Oak Says Ex-Chief Billed It for Work on Home
Had former Oak Industries Chairman and Chief Executive Everitt A. Carter not resigned his posts in late 1984, the company may have had grounds to fire him because he allegedly billed Oak for improvements to his personal residence and awarded Oak contracts to a firm owned by his wife, according to internal Oak documents obtained by The Times.
Oak was improperly billed for more than $58,000 in labor costs by an Escondido construction company for work completed on Carterās personal residence in the South Mission Hills section of San Diego, according to a report completed by the audit committee of Oakās board of directors in February, 1985.
The firm, Burrows Construction Co., also built Oakās 75,000-square-foot Spanish-style headquarters in Rancho Bernardo in 1980 for about $7 million.
Carter, Oakās chairman since 1963, resigned abruptly in November, 1984. At the time, he said he ājust got tiredā and was āworn to a frazzleā by Oakās financial downturn and a Securities and Exchange Commission investigation of both Oak and Carter.
In 1980, Carter contracted with Burrows to remodel his private house at a cost of $109,807, including more than $58,000 in labor costs that Burrows āanticipated passing on to Oak,ā according to the audit committeeās investigation. The work was completed in early 1981.
The internal Oak report said that Burrows officials were told by Carter that costs for work done on the private residence āwere not to be borne by Mr. Carter.ā
Burrows representatives also believed, according to the report, that āas a result of the work referred to Burrows by Carter on behalf of Oak,ā work on Carterās residence was to be furnished at āminimal or no costā and that any other charges would be recovered from Oak.
Burrows later āpadded billsā for work performed at Oakās headquarters and at its manufacturing facility in nearby Carlsbad to recoup its labor and other costs, according to the document.
Carter later paid the company $45,000 in connection with the Burrows bill, according to the document. Burrows is still owed about $52,000 for its work at Carterās house, according to John Seitman, Borrowsā attorney.
Carterās actions, the report concluded, were improper, violated the companyās code of ethics and subjected him to ātermination for cause.ā
The internal report also claimed that Carter insisted that an interior design firm owned by his wife, Brenda Mason, be used to redecorate Oakās plant in Taiwan. John Huang, the plantās manager, resisted Carterās demands, according to the report, and used local designers for the job.
Nonetheless, Masonās firm billed and was paid by Oak for the design work it did perform. The report concluded that Carterās actions were improper.
Carter could not be reached for comment.
Since Carterās resignation, he, the company and several other former officers and directors have signed consent agreements with the SEC prohibiting them from violating any securities laws. Carterās settlement also bans him from ever again serving as an officer or director of a U.S.-based public company.
Earlier this year, Oakās insurance company agreed to pay about $33 million to settle a class-action shareholder lawsuit that had accused the company and management of securities fraud and negligence.
Carter Sued by Firm
Oak has sued Carter to recover more than $1 million in loans and āimproperly reimbursedā non-business expenses from him. The company has also canceled Carterās employment contract, which would have paid the former chief executive $250,000 per year in cash and more than $125,000 in benefits between 1985 and 1989.
Carter has countersued, demanding payment of his contract.
Oak Chairman E. L. McNeely said that because of the litigation, he would not comment on the audit committeeās report on Carter.
Carter was Oakās chief strategist for more than two decades, guiding it from a tiny electronics firm in Crystal Lake, Ill., to a high-flying, San Diego-based media conglomerate with worldwide operations.
Revenue Peaked in 1982
Revenue hit a peak of $545.7 million in 1982 and earnings reached $30.1 million in 1981 before the recession, a soured subscription-TV market, a too-ambitious expansion strategy and a defective cable-TV converter product plunged Oak into red ink, an SEC investigation and a class-action shareholders lawsuit.
Oak lost $37.6 million last year and reported about $300 million in losses from 1982 through 1984.
Oakās McNeely is now attempting to turn around the once booming company. Earlier this year, Oak received a $166.7-million capital infusion from Allied-Signal--a $15-million cash investment and $151.7 million to buy Oakās materials group.
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