September 19, 2018

Bruce Karatz

Here’s What Happens When You Lie to Your Auditors

There’s been a fair amount kvetching, Monday-morning QBing, and just plain hating on auditors lately. Most of it deserved. That said, there are still laws on the books that say you can’t dismiss them entirely and tell them bald-faced lies whenever you want.

Bruce Karatz was the CEO of KB Homes and he was convicted for, among other things, lying to Ernst & Young:

Karatz was involved in a backdating scheme in which he awarded himself and other execs millions of dollars in stock-based compensation, a jury found. Background on Karatz is here and here.

The 64-year-old faces 80 years in prison after being convicted of four felony counts including wire fraud and lying to his company’s auditor, Ernst & Young, about the matter, according to the U.S. attorney’s office in Los Angeles. He was acquitted on 16 other counts.

Jesus, 80 years? We’re no expert on sentencing guidelines but using simple arithmetic, that’s 20 years per count. We’re all for justice but that’s some serious FPMITA prison time. And the way judges have been handing out sentences lately, we wouldn’t expect leniency.

After Backdating Setbacks, Feds Chop Former KB CEO Karatz [Law Blog]