Beazer Homes USA, under federal investigation for its loan origination practices, has fired its chief accounting officer for attempting to destroy documents.
Michael T. Rand was terminated by the company's board of directors for cause after Beazer's independent legal counsel, hired to investigate allegations of fraud in the company's mortgage business, told them he had found out about Rand's actions during his investigation, according to a document filed with the Securities and Exchange Commission.
The company's mortgage arm, which originates but does not underwrite loans, has been under investigation by the SEC, the U.S. Department of Housing and Urban Development and the FBI since March, when The Charlotte Observer published a series about unusually high foreclosure rates among buyers of Beazer homes in local subdivisions. The series asserted the foreclosures were sparked by Beazer's aggressive sales tactics and alleged inflated income numbers were put on loan applications to arrange larger loans than customers could afford.
At the end of March, Beazer said it had received a grand jury subpoena for documents related to its mortgage business from the U.S. Attorney's Office, western district of North Carolina. In April, it hired the independent counsel and an independent financial consultant to investigate internally.
In May the SEC announced it was informally investigating whether anybody related to Beazer Homes had violated federal securities laws.
In late April, beneficiaries of the company's 401K plan filed a class action lawsuit alleging the company breached its fiduciary duties by not providing timely, accurate and complete information about its operations. The company has denied any wrongdoing in both cases and has agreed to cooperate fully with any investigation and to defend itself against the allegations.
Rand, 44, went to work for Beazer in November of 1996 as vice president, operational controls. He was promoted to corporate controller in 1998 and senior vice president and corporate controller in October of 2002. Before Beazer, Rand was with KPMG Peat Marwick since 1984. His salary in 2006, according to company documents, was $670,455, including bonuses.
Rand is the second senior executive fired this year by Beazer and the third to leave the company. General counsel Kenneth Gary was fired in February for "personal conduct" that violated company policies. In March, chief financial officer James O'Leary left to become CEO of Kaydon Corp.
A company spokesperson declined to comment beyond what was stated in the 8K filing with the SEC.
J.P. Morgan building industry analyst Michael Rehaut said in a research note that he found the attempts to destroy documents "troubling." He contined, "Aside from whether Rand succeeded in destroying any documents, as we note the company described his actions as 'attempts,' this raises red flags regarding the content of the documents in question, in our view. "
Beazer stock (NYSE BZH) closed down 9.57% to $25.81 per share in Thursday trading.