With the ouster of chief executive, Bruce Karatz, following a stock-option scandal, KB Home has created two problems for itself.
For starters, Karatz is the only CEO the company has had in its 20-year history, so with his departure, the Los Angeles-based homebuilder is left with a leadership void amid a tough housing market. Homebuilders are beginning to file for bankruptcy across the country. Last month, East Brunswick, N.J.-based Kara Homes Inc. and Bella Vista, Ark.-based builder Betty Homes Inc. filed for Chapter 11 bankruptcy protection. Both builders sit on the opposite end of the housing market. Kara is known for large, upscale homes in the affluent New Jersey suburbs of New York and Philadelphia. On the other end, Betty is known for starter homes in Arkansas. Both fell into trouble as management failed to address the softening market for new homes. Without Karatz's guidance, KB could fall into a similar trap.
Another strain that could send KB into bankruptcy is litigation associated with the options scandal. The board's ouster of Karatz instantly made him and the company high-profile potential targets for federal prosecutors, legal experts told The Los Angeles Times. As the head of a business with $10 billion in annual sales, Karatz automatically would present a higher priority to government investigators than executives who ran smaller companies facing similar options scandals, several attorneys told the Times. There are about 150 companies facing similar options investigations. Legal experts say companies naturally would prefer not to dismiss executives because doing so can imply wrongdoing by the company and invite lawsuits from angry shareholders.—Matthew Wurtzel
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KB Homes told me when I purchased my home in Southern Fields subdivision in Clermont FL that they would not sell to investors in my neighborhood to protect my homes value. Even their contract states this you cannot purchase unless you intend to live in the home. Yet it turns KB Homes works with investors all around the country and sold dozens of homes in my neighborhood to investors that were known investors and had purchased numerous KB Homes all over Orlando, Las Vegas and all over the country. One investor bragged that he owned over 100 KB Homes accross the country. These investors know all the KB managers by name. It was not long before we had trashy renters destroying our community, crime and all kinds of trouble. As soon as the market started spiraling downward these investors walked leaving dozens of homes sitting vacant and uncared for. As soon as this happened KB homes began dumping houses like hotcakes way below what we paid for them just a few months earlier. In some subdivisions KB was dumping homes several hundred thousand below what they sold for only a year earlier. KB Homes is nothing but a gang of crooks that lie, cheat and steal from hard working honest customers leaving with no equity, unsafe neighborhoods and turned our dream of home ownership into a freaking nightmare. I pray to God KB Homes goes belly up and the criminals running the company are put where they belong, Behind Bars. What I would realy like to know is why even though we have made numerous agencies aware of the situation including our congressman and state attorney general, why isnt anyone listenning, why isnt anything being done? Why do our lawmakers sit back and do absolutely nothing to help us?