Federal prosecutors aren't buying former KB Home CEO Bruce Karatz's claim that he didn't defraud shareholders during the backdating scandal that rocked the company.
Karatz, in a motion filed for a new trial, says he was relying in good faith on advice from KB's General Counsel Ben Hirst, who advised him to conceal the backdating practices. The feds say no way, since Karatz lied to both KB lawyers and independent auditors about the concealment. Instead, "the record readily establishes that [Karatz] used Hirst to perpetrate a fraud," according to papers filed by the prosecution.
Karatz's attorney, John Keker of San Francisco's Keker & Van Nest, claims that his client was "erroneously denied" a jury instruction that state Karatz could not have committed fraud in concealing KB's backdating practices if he was relying on an attorney's advice. The prosecutors claim such an instruction would have no bearing on the verdict, since Karatz lied during subsequent investigations, removing any good faith arguments.
The National Law Journal has more on the story.