NYT’s Norris Lets Beazer and Justice Have It

Floyd Norris has a tough column this morning on Beazer Homes and the government letting it off the hook for its crimes with what’s effectively a slap on the wrist.

Here’s the excellent lede, which, uh, doesn’t exactly beat around the bush:

For years, Beazer Homes USA was much more than a builder of houses. It was a veritable crime wave.

The company defrauded buyers, particularly poor people being sold homes they could not afford. It defrauded the federal government by getting government-guaranteed mortgages for those buyers. It created subdivisions now dominated by dozens of foreclosed homes.

And while it was at it, Beazer lied to shareholders about how much money it was making. First, it lied by claiming it was making less than it was. Then it lied by hiding losses when the housing bubble began to burst. To keep the lies going, the government says, the company prepared fraudulent documents to mislead its auditors.

For all that Beazer has to pay $15 million to make its problems go away. And CEO Ian McCarthy and the board, in charge when all the nastiness was being perpetrated? They get to stay. McCarthy just has to forfeit a $600,000 bonus he got last year as his company lost a billion dollars. Oh, and the reason for (at least part of) the bonus:

his efforts in “communicating the importance of compliance by employees.”

Heckuva job!

Norris does well to point out that the Beazer thuggery might have gone uncaught if it weren’t for the Charlotte Observer, which in 2007 performed some of the best financial journalism in recent years with its series “Sold a Nightmare.”

Norris finds a link to part one of the four-part series (which has tons of sidebars), but the rest of the URLs are broken. I asked the Observer several weeks ago to republish “Sold a Nightmare” online as a public service, and was told the paper is updating its website. (UPDATE: The Observer now has the series up, along with its other excellent work on housing. See “Sold a Nightmare” here, here, here, and here.

In reporting that the Justice Department feared tipping Beazer into bankruptcy, Norris writes that “The determination of who was responsible evidently is largely based on the company’s own investigation, which was shared with the government but not made public.” Which is somewhat problematic, don’t you think? Why hasn’t the government investigated Beazer?

And Norris is smart to point out the message this sends to corporate chieftains everywhere—which just reinforces what they already know:

If a boss can preserve his deniability about crimes committed by his company — perhaps by showing little curiosity about just how the profits are being earned when he is taking in millions from cashing in stock options — then he can escape being held accountable if the crimes are eventually uncovered.

Great column-writing.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.