Builder loses $11.7 million as result of trading scandal

Tuesday, Aug. 31, 1999 | 11:22 a.m.

Kaufman and Broad Home Corp., the largest homebuilder in Nevada, said today its earnings for the quarter ending today will be reduced an estimated $11.7 million, or 24 cents per share, because of what it called employee misconduct.

The 24-cent reduction compares to earnings by Kaufman and Broad of 68 cents per share in last year's third quarter.

The Los Angeles company made the announcement after it discovered unauthorized mortgage loan trading activity by an employee of its mortgage banking subsidiary, Kaufman and Broad Mortgage Co.

A spokeswoman said that instead of engaging in trades tied to actual Kaufman and Broad mortgages, the employee was engaging in trades speculating on changes in interest rates and in other unauthorized activity.

The spokeswoman said the employee, who has been terminated, did not receive any personal financial gain from the trading. She declined to talk about his motives.

"We are confident that we have identified and recognized the full extent of the loss and that we have taken appropriate steps to prevent future unauthorized trading activities," said Michael Henn, senior vice president and chief financial officer.

Despite the problem, Kaufman and Broad expects to report record third quarter and full-year earnings.

Kaufman and Broad last year purchased Lewis Homes of Upland, Calif., to become the largest homebuilder in the United States.

The deal also made Kaufman and Broad the largest builder in Las Vegas. The combined K&B-Lewis controls an estimated 15 to 20 percent of the Las Vegas market with about 2,500 home sales annually.