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Ex-KB Home CEO facing prison

Option backdating created $70M in liabilities

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The former CEO and chairman of the board of KB Home, Bruce E. Karatz, is facing a prison term after being convicted of four felony county related to a stock-option backdating scheme, prosecutors said.Karatz, 64, of Bel Air Estates, Calif., was accused of attempting to cover up the backdating of his own and other executives' stock options for seven years. The 2006 cover-up included failures to disclose the stock-option backdating in filings with the U.S. Securities and Exchange Commission and to KB's outside auditors, prosecutors said.After KB Home discovered irregularities in its reporting, the company was unable to file a quarterly report with regulators as scheduled in October 2006. KB Home filed the report and the company's 2006 annual report in February 2007. The reports recognized more than $36 million in previously undisclosed stock-based compensation expenses, and a total increase of more than $70 million in accrued liabilities arising from adjustments required to address the ba...