Beazer Homes settles suit for $30.5 million

Beazer Homes USA has agreed to a $30.5 million settlement in a two-year-old lawsuit spawned by its financial troubles.

The suit, filed as a class-action in March 2007 by shareholder Eugene Kratz, alleged Beazer and its top executives artificially inflated the company’s stock price on sales generated by making loans to unqualified buyers.

Atlanta-based Beazer admits no wrongdoing in the settlement, which must be approved by a judge.

Beazer believes the settlement is “in the best interest of the company and its stakeholders, as it eliminates the uncertainties, distractions, burden and further expense associated with this litigation,” according to a news release.

The settlement money will be put into a fund for investors who purchased Beazer common stock between Jan. 27, 2005 and May 12, 2008.

Kratz claimed loans made to unqualified buyers fueled unsustainable profits and led to misleading projections for future company performance.

The lawsuit alleged stock prices, based on those performance projections, were artificially inflated. The suit also claimed that a drop in stock prices in late March 2007 followed the news of a probe into Beazer’s lending practices and damaged unsuspecting stockholders.

In addition to the company, the suit individually named Beazer Chief Executive Ian McCarthy; former Chief Financial Officer James O’Leary; former Chief Accounting Officer Michael T. Rand; and former General Counsel Kenneth J. Gary.

The officers failed to exercise proper internal controls over the mortgage program, the suit alleged, and created false financial statements for stockholders.

Gary was fired from Beazer in February 2007 for undisclosed violations of company policy. O’Leary resigned in March 2007 to become CEO of another company.

Rand was fired in June 2007 after the company said he was discovered attempting to shred documents amid an internal probe of Beazer’s mortgage lending practices.