SEC Obtains Settlement With CEO to Recover Compensation and Stock Profits Received During Company Fraud - 3 Mar 2011

2011-61

Washington, D.C., March 3, 2011 – The Securities and Exchange
Commission today announced a settlement with the chief executive officer
of an Atlanta-based homebuilder to recover several million dollars in
bonus compensation and stock profits that he received while the company
was committing accounting fraud.

According to the SEC’s complaint filed today in federal court in
Atlanta, CEO Ian J. McCarthy previously failed to reimburse Beazer Homes
USA Inc. for bonuses, other incentive-based or equity-based
compensation, and profits from Beazer stock sales that he received
during the 12-month periods after his company filed fraudulent financial
statements during fiscal year 2006.

The SEC brought previous enforcement actions against the company and
its former chief accounting officer who perpetrated the fraud. While not
personally charged for the misconduct, McCarthy is still required under
Section 304 of the Sarbanes-Oxley Act to reimburse the issuer for
incentive-based compensation and stock sale profits received during that
fraudulent period. The settlement with McCarthy is subject to court
approval.

“Today’s action makes clear that incentive compensation and stock
sale profits for CEOs and CFOs is subject to a clawback if received
while a company was deceiving its shareholders about financial results,”
said Robert Khuzami, Director of the SEC’s Division of Enforcement.
“This provides an important incentive for senior executives to be
vigilant in preventing misconduct and ensuring that companies comply
with financial reporting requirements.”

Rhea Kemble Dignam, Director of the SEC’s Atlanta Regional Office,
added, “McCarthy was receiving millions of dollars in bonuses and other
incentive compensation while Beazer was misleading investors and
fraudulently overstating its income. Section 304 requires McCarthy to
reimburse Beazer for that compensation and profits on the sale of Beazer
stock.”

Without admitting or denying the SEC’s allegations, McCarthy agreed
to reimburse Beazer $6,479,281 in cash, 40,103 restricted stock units
(or its equivalent), and 78,763 shares of restricted stock (or its
equivalent). This reimbursement represents McCarthy’s entire fiscal year
2006 incentive bonus ($5,706,949 in cash and 40,103 in restricted stock
units), $772,232 in stock sale profits, and 78,763 shares of restricted
stock granted in 2006.

Section 304 of the Sarbanes-Oxley Act requires reimbursement by
certain senior corporate executives of any bonus or other
incentive-based or equity-based compensation received during a period in
which a company was in material non-compliance with financial reporting
requirements due to misconduct, as well as profits from stock sales
during that same period. This can include an individual who has not been
personally charged with the underlying misconduct or alleged to have
otherwise violated the federal securities laws.

According to the SEC’s complaint against McCarthy, Beazer was
required to prepare accounting restatements for the fiscal year ended
Sept. 30, 2006 and first three quarters of fiscal 2006 due to its
fraudulent conduct, which consisted of a manipulation of Beazer’s land
development and house cost-to-complete accounts as well as the improper
recording of certain model home financing transactions as sales for the
purpose of increasing Beazer’s income.

Beazer settled an SEC enforcement action in September 2008, and the SEC charged its former chief accounting officer Michael T. Rand in July 2009. The litigation against Rand is still ongoing.

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For more information about this enforcement action, contact:

Rhea Kemble Dignam

Director, SEC Atlanta Regional Office

(404) 842-7610

William P. Hicks

Associate Director, Enforcement, SEC Atlanta Regional Office

(404) 842-7675

http://www.sec.gov/news/press/2011/2011-61.htm