KB Home is under criminal investigation by federal prosecutors over its backdating of executive stock-options, according Bloomberg News.


Bloomberg, citing people close to the matter, said the investigation is being conducted by the U.S. Attorney's Office in Los Angeles. The story notes that federal prosecutors have started criminal investigations into the backdating practices of more than 50 companies in cases considered the most egregious.


The Los Angeles-based homebuilder, the fifth largest in the U.S., revealed earlier this year in a regulatory filing that former Chief Executive Bruce Karatz and Gary Ray, its ex-human resources chief, used "hindsight" to ensure favorable exercise prices on options grants in order to sweeten their salaries. Karatz earned $126 million before he resigned late last year. Ray was fired shortly after.


More than 200 other companies, including more than a dozen from the L.A. area, including Activision Inc., THQ Inc. and California Pizza Kitchen Inc., have disclosed federal or internal probes into misdated options. The investigations have led to earnings restatements exceeding $9.5 billion, according to Bloomberg.


Shares in KB were down $1.11, or 2 percent, to $51.450 in afternoon trading Friday on the New York Stock Exchange.

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