Former KB Home Executive Pleads Guilty

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A former executive of KB Home pleaded guilty Monday to conspiring to obstruct justice in connection with stock option backdating at the L.A.-based home builder.

The U.S. Attorney’s Office said Gary Ray, 50, entered the plea in L.A. federal court, admitting he conspired with former KB Home Chief Executive Bruce Karatz to obstruct a 2006 investigation by the U.S. Securities and Exchange Commission into stock option backdating at the Los Angeles homebuilding company. Ray was vice president and head of human resources at KB.

In September, Karatz agreed to pay $7.2 million to settle SEC charges that he fraudulently backdated stock options issued to himself and other employees for at least six years.

Ray, a Pacific Palisades resident, on Monday admitted that he and Karatz agreed to collaborate into causing KB Home’s general counsel to prepare and submit false and misleading reports on the company’s option granting practices, according to a press release from the U.S. Attorney’s Office. The false reports were given to KB Home’s audit committee and other company managers who relied on them when making disclosures on required SEC filings.

A KB Home spokeswoman declined comment on the case.

Ray faces up to five years in federal prison. He agreed to corporate with the government in its continuing investigation of stock option backdating at KB Home.

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