SEC Is Conducting Informal Inquiry into Beazer
Beazer Homes USA said on Thursday the U.S. Securities and Exchange Commission is conducting an informal inquiry to determine if the company or its employees had violated securities laws.
Beazer, the sixth biggest U.S. home builder, also said in an SEC filing that it had been named as a defendant in another lawsuit relating to its mortgage-origination unit, this one filed by employees and their beneficiaries.
Beazer, based in Atlanta, is already the subject of several lawsuits as well as a U.S. Attorney's investigation into practices related to its mortgage-origination business.
The company said it received notice of the SEC inquiry on May 1. It also said that it received notice on April 30 that it and some current and former directors had been named as defendants in a punitive lawsuit seeking class-action status.
The lawsuit, filed in U.S. District Court in the Northern District of Georgia, was filed on behalf of "thousands" of employees participating in Beazer's 401(k) retirement plan.
The lawsuit seeks to represent those who were participating in, or were beneficiaries of, the plan from Dec. 31, 2005 through March 29, 2007, according to the complaint. As of Dec. 31, 2005 Beazer stock accounted for 43.65% of the plan's assets.
The suit said Beazer's shares began to drop after The Charlotte Observer reported on March 18 that Beazer was being investigated by federal housing officials for questionable loans arranged by the mortgage unit for buyers in a North Carolina development.
Three days later, Beazer's chief financial officer, James O'Leary, who is a defendant in the suit, resigned.
The company has since said that it has received a grand jury subpoena from the U.S. Attorney's office in the Western District of North Carolina seeking documents related its mortgage business.
After the Observer's articles and the company's statements acknowledging the probe, Beazer shares fell about 13%. The stock closed at $34.14 on Thursday, recovering almost all of those losses.
The suit accuses the defendants of "not providing timely, accurate and complete information concerning the company." "At this time, Beazer Homes has found not evidence to support the
allegations and intends to vigorously defend this action," the company said in the filing.
Beazer said it has been in contact with the prosecutor's office and is cooperating with the investigation. The company is also involved in two other lawsuits.
One alleges that Beazer's mortgage company used aggressive tactics to sell mortgages to unqualified buyers.
The other alleges breach of fiduciary duty by current and former executives and directors related to the mortgage business.
Beazer said its Audit Committee has initiated an internal review of the mortgage-origination business and related matters and has retained independent legal counsel and an independent financial consultant.
The announcement of the SEC inquiry and the new complaint was released after the close of trading on the New York Stock Exchange. In after-hours trading, Beazer shares were little changed.