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Jurors begin deliberations in backdating trial of former KB Home CEO Bruce Karatz

April 9, 2010 |  1:38 pm

The fate of former KB Home Chief Executive Bruce Karatz is now in the hands of a federal jury in Los Angeles.

Karatz, who faces 20 felony charges, is accused of making millions of dollars by backdating stock options and then trying to hide the practice from shareholders and outside accountants. The jury of nine men and three women began deliberations Friday afternoon in the courtroom of U.S. District Judge Otis D. Wright II.

Assistant U.S. Atty. Paul G. Stern told jurors that Karatz backdated stock options from 1999 to 2005, making $6 million of illegal profit in the process.

"What this case is about is the defendant taking unauthorized compensation from the company and from the shareholders and not disclosing it," Stern said.

Karatz, 64, who served as KB's CEO from 1986 to 2006, did not testify at the trial. KB Home, one of the nation's largest home builders, was forced to restate its earnings in 2007, disclosing $36 million in previously unreported compensation expenses related to backdated options.

Defense attorney John Keker said Karatz did nothing improper and was open with accountants and lawyers about how grant dates for stock options were chosen. Regulations regarding stock options were confusing, Keker said, and KB Home was one of about 200 public companies that restated earnings after 2005 to clear up options expenses.

"I'm not asking you for favors. I'm not asking you for mercy. I'm asking you to do the right thing, and you'll end up deciding Mr. Karatz is not guilty ... and send him home to his family," Keker said.

-- Stuart Pfeifer

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