The head of a West Coast construction firm -- charged by the Securities and Exchange Commission with milking the firms's assets to benefit himself, family and friends -- has agreed to step down from his corporate position.
In addition, the SEC settlement announced yesterday will lead to the eventual repayment of any money found to be siphoned off.
Jack M. Catain Jr., who was until yesterday chairman and chief executive officer of Rusco Industries, and Rusco agreed to a series of permanent injunctions and to pledges to revamp the company and repay any diverted funds as part of a settlement in which they neither admitted nor denied a series of charges covering a five-year period.
Rusco, which is traded on the American Stock Exchange, is a construction firm, with annual sales of more than $60 million, engaged primarily in manufacturing windows and doors.
Catain, who is also a principal stockholder in Rusco, has been the subject of several-year investigation by the Justice Department for alleged involvement in laundering money for organized crime, according to published reports.
Rusco said yesterday it had signed a decree to avoid long and costly litigation.
According to the charges outlined in an SEC complaint, Catain and his friends and associates treated the corporation like a piggy bank, using corporate funds to pay financial obligations incurred by Catain and providing a willing customer for businesses and transactions in which Catain an his family or associates had undisclosed interests.
Besides using Rusco's assets in disregard of the company's interests, the complaint also charged that Catain and Rusco violated antifraud provisions of federal securities laws and failed to report information they were obligated to make known to Rusco's shareholders or the investing public.
The complaint alleges that Rusco was used to bail Catain out of a losing venture in one case and alleges that in other instances Rusco failed to collect money owed from corporations controlled by Catain's friends or didn't make efforts to until the SEC'S investigation began.
Under the terms of a consent order agreed to by Catain and Rusco, the corporation and its former president are enjoined from further violations of securities laws. Catain is required to resign immediately and repay any money found to be owed to Rusco from the activities outlined by the SEC in its complaint or found by a specially created audit committee.
Rusco is to restructure its board of directors to make the majority outside independent directors and to set up an audit committee of outside independent directors. Under the supervision of a special counsel , the audit committee is to conduct a comprehensive investigation of Catain's activities in the areas outlined in the complaint and to file a report with the commission.
Commission officials said yesterday it is impossible to estimate how much money Catain ultimately might be required to return to the company.