Beazer Homes’ Former Chief Accounting Officer Is Indicted

Michael T. Rand, the former Chief Accounting Officer for Beazer Homes USA, Inc., has been charged in an 11 count federal bill of indictment with conspiracy, securities fraud, obstruction, witness tampering, false statements to a financial institution, misleading conduct, and destruction of records. The charges arise from an ongoing government investigation involving Beazer and its employees. 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 over time up to $50,000,000. 

According to the indictment, Rand is alleged to have directed an accounting fraud conspiracy to manipulate Beazer’s books and records, to deceive Beazer’s auditors, and to achieve earnings targets, and to boost or lower earnings at Beazer. The conspiracy is alleged to have gone on from at least in or about 2000 through in or about 2007.
 
The indictment alleges that Rand and others executed the conspiracy in two main ways: First, between 2005 and 2006, the government alleged, 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 recognize revenue from purported “sales” of model homes. This activity was, according to the allegations, in direct contravention of the accounting rules as interpreted by Beazer’s auditors, and, as alleged, was hidden from Beazer’s auditors. Second, between 2000 and 2007, the indictment further alleges, Rand directed and agreed with others to engage in a scheme to commit securities fraud and create false books and records at Beazer by practicing a form of what is commonly known as “cookie jar accounting,” which allowed Rand and others to manipulate Beazer’s publicly reported financial statements.
 
The indictment alleges in count one that Rand conspired with Beazer, Employee #1, Company #1, and others, to commit securities fraud, to make misleading statements to Beazer’s auditors and accountants, to circumvent Beazer’s internal accounting controls, and to falsify books, records, and accounts of Beazer. Count two of the indictment alleges mail/wire fraud conspiracy in relation to the accounting fraud. Count three alleges securities fraud in that the defendant, in carrying out the conspiracy, operated a fraud upon Beazer investors and others in connection with the sale of Beazer’s common stock.
 
Counts four and five of the indictment allege that Rand made false statements and reports to Wachovia Bank. Count four refers specifically to a loan in excess of $35 million by Wachovia for use by Beazer in the “West Morehead Project” in Charlotte. The indictment alleges that in March 2009, Beazer was unable to complete the “West Morehead Project” and defaulted on the loan, resulting in loss to Wachovia of over $5 million. Count five refers specifically to a several hundred million dollar line of credit from a syndicate of lenders, including Wachovia, in which Wachovia relied upon and reviewed Beazer’s financial statements, which Rand and others, allegedly fraudulently manipulated.
 
Count six alleges that Rand obstructed justice in that he corruptly altered, destroyed, and concealed records, intending to impair their availability for the use of a federal grand jury. Count seven charges destruction of records, alleging that Rand altered, destroyed and covered up records and documents with the intent to impede the criminal investigation. Counts eight and nine allege that on two separate occasions Rand knowingly and corruptly engaged in misleading conduct toward another person with the intent to hinder, delay, or prevent communication of information to the FBI in the course of the criminal investigation.
 
Count ten alleges witness tampering, and count eleven alleges obstruction of an official proceeding: the proceeding of the federal grand jury.