US - The Sheet Metal Workers' National Pension Fund has filed a law suit against Beazer Homes, claiming the company breached its fiduciary duties by wasting assets and damaging its reputation.
In its official complaint document, the US$3.1bn fund, which continues as a shareholder in the home builder and mortgage provider, cited numerous occasions when, in its opinion, board members were “reckless or grossly negligent”.
Amongst a flurry of accusations, the fund claimed former and current board members artificially inflated company stock prices and were then able to award themselves “excessive and undeserved bonus compensation”.
It is also claimed the firm engaged in improper lending of mortgages to borrowers unable to meet repayment deadlines which drew attention from US authorities investigating sub-prime lending.
The filing stated that due to this investigation at the end of March, by 22 August 2007, the company’s share price had dropped 66%, contributing to a loss of $831m in market capitalisation.
The fund concluded that it had not taken this action directly to the company as “the entire board has breached its fiduciary duties and cannot exercise independent judgement to prosecute litigation against themselves”.
No one from Beazer Homes was available for comment at the time of going to press.
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