CORRECTED

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 20717 / September 15, 2008

Accounting and Auditing Enforcement Release No. 2879 / September 15, 2008

Securities and Exchange Commission v. Bruce E. Karatz, United States District Court for the Central District of California, Civil Action No. CV 08-06012 AHM (FFMx)

SEC Announces $7.2 Million Settlement With Former KB Home Chairman and CEO for Stock Option Backdating and Self-Dealing

The Securities and Exchange Commission today filed settled civil fraud charges against Bruce E. Karatz, the former chairman and CEO of Los Angeles homebuilder KB Home, Inc., for his participation in a multi-year scheme to backdate stock options to himself and other KB Home officers and employees.

The Commission's complaint, filed in federal court in Los Angeles, alleges that from at least 1999 through 2005, Karatz enriched himself and others at KB Home by using hindsight to pick advantageous grant dates for KB Home's annual stock option grants. On many occasions, the grant dates coincided with dates of low monthly closing prices for the company's common stock. In addition, the complaint alleges that Karatz continued to use hindsight for stock option grant dates even after the Sarbanes-Oxley Act of 2002 imposed stricter reporting requirements on officers of public companies. The complaint also alleges that, because of the backdating scheme, KB Home filed periodic reports and proxy statements with the SEC that inaccurately stated that KB Home granted options at fair-market-value on the date of the grant. Karatz received backdated annual stock option awards amounting to 2,860,000 shares of KB Home stock and profited more than $6 million from exercising many of these options.

Karatz agreed to settle the Commission's charges without admitting or denying the allegations in the complaint. Under the settlement, Karatz consented to the entry of an order that (i) permanently enjoins him from future violations of Section 17(a) of the Securities Act of 1933, Sections 10(b), 14(a), and 16(a) of the Securities Exchange Act of 1934 ("Exchange Act") and Rules 10b-5, 13a-14, 13b2-1, 14a-9, and 16a-3 thereunder, and aiding and abetting violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13 thereunder; (ii) requires him to pay $6,714,819.27 in disgorgement and interest and a civil penalty of $480,000; and (iii) bars him from serving as an officer or director of a public company for five years. The settlement is subject to approval by the court.

http://www.sec.gov/litigation/litreleases/2008/lr20717.htm