KB Home CEO Retires After Probe

Bruce Karatz has retired as chairman of the board, director, and chief executive officer of KB Home following an independent investigation into the company's stock-option granting practices, which concluded that the company used incorrect measurement dates for stock option grants from 1998 to 2005The board has terminated the employment of Gary A. Ray, the company's head of human resources, and Richard B. Hirst has resigned as executive vice president and chief legal officer, effective immediately, the Los Angeles-based company reported. Mr. Karatz, who was with KB Home for 34 years, has agreed to pay the company the difference between the initial strike price and the closing price on the new measurement date for options he has exercised that were incorrectly priced. He has also agreed that each new strike price will be the closing price on the new measurement date. This is expected to involve an aggregate voluntary value transfer from Mr. Karatz to the company of approximately $13 million, KB Home said. The homebuilder said it expects that the incremental noncash compensation expense arising from the errors is not likely to exceed $50 million, spread over the vesting periods of the options in question.