Beazer Homes Case

Investors were pinch to believe that the confederation fiscals were healthier than they actually were, as prove by the changes famed when the financial statements had to be echod. As a result of doing this, investors who were to a cut place the impression of a healthier position, act to invest in an organization that was fundamentally doing nonhing to a greater extent than stealing their m oney money which could devote been invested into a antithetical enterprise kind of than padding the pockets of executives that didnt illuminate it.As a result of having to restate financial statements, the per smelling at terms of Beazer Homes dropped from the $35/share price level in whitethorn, to approximately $11/share by the end of July. This is a authoritative passing game in wealthiness for investors. In do-gooder to the allegations against Mr. Rand for possible account statement fraud, allegations were also brought against Beazer Homes for owe fraud. To contend the interrogative as to which is a more salutary offense, it would be our credit that both would take aim an equal weight unit of seriousness.On the one hand, investors were misled, as tell above, and this led to a significant dismission of wealth for m each, particularly those individuals and/or institutions that may deplete held a large position. On the other hand, to address the issue of owe fraud, new homeowners were a great deal cheated out of money that they paid to Beazer Homes. A example of this is when Beazer Homes would exact purchasers to pay a fee for kindle discount points at closing. Then Beazer Homes would persevere the cash reliable and non lower the interest enumerate.This is just now one example, scarcely it can be an extremely expensive one when you look at how much(prenominal) a . 25 percentage or . 5 percent reduction in an interest rate can be over the intent of a 20 or 30 year dictated rate mortgage thats if Beazer Homes wasnt trying to pe rsuade people that an adjustable rate or hybrid mortgage would be wagerer for their situation. Additionally, Beazer Homes ignored income collectments when do loans to unqualified purchasers, which not only set up the purchaser in jeopardy of having the income compulsory to make their ayments, plainly in the solution of default or foreclosure, it can fix a significant impact on the home determine of the neighborhood. As a result of these judicial issues with Beazer Homes, the bit issued a note to the Beazer Homes chief operating officer called the well notice. The swell notice was created low the Sarbanes-Oxley Act of 2002, which states that if a firm has to restate their financial statements, the entropy can require the CEO and chief financial officer to return any and all bonuses that were standard during the period of restated financial statements.Additionally, the CEO and chief financial officer do not need to have any fellowship of errors. The SEC issued the Wel ls notice to the Beazer Homes CEO, Ian J. McCarthy, on 13 November 2009, indicating that the SEC would be brining a civil pillow slip against him to collect bonus compensation. In the notice issued to the CEO, there was no indication or allegations of cover-up, or misconduct, on the part of Mr. McCarthy with detect to the financial statements or other disclosures that were produce during the period in question.