Kansas Investor Sues Computer Automation
Computer Automation Inc., the ailing Irvine electronics manufacturer, said Tuesday that it has been sued for $16 million by a Kansas businessman who invested $3 million in the company and once planned on rescuing it from its financial woes.
The suit, filed by pizza-topping maker Larry K. Doskocil, charges the company, three of its current officers and one former official with fraud, negligent misrepresentation and breach of contract in connection with the investment.
Doskocil claims that before purchasing $3 million worth of the company’s subordinated debentures last August, his representatives received false information on the financial health and future business opportunities of the company. The suit claims that the company officials made the representations “with the intent to defraud and deceive Doskocil and induce him to deliver” the $3 million.
The suit seeks $6 million in compensatory damages and a $10-million punitive award.
Doug Cutsforth, Computer Automation’s president and one of the officials named in the suit, denied the charges and attributed the allegations to Doskocil’s disappointment that he was unable to assume full control of the company.
Cutsforth said Doskocil had intended to purchase 23.5% of the company’s stock in September, an amount that could have increased his representation on Computer Automation’s board of directors beyond the two seats he received as part of his agreement to invest the initial $3 million.
When the stock sale fell through, Cutsforth said Doskocil began negotiating with the company to purchase another $3 million worth of debentures. In that deal, which failed in early November, Doskocil would have been given the right to pick the company’s chairman and chief executive officer.
“They intended to come in and take management control of the company,” Cutsforth said. “But it didn’t work out as originally planned.” Cutsforth confirmed that one of Doskocil’s nominees to the board, David Smoak, an official of Doskocil’s pizza-topping company in Hutchinson, Kan., has resigned. The other, PaineWebber investment banker Frank Klepetko who arranged the original debenture sale, is still listed as a board member.
The suit charges that Computer Automation officials, among other things, told Doskocil’s representatives that the company’s losses for the 1985 fiscal year would not exceed about $11.7 million and that fourth-quarter sales in the industrial products division would not be lower than $3.5 million.
However, when the books were closed on the year ended Sept. 30, annual losses totaled $12.7 million.
