Ex-KB CEO Facing 415 Years in Prison

Options Scheme Allegedly Bilked Shareholders Out of Millions

AP is reporting that former KB Home CEO Bruce Karatz has been indicted on "multiple counts of fraud and other crimes related to a stock option backdating scheme" and now faces up to 415 years in prison if convicted on all charges. KB Home has built dozens of residential communities throughout Florida, many concentrated around Orlando, Jacksonville and Southwest Florida. In an interview three years ago with The New York Times, then-CEO Karatz remained bullish on the outlook for KB and housing in general. "I believe we're going to have very strong demand on any historical basis; not as good as it was a year ago, but still very strong. And big home builders are going to be able to operate very well. I don't think there's going to be any significant price depreciation." A few months later, Karatz was forced out of the company over the options scheme. Considering the 50% price reductions in several Florida markets, Karatz's crystal ball proved to be a little fuzzy. The share price of KB Home has followed a similar trajectory since that NYTimes interview. (KBH chart)