Regulators Investigate Stock-Options Practices at KB Home

The Department of Justice has launched a probe into the handling of stock options at KB Home, one of the nation's largest homebuilders, although it is not targeting the company directly, KB Home said Friday.

As part of its inquiry, the Justice Department is interviewing current and former executives of KB Home, a company spokesman said.

The company last month acknowledged that the Securities and Exchange Commission had launched a formal investigation into its options practices.

Justice also is "looking into these practices but has informed KB Home that it is not a target of this investigation," according to a company release. "KB Home has and intends to fully cooperate with any government agency looking into this matter."

KB Home is one of at least 200 companies to disclose SEC, DOJ or internal investigations, according to an Associated Press review.

KB Home's former chief executive Bruce Karatz, along with its executive vice president and chief legal officer, were forced to step down late last year after it was disclosed that Karatz benefited from favorably dated option awards. He agreed to repay $13 million stemming from incorrect measurement dates for financial reporting of annual option grants between 1998 and 2005.
The company also has said it expects to record additional expenses of no more than $50 million and was investigating whether it needed to restate earnings for prior periods.