The chief executive officer of Atlanta-based homebuilder Beazer Homes will pay back $6.5 million in bonus pay and stock profits to settle a Securities and Exchange Commission complaint brought against him under the clawback provision of Sarbanes-Oxley.

According to the SEC complaint, Beazer CEO Ian McCarthy failed to reimburse the company for cash bonuses, incentive and equity-based compensation and profits from Beazer stock sales that he received in the 12 months after the company filed fraudulent financial statements. Beazer restated its financials for the fiscal year ended Sept. 30, 2006, and the first three quarters of fiscal 2006 due to a fraudulent earnings management scheme to inflate income and earnings.

Under Section 304 of SOX, McCarthy is required to reimburse the company for incentive-based compensation and stock sale profits received during that period, even though he wasn't personally charged for the misconduct. The settlement is subject to court approval. Without admitting or denying the SEC's allegations, McCarthy agreed to reimburse Beazer roughly $6.5 million in cash, and the equivalent of more than 40,000 restricted stock units or equivalent and nearly 79,000 shares of restricted stock.

The action provides “an important incentive for senior executives to be vigilant in preventing misconduct and ensuring that companies comply with financial reporting requirements,” Robert Khuzami, SEC enforcement director, said in a statement.

The SEC brought previous enforcement actions against the company and the former chief accounting officer it alleges perpetrated the fraud. Beazer settled an SEC enforcement action in September 2008, and the SEC charged its former chief accounting officer, Michael Rand, in July 2009. The litigation against Rand is ongoing.

The settlement is the latest by the SEC to invoke SOX Section 304 against an executive who wasn't charged in the fraud prompting the clawback. The first such action came in July 2009, when the SEC sued Maynard Jenkins, the former CEO of CSK Auto Corp. That case is still in court. In June 2010, the former CEO of Diebold Inc., Walden O'Dell, agreed to pay back cash bonuses, stock, and stock options to settle a 304 action after the company restated its financials for fiscal 2003 due to accounting fraud. In August 2010, Navistar International's CEO and former CFO agreed to return more than $2.3 million in bonuses paid to them based on overstated earnings to satisfy the forfeiture provision of Section 304.

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