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Business Week: Beazer Stock Plunges
Wednesday, 28 March 2007

Beazer Homes shares plunge 17 percent
Shares of Beazer Homes USA Inc. fell more than 17 percent in after-hours trading after the FBI said it is among agencies investigating possible fraud in the company's mortgage lending practices and other financial transactions. The Atlanta-based company, which has suffered hefty losses amid a downturn in the housing market, is the subject of an investigation by the FBI and the U.S. attorney's office in Charlotte, N.C., along with the Internal Revenue Service and the U.S. Department of Housing and Urban Development, FBI agent Ken Lucas said Tuesday.

Beazer Homes shares plunge 17 percent
Atlanta

Shares of Beazer Homes USA Inc. fell more than 17 percent in after-hours trading after the FBI said it is among agencies investigating possible fraud in the company's mortgage lending practices and other financial transactions.

The Atlanta-based company, which has suffered hefty losses amid a downturn in the housing market, is the subject of an investigation by the FBI and the U.S. attorney's office in Charlotte, N.C., along with the Internal Revenue Service and the U.S. Department of Housing and Urban Development, FBI agent Ken Lucas said Tuesday.

Beazer shares dropped $5.38 to $26.03 in electronic trading after closing down 91 cents, or 2.8 percent, at $31.41 on the New York Stock Exchange.

Lucas, a spokesman for the FBI's Charlotte field office, said the inquiry began last week and involves "fraud in general" and more specifically is related to corporate, mortgage and investment issues.

Lucas declined to release more details about the investigation. He also would not say what prompted the inquiry.

In a written statement, Beazer said it "can not comment on or verify any investigation. However, we will fully cooperate with any investigation by any government agency."

"Beazer Homes has a long established commitment to managing and conducting business in an honest, ethical and lawful manner," the statement said.

The Charlotte Observer reported last week that the company had an unusually high rate of foreclosures in many developments around North Carolina's largest city. The paper reported that of the 2,900 Beazer homes built in Mecklenburg County between 1997 and 2006, at least 388 have foreclosed -- a rate above 13 percent.

Nationally, fewer than 3 percent of buyers lose homes to foreclosure, the paper said. In its series, The Observer documented four examples where the income and debts of borrowers were misstated on their applications for government-insured loans.

The news comes amid woes in the homebuilding sector and a recent meltdown in the subprime mortgage sector that has seen several lenders seek bankruptcy protection. Subprime lenders loan money to people with poor credit, and they have faced surging default rates as interest rates have risen while homes have been losing value in a softening market.

Weak demand for new homes, sales at steep discounts and the need for inventory writedowns have taken a toll on the company's results. Losses for the first quarter ended Dec. 31 totaled $59 million, compared with a profit of $89.9 million in the same period a year earlier, while revenue slid to $806.4 million from $1.1 billion in the year-ago period.

Last week, Beazer said that its chief financial officer, James O'Leary, was stepping down after four years with the homebuilder to become president and chief executive of Kaydon Corp.

http://www.businessweek.com/ap/financialnews/D8O4V1H00.htm?chan=search

 
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Reckless Endangerment
BY: GRETCHEN MORGENSON
and JOSHUA ROSNER

Outsized Ambition, Greed and
Corruption Led to
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