The United States Attorney's Office

FORMER HEAD OF HUMAN RESOURCES AT KB HOME AGREES TO PLEAD GUILTY TO CONSPIRACY TO OBSTRUCT JUSTICE IN CONNECTION WITH INTERNAL INVESTIGATION OF BACKDATING OF STOCK OPTIONS

A former Vice-President and head of Human Resources at KB Home (“KB”) has agreed to plead guilty to a conspiracy in 2006 to obstruct justice in connection with an internal investigation into stock option backdating at KB.

In a plea agreement and one-count information filed today in United States District Court in Los Angeles, Gary A. Ray, 50, of Pacific Palisades, agreed to plead guilty to conspiring with the CEO of KB in spring 2006 to impede and obstruct a contemplated investigation by the Securities and Exchange Commission (“SEC”) into stock option backdating at KB.  Ray has admitted that he and the CEO agreed that they would collaborate in causing KB’s general counsel to prepare and to submit a false and misleading report on KB’s historical option granting practices to KB’s Audit Committee and other KB managers, who relied on the false report in making disclosure decisions with respect to required SEC filings.

Pursuant to the terms of the plea agreement signed by Ray and filed today, Ray is subject to a statutory maximum sentence of five years of imprisonment.

Ray has also agreed to cooperate with the government in its continuing investigation of stock option backdating at KB. 

“Corporate officers have an obligation to truthfully report the operations and financial activities of the companies that they serve, particularly in the area of executive compensation,” said United States Attorney Thomas P. O’Brien.   “Efforts to corrupt compliance with these reporting obligations and to obstruct the oversight function of the Securities and Exchange Commission will be aggressively investigated and prosecuted by this Office.”      

This case was investigated by the Federal Bureau of Investigation.

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Release No. 08-154
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