Beazer Homes has fired its CEO about three months after he agreed to give back $6.5 million in bonuses and profits from the sale of company stock in a deal with federal regulators.
Ian McCarthy had accrued those gains at a time when investigators said the company was committing accounting fraud. He acknowledged no wrongdoing.
Chief Financial Officer Allan Merrill will take over, the company said Monday. Beazer spokeswoman Carey Phelps said the company's board of directors terminated McCarthy.
"This is a direction they wanted to go in," Phelps said. "It was time for a change."
McCarthy did not have a listed phone number in the Atlanta area, where Beazer is based.
The surprise announcement sent shares sliding as much as 5 percent Monday, but the shares later recovered and closed up 3 cents at $3.18.
"Our understanding is that this was not a long-planned transition and that the board had met a handful of times without management's knowledge in order to decide what changes would be in the best interest of (shareholders)," said Josh Levin, an analyst with Citi Investment Research.
Still, most industry watchers believe McCarthy's departure is a positive.
The change should help Beazer focus on long-term growth, said UBS Investment Research analyst David Goldberg. His replacement Merrill has served as chief financial officer for the last four years, and should help the company solidify changes it has made after restating several years' worth of earnings.
"We continue to believe the company's underperformance relative to peers will reverse over time ..." Goldberg said wrote.
In 2008, Beazer restated its financial earnings reports covering the fiscal years between 2002 and 2007, according to filings with the Securities and Exchange Commission.
In March, the SEC announced a settlement with Beazer in March, seeking to "claw back" cash and stock incentive payments that McCarthy earned during a period when the company's financial reports were in error.
Regulators said Beazer had inflated profits in the 2006 fiscal year by falsely recording home-financing transactions and manipulating other results. McCarthy wasn't personally charged, but anti-fraud laws require senior executives to repay bonuses, incentive pay and stock profits during the period of the accounting violation.
The Atlanta homebuilder said that Robert Salomon also has been tapped as executive vice president and CFO. Salomon joined Beazer in 2008 as the company's chief accounting officer.
Phelps said McCarthy will receive a severance package, the terms of which will soon be filed with federal regulators. She said McCarthy is eligible for the severance package laid out in his employment agreement because he was not fired "for cause," but was replaced because the board wanted a leadership change.