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 Carter’s personal residence in the South Mission Hills section of San Diego, according to a report completed by the audit committee of Oak’s board of directors in February, 1985.

The firm, Burrows Construction Co., also built Oak’s 75,000-square-foot Spanish-style headquarters in Rancho Bernardo in 1980 for about $7 million.

Carter, Oak’s chairman since 1963, resigned abruptly in November, 1984. At the time, he said he “just got tired” and was “worn to a frazzle” by Oak’s 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 “anticipated passing on to Oak,” according to the audit committee’s 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 “were not to be borne by Mr. Carter.”

Burrows representatives also believed, according to the report, that “as a result of the work referred to Burrows by Carter on behalf of Oak,” work on Carter’s residence was to be furnished at “minimal or no cost” and that any other charges would be recovered from Oak.

Burrows later “padded bills” for work performed at Oak’s 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 Carter’s house, according to John Seitman, Borrows’ attorney.

Carter’s actions, the report concluded, were improper, violated the company’s code of ethics and subjected him to “termination for cause.”

The internal report also claimed that Carter insisted that an interior design firm owned by his wife, Brenda Mason, be used to redecorate Oak’s plant in Taiwan. John Huang, the plant’s manager, resisted Carter’s demands, according to the report, and used local designers for the job.

Nonetheless, Mason’s firm billed and was paid by Oak for the design work it did perform. The report concluded that Carter’s actions were improper.

Carter could not be reached for comment.

Since Carter’s 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. Carter’s settlement also bans him from ever again serving as an officer or director of a U.S.-based public company.

Earlier this year, Oak’s 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 “improperly reimbursed” non-business expenses from him. The company has also canceled Carter’s 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 committee’s report on Carter.

Carter was Oak’s 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.

Oak’s 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 Oak’s materials group.