KB Home scandal sheds light on sentencing standards

KB Homes corporate headquarters on Wilshire Blvd in Los Angeles, California.


JEREMY HOBSON: Sentencing is scheduled today in federal court in Los Angeles for the former CEO of KB Home. Bruce Karatz was convicted of fraud in a stock backdating scandal. The judge has to decide whether Karatz will go to prison, or just get house arrest.

And as Marketplace's Alisa Roth reports, the decision will shine a light on how white collar criminals are sentenced.

ALISA ROTH: The real question is how much money Karatz's scheme cost KB Home and its shareholders. Prosecutors say the answer is $11 million, which means they think he should go to prison for several years. But it's not clear how much his crime hurt anybody. So some people are recommending a much lighter sentence: probation and eight months of house arrest. Joshua Fershee is a law professor at the University of North Dakota.

JOSHUA FERSHEE: You didn't take the money from anybody and that's the real harm. And so the calculation should be zero.

He says this case actually represents a much bigger issue: whether sentencing guidelines are unfairly harsh to low-level criminals like drug dealers. And too light for white-collar criminals like Karatz.

Prosecutors in this case argue that house arrest for Karatz would amount to a two-tiered criminal justice system. Because under that scenario, he'd be confined to his 24-room mansion in Bel Air.

I'm Alisa Roth for Marketplace.

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Barings Bank (1762 to 1995) was the oldest merchant bank in London[1] until its collapse in 1995 after one of the bank's employees, Nick Leeson, lost £827 million ($1.3 billion) speculating—primarily—on futures contracts. Since no money was taken then the same methodology applies? Karatz has little construction skills. Karatz broke the 11th commandment thou shall not get caught. http://www.akbhomesucks.com

Time to sentence the head of KB Home/ to prison or on his Bel Air grounds roam/ Just a little back date no harm no foul?/ Blind justice should throw in the towell/ How about the sense of right and wrong/ Images of the rules to white collars do not belong/ 3-4 million in lost tax revenue/ Ethics sink and disregard grew/ Steal 10 grand its several years/ No wonder D.A sense a second tier/ To prison I say for this ethics breach/ Bonus of construction skills there he could teach. Alaskanpoet

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