Risk & Compliance

Beazer Fires Top Accountant

Homebuilder cites ethics violations as reason for termination.
Stephen TaubJune 28, 2007

Beazer Homes USA said it fired Senior Vice President and Chief Accounting Officer Michael T. Rand for violating the company’s ethics policy. The homebuilder added that the finance executive tried to destroy documents in violation of the company’s document retention policy, according to a company regulatory filing.

Rand could not be reached for comment at press time.

The company noted that it is currently conducting an internal investigation of its mortgage origination business and related matters and recently became aware of Rand’s actions during that investigation. Rand’s termination followed a briefing by an independent legal counsel retained by the company’s audit committee.

It is not unusual for executives to be fired or asked to resign for violating a company’s ethics policies. For example, last month, WellPoint CFO David Colby was asked by management and the board to resign for violating the company’s code of conduct. In his case, the termination stemmed from a number of publicly reported incidents regarding his private life.

Currently, the Federal Bureau of Investigation and the Department of Housing and Urban Development are investigating whether Beazer violated federal regulations in arranging government-insured mortgage loans, noted the The Wall Street Journal. Reportedly, the FBI said it is looking at issues of possible fraud.

Beazer spokeswoman Leslie Kratcoski told the paper, “We have informed the U.S. attorney’s office and the SEC about this issue.” She said the internal investigation by the company’s audit committee, which is being assisted by independent legal counsel, is continuing. Last winter, groups of home buyers in North Carolina alleged that Beazer steered them into mortgages they couldn’t afford, leading to widespread foreclosures, noted the Journal. It added that Beazer has said it hasn’t found evidence to support the allegations.

Rand joined Beazer in late 1996 as vice president, operational and accounting controls and was promoted to vice president, corporate controller in June of 1998. Rand was promoted to senior vice president and corporate controller in October 2002. Prior to joining Beazer, Rand was with KPMG Peat Marwick from 1984 to 1996, at which time he served as a senior audit manager.

In February, Beazer fired executive vice president and general counsel Kenneth J. Gary “for cause,” citing “a pattern of personal conduct which includes violations of company policies. Then in March, James O’Leary resigned as executive vice president and chief financial officer to become president and chief executive officer of Kaydon Corp., where he has been a member of the board since 2005.

Meanwhile, in May, Beazer disclosed that the Securities and Exchange Commission had launched an informal inquiry to determine whether any person or entity related to the company has violated federal securities laws. CFO.com previously reported that Beazer also is the subject of a new class-action lawsuit filed on behalf of present and former participants and beneficiaries of the company’s 401(k) plan. The lawsuit names as defendants Beazer Homes, certain current and former officers and directors, and the plan’s benefits-administration committee.

The complaint, filed in U.S. District Court for the Northern District of Georgia, alleges breach of fiduciary duties under the Employee Retirement Income Security Act as a result of investments by the plan in Beazer stock when participants allegedly were not provided timely, accurate, and complete information about the company.

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