2009-07-01 SEC Press press_release 7 KB 3,345 chars

Press Release: SEC Charges Former Chief Accounting Officer of Beazer Homes for Fraudulent Earnings Management Scheme; 2009-146; July 1, 2009

Release: 2009-146
Caption: Securities and Exchange Commission v. Fraudulent Earnings Management Scheme, et al.

summary

The SEC charged former Beazer Homes CFO Michael T. Rand with orchestrating a multi-year 'cookie jar' earnings management scheme, fraudulently creating $63M in hidden reserves (2000–2005) and reversing them to overstate income by $47M (2006–2007 Q2), misleading auditors and inflating bonuses, resulting in charges for securities fraud and a sought ban from serving as a public company officer.

paragraph

The SEC charged Michael T. Rand, former chief accounting officer of Beazer Homes USA, with a fraudulent earnings management scheme that understated income by $63 million between 2000 and 2005 through improper accounting reserves and later overstated income by $47 million in 2006 and the first two quarters of 2007 by reversing those reserves and fraudulently recognizing revenue from model home sale-leasebacks using secret side agreements. His actions were designed to manipulate diluted earnings per share to meet analyst expectations, maximize executive bonuses, and conceal declining financial performance while misleading both internal accountants and outside auditors. The SEC filed charges alleging violations of antifraud, reporting, books and records, and internal control provisions, seeking disgorgement, prejudgment interest, financial penalties, a permanent injunction, and a bar from serving as an officer or director of any public company.

narrative

The SEC charged Michael T. Rand, former chief accounting officer of Beazer Homes USA, with orchestrating a multi-year fraudulent earnings management scheme spanning 2000 to 2007 to manipulate financial results and secure executive bonuses. Between 2000 and 2005, Rand improperly created over $63 million in secret accounting reserves, understating Beazer’s net income by approximately 7% of its cumulative restated earnings during that period. Beginning in 2006, as the company’s performance declined, Rand reversed these reserves and fraudulently recognized $47 million in revenue from model home sale-leasebacks using undisclosed side agreements, overstating income by 20% of Beazer’s restated net income for 2006 and the first two quarters of 2007. He deliberately misled Beazer’s internal accountants and outside auditors to conceal these manipulations, ensuring the fraudulent results appeared legitimate in SEC filings. The SEC alleges these actions were designed to meet Wall Street earnings expectations, inflate bonuses, and attract investors during a period of financial deterioration. The Commission filed charges in U.S. District Court for the Northern District of Georgia, seeking permanent injunction, disgorgement of ill-gotten gains with prejudgment interest, financial penalties, and a bar from serving as an officer or director of any public company. The investigation, supported by the U.S. Attorney’s Office of the Western District of North Carolina, remains ongoing.

Enriched metadata

Scheme: accounting-fraud (100%)
Court: Northern District of Georgia
Victim loss: $955,000,000

Classified accounting-fraud(confidence 100%). EDGAR detection: forms 10-K/10-Q/8-K/NT 10-K· recall 80% / precision 48%. detection rule →

Extracted insights

Dollar amounts 5

$955.00M $955 million $100M–$1B
$232.00M $232 million $100M–$1B
$63.00M $63 million $10M–$100M
$60.00M $60 million $10M–$100M
$47.00M $47 million $10M–$100M

Entities 5

person fraudulent earnings management scheme
person robert khuzami
agency sec charges former chief accounting officer of beazer homes
agency sec's complaint
agency Securities and Exchange Commission

Triples 14

Sec Charges Former Chief Accounting Officer Of Beazer Homes Charges Fraudulent Earnings Management Scheme
Sec Alleges Michael T. Rand Of Sandy Springs, Ga. Fraudulently Decreased Beazer's Reported Net Income By Recording Improper Accounting Reserves During Certain Periods Between 2000 And 2005 In Order To Meet Or Exceed Analysts' Expectations For Beazer's Diluted Earnings Per Share (Eps) And Maximize Yearly Officer And Senior Employee Bonuses
Rand Began Reversing Improper Reserves Beginning In The First Quarter Of Fiscal Year 2006 In Order To Offset Beazer's Declining Financial Performance
Robert Khuzami Said Michael Rand Orchestrated An Old-Fashioned 'Cookie Jar' Earnings Management Scheme Where He Hid From View Over $60 Million In So-Called Reserves
Robert Khuzami Said Michael Rand Fraudulently Reversed Those Secret Reserves And Appeased Financial Analysts, Enticed New Investors, And Most Importantly Earned Himself An Undeserved Lucrative Bonus
Sec Alleges Rand Improperly Recognized Revenue From The Sale And Leaseback Of Certain Model Homes On Beazer's Financial Statements And Used Secret Side Agreements In Order To Hide His Misconduct From Beazer's Outside Auditors
Rand's Actions Caused Beazer To Understate Its Income In Sec Filings By Approximately $63 Million During Fiscal Years 2000 To 2005
Rand's Actions Represented Approximately 7 Percent Of Beazer's Cumulative Actual Restated Net Income Of $955 Million For The Period
Rand's Fraudulent Actions Caused Beazer To Overstate Its Income And Understate Its Loss By A Total Of $47 Million During Fiscal 2006 And The First Two Quarters Of Fiscal 2007
Rand's Fraudulent Actions Represented 20 Percent Of Beazer's Cumulative Actual Restated Net Income Of $232 Million For The Period
Sec's Complaint Charges Rand With Violations Of The Antifraud, Reporting, Books And Records And Internal Control Provisions Of The Federal Securities Laws
Sec Seeks A Permanent Injunction, Disgorgement Of Rand's Ill-Gotten Gains Plus Prejudgment Interest, And A Financial Penalty
Sec Seeks A Court Order Barring Rand From Acting As An Officer Or Director Of Any Public Issuer
Sec Acknowledges The Assistance Of The U.S. Attorney's Office Of The Western District Of North Carolina

View original SEC press releasesec.gov

Extracted body text (3,345c)

SEC Charges Former Chief Accounting Officer of Beazer Homes for Fraudulent Earnings Management Scheme FOR IMMEDIATE RELEASE 2009-146 Washington, D.C., July 1, 2009 — The Securities and Exchange Commission today charged the former chief accounting officer of Atlanta-based home builder Beazer Homes, USA, Inc., for conducting a multi-year fraudulent earnings management scheme and misleading Beazer's outside auditors and internal Beazer accountants in order to conceal his wrongdoing. Additional Materials Litigation Release No. 21114 SEC Complaint The SEC alleges that Michael T. Rand of Sandy Springs, Ga., fraudulently decreased Beazer's reported net income by recording improper accounting reserves during certain periods between 2000 and 2005 in order to meet or exceed analysts' expectations for Beazer's diluted earnings per share (EPS) and maximize yearly officer and senior employee bonuses. Rand began reversing these improper reserves beginning in the first quarter of fiscal year 2006 in order to offset Beazer's declining financial performance. "Michael Rand orchestrated an old-fashioned 'cookie jar' earnings management scheme where he hid from view over $60 million in so-called reserves," said Robert Khuzami, Director of the SEC's Division of Enforcement. "Then when Beazer's business declined, he fraudulently reversed those secret reserves and appeased financial analysts, enticed new investors, and most importantly earned himself an undeserved lucrative bonus." The SEC also alleges that in fiscal year 2006 and the first two quarters of fiscal year 2007, Rand improperly recognized revenue from the sale and leaseback of certain model homes on Beazer's financial statements and used secret side agreements in order to hide his misconduct from Beazer's outside auditors. Cumulatively, Rand's actions caused Beazer to understate its income in SEC filings by approximately $63 million during fiscal years 2000 to 2005, representing approximately 7 percent of Beazer's cumulative actual restated net income of $955 million for the period. Rand's fraudulent actions caused Beazer to overstate its income and understate its loss by a total of $47 million during fiscal 2006 and the first two quarters of fiscal 2007, representing 20 percent of Beazer's cumulative actual restated net income of $232 million for the period. The SEC's complaint, filed in U.S. District Court for the Northern District of Georgia, charges Rand with violations of the antifraud, reporting, books and records and internal control provisions of the federal securities laws, and seeks a permanent injunction, disgorgement of Rand's ill-gotten gains plus prejudgment interest, and a financial penalty. The SEC also seeks a court order barring Rand from acting as an officer or director of any public issuer. The Commission acknowledges the assistance of the U.S. Attorney's Office of the Western District of North Carolina. The SEC's investigation is continuing. # # # For more information, contact: Katherine S. Addleman Regional Director, SEC's Atlanta Regional Office (404) 842-7610 William P Hicks Regional Trial Counsel, SEC's Atlanta Regional Office (404) 842-7675 Stephen E. Donahue Assistant Regional Director, SEC's Atlanta Regional Office (404) 842-7618 http://www.sec.gov/news/press/2009/2009-146.htm Home | Previous Page Modified: 07/01/2009

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