Federal Charges Include Conspiracy, Obstruction, and Witness Tampering
CHARLOTTE, NC—Michael T. Rand, 48, of Alpharetta, Georgia, and former Chief Accounting Officer for Beazer Homes USA, Inc. (hereafter, “Beazer”), has been charged in a 11-count federal bill of indictment with conspiracy, securities fraud, obstruction, witness tampering, false statements to a financial institution, misleading conduct, and destruction of records. Rand appeared today before a U.S. Magistrate Judge in U.S. District Court in Asheville and was ordered detained pending a detention hearing. The charges arise from an ongoing government investigation involving Beazer and its employees. In July 2009, a federal bill of information was filed in U.S. District Court charging Beazer with, among other things, participation in the conspiracy and securities fraud with Rand. Beazer accepted responsibility for those charges and, in a deferred prosecution agreement, agreed to pay restitution over time up to $50,000,000.
First Assistant U.S. Attorney David A. Brown of the Western District of North Carolina, and Owen D. Harris, Special Agent in Charge of the FBI in North Carolina, announced today that the bill of indictment charging Rand was filed under seal on August 18, 2010, and unsealed today in open court.
According to the indictment, Rand is alleged to have directed an accounting fraud conspiracy to manipulate Beazer’s books and records, to deceive Beazer’s auditors, and to achieve earnings targets, and to boost or lower earnings at Beazer. The conspiracy is alleged to have gone on from at least in or about 2000 through in or about 2007.
The indictment alleges that Rand and others executed the conspiracy in two main ways: First, between 2005 and 2006, it is alleged, Rand entered into a hidden oral side agreement with another company through one of its employees, which was designed to allow Beazer to obtain cash and recognize revenue from purported “sales” of model homes. This activity was, according to the allegations, in direct contravention of the accounting rules as interpreted by Beazer’s auditors, and, as alleged, was hidden from Beazer’s auditors. Second,between 2000 and 2007, the indictment further alleges, Rand directed and agreed with others to engage in a scheme to commit securities fraud and create false books and records at Beazer by practicing a form of what is commonly known as “cookie jar accounting,” which allowed Rand and others to manipulate Beazer’s publicly reported financial statements.
The indictment alleges in count one that Rand conspired with Beazer, Employee #1, Company #1, and others, to commit securities fraud, to make misleading statements to Beazer’s auditors and accountants, to circumvent Beazer’s internal accounting controls, and to falsify books, records, and accounts of Beazer. Count two of the indictment alleges mail/wire fraud conspiracy in relation to the accounting fraud. Count three alleges securities fraud in that the defendant, in carrying out the conspiracy, operated a fraud upon Beazer investors and others in connection with the sale of Beazer’s common stock.
Counts four and five of the indictment allege that Rand made false statements and reports to Wachovia Bank. Count four refers specifically to a loan in excess of $35 million by Wachovia for use by Beazer in the “West Morehead Project” in Charlotte. The indictment alleges that in March 2009, Beazer was unable to complete the “West Morehead Project” and defaulted on the loan, resulting in loss to Wachovia of over $5 million. Count five refers specifically to a several hundred million dollar line of credit from a syndicate of lenders, including Wachovia, in which Wachovia relied upon and reviewed Beazer’s financial statements, which Rand and others, allegedly fraudulently manipulated.
Count six alleges that Rand obstructed justice in that he corruptly altered, destroyed, and concealed records, intending to impair their availability for the use of a federal grand jury. Count seven charges destruction of records, alleging that Rand altered, destroyed and covered up records and documents with the intent to impede the criminal investigation. Counts eight and nine allege that on two separate occasions Rand knowingly and corruptly engaged in misleading conduct toward another person with the intent to hinder, delay, or prevent communication of information to the FBI in the course of the criminal investigation.
Count ten alleges witness tampering, and count eleven alleges obstruction of an official proceeding, to wit, the proceeding of the federal grand jury.
Rand faces maximum statutory penalties, if convicted, as follows:
- Count One: Five years and a $250,000 fine
- Count Two: 20 years and a $250,000 fine
- Count Three: 20 years and a $250,000 fine
- Counts Four and Five: 30 years and $1,000,000 fine
- Count Six: 20 years and a $250,000 fine
- Count Seven: 20 years and a $250,000 fine
- Counts Eight and Nine: 20 years and a $250,000 fine
- Count Ten: 20 years and a $250,000 fine
- Count Eleven: 20 years and a $250,000 fine.
It is important to note that any sentence received upon conviction will be influenced by the Federal Sentencing Guidelines, which the Court consults in order to determine a defendant’s actual sentence. Sentences are based upon a formula that takes into account the severity and characteristics of the offense and each defendant’s criminal history, if any.
The charges contained in the indictment are only allegations. In the American justice system, a person is presumed innocent unless and until he or she is proven guilty in a court of law.
First Assistant U.S. Attorney Brown credits the FBI with leading the investigation that resulted in the filing of these charges. The Government is represented in this matter by Assistant U.S. Attorney Kurt Meyers of the U.S. Attorney’s Criminal Division in Charlotte.