December 1, 2009
SEC Clawing Back Pay Again – Beazer Homes This Time
– Paul Hodgson, The Corporate Library
From our blog: The Securities Docket reported recently that the SEC was going after Ian McCarthy the CEO of Beazer Homes – using Sox 304 – for clawbacks of his incentive payments, just like it did for CSK Auto Corporation’s CEO. The issue here is the same. The SEC is not alleging that either CEO was responsible for fraud, but simply that the incentives and other compensation were earned based on misstated financial accounts. The accounts are already being restated for 2004-2007 and they are likely to be restated for 1999-2003 as well.
That’s quite a lot of pay. Even for 2004-2007, in bonuses and option profits alone that’s $38 million.
Ian McCarthy has been the CEO for 15 years, so it’s going to be tough to point the finger elsewhere anyway. And we’ve already blogged about this. In the face of a Federal investigation, Mr. McCarthy claimed not to have any knowledge of what was going on, none whatsoever, not at all, no idea, nada, completely bemused by the whole thing, just couldn’t have come as more of a surprise to him that there was mortgage fraud, discount point fraud, down-payment assistance fraud, HUD-licensing fraud, and stated income fraud. Before all this he probably wasn’t even sure how the word “fraud” was spelt, I bet.
As we said then, knowledge has nothing to do with it. Responsibility is everything. And was he responsible? Well, we said yes back in July and apparently the SEC agrees with us.
This is about the clearest evidence yet that a simple fraud-based clawback policy is completely useless and a waste of paper.