Money & Company

Tracking the market and economic trends
that shape your finances.

« Previous Post | Money & Company Home | Next Post »

Jury has a question in KB Home options backdating case

April 19, 2010 |  3:51 pm

Jurors asked the judge for help last week during deliberations in the stock-options-backdating prosecution of former KB Home chief Bruce Karatz, according to documents released Monday.

The panel asked the court for a definition of a "derivative action," which was referenced in a KB Home internal document that is evidence in the case.

Shareholders filed derivative-action lawsuits against Karatz and several other KB executives in 2006, alleging that the backdating of employee stock options had diminished the value of the company's stock. The lawsuits were settled in 2008.

After discussing the jury's question with prosecution and defense attorneys by e-mail, U.S. District Judge Otis D. Wright II sent the jury this response: "There is no testimony about a derivative action and you should not concern yourself with it."

Wright released the e-mails and the jury's question Monday at the request of The Times.

Karatz, who served as KB's chief executive from 1986 to 2006, is charged with 20 felonies related to the backdating of his and other executives' stock options.

The jury, which has deliberated five days, is scheduled to resume its discussions Tuesday.

--Stuart Pfeifer