Human Capital & Careers

KB Home Faces ERISA Suit over Options

Plaintiffs allege that undisclosed, backdated option grants ''unjustly enriched certain defendants'' and caused the plan to invest in the company's...
Stephen TaubApril 10, 2007

KB Home disclosed Monday that it is the target of a lawsuit alleging violations of the Employee Retirement Income Security Act, stemming from backdated stock options.

In a regulatory filing, the homebuilder stated that the complaint was filed last month in U.S. District Court for the Central District of California against the company, its directors, and certain current and former officers.

On behalf of all participants in the company’s 401(k) plan, the complaint alleges that defendants breached their fiduciary duties under ERISA to members of the plan by issuing backdated option grants and failing to disclose this information to the plan participants. According to KB Home, the plaintiffs claim “claim that this conduct unjustly enriched certain defendants to the detriment of the 401(k) plan and its participants, and caused the 401(k) plan to invest in the company’s securities at allegedly artificially inflated prices.”

KB Home’s filing offered no further comment other than that the company “agreed to accept service of the complaint.”

According to the blog D & O Diary, four other companies face similar suits: UnitedHealth Group, Affiliated Computer Services, Analog Devices, and The Home Depot.

In a regulatory filing last summer, for example, Home Depot disclosed that two lawsuits seeking class action status were filed against the company, The Home Depot Futurebuilder Administrative Committee, and certain current and former directors. The lawsuits allege breach of fiduciary duty in violation of ERISA, added the company, in connection with its return-to-vendor and stock option practices.

Home Depot stated at the time that it believes the actions are without merit and that it intends to defend them vigorously.

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