. §§ 240.12-20, 240.13a-l and 240.13a-13]. 
COUNT V-RECORD-KEEPING VIOLATIONS 
Aiding 
and Abetting Violations of Section 13(b)(2)(A) of the Exchange 
M!..[15 U.S.C. 
§ 78m(b)(2)(A)] and Violations of Rule 13b2-1 [17 C.F.R. § 
240.13b2-11 
·104. Paragraphs 1  through 87 are hereby realleged and are incorporated 
herein by reference. 
105. Defendant Rand aided and abetted Beazer's violations 
of Section 
13(b)(2)(A) 
of the Exchange Act, which occurred when Beazer failed to make and 
keep books, records, and accounts, which, in reasonable detail, accurately and 
fairly reflected the transactions and dispositions 
ofJust for Feet's assets. 
106. Rule 13b2-1 prohibits any person from directly or indirectly falsifying 
or causing the falsification of any such books, records or accounts. 
107. Through the conduct described in the above paragraphs, Defendant 
Rand violated Rule 13b2-1 and aided and abetted violations 
of 13(b)(2)(A) of the 
Exchange Act and unless enjoined will continue to do so. 
COUNT 
VI-BOOKS AND RECORDS AND INTERNAL 
CONTROLS_VIOLATIONS 
32 

Aiding and Abetting Violations of Section 13(b)(2)(B) [15 U.S.C~ § 
78m(b)(2)(B)] of the Exchange Act and Violations of Section 13(b)(5) of the 
Exchange Act 
lI5 U.S.C. § 78m(b)(5H 
108. Paragraphs 1  through 
87 are ·hereby realleged and are incorporated 
herein by reference. 
109. Section 13(b)(5) 
of the Exchange Act prohibits any person from 
knowingly circumventing and knowingly failing to implement a system 
of internal 
accounting controls and knowingly falsifying any book, record, or account 
required by Section 13(b)(2)(A) 
of the Exchange Act. 
110. Section 13(b)(2)(B) requires issuers to devise and maintain a  system 
of internal accounting controls sufficient to provide reasonable assurances that, 
among other things, transactions are executed in accordance with managemen.t's 
authorization and that transactions are recorded 
as necessary to permit the 
preparation 
of financial statements in conformity with GAAP and to maintain 
accountability for assets. 
111. Through the conduct described above, Defendant Rand aided and 
abetted violations 
of Section 13(b)(2)(B) and violated Section 13(b)(5) of the 
Exchange Act and unless enjoined will continue to do so. 
33
 

COUNT vn -LYING TO ACCOUNTANTS
 
Violation 
of Rule 13b2-2 promulgated under the Exchange Act 
117 C.F.R. § 240.13b2-21 
112. Paragraphs 1  through 
87 are hereby realleged and are incorporated 
herein by reference. 
113. Rule 13b2-2 prohibits officers and directors from, directly or 
indirectly, making and causing 
to be made materially false and misleading 
statements or omitting to state, or causing another to omit to state, any material fact 
in order to make statements made not misleading to an accountant in connection 
with any audit or examination 
of the financial statements required to be filed with 
the Commission or the preparation or filing 
of any document or report to be filed 
with the Commission. 
114. Through the conduct described above, Defendant Rand violated Rule 
13b2-2 promulgated under the Exchange Act and unless enjoined will continue to 
do so. 
PRAYER 
FOR RELIEF 
WHEREFORE, Plaintiff Commission, respectfully prays that the 
Court: 
1. 
34
 

Make findings of fact and conclusions of law in accordance with Rule 
52 
of the Federal Rules of Civil Procedure. 
II. 
Issue a permanent injunction enjoining Defendant Rand and his 
agents, servants, employees, attorneys, and all persons in active concert or 
participation with them who receive actual notice 
of the order by personal service 
or otherwise, and each ofthem: 
a. from violating Section 17(a) of the Securities Act [15 § U.S.C. 
77q(a)]; 
b. from violating Section 10(b) 
of the Exchange Act [15 U.S.C. § 78j(b)] 
and Rule 10b-5 thereunder [17 C.F.R. 
§ 240.10b-5]; 
c. from violating Section 13(b)(5) ofthe Exchange Act [§ 78m(b)(5)]; 
d. from violating Rule 13b2-2 promulgated under the Exchange Act [17 
C.F.R. § 240.l3b2-2]; 
e. from aiding and abetting violations of Section 13(a) of the Exchange 
Act 
[15 U.S.C. § 78m(a)] and Rules  12b-20, 13a-1, 13a-11 and 13a-13 thereunder 
[17 C.F.R. 
§§ 240.l2b-20, 240.13a-1, 240.13a-11 and 240.l3a-13]; 
f. from violating Rule 13b2-1 under the Exchange Act [17 C.F.R. § 
240.13b2-1]; and 
35 

g. from aiding and abetting violations of Sections 13(b)(2)(A) and 
13(b)(2)(B) 
ofthe Exchange Act [15 U.S.C. §§ 78m(b)(2)(A) and 78m(b)(2)(B)]. 
III. 
Issue an Order awarding disgorgement 
of ill-gotten gains and prejudgment 
interest thereon against Defendant Rand. 
IV. 
Issue an Order requiring Defendant Rand to pay civil monetary penalties, 
pursuant to Section 
20(d)(l) of the Securities Act [15 U.S.C. §  77t(d)(l)] and 
Section 21(d)(3) ofthe Exchange Act [15 U.S.C. § 78u(d)(3)]. 
V. 
Issue an Order pursuant to Section 
21(d)(2) of the Exchange Act [15 U.S.C.§ 
78u(d)(2)] prohibiting Defendant Rand from acting as an officer 
or director of any 
issuer that has a  class 
of securities registered with the Commission pursuant to 
Section 
12 of the Exchange Act [15 U.S.C. § 781] or that is  required to file reports 
with the Commission pursuant to Section 
15(d)of the Exchange Act [15 U.S.C.§ 
78o(d)]. 
36
 

VI. 
Issue an Order that retains jurisdiction over this action in order to implement 
and carry out the terms 
of all orders and decrees that may have been entered or to 
entertain any suitable application or motion 
by the Commission for additional 
relief within the jurisdiction 
ofthis Court. 
VII. 
Grant such other and further relief as may be necessary and 
appropriate. 
Dated: July 
.1, 2009 
RESPECTFULLY SUBMITTED, 
COUNSEL 
FOR PLAINTIFF 
U. 
S. SECURITIES AND EXCHANGE COMMISSION 
3475 Lenox Road, N.E., Suite 1000 
Atlanta, Georgia 30326-1234 
37
 

(404) 842-7675
 
(404) 842-7679 fax 
Email: [email protected] 
38 

FILED IN CLERK'S OFFICE 
U.S.D.C. Atlanta 

JUL 012009 

IN THE UNITED STATES DISTRICT COURT 
FOR THE NORTHERN DISTRICT OF GEORGIA 

ATLANTA DIVISION 

JAM~.N. ~ATTEN, Clerk 

131); d.-ftV'J Deputy Clerk 

SECURITIES AND EXCHANGE 
COMMISSION, 

Plaintiff,	 Civil Action 
File No. 

v. 1 09· r, V.1 780 
MICHAEL T. RAND, 

·Defendant. 

COMPLAINT FOR INJUNCTIVE AND OTHER RELIEF 

The Securities and Exchange Commission ("Commission") files this 

Complaint for Injunctive and Other Relief and alleges as follows: 

INTRODUCTION 

1. This case involves a fraudulent earnings management scheme 

perpetrated at Beazer Homes USA, Inc. ("Beazer"), an Atlanta-based homebuilder 

and public issuer. Between January 2000 and April 2007, Michael T. Rand 

("Rand"), initially as Corporate Controller, then as Chief Accounting Officer of 

Beazer, fraudulently manipulated Beazer's reported quarterly and annual income in 



order to meet_or exceed analysts' expectations for Beazer's diluted earnings per 

share (EPS) and maximized yearly bonuses of certain officers and senior 

employees. As part ofhis misconduct, Rand took affirmative.steps to conceal the 

fraud from Beazer's outside auditors and certain internal·Beazer accountants. 

2. Rand caused Beazer to fraudulently decrease its reported net income 

during fiscal years 2000 through 2005, a period of strong growth and financial 

performance, by recording improper reserves and/or liabilities (collectively 

"reserves"). Then, beginning in the first quarter of fiscal year 2006, to offset its 

declining financial performance, Rand caused Beazer to reverse these iinproper 

reserves, thereby fraudulently inflating Beazer's income. Additionally, during 

fiscal2006 and the first quarter of fiscal 2007, Beazer improperly recognized 

revenue from the sale and leaseback of certain model homes. Cumulatively, 

Beazer fraudulently understated its income by $63 million during fiscal years 2000 

to 2005 ($37 million after income taxes), representing over 7% of Beazer's 

cumulative actual restated net income of$955 million for the period (4% after 

income tax effect). During fiscal year 2006 and the first two quarters of fiscal year 

2007, Rand caused Beazer to overstate its income by approximately $47 million 

($30 million after income taxes), representing 20% ofBeazer's cumulative restated 

net income of$232 million for the period (13% after income tax effect). 

2
 



3. Beazer'simproper manipulation of reserves involved principally two 

categories: (i) land acquisition and development inventory accounts (collectively 

"land inventory accounts"), i.e., expenses necessary to develop and complete 

subdivisions as it pertains to the land surrounding individual home lots; and (ii) 

house costs-to-complete accounts, i.e., contingencies to cover specific costs (e.g., 

cabinetry, driveway repairs, etc.) expected to be incurred within four to nine 

months after Beazer and its customer had closed on the purchase of the home.. 

Beazer's improper sale-leaseback accounting involved recognizing revenue upon 

the sale of model homes to, and those homes' leaseback from, third-party 

investors, while retaining a financial interest in profits obtained when the investors 
. I 

subsequently sold the homes to homebuyers. 

4. Defendant Rand has engaged in, and unless restrained and enjoined by 

this Court, will continue to engage in, acts and practices which constitute and will 

constitute violations of Section 17(a) of the Securities Act of 1933 ("Securities 

Act") [15 U.S.C. § 77q(a)] and; Sections 10(b) and 13(b)(5) of the Securities 

Exchange Act of 1934 ("Exchange Act") [15 U.S.C. §§ 78j(b) and 78m(b)(5)] and 

Rules 10b-5, 13b2-1 and 13b2-2 promulgated thereunder [17 C.F.R. §§ 240.10b-5, 

240.13b2-1, 240. 13b2-2], and acts and practices that aided and abetted violations 

of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act [15 U.S.C. §§ 

3
 



78m(a), 78m(b)(2)(A) and 78m(b)(2)(B)] and Rules 12b-20, 13a-l, 13a-ll and 

13a-13 promulgated thereunder [17 C.F.R. §§ 240.12b-20, 240.13a-l, 240.13a-ll 

and 240.13a-13]. 

JURISDICTION AND VENUE 

5. The Commission brings this action pursuant to Section 20(b) of the 

Securities Act [15 U.S.C. § 77t(b)] and Section 21(d) of the Exchange Act [15· 

U.S.C. § 78u(d)]. 

6. This Court has jurisdiction of this action pursuant to Sections 20(b) 

and 22(a) of the Securities Act [15 U.S.C. §§ 77t(b) and 77v(a)] and Sections 21(d) 

and 27 of the Exchange Act [15 U.S.C. §§ 78u(d) and 78aa]. 

7. Defendant Rand, directly and indirectly, has made use of the mails, 

the means and instruments of transportation and communication in interstate 

commerce, and the means and instrumentalities of interstate commerce, in 

connection with the transactions, acts, practices and courses of business alleged in 

this Complaint. 

8. Venue lies in this Court pursuant to Section 22(a) of the Securities Act 

[15 U.S.C.§ 77v(a)] and Section 27 of the Exchange Act [15 U.S.C. § 78aa] 

because Beazer was based in this district, many of the acts constituting the scheme 

occurred within this district, and the defendant resides in this district. 

4
 



THE DEFENDANT
 

9. Michael T. Rand, 47, of Sandy Springs, Georgia, is a CPA licensed in 

Georgia. He began his career at Beazer in November 1996 as its Vice President­

Operational and Controls and thereafter was promoted to Vice President-Corporate 

Controller (June 1998), Senior Vice President-Corporate Controller (October 

2002), and Senior Vice President-Chief Accounting Officer (August2004). At all 

relevant times, Rand served as Beazer's Principal Accounting Officer. On June 27, 

2007, he was terminated. Prior to Beazer, from 1984 to 1996, Rand was employed 

by KPMG Peat Marwick, leaving as a senior manager. 

ISSUER INVOLVED 

10. Beazer Homes USA, Inc. is a Delaware corporation headquartered in 

Atlanta, Georgia. During the relevant conduct, Beazer engaged in the business of 

homebuilding through approximately 30 regional divisions. Since March 1994, 

Beazer's common stock has been registered with the Commission pursuant to 

Section 12(b) of the Exchange Act and listed on the New York Stock Exchange 

under the symbol BZH. At all relevant times, Beazer's independent auditor has 

been Deloitte & Touche LLP ("Deloitte"). Beazer filed various reports with the 

Commission during the relevant period on Forms 8-K, 10-Q and 10-K, and 

registration statements on Forms S-3, S-4 and S-8. The registration statements 

5
 



were filed in conjunction with the issuance of various stock or debt, and the Forms 

8-K included press releases related to Beazer's results of operations, and/or various 

financial statements and information. 

Manipulation of Land Inventory Accounts 

11. As part of its home building and sale operations, Beazer purchased 

parcels ofland upon which it constructed houses to form subdivisions. Beazer 

recorded the acquired land, along with costs for the common development of the 

parcel-such as sewer systems and streets-as an asset on Beazer's balance sheet 

in the land inventory accounts. 

12. As subdivisions were built, Beazer allocated the costs accumulated in 

the land inventory accounts to individual home lots, which were then offered for 

sale. When the home sale was recorded in Beazer's books, all associated 

homebuilding costs, including allocated costs recorded in the land inventory 

accounts, were expensed as a cost of the sale, with a corresponding reduction, or 

credit, in the land inventory account. 

13. Because Beazer sold houses within a subdivision as the development 

of that subdivision progressed, the land inventory expense recorded for any 

particular house sale was necessarily an estimate. The setting of inventory credits 

was done by each division based on estimates of costs to acquire, develop and 

6
 



complete subdivisions plus an added amount for contingencies. Once established, 

divisions needed approval from Rand, who reviewed the reserves on a monthly 

basis, to make adjustments. 

14. As additional houses in a subdivision were sold, the land inventory 

account continued to be decreased (credited) by amounts representing the land 

acquisition and development costs allocated to each individual house. If costs had 

been allocated properly, then shortly after the final house in a development had 

been sold, the balance in the land inventory account should have been at or near 

zero. 

15. During all four quarters in fiscal year 2000, all four quarters in fiscal 

year 2001, all four quarters in fiscal year 2002, the first three quarters in fiscal year 

2003, all four quarters in fiscal year 2004, and all four quarters in fiscal year 2005, 

Rand manipulated the amounts recorded in the land inventory accounts by over­

allocating land inventory costs in material amounts. 

16. D u r i n g  fiscal year 2000 (beginning October 1, 1999), these land 

inventory costs were overstated by approximately $902,000 in the first quarter 

(ending December 31, 1999); $791,000 in the second quarter (ending March 31, 

2000); $727,000 in the third quarter (ending June 30, 2000); and $987,000 in the 

fourth quarter (ending September 30, 2000). 

7
 



17. During fiscal year 2001, these land inventory costs were overstated by 

approximately $1,455,000 in the first quarter; $584,000 in the second quarter; 

$1,322,000 in the third quarter; and $2,571,000 in the fourth quarter. 

18. During fiscal year 2002, these land inventory amounts were overstated 

by approximately $1,827,000 in the first quarter; $2,761,000 in the second quarter; 

$1,270,000 in the third quarter; and $2,586,000 in the fourth quarter. 

19. During fiscal year 2003, these land inventory amounts were overstated 

by approximately $2,440,000 in the first quarter; $1,422,000 in the second quarter; 

and $1,086,000 in the third quarter. 

20. During fiscal year 2004, these land inventory amounts were overstated 

by approximately $3,996,000 in the first quarter; $4,253,000 in the second quarter; 

$5,963,000 in the third quarter and $2,227,000 in the fourth quarter. 

21. During fiscal year 2005, these land inventory amounts were overstated 

by approximately $3,388,000 in the first quarter; $4,443,000 in the second quarter; 

$5,122,000 in the third quarter and $4,469,000 in the fourth quarter. 

22. For example, in order to reduce its first quarter fiscal 2002 earnings, 

which had exceeded analysts' EPS expectations, Rand fraudulently increased the 

land inventory expense recorded for homes sold during the quarter. 

23. On January 8, 2002, after the end of the first quarter, Rand emailed a 

8
 



target earnings amount to the relevant financial personnel in numerous Beazer 

divisions, including Northern California, Southern California, Arizona and Las 

Vegas, with instructions not to exceed the target by a certain amount. The 

distributed target for each division was less than each division's previously 

expected quarterly results. 

24. Rand advised the divisions to review their land inv.entory accounts in 

order to increase expenses and reduce earnings. In one particular email, Rand 

instructed the Florida qivision to provide "more than adequate land allocations in 

communities closing out this year" as a means to reduce their earnings. 

25. On January 10, 2002, Rand, via emails, directed certain divisions to, 

"[s]et aside all the reserves you reasonably can....the quarter is too high." This 

was followed by a series of emails in which Rand specified the amounts by which 

certain divisions should increase their reserves, along with targets for their EBIT 

(Earnings Before Interest and Taxes). 

26. The divisions substantially carried out his directions, and Rand was 

able to reduce Beazer's quarterly EPS from $2.60 to $2.47 a share, which exceeded 

analysts' consensus of $2.00 per share. In total, Beazer recorded approximately 

$1.827 million in excess land inventory costs for that quarter, or approximately 8% 

of its reported net income. 

9 



27. By increasing land inventory expenses, Rand caused ~eazer to 

understate its net income by a total of $56 million ($33 million after tax 

effect)(approximately 5% of reported net income) between fiscal years 2000 and 

2005. 

28. Beginning in the first quarter of2006, Rand began to reverse the 

reserves existing in the land inventory accounts, which increased then-current 

period earnings. The credit balances in land inventory accounts were debited, i.e., 

zeroed out, and a cost of sales expense credited, i.e., reduced. These reversals 

improperly reduced expenses and increased Beazer's earnings. During all four 

quarters of 2006, Rand caused Beazer to release these land inventory reserves, 

boosting then-current period earnings by approximately $100,000 in the first 

quarter of2006, approximately $301,000 in the second quarter of2006, 

approximately $14,278,000 in the third quarter of2006, and approximately 

$10,816,000 in the fourth quarter of2006. 

29. During 2006, Beazer overstated its net income by approximately $16 

million by "zeroing out" credit balances in its land inventory accounts. These 

journal entries were made by the divisional financial managers acting at Rand's 

specific direction. For example, in the second quarter of2006, Rand directed the 

reversal of a credit balance of $3.1 million in the land inventory accounts of the 

10
 



Las Vegas division. On April 1, 2006, just prior to the close ofBeazer's second 

quarter 2006, a senior Beazer Corporate Controller, acting with Rand's knowledge, 

directed the Las Vegas division, by e-mail, to "takedown $3.1 million in land 

reserves." 

30. The Las Vegas Finance VP complied with the request. A total of 

$3.1 million ofpreviously expensed land· inventory costs were reversed from 

Beazer's general ledger system. Included in the reversal was over $2 million of 

excess land inventory costs that had been held open in Beazer's general ledger 

from two Las Vegas subdivisions that had closed in August and September 2004. 

This entry added approximately $2 million to Beazer's quarterly net income after 

income taxes, which in tum added approximately $0.05 to Beazer's reported 

quarterly earnings per share of $2.35, thereby allowing Beazer, along with other 

improper accounting entries, to exceed analyst EPS expectations. 

Manipulation of "House Cost to Complete" Reserves 

31. Under its accounting policies, Beazer recorded revenue and profit on 

the sale of a house after the close of the sale of that house to a homebuyer. In the 

journal entries to record the sale, Beazer typically reserved a portion of its profit 

earned on the house. This reserve, called a "house cost-to-complete" reserve, was 

established to cover any unknown expenses that Beazer might incur on the sold 

11
 



house after the close, such as minor repairs or final cosmetic touchups. Although 

the amount of this reserve varied by region, it was typically $1,000 to $4,000 per 

house. 

32. Beazer's policy was to reverse any unused portion of the house cost­

to-complete reserve within four to nine months after the close, taking any unused 

portion into income at that time. Although creation of such a house cost-to­

complete reserve is proper, Rand fraudulently utilized these reserves to manage 

Beazer's earnings. As specified below, in various quarters between,2000 and 

2005, Rand over-reserved house cost-to-complete expenses in order to defer profit 

to future periods. Rand then took steps to maintain these reserves beyond the 

typical four to nine months and until increased earnings were required in future 

periods. 

33. In fiscal year 2000, the cost-to-complete expense was over-reserved 

by approximately $610,000 in the second quarter; $5,000 in the third quarter; and 

$2,288,000 in the fourth quarter. 

34. In fiscal year 2001, the cost-to-complete expense was over-reserved 

by approximately $1,138,000 in the first quarter; and $543,000 in the second 

quarter. 

35. In fiscal year 2002, the cost-to-complete expense was over-reserved 

12
 



· by approximately $2,184,000 in the first quarter; and $813,000 in the second 

quarter. 

36. In fiscal year 2003, the cost-to-complete expense was over-reserved 

by approximately $1,380,000 in the first quarter. 

37. In fiscal year 2004, the cost-to-complete expense was over-reserved 

by approximately $1,057,000 in the first quarter; $1,137,000 in the third quarter; 

and $2,051,000 in the fourth quarter. 

38. In fiscal year 2005, the cost-to-complete expense was over-reserved 

by approximately $805,000 in the second quarter; and $1,427,000 in the third 

quarter. 

39. For example, at the end of the fourth quarter offiscal 2000, Rand 

instructed the Virginia division to decrease their EBIT for the quarter to $5.2 

million. Rand suggested, among other methods, that the balance in the house cost­

to-complete accounts be increased. There was no reasonable accounting basis for 

recording these increased amounts. 

40. By the end of the first quarter of fiscal 2001, Beazer had excess house 

cost-to-complete reserves of approximately $3 million spread out over various 

divisions. On other occasions, Rand took steps to maintain these reserves beyond 

the four to nine month period until increased earnings were required in future 

13
 



periods. 

41. Near the end of the first quarter of fiscal 2001, Rand instructed the 

Virginia division to defer reducing house cost-to-complete reserves greater than 

nine months old, so the division would not exceed its targeted quarterly EBIT. 

42. Beginning in 2006, Beazer-requiring additional income­

manipulated its house cost-to-complete reserve to increase its profits. First, during 

the first quarter of2006, Rand caused Beazer to begin reversing some of the excess 

cost-to-complete reserves that it had previously recorded. As a result of Rand's 

directives, Beazer reduced its cost of sales expense by approximately $1.5 million 

by reducing the cost-to-complete reserve to zero on a number of houses. 

43. In the first quarter of fiscal year 2006, the reversal of excess cost-to­

complete reserves previously recorded fraudulently added $183,000 to earnings for 

that period. 

44. In the third quarter of fiscal year 2006, the reversal of excess cost-to­

complete reserves previously recorded fraudulently added $2,130,000 to earnings 

for that period. 

45. In the fourth quarter of fiscal year 2006, the reversal of excess cost-to­

complete reserves previously recorded fraudulently added $209,000 to earnings for 

14
 



that period. 

46. In the first quarter of fiscal year 2007, the reversal of excess cost40­

complete reserves previously recorded fraudulently added $1,549,000 to earnings 

for that period. 

47. Additionally, at Rand's instruction, certain Beazer divisions in order 

to report more income failed to establish a house cost-to-complete reserve on 

house sales closing during the quarter. Beazer's Las Vegas division failed to 

record any cost-to-"complete reserve for approximately 85 houses sold during 

December 2005. This resulted in an improper recognition, in violation ofGAAP, 

ofmore than $200,000 of income for the period. 

48. Combined, the additional income due to this misconduct added 

approximately $0.03 to Beazer's EPS. 

The Fraudulent Sale-Leaseback Transactions 

49. Beginning in the first quarter of fiscal 2006, Rand intentionally 

recorded certain lease transactions involving approximately 360 Beazer model 

homes as sale-Ieasebacks, with full knowledge that the transactions did not qualify 

for such accounting treatment under GAAP. This misconduct caused Beazer to 

report improperly approximately $22 million of pre-tax income, or 4% of 

15 



consolidated net income, during fiscal 2006. Specifically, Beazer overstated 

income by approximately $8,306,000 in the first quarter of fiscal year 2006, 

$4,179,000 in the second quarter of fiscal year 2006, $1,583,000 in the third 

quarter of fiscal year 2006, and $8,341,000 in the fourth quarter of fiscal year 

2006. 

50. Beazer retained a continuing interest in the potential appreciation of 

the model homes based upon terms contained in side agreements with certain 

investor pools purchasing the model homes. These pools were organized by a 

subsidiary of GMAC, LLC. Pursuant to GAAP, this continuing interest required 

the transactions to be treated as financing transactions. Continl,ling involvement 

includes an obligation by the buyer-lessor to share with the seller-lessee any 

portion of the appreciation of the property, or when the seller retains an interest in 

future profits of the leased asset. 

51. The sale-leaseback transactions included continuing involvement by 

the seller-lessee (Beazer) and should have been accounted for as a financing or by 

the deposit method, with no revenue recognition. Rand nevertheless recorded them 

as sale-Ieasebacks, recognizing sales revenue at the inception of the lease. 

52. Beazer's auditor, Deloitte and certain internal Beazer accountants 

16 



reporting to Rand, specifically advised Rand via email that Beazer's appreciation 

rights in the homes represented a continuing interest that, pursuant to GAAP, 

precluded Beazer from recognizing revenue when the homes were sold to GMAC. 

53. In an attempt to circumvent GAAP, and to deceive Deloitte and 

certain Beazer internal accountants, Rand caused the final, written versions of the 

sale-leaseback agreements to omit any reference to Beazer's continuing profit 

participation. Rand then directed, by email, his subordinates to record revenue at 

the time the model homes were initially sold to the GMAC investor pools. In order 

to deceive Deloitte and certain internal Beazer accountants involved in the 

transactions, Rand provided Deloitte with copies of the sale-leaseback agreements 

which intentionally omitted the provisions relating to the continuing profit 

participation by Beazer. Rand also failed to disclose the side agreements to 

Deloitte and certain Beazer internal accountants. 

54. Additionally, on January 18, 2006, Rand provided to Deloitte and 

certain Beazer internal accountants a memo which specifically stated that Beazer 

would not "participate in the appreciation" ofthe leased assets (model homes).· 

Based on Rand's concealment and misrepresentations, Deloitte agreed that 

immediate revenue recognition was proper. 

17 



55. As a result of the improper accounting practices described above, 

Beazer's books and records and financial statements were materially inaccurate 

beginning in the first quarter of fiscal year 2000 and continuing at least through the 

second quarter of fiscal year 2007. 

Fraudulent Reports and Other Filings 

56. The inaccurate results described above were included in financial 

statements in Beazer's periodic reports on Form 10-Q filed shortly after the 

respective quartf;r ends, beginning at least with Beazer's Form 10-Q for the quarter 

ended December 31, 1999, filed on February 14, 2000 and continuing at least until 

Beazer's quarterly report on Form 10-Q for the quarter ended March 31, 2007, 

filed on April 26, 2007. Rand was aware at all times that the results would be 

included in such reports. 

57. The inaccurate results described above were included in Beazer's 

annual reports on Forms 10-K filed with the Commission after the ends of the 

respective fiscal years, as described below. Rand was aware at all times that the 

results would be included in such reports. The various Forms 10-K were signed by 

Rand. 

58. Beazer's Form 10-K for the fiscal year ended September 30,2000, 

18
 



filed on December 22, 2000, understated its pre-tax income for the fiscal year by 

approximately $6,199,000 as the result ofRand's fraudulent overstatement of land 

inventory and cost-to-complete reserves. 

59. Beazer's Form 10-K for the fiscal year ended September 30,2001, 

filed on December 21, 2001, understated its pre-tax income for the fiscal year by 

approximately $6,057,000 as the result ofRand's fraudulent overstatement of land 

inventory and cost-to-complete reserves. 

60. Beazer's Form 10-K for the fiscal year ended September 30,2002, 

filed on December 20, 2002, understated its pre-tax income for the fiscal year by 

approximately $9,627,000 as the result of Rand's fraudulent overstatement of land 

inventory and cost-to-complete reserves. 

61. Beazer's Form 10-K for the fiscal year ended September 30, 2003, 

filed bn December 19,2003, understated its pre-tax income for the fiscal year by 

approximately $3,207,000 as the result ofRand's fraudulent misstatement of land 

inventory and cost-to-complete reserves. 

62. Beazer's Form 10-K for the fiscal year ended September 30,2004, 

filed on December 7,2004, understated its pre-tax income for the fiscal year by 

approximately $20,094,000 as the result of Rand's fraudulent overstatement of 

19
 



land inventory and cost-to-complete reserves. 

63. .Beazer's Form 10-K for the fiscal year ended September 30, 2005, 

filed on December 9,2005, and its amended annual report on Form 10-K for year 

ended September 30,2005, filed on May 25,2006, understated its pre-tax income 

for the fiscal year by approximately $18,219,000 as the result ofRand's fraudulent 

overstatement of land inventory and cost-to-complete reserves. 

64. Beazer's Form 10-K for the fiscal year ended September 30, 2006, 

filed on December 8, 2006, overstated Beazer's pre-tax income by approximately 

$49,923,000 as the result of Rand's use of previously misstated land inventory and 

cost-to-complete reserves and his fraudulent recording ofsale-leaseback 

transactions. 

65. Beazer's current report on Form 8-K dated January 19,2006, filed on 

January 19,2006, reported First Quarter 2006 EPS of'$2.00, up 27%. The Report 

further stated that "Beazer announced results for the quarter ended December 31, 

2005, reporting a record for quarterly earnings per share. Highlights of the quarter, 

compared to the same period of the prior year, are as follows ..... Net income of 

$89.9 million, or $2.00 per diluted share (up 29.0% and 27.4%, respectively)." 

66. In fact, Beazer's pre-tax income was overstated by at least $8,306,000 

20as a result ofdefendant Rand's fraudulent recoding ofmodel sale-leaseback 

transactions. 

67. Beazer's current report on Form 8-K dated April 27, 2006, filed on 

April 27, 2006 announced net income of$104.4 million, and " ... Record Second 

Quarter 2006 EPS of $2.35." 

68. In fact, Beazer's pre-tax income for the second quarter of fiscal year 

2006 was overstated by at least $4,480,000 as a result ofRand's improper use of 

Land Inventory reserves and his recording of model sale-leaseback transactions. 

69. Beazer's current report on Form 8-K dated July 27,2006, filed on July 

27,2006, announced third quarter 2006 net income of$102.6 million, or $2.37 per 

diluted share, compared to net income of$112.7 million, or $2.50 per diluted share 

in the prior year's third quarter. 

70. In fact, Beazer's pre-tax income for the third quarter of fiscal year 

2006 was overstated by approximately $17,991,000 as a result ofRand's 

fraudulent use of the land inventory reserve and the cost-to-complete reserve and 

his fraudulent recording of model sale-leaseback transactions. 

71. Beazer's current report on Form 8-K dated November 7,2006, filed 

on November 7,2006, announced fourth quarter and FY 2006 financial results 

21
 



including net income for the quarter of $91.9 million, or $2.19 per diluted share, 

compared to net income of$164.4 million, or $3.61 per diluted share in the prior 

year's fourth quarter. For the year ended September 30, 2006, Beazer reported net 

income of$388.8 million, or $8.89 per diluted share, compared to reported net 

income of$262.5 million, or $5.87 per diluted share, and adjusted net income of 

$392.8, or $8.72 per diluted share in FY 2005. 

72. In fact, Beazer's pre-tax income for the fourth quarter of fiscal year 

2006 was overstated by approximately $19,366,000 as a result ofRand's 

fraudulent use of the land inventory reserve and the cost-to-compete reserve and 

his fraudulent recording ofmodel sale-leaseback transactions. Beazer's pre-tax 

income for the fiscal year was overstated by approximately $50,143,000 as the 

result ofRand's scheme. 

73. Beazer's current report on Form 8-K dated January 25,2007, filed on 

January 25,2007, announced financial results for the quarter ended December 31, 

2006, which included a reported net loss of $(59.0) million, or $(1.54) per share, 

including charges related to inventory impairments and abandonment of land . 

option contracts of$119.9 million on a pre-tax basis, compared to net income of 

$89.9 million, or $2.00 per diluted share in the first quarter of the last fiscal year. 

22
 



Excluding charges for inventory impairments and abandonment of land option 

contracts, adjusted net income was reported at $15.9 million, or $0.41 per diluted 

share. 

74. In fact, Beazer's pre-tax income for the quarter ended December 31 

included $1,549,000 of improper income resulting from Rand's fraudulent use of 

the cost-to-complete reserve. 

75. Beazer's current report on Form 8-K dated April 26, 2007, filed on 

April 26, 2007, announced financial results for the quarter ended March 31, 2007, 

which included a reported net loss of$(43.1) million, or $(1.12) per share, 

including charges related to inventory impairments, impairments fromjoint 

ventures, and abandonment of land option contracts totaling $86.9 million on a 

pre-tax basis. Excluding charges for inventory impairments, impairments of 

investments in joint ventures and abandonment of land option contracts, adjusted 

net income was reported to be $11.2 million, or $0.30 per diluted share. For the 

second quarter of the prior year, net income was $104.4 million, or $2.35 per 

diluted share. 

76. In fact, Beazer's pre-tax income for the quarter ended March 31, 2007 

included approximately $2,544,000 of income improperly recorded as a result of 

23
 



Rand's fraudulent use of the land inventory and cost-to-complete reserves. 

77. Beazer's registration statement on Form S-3, filed on August 4,2004, 

in connection with the sale of4 5/8% Convertible Senior Notes due 2024 and 

Common Stock Issuable Upon Conversion of the Notes, incorporated by reference 

Beazer's Form 10-K for the fiscal year ending September 30,2003 and Forms 10­

Q for the quarters ending December 31, 2003, March 31, 2004 and June 30, 2004. 

78. Beazer's registration statement on Form 8-4, filed on January 23, 

2004, which registered the exchange of $200 million of6 1/2% Notes due 2013 for 

like notes not previously registered, incorporated by reference Beazer's Form 10-K 

for fiscal year ending September 30, 2003. 

79. Beazer's amendment no. 1 registration statement on Form S-4, filed 

on March 16,2004, and amendment no. 2, filed on March 30, 2004, and 

Amendment No.3, filed on April 7, 2004, and Amendment No.4, filed on April 9, 

2004, all ofwhich registered the exchange of $200 million of6 1/2% Notes due 

2013 for like notes not previously registered, incorporated by reference Beazer's 

Form 10...K for the fiscal year ended September 30,2003, Beazer's Form 10-Q for 

the quarter ended December 31, 2003 and Beazer's Form 8-K dated January 27, 

2004 and filed January 27, 2004. 

24
 



80. Beazer's registration statement on Form S-4, filed on August 3, 2005, 

. which registered the exchange of$350 million of6.875% Notes due 2015 for like 

notes not previously registered, incorporated by reference Beazer's Form 10-K for 

the fiscal year ended September 30,2004, and its Forms 10-Q for the quarters 

ended December 31, 2004, March 31, 2005 and June 30, 2005. 

81. Beazer's registration statement on Form S-4, filed on August 15, 

2006, which registered the exchange of $275 million of8.125% Notes due 2016 

for like notes not previously registered, included financial statements for the three 

years ended September 30,2005 and financial statements for quarters ended June 

30, 2005 and 2006. 

82. Beazer Homes USA, Inc. registration statement on Form S-8, filed on 

November 12,2002, registering the offer of2,875,000 shares ofBeazer common 

stock, incorporated by reference Beazer's Form 10-K for the fiscal year ending 

September 30,2001, its Form 10-Q for the quarters ending December 31,2001, 

March 31, 2002 and June 30, 2002, and Forms 8-K or amendments dated April 4, 

2002, April 17, 2002, July 23,2002, August 8, 2002, and November 5, 2002. 

83. Beazer also issued numerous press releases announcing the misstated 

financial results throughout the scheme, including releases dated July 23, 2002, 

25
 



August 8, 2002, November 5,2002, April 22, 2003, July 22,2003, November 5, 

2003, January 27,2004, April 22, 2004, July 29,2004, November 5,2004, January 

27,2005, April 28, 2005, July 28,2005, November 2,2005, January 19,2006, 

April 27, 2006, July 27, 2006, November 7,2006, January 25,2007 and April 26, 

2007. 

84. With his extensive accounting knowledge, defendant Rand knew, or 

was severely reckless in not knowing, that the method for accounting for the land 

inventory reserves, the cost-to-complete reserves, and the model sale-Ieasebacks, 

was fraudulent and did not conform to·GAAP. 

85. Defendant Rand signed the fraudulent Forms 10-K and registration 

statements listed above. At the time that he signed the documents, Rand knew, or 

was severely reckless in not knowing, that his actions resulted in the inclusion of 

false and misleading information. 

86. Defendant Rand shared responsibility to keep Beazer's books, records 

and accounts, and establish and maintain its internal accounting controls. 

Defendant Rand failed to implement accounting controls sufficient to provide 

reasonable assurances that transactions were recorded as necessary to permit the 

preparation of financial statements in conformity with GAAP and to maintain 

26
 



accountability for assets. Defendant Rand lmowingly caused transactions to be 

recorded improperly and in a manner which caused the financial statements to be 

inconsistent with GAAP. 

Rand's Stock Sales 

87. During the course of the fraud, Rand sold at least 47,355 shares of 

Beazer common stock for gross proceeds of over $3 million. Additionally, he 

received bonuses under the Company's Value Created Incentive Plan of over $1.7 

million. 

CLAIMS FOR RELIEF 

COUNT I--FRAUD 

Violations of Section 17(a)(l) of the Securities Act [15 U.S.C. § 

77g(a)(lU 

88. Paragraphs 1 through 87 are hereby realleged and are incorporated 

herein by reference. 

89. Defendant Rand, in connection with the offer or sale of securities 

described herein, by the use of the means and instruments of interstate commerce 

27
 



and by use of the mails, directly and indirectly, employed devices, schemes, and 

artifices to defraud. 

90. Defendant Rand knowingly, intentionally or with severe recklessness, 

engaged in the aforementioned devices, schemes and artifices to defraud. In 

engaging in such conduct, Defendant acted with scienter, that is, with an intent to 

deceive, manipulate and defraud or with a severe reckless disregard for the truth. 

91. By reason of the foregoing, Defendant Rand, violated and unless 

enjoined, will continue to violate and cause the violation of Section 17(a)(1) of the 

Securities Act [15 U.S.C. § 77q(a)(1)]. 

COUNT II~-FRAUD 

Violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act ~ 

U.S.C. § 77g(a)(2) and 77g(a)(3U 

92. Paragraphs 1 through 87 are hereby realleged and are incorporated 

herein by reference. 

93. Defendant Rand, in connection with the offer or sale of securities 

described herein, by the use of the means and instruments of interstate commerce 

and by use of the mails, directly and indirectly: 

28 



(a) obtained money or property by means of untrue statements of 

material facts and omissions of material facts necessary in order to 

make the statements made, in light of the circumstances under which 

they were made, not misleading; and 

(b) engaged in transactions, practices, and courses of business 

which operated and would operate as a fraud or deceit upon the 

purchasers of securities, all as more particularly described in the 

paragraphs above. 

94. By reason of the foregoing, Defendant Rand, violated and unless 

enjoined, will continue to violate and cause the violation of Sections 17(a)(2) and 

17(a)(3) of the Securities Act [15 U.S.C. § 77q(a)(2) and 77q(a)(3)]. 

COUNT III--FRAUD 

Violations of Section 10(b) of the Exchange Act lIS. U.S.C. § 78j(b)l..ill!!! 
Rule 10b-S thereunder [17 C.F.R. § 240.10b-Sl 

95. Paragraphs 1 through 87 are hereby realleged and are incorporated 

herein by reference. 

96. Defendant Rand, III connection with the purchase and sale of 

29
 



securities described herein, by the use of the means and instrumentalities of 

interstate commerce and by use of the mails, directly and indirectly: 

a) employed devices, schemes, and artifices to defraud; 

b) made untrue statements of material facts and omitted to state 

material facts necessary in order to make the statements made, in light 

of the circumstances under which they were made, not misleading; 

and 

c) engaged in acts, practices, and courses ofbusiness which would 

and did operate as a fraud and deceit upon the purchasers of such 

securities, all as more particularly described in the paragraphs above. 

97. Defendant Rand intentionally, or with severe reckl~ssness engaged in 

the aforementioned conduct. 

98. In engaging in such conduct, Defendant acted with scienter, that is, 

with an intent to deceive, manipulate and defraud or with a severe reckless 

disregard for the truth. 

99. By reason of the foregoing, Defendant Rand, violated and unless 

enjoined, will continue to violate Section 10(b) of the Exchange Act [15 U.S.C. § 

78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5]. 

30 



COUNT IV-REPORTING PROVISIONS 

Aiding and Abetting Beazer's Violations of Section 13(a) of the 
Exchange Act [15 U.S.C. § 78m(a)) and Rules 12b-20, 13a-l, 13a-ll and 13a­
13 thereunder [17 C.F.R. §§ 240.12b-20, 240.13a-l, 240.13a-ll and 240.13a­

ill 

100. Paragraphs 1 through 87 are hereby realleged and are incorporated 

herein by reference. 

101. Defendant Rand aided and abetted Beazer's violations of Section 

13(a) of the Exchange Act [15 U.S.C. § 78m(a)] and Rules 12b-20, 13a-l and 13a­

13 thereunder [17 C.F.R. §§ 240.12-20, 240.13a-l and 240.13a-13], which 

occurred when Beazer filed annual, current and periodic reports that contained 

financial statements that were not prepared in conformity with GAAP and 

contained material misstatements. 

102. Through the conduct described in the above paragraphs, the 

Defendant knowingly or with severe recklessness substantially assisted Beazer's 

violations of this section and rules. 

103. By reason of the foregoing, Defendant Rand, aided and abetted and 

unless enjoined, will continue to aid and abet violations of Section 13(a) of the 

Exchange Act [15 U.S.C. § 78m(a)] and Rules 12b-20, 13a-l and 13a-13 

31
 



thereunder [17 C.F.R. §§ 240.12-20, 240.13a-l and 240.13a-13]. 

COUNT V- RECORD-KEEPING VIOLATIONS 

Aiding and Abetting Violations of Section 13(b)(2)(A) of the Exchange 
M!..[15 U.S.C. § 78m(b)(2)(A)] and Violations of Rule 13b2-1 [17 C.F.R. § 

240.13b2-11 

·104. Paragraphs 1 through 87 are hereby realleged and are incorporated 

herein by reference. 

105. Defendant Rand aided and abetted Beazer's violations of Section 

13(b)(2)(A) of the Exchange Act, which occurred when Beazer failed to make and 

keep books, records, and accounts, which, in reasonable detail, accurately and 

fairly reflected the transactions and dispositions of Just for Feet's assets. 

106. Rule 13b2-1 prohibits any person from directly or indirectly falsifying 

or causing the falsification of any such books, records or accounts. 

107. Through the conduct described in the above paragraphs, Defendant 

Rand violated Rule 13b2-1 and aided and abetted violations of 13(b)(2)(A) of the 

Exchange Act and unless enjoined will continue to do so. 

COUNT VI-BOOKS AND RECORDS AND INTERNAL 
CONTROLS_VIOLATIONS 

32 



Aiding and Abetting Violations of Section 13(b)(2)(B) [15 U.S.C~ § 
78m(b)(2)(B)] of the Exchange Act and Violations of Section 13(b)(5) of the 

Exchange Act lI5 U.S.C. § 78m(b)(5H 

108. Paragraphs 1 through 87 are ·hereby realleged and are incorporated 

herein by reference. 

109. Section 13(b)(5) of the Exchange Act prohibits any person from 

knowingly circumventing and knowingly failing to implement a system of internal 

accounting controls and knowingly falsifying any book, record, or account 

required by Section 13(b)(2)(A) of the Exchange Act. 

110. Section 13(b)(2)(B) requires issuers to devise and maintain a system 

of internal accounting controls sufficient to provide reasonable assurances that, 

among other things, transactions are executed in accordance with managemen.t's 

authorization and that transactions are recorded as necessary to permit the 

preparation of financial statements in conformity with GAAP and to maintain 

accountability for assets. 

111. Through the conduct described above, Defendant Rand aided and 

abetted violations of Section 13(b)(2)(B) and violated Section 13(b)(5) of the 

Exchange Act and unless enjoined will continue to do so. 

33
 



COUNT vn - LYING TO ACCOUNTANTS
 

Violation of Rule 13b2-2 promulgated under the Exchange Act 
117 C.F.R. § 240.13b2-21 

112. Paragraphs 1 through 87 are hereby realleged and are incorporated 

herein by reference. 

113. Rule 13b2-2 prohibits officers and directors from, directly or 

indirectly, making and causing to be made materially false and misleading 

statements or omitting to state, or causing another to omit to state, any material fact 

in order to make statements made not misleading to an accountant in connection 

with any audit or examination of the financial statements required to be filed with 

the Commission or the preparation or filing of any document or report to be filed 

with the Commission. 

114. Through the conduct described above, Defendant Rand violated Rule 

13b2-2 promulgated under the Exchange Act and unless enjoined will continue to 

do so. 

PRAYER FOR RELIEF 

WHEREFORE, Plaintiff Commission, respectfully prays that the 

Court: 

1. 

34
 



Make findings of fact and conclusions of law in accordance with Rule 

52 of the Federal Rules of Civil Procedure. 

II. 

Issue a permanent injunction enjoining Defendant Rand and his 

agents, servants, employees, attorneys, and all persons in active concert or 

participation with them who receive actual notice of the order by personal service 

or otherwise, and each of them: 

a. from violating Section 17(a) of the Securities Act [15 § U.S.C. 

77q(a)]; 

b. from violating Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] 

and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5]; 

c. from violating Section 13(b)(5) of the Exchange Act [§ 78m(b)(5)]; 

d. from violating Rule 13b2-2 promulgated under the Exchange Act [17 

C.F.R. § 240.l3b2-2]; 

e. from aiding and abetting violations of Section 13(a) of the Exchange 

Act [15 U.S.C. § 78m(a)] and Rules 12b-20, 13a-1, 13a-11 and 13a-13 thereunder 

[17 C.F.R. §§ 240.l2b-20, 240.13a-1, 240.13a-11 and 240.l3a-13]; 

f. from violating Rule 13b2-1 under the Exchange Act [17 C.F.R. § 

240.13b2-1]; and 

35 



g. from aiding and abetting violations of Sections 13(b)(2)(A) and 

13(b)(2)(B) of the Exchange Act [15 U.S.C. §§ 78m(b)(2)(A) and 78m(b)(2)(B)]. 

III. 

Issue an Order awarding disgorgement of ill-gotten gains and prejudgment 

interest thereon against Defendant Rand. 

IV. 

Issue an Order requiring Defendant Rand to pay civil monetary penalties, 

pursuant to Section 20(d)(l) of the Securities Act [15 U.S.C. § 77t(d)(l)] and 

Section 21(d)(3) of the Exchange Act [15 U.S.C. § 78u(d)(3)]. 

V. 

Issue an Order pursuant to Section 21 (d)(2) of the Exchange Act [15 U.S.C.§ 

78u(d)(2)] prohibiting Defendant Rand from acting as an officer or director of any 

issuer that has a class of securities registered with the Commission pursuant to 

Section 12 of the Exchange Act [15 U.S.C. § 781] or that is required to file reports 

with the Commission pursuant to Section 15(d)of the Exchange Act [15 U.S.C.§ 

78o(d)]. 

36
 



VI. 

Issue an Order that retains jurisdiction over this action in order to implement 

and carry out the terms of all orders and decrees that may have been entered or to 

entertain any suitable application or motion by the Commission for additional 

relief within the jurisdiction of this Court. 

VII. 

Grant such other and further relief as may be necessary and 

appropriate. 

Dated: July .1, 2009 

RESPECTFULLY SUBMITTED, 

COUNSEL FOR PLAINTIFF 
U. S. SECURITIES AND EXCHANGE COMMISSION 
3475 Lenox Road, N.E., Suite 1000 
Atlanta, Georgia 30326-1234 

37
 



(404) 842-7675
 
(404) 842-7679 fax 
Email: [email protected] 

38