U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 22074 / August 30, 2011
Accounting and Auditing Enforcement Release No. 3314 / August 30, 2011
Securities and Exchange Commission v. James O'Leary, Case No. 1:11-cv-2901 (N.D. Ga.)
On August 30, 2011, the Securities and Exchange Commission filed an action against James O'Leary, the former Chief Financial Officer of Beazer Homes USA, Inc., an Atlanta, Georgia-based homebuilder, seeking to recover, pursuant to Section 304 of the Sarbanes-Oxley Act of 2002, bonuses and other incentive-based and equity-based compensation and stock sale profits received while the Company was committing accounting fraud.
Section 304 of Sarbanes-Oxley requires reimbursement by chief executive officers and chief financial officers of certain compensation and stock sale profits they received while their companies were in material non-compliance with financial reporting requirements due to misconduct, as well as profits from stock sales during that same period. This can include an individual who has not been personally charged with the underlying misconduct or alleged to have otherwise violated the federal securities laws.
The SEC’s complaint, filed in federal district court in Atlanta, Georgia, does not allege that O’Leary participated in any misconduct. But the complaint alleges that O’Leary is still required, under Section 304 of Sarbanes-Oxley, to reimburse Beazer more than $1.4 million that he received after Beazer filed materially false financial statements during fiscal year 2006.
Without admitting or denying the Commission’s allegations, O’Leary agreed to reimburse Beazer $1,431,022 in cash within 30 days of entry of the Court order approving the settlement. This amount represents O’Leary’s entire fiscal year 2006 incentive bonus: $1,024,764 in cash incentive compensation and $131,733 previously received from Beazer in exchange for all restricted stock units he received as additional incentive compensation for fiscal year 2006. The settlement amount also includes $274,525 in stock sale profits. The settlement with O’Leary is subject to court approval.
This is the fourth enforcement action that the Commission has brought arising out of Beazer’s accounting misconduct. Earlier this year, the Commission reached a settlement with Beazer’s then-CEO Ian McCarthy to recover, pursuant to Section 304 of Sarbanes-Oxley, several million dollars in bonus compensation and stock profits received. See Lit. Rel. No. 21873 (Mar. 4, 2011). Beazer settled an enforcement action in September 2008, see Rel. No. 33-8960 (Sep. 24, 2008), and the Commission charged Beazer’s former chief accounting officer Michael Rand in July 2009. See Lit. Rel. No. 21114 (Jul. 1, 2009).