U. S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21114 / July 1, 2009
Accounting and Auditing Enforcement Release No. 3003 / July 1, 2009
Securities and Exchange Commission v. Michael T. Rand, Civil Action No. 1:09-CV-1780 (NDGA, July 1, 2009)
The Securities and Exchange Commission (Commission) announced that on July 1, 2009, it filed a civil complaint against Michael T. Rand, of Sandy Springs, Georgia. The Commission charged Rand, the former chief accounting officer of Atlanta-based home builder Beazer Homes, USA, Inc., for conducting a multi-year fraudulent earnings management scheme and misleading Beazer’s outside auditors and internal Beazer accountants in order to conceal his wrongdoing.
The Commission alleges that Rand fraudulently decreased Beazer’s reported net income by recording improper accounting reserves during certain periods between 2000 and 2005 in order to meet or exceed analysts’ expectations for Beazer’s diluted earnings per share (EPS) and maximize yearly officer and senior employee bonuses. Rand began reversing these improper reserves beginning in the first quarter of fiscal year 2006 in order to offset Beazer’s declining financial performance.
The Commission’s Complaint also alleges that in fiscal year 2006 and the first two quarters of fiscal year 2007, Rand improperly recognized revenue from the sale and leaseback of certain model homes on Beazer’s financial statements and used secret side agreements in order to hide his misconduct from Beazer’s outside auditors. Cumulatively, Rand’s actions caused Beazer to understate its income in SEC filings by approximately $63 million during fiscal years 2000 to 2005, representing approximately 7 percent of Beazer’s cumulative actual restated net income of $955 million for the period. Rand’s fraudulent actions caused Beazer to overstate its income and understate its loss by a total of $47 million during fiscal 2006 and the first two quarters of fiscal 2007, representing 20 percent of Beazer’s cumulative actual restated net income of $232 million for the period.
The Commission’s complaint charges Rand with violating Section 17(a) of the Securities Act of 1933, Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 and Rules 10b-5, 13b2-1, and 13b2-2 thereunder, and, with 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, 13a-11, and 13a-13 thereunder, and seeks a permanent injunction, disgorgement of Rand’s ill-gotten gains plus prejudgment interest, and a financial penalty.
The SEC also seeks a court order barring Rand from acting as an officer or director of any public issuer.
See also, Exchange Act Release No. 58633 / September 24, 2008.