Legal News

Beazer, Now an Admitted Tortfeasor, Settles Fraud Charges

By Ashby Jones

The latest from the world of law and bad mortgages: The Justice Department reported on Wednesday that in a deferred-prosecution agreement, Beazer Homes will pay up to $53 million to settle mortgage fraud charges related to federally insured mortgage loans the company made to buyers of its homes. Beazer — currently touting something called “Beazernomics” on its Web site — will pay $5 million to the federal government and up to $48 million to victimized homeowners.

The settlement is tied to an agreement with federal prosecutors in North Carolina that will allow the Atlanta-based Beazer to avoid criminal prosecution on the mortgage-fraud and other accounting-fraud charges related to the manipulation of company earnings. Click here for the WSJ story; here for the NYT story; here for part one of a series undertaken by the Charlotte Observer several years ago about Beazer’s mortgage practices.

In a separate action, the Securities and Exchange Commission filed civil charges Wednesday against Beazer’s former chief accounting officer, Michael Rand, accusing him of conducting a fraudulent earnings scheme and hiding his wrongdoing from outside auditors and other company accountants.

In the mortgage fraud case, prosecutors said Beazer ignored income requirements in making loans to unqualified buyers, and sought to hide from the Federal Housing Administration that some company branches had excessive default rates on their loans.

Prosecutors also said Beazer charged home buyers interest “discount points” at closing but kept the money and didn’t reduce interest rates on the loans. They added that the home builder provided buyers with cash gifts so they could come up with minimum down payments, only to add the gift price onto the purchase price of the house.

Beazer said in a statement that it has fully cooperated with governmental authorities since irregularities in its mortgage origination business and its financial reporting came to light.

“We deeply regret these matters and have used what we have learned to strengthen our control and compliance culture,” said Beazer Chief Executive Ian J. McCarthy.

Full post as published by Law Blog - WSJ.com on July 02, 2009 (boomark / email).