Beazer exec found guilty in retrial
07/18/2014 1:22 PM
07/18/2014 1:52 PM
Given a second trial in Charlotte, former Beazer executive Michael Rand heard the same verdict: guilty.
A federal court jury Friday convicted Rand of securities fraud and other charges stemming from what prosecutors describe as a seven-year accounting conspiracy at the Atlanta-based construction giant.
Rand was charged with manipulating earning reports to mislead investors and regulators, then lying about it to federal investigators and company auditors.
He also was accused of trying to block a federal probe into his company’s illegal home-mortgage practices that led to hundreds of Charlotte-area foreclosures.
Rand, 52, and Beazer’s former chief accounting officer, faces a maximum penalty of 85 years in prison and a $1.25 million fine. Sentencing will occur at a later date.
“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,” First Assistant U.S. Attorney Jill Rose said after the trial. “Today’s verdict is a warning and a reminder that our office will continue to pursue corporate corruption to protect our economy.”
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, U.S. District Judge Robert Conrad of Charlotte 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.
The federal investigation that led to Rand’s indictment began in 2007. It 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.
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.
During the federal mortgage-fraud probe, prosecutors say Rand deleted some 6,000 emails, many of them incriminating. Beazer fired him in 2007.
At the start of Rand’s second trial last week, Assistant U.S. Attorney Kurt Meyers told jurors that the Alpharetta, Ga., man lied to investors, the government and the company’s own auditors about his accounting practices.
In particular, Rand used a so-called cookie jar scheme to manipulate Beazer’s reported earnings, Meyers said.
When the company’s earnings exceeded market expectations, Rand lowered Beazer’s net income by fraudulently increasing certain expenses and setting the money aside. When profits fell, Rand jacked up the earnings report by raiding what was in the jar.
Rand’s lead attorney, Brent Gurney of Washington, D.C., argued that Rand had committed no crimes.
Instead, Rand followed the standard practice of building up the company’s reserves during boom times and using that money to bolster Beazer when profits fell, Gurney said. Rand increased Beazer’s reserves not to hide earnings but because the company’s financial safety net was inadequate, the attorney said.
“What kind of fraud scheme is that?” Gurney asked. “Only the government sees savings as a bad thing.”
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