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Former Beazer Homes Chief Accounting Officer Loses Stay of SEC Suspension
September 30, 2019
The SEC suspended a felon's ability to practice before it as a CPA, which was his chosen profession until he ran afoul of the law. He argues that he poses only a negligible risk to the public and should not be suspended by the federal regulator. It may well be that this convict will overturn his conviction, which is what he seems to be actively pursuing these days. Personally, I don't think he stands a chance, but, hey, if he's innocent, I wish him all the best with his appeals-- after all, I remember all too well the trials and tribulations of poor Andy Dufresne!
Beazer Homes Exec Rand
From 1996 until 2007, Michael T. Rand worked for Beazer Homes USA, Inc. ("Beazer") in various accounting positions, ultimately rising to the position of the company's Senior Vice President and Chief Accounting Officer. In 2007, Rand was terminated by Beazer; and, in 2009, his CPA license lapsed. And that's not the half of it!
2011 and 2014 Convictions
Starting in March 2007, the United States Department of Justice began investigating an alleged seven-year accounting fraud conspiracy involving Beazer and its employees. Charlotte Jury Finds Former Chief Accounting Officer For Beazer Homes USA, Inc. Guilty Of Accounting Fraud And Obstruction Of Justice In Second Trial (DOJ Release / July 18, 2014)
https://www.justice.gov/usao-wdnc/pr/charlotte-jury-finds-former-chief-accounting-officer-beazer-homes-usa-inc-guilty In July 2009, Beazer pled guilty to an Information charging the firm, in part, with 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 of $50 million.
Rand was indicted by a federal grand jury in August 2010; and, in October 2011, he was found guilty; however, that verdict was vacated due to jury misconduct. Following a two-week retrial, a jury found Rand guilty of conspiracy to commit securities fraud, to make false and misleading statements to auditors and accountants, to circumvent Beazer's internal accounting controls, and to falsify the books, records, and accounts of Beazer. Rand was also convicted of engaging in a wire fraud conspiracy. Also, the jury convicted Rand of obstruction of justice in relation to a federal grand jury investigation after it was determined that he had deleted nearly 6,000 emails. Finally, the jury convicted Rand of lying to hinder an investigation conducted by the Charlotte FBI and the U.S. Attorney's Office in the Western District of North Carolina, by making numerous false statements to investigators on behalf of the Audit Committee of Beazer's Board of Directors -- and after Rand learned that such false statements would be reported to the FBI and U.S. Attorney, he then directed an accounting fraud conspiracy to falsify reported profits at Beazer by lying to Beazer's auditors, fraudulently achieving earnings targets, falsifying Beazer's books and records, and deceiving the public by boosting and lowering earnings at Beazer. As alleged in part in the 2014 DOJ Release:
According to evidence presented at Rand's second trial, Rand executed the conspiracy in two main ways: Between 2005 and 2006, 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 to improperly report revenue from purported "sales" of model homes. This activity was in direct contravention of the accounting rules and hidden from Beazer's auditors. Between 2000 and 2007, Rand directed a scheme to commit securities fraud and create false books and records at Beazer by practicing "cookie jar accounting," which allowed Rand and others to falsely report profits in Beazer's publicly reported financial statements.
2015 Sentencing
On April 30, 2015, Rand was sentenced to 120 months in prison plus three years of supervised release. Federal Judge Hands Down 10-Year Sentence To Former Chief Accounting Officer For Beazer Homes USA, Inc. / Defendant was Convicted of Accounting Fraud and Obstruction of Justice in Second Trial (DOJ Release / April 30, 2015)
https://www.justice.gov/usao-wdnc/pr/federal-judge-hands-down-10-year-sentence-former-chief-accounting-officer-beazer-homes
2019 SEC Suspension
Pursuant to its finding that Rand had been convicted of a felony, the SEC suspended him from appearing or practicing before the federal regulator pursuant to the SEC's Rule of Practice 102(e)(2). In the Matter of Michael T. Rand, CPA (SEC Order of Suspension Pursuant to Rule 102(e)(2) of the Commission's Rules of Practice; '34 Act Rel. No. 86028; Acct. and Aud. Enf. Rel. No. 4048; Admin. Proc. File No. 3-19191 / June 4, 2019)
SIDE BAR: SEC Rule of Practice 102. Appearance and Practice Before the Commission.. . .(e) Suspension and Disbarment.. . .(2) Certain Professionals and Convicted Persons. Any attorney who has been suspended or disbarred by a court of the United States or of any State; or any person whose license to practice as an accountant, engineer, or other professional or expert has been revoked or suspended in any State; or any person who has been convicted of a felony or a misdemeanor involving moral turpitude shall be forthwith suspended from appearing or practicing before the Commission. A disbarment, suspension, revocation or conviction within the meaning of this rule shall be deemed to have occurred when the disbarring, suspending, revoking or convicting agency or tribunal enters its judgment or order, including a judgment or order on a plea of nolo contendere, regardless of whether an appeal of such judgment or order is pending or could be taken. . . .
Rand's Motion to Stay Suspension
In response to the SEC's Order of suspension,Rand sought a stay. In the Matter of Michael T. Rand, CPA (SEC Order Denying Stay, '34 Act Rel. No. 87139; Admin. Proc. File No. 3-19191 / September 27, 2019) https://www.sec.gov/litigation/opinions/2019/34-87139.pdf In his application to the SEC for a stay, Rand argued that such relief is appropriate because he:
- is collaterally attacking his criminal conviction, and
- poses "negligible" risks given his current incarceration.
In denying Rand's motion for a stay, the SEC offers this rationale {Ed: footnotes omitted]:
Bill Singer's CommentRule 102(e)(2) does not provide for a stay of a forthwith suspension. Rather, Rule 102(e)(5)(ii) provides that a person suspended pursuant to Rule 102(e)(2) may apply for reinstatement after "all the grounds for application of [Rule 102(e)(2)] are subsequently removed by a reversal of the conviction." Rule 102(e)(5)(ii) also provides that an "application for reinstatement on any other ground . . . may be filed at any time and the applicant shall be accorded an opportunity for a hearing in the matter." Rand, however, has not filed an application for reinstatement. Indeed, he argues that he will "apply for reinstatement once all the grounds are ‘removed' by a reversal of the criminal conviction." Rand seeks a stay of his suspension pending his collateral attack on the conviction, but the pendency of a challenge to a conviction is grounds for neither reinstatement nor a stay. If Rand's conviction is overturned, he can apply for reinstatement on that basis. The Commission's rules do not authorize a stay.
Some folks just never quite get it. Rand was convicted not once but twice (albeit the first conviction was thrown out for juror misconduct); and, accordingly, Rand is a felon. If his collateral attacks on his conviction prevail, then his felon status may change; however, that's a big "if" and remains to be seen. Still -- ya gotta admire this guy's chutzpah when it comes to dismissively characterizing his felony conviction and federal incarceration as evidencing a "negligible" risk to the investing public. Negligible? Rand's conviction included findings that he lied to the FBI and U.S. Attorney in order to hinder their investigations, and, making matters worse, he then directed an accounting fraud to deceive federal investigators, Beazer shareholders, and the investing public. That's hardly negligible. Frankly, I'm not sure that the confines of a prison cell will present all that much deterrent to such a clever fellow. Thankfully, the SEC is on top of this matter.