Beazer hit with suit seeking class action
The suit names as defendants certain company officers and directors, alleging that between July 27, 2006 and March 27, 2007, the defendants "issued false and misleading statements" about the company's business and prospects and failed to disclose to the investing public several "adverse facts." First, the suit alleges Atlanta-based Beazer (NYSE: BZH) did not have required internal controls over its lending practices and that because of alleged improper lending practices prior to and during the class period, it lead to foreclosures and other problems.

Beazer hit with suit seeking class action

Atlanta Business Chronicle - Thursday, March 29, 2007

A suit seeking class action against Beazer Homes USA Inc. was filed Thursday in federal court in Atlanta, alleging the homebuilder issued false and misleading statements and did not disclose certain information.

The suit names as defendants certain company officers and directors, alleging that between July 27, 2006 and March 27, 2007, the defendants "issued false and misleading statements" about the company's business and prospects and failed to disclose to the investing public several "adverse facts."

First, the suit alleges Atlanta-based Beazer (NYSE: BZH) did not have required internal controls over its lending practices and that because of alleged improper lending practices prior to and during the class period, it lead to foreclosures and other problems.

The suit also claims Beazer's business was growing mostly due to alleged improper lending practices to low-income borrowers and that many of the company's buyers would not be able to pay their loans after the first two years, causing decreased sales and earnings and many foreclosures.

Further, the suit claims that given increased volatility in the lending market, Beazer had "no reasonable basis" to make projections about its 2007 results. And as a result of defendants' alleged false statements, Beazer stock traded at artificially inflated prices during the class period, reaching a high of $48 a share in December 2006, the suit says. The company's CEO and CFO were able to sell more $9.7 million worth of their Beazer stock, the suit noted.

On March 18, The Charlotte [N.C.] Observer reported federal housing officials were reviewing whether Beazer complied with federal rules in arranging government-insured loans for buyers in its subdivisions. On March 21, Beazer announced the resignation of its CFO.

Then, on March 27, after the market closed, Beazer issued a press release responding to media reports and inquiries into the possibility of a federal investigation of the company in connection with alleged mortgage fraud. On this news, Beazer's stock fell $2.64 a share to close at $28.77 a share on March 28, a one-day decline of 9 percent and a 40 percent decline from its class period high of $48 per share.

Earlier on March 29, Beazer got a grand jury subpoena from the U.S. Attorney's Office in the Western District of North Carolina seeking documents related to the homebuilder's mortgage origination services.
http://sanantonio.bizjournals.com/atlanta/stories/2007/03/26/daily34.html