Ex-KB Home CEO sentenced to house arrest

Bruce Karatz, the former chief executive of KB Home, received a sentence of five years probation for his conviction on charges relating to backdating stock options,  according to an article in the New York Times .Eight months of the sentence must be served at home with an electronic monitoring bracelet.

The sentence, handed down Nov. 10 by a federal judge in Los Angeles, was a stunning defeat for federal prosecutors, who recommended six and a half years in prison. The government stated in a sentencing memorandum that  home detention in the defendant’s  “24-room Bel-Air mansion” would suggest “a two-tiered criminal justice system, one for the affluent … and a second for ordinary citizens.”

This did not go over well with Judge Otis D. Wright II, who described the memo’s language as “inflammatory,” adding: “To invite public ridicule and scorn on this institution, I think, is unspeakable.”

Wright also ordered Karatz to pay a $1 million fine and perform 2,000 hours of community service. His sentence followed the U.S. probation office’s sentencing recommendation.

Karatz, who led KB Home from 1986 to 2006, originally faced 20 felony counts. Prosecutors claimed he made more than $6 million by manipulating backdated stock options and then lying about it in regulatory filings

The executive’s defense attorneys countered that Karatz never intentionally violated any securities laws and handled his options the same way that hundreds of other companies did.