Candidate named in stock lawsuit

Newport Beach planning commissioner and City Council candidate Michael Henn, a former executive of builder KB Home, is named in a civil suit alleging improper handling of stock options.

The civil suit, filed in August in Los Angeles County Superior Court, says Henn and 18 other current or former company officials illegally made money by backdating stock options.

Henn was KB Home’s senior vice president and chief financial officer from 1994 to 2000. He said he did receive stock options from the company but had nothing to do with when they were issued or dated.

“I had no direct involvement in that activity,” Henn said.

Because of the pending litigation, he declined to comment on whether anything improper took place at KB Homes.

Stock-option backdating involves changing the date stock options are given to ensure the recipient can sell them at a profit.

A stock option allows the person receiving it to buy a company’s stock at the market price on the date the option is given. If the stock price goes up and the date of the options is changed to one when the market price is low, the holder of the options can reap bigger profits when selling.

A call to KB Home’s corporate office in Los Angeles was not returned by Tuesday evening.

Recent online news reports said the Securities and Exchange Commission has begin an informal inquiry into the granting of KB Home stock options and that two other lawsuits have been filed by shareholders.