According to a press release, the Securities and Exchange Commission (SEC) has charged Michael T. Rand, the former chief accounting officer of Beazer Homes, USA, Inc., with conducting a fraudulent earnings management scheme. It is alleged that this scheme took place over a period of years and that Rand mislead both internal Beazer accountants and outside auditors to hide his wrongdoing.
Specifically, it is alleged that Rand decreased the reported net income of Beazer through recording improper accounting reserves. This allegedly occured between 2000-20005 in an effort to “meet or exceed analysts’ expectations for Beazer’s diluted earnings per share (EPS) and maximize yearly officer and senior employee bonuses.” Rand himself is alleged to have gained a lucrative bonus as a result of his scheme. It is stated that Rand then when Beazer’s financial performance declined he began reversing the improper reserves in 2006 to offset loss.
The SEC alleges that Rand hid over $60 million in reserves. This amount represented approximately 7% of Beazer’s actual restated net income for the period, which was $955 million. However, in 2006, Rand caused Beazer to overstate its income and understate its loss by $47 million.
Rand has been charged with violations of the “antifraud, reporting, books and records and internal control provisions of the federal securities laws.” The SEC seeks a permanent injunction, a financial penalty against Rand, and for Rand to disgorge his ill-gotten gains from the scheme.