Charlotte Jury Finds Former Chief Accounting Officer For Beazer Homes USA, Inc. Guilty Of Accounting Fraud And Obstruction Of Justice In Second Trial
United States Attorney Anne M. Tompkins Western District Of North Carolina
CHARLOTTE, N.C. – A federal jury sitting in Charlotte has convicted the former Chief Accounting Officer for Beazer Homes USA, Inc. (“Beazer”) of conspiracy and obstruction of justice charges stemming from a federal investigation into a seven-year accounting fraud conspiracy at Beazer. The jury returned the guilty verdict today against Michael T. Rand, 52, of Alpharetta, Ga., following a two-week trial. This was the second trial for the defendant, who was previously found guilty in October 2011. That verdict was later vacated due to juror misconduct and the Honorable Robert J. Conrad, Jr. ordered a re-trial.
The charges arise from a government investigation involving Beazer and its employees that began in March 2007. In July 2009, a federal bill of information was filed in U.S. District Court charging Beazer with, among other things, participation in the conspiracy and securities fraud with Rand. Beazer accepted responsibility for those charges and, in a deferred prosecution agreement, agreed to pay restitution of $50 million. Rand was indicted by a federal grand jury in August 2010.
“The U.S. Attorney’s Office is committed to safeguarding the integrity of our financial markets from corporate executives like Rand, who put profits ahead of duty. Rand’s actions breached his obligation to the investors and the public and jeopardized the stability of the housing industry. Today’s verdict is a warning and a reminder that our office will continue to pursue corporate corruption to protect our economy,” said First Assistant U.S. Attorney Jill W. Rose, in making today’s announcement.
“The FBI makes it a high priority to protect shareholders and help to uphold the integrity of our financial markets. Today’s verdict should send a clear message that corporate fraud, in this case cooking the books, will not be tolerated and you engage in such frauds at the risk of your freedom,” stated John A. Strong, Special Agent in Charge for the Charlotte Division of the FBI.
The federal jury convicted Rand of five counts related to his conduct while serving as Beazer’s Chief Accounting Officer. Specifically, Rand was convicted of directing an accounting fraud conspiracy to falsify reported profits at Beazer by lying to Beazer’s auditors, fraudulently achieving earnings targets, falsifying Beazer’s books and records, and deceiving the public by boosting and lowering earnings at Beazer. According to evidence presented at Rand’s second trial, Rand executed the conspiracy in two main ways: Between 2005 and 2006, Rand entered into a hidden oral side agreement with another company through one of its employees, which was designed to allow Beazer to obtain cash and to improperly report revenue from purported “sales” of model homes. This activity was in direct contravention of the accounting rules and hidden from Beazer’s auditors. Between 2000 and 2007, Rand directed a scheme to commit securities fraud and create false books and records at Beazer by practicing “cookie jar accounting,” which allowed Rand and others to falsely report profits in Beazer’s publicly reported financial statements.
Rand was convicted of conspiracy to commit securities fraud, to make false and misleading statements to auditors and accountants, to circumvent Beazer’s internal accounting controls, and to falsify the books, records, and accounts of Beazer. Rand was also convicted of engaging in a wire fraud conspiracy.
The jury also convicted Rand of obstruction of justice in relation to a federal grand jury investigation. Trial evidence showed that after being notified of the federal grand jury’s investigation of Beazer in March 2007, Rand deleted nearly 6,000 emails, obstructing the grand jury investigation then focused on the separate investigation into mortgage fraud at Beazer.
Finally, the jury convicted Rand of lying to hinder an investigation conducted by the Charlotte FBI and the U.S. Attorney’s Office in the Western District of North Carolina, by making numerous false statements to investigators on behalf of the Audit Committee of Beazer’s Board of Directors, after learning that such false statements would be reported to the FBI and the U.S. Attorney’s Office.
The securities fraud conspiracy charge carries a maximum sentence of five years in prison and a $250,000 fine. Wire fraud conspiracy carries a maximum sentence of 20 years in prison and a $250,000 fine. The obstruction of justice charge carries a penalty of 20 years in prison and a $250,000 fine. The charge of misleading conduct to hinder an investigation carries a maximum prison term of 20 years and a $250,000 fine, and the obstruction of official proceedings charge carries a maximum prison term of 20 years and a $250,000 fine. Rand’s actual sentence will be determined by the U.S. District Court at sentencing. Rand has been released on bond until his sentencing hearing, which has not been set yet.
The U.S. Attorney’s Office credited the FBI for conducting an investigation which resulted in today’s conviction. Assistant U.S. Attorneys Kurt W. Meyers and Maria K. Vento of the U.S. Attorney’s Office in Charlotte prosecuted the case.