Former Beazer executive sentenced to 10 years

A federal judge in Charlotte sentenced a former Beazer Homes USA executive to 10 years in prison on Thursday for his role in a long-running accounting scheme at the Atlanta-based homebuilder.

Michael Rand, the company’s former chief accounting officer, could have faced life in prison, but prosecutors recommended a sentence of no more than 15 years. Rand’s attorney asked for five years before U.S. District Court Judge Robert Conrad made his ruling after a daylong hearing.

“Illegality became the norm in this company,” Conrad said from the bench. “I’m convinced the defendant knew what he was doing was wrong.”

The sentencing was the latest in a legal drama that began with Rand’s indictment in 2007 and included two jury trials. The federal investigation into the company followed a series of Observer stories focusing on Beazer practices that broke federal lending laws and put hundreds of Charlotte-area residents into homes they couldn’t afford.

A federal jury in 2014 convicted Rand, 52, of securities fraud and other charges stemming from what prosecutors describe as a seven-year conspiracy. The government charged him with manipulating earnings reports to mislead investors and regulators, then lying about it to federal investigators and company auditors.

Rand, of Sandy Springs, Ga., was also accused of trying to block a federal probe into his company’s illegal home-mortgage practices that led to hundreds of Charlotte-area foreclosures.

At Thursday’s hearing, prosecutors and Rand’s attorney debated the severity of the accounting misstatements and the actual losses incurred by investors. Rand’s attorney, Brent Gurney, called the adjustments later made to the homebuilder’s financial statements as “de minimis,” while Assistant U.S. Attorney Kurt Meyers called Rand’s misconduct “pervasive” and “long-lasting.”

“There is a perception among many that the system is rigged,” Meyers said. “The defendant’s conduct enforces that.”

Before receiving his sentence, Rand spoke to the court, with more than a dozen supporters in the audience, including family members, friends and his rabbi. He broke down at points during his remarks, and family members cried and consoled each other on and off during the day.

Rand said his father was a magistrate judge and that he never expected to be in federal court awaiting sentencing. He described the last eight years of his life as “devastating.”

“I lost my career as an accountant,” he said. “I lost my family. I lost my home. I divorced my wife of 17 years.”

Rand said he took responsibility for his actions and asked Conrad “for nothing more than to be part of my kids’ future, kids I just adore.” His 14-year-old twins were not in attendance.

Two trials

Rand was indicted in 2010 and accused of illegally hiding company profits, concocting phony financial statements and destroying thousands of emails to block federal investigators. He was convicted a year later.

In 2013, Conrad ordered a new trial after learning that two of Rand’s jurors had Googled the term “reasonable doubt” during deliberations. One of the two also admitted reading news stories about the Rand case and how some local communities built by Beazer had been crippled by foreclosures.

During the federal mortgage-fraud probe, prosecutors say Rand deleted some 6,000 emails, many of them incriminating. Beazer fired him in 2007.

While the homebuilder amassed $389 million in profits in 2006, more than 13 percent of its Mecklenburg houses resulted in foreclosures, leaving behind wrecked families and ravished neighborhoods.

Despite the damage, Rand is one of only two Beazer figures who have faced charges. Janette Parker, the manager of Beazer's mortgage office in Charlotte, pleaded guilty to three counts of mortgage fraud in 2011.

The company and its two top leaders avoided prosecution by paying back almost $60 million to the government and affected homeowners.

On Thursday, Beazer, which named a new CEO in 2011, reported a quarterly loss of $2.1 million, which was an improvement over an $8.2 million loss a year earlier. The company’s shares are down nearly 10 percent this year and 63 percent since the beginning of 2007.

$135 million in losses

Thursday’s hearing began with dueling experts testifying about the actual losses investors incurred when Beazer’s stock dropped in 2007 on various days when the company disclosed investigations of its accounting practices and mortgage operations.

An expert for the defense said there were no discernible losses from Rand’s actions, while an expert for the government provided estimates that ran from $135 million to more than $1 billion, using various methodologies.

Conrad settled on $135 million, but said an estimate of $250 million produced by one of the expert’s models was “probably more accurate.”

As he listed factors that went into Rand’s sentence, Conrad said he believed executives above the former chief accounting officer in the chain of command were involved in manipulating earnings, but that Rand was an “organizer.”

At the end of the hearing, Assistant U.S. Attorney Maria Vento asked that Rand be taken into custody immediately because he could be a flight risk due to his long sentence. Gurney, Rand’s attorney, said his client should be allowed to report on his own and that he would not flee because he would never get a chance to see his kids again.

“That is persuasive,” Conrad said, allowing him to report when he is assigned to a prison.

Rand’s attorneys requested a prison location in Montgomery, Ala., although Gurney said after the hearing that he plans an appeal. Staff writer Michael Gordon contributed

This story was originally published April 30, 2015 at 4:14 PM with the headline "Former Beazer executive sentenced to 10 years."