Finally some good news for KB Home.
The homebuilder said the Securities and Exchange Commission has concluded its investigation into the company's accounting and disclosures and does not plan to recommend any enforcement action. The letter from the regulator concludes the SEC's investigation, which began in October 2009.
"We are pleased to announce that the SEC has concluded its investigation," said Jeffrey Mezger, president and chief executive officer of KB Home, in a statement.
There are no details about the nature of the allegations.
Same was true in October 2009 when the company first announced in its quarterly report that the staff of the SEC notified the company that a formal order of investigation had been issued regarding possible accounting and disclosure issues. At the time, it stressed that the probe should not be construed as an indication by the SEC that there has been any violation of the federal securities laws.
And this is exactly how it turned out.
What were the allegations? What prompted the SEC to look into the matter? Was it a disgruntled whistle-blower?
The answers would be instructive to other companies that could wind up as targets of SEC probes. Guess we'll never know.
The good news here is that the SEC informed the company that the investigation was closed. Sounds basic, right?
Believe it or not until a few years ago the regulator did not often communicate to companies under investigation that the probe was completed and that no further action would be taken, leaving the company hanging and suspicion hovering for all potential customers and investors to speculate.
Their attitude at the time was that as a policy, the Commission does not disclose the existence of an investigation in the first place, so it typically won't announce that one has ended.
KB Home, however, is no stranger to controversy.
The company was embroiled in the options backdating scandal. In April, former chief executive officer Bruce Karatz was convicted by a federal jury of four felony counts, including two counts of mail fraud, one count of lying to company accountants and one count of making false statements in reports to the Securities and Exchange Commission. He was acquitted on 16 other charges.
In September 2008, Karatz agreed to pay $7.2 million to settle civil charges for his role in the stock-option backdating scheme that benefitted himself and other KB Home officers and employees.
Last November, a Texas homeowner filed a class-action lawsuit today against KB Home, Countrywide Financial and LandSafe Appraisal Services, claiming the three conspired to rig housing prices in Texas and Colorado, costing home purchasers millions of dollars and pushing homeowners into dangerous loans.
Earlier, a lawsuit filed against the same parties alleged they fraudulently inflated sales prices of KB homes in Arizona and Nevada.