The Securities and Exchange Commission yesterday charged Pittsburgh-based Allegheny International Inc., its former chairman Robert J. Buckley and others with failing to disclose that top officers personally benefited from the use of five corporate jets, 239 cases of wine and other executive perks and payments from 1981 through 1985.
Buckley was ousted as Allegheny chairman in August 1986 after an article in Business Week magazine described lavish executive life styles at a company whose financial condition was deteriorating. He had no comment yesterday and is expected to fight the SEC in court. Buckley's son, Christopher, has filed a libel suit against Business Week.
Allegheny, a consumer and industrial products giant that markets such well-known brands as Sunbeam and Oster, settled the SEC case without admitting or denying the charges. As part of the settlement, the company agreed to implement a new system of internal accounting and managerial controls designed to prevent future violations of securities laws.
The SEC action is the biggest case focusing on executive perquisites in several years, according to William McLucas, the commission's associate director of enforcement. The SEC's landmark case in this area is a 1977 action involving alleged abuses by Miami financier Victor Posner, which led to standards for disclosure of such benefits. According to the SEC, Allegheny failed to keep records concerning the personal use of five corporate jets by Buckley and other executives from 1980 through 1985. The SEC said that in 1982, Buckley and other senior corporate officers directed that records of personal use of corporate aircraft not be maintained.
Buckley and his wife took numerous trips aboard the corporate jets to Vero Beach, Fla., where they owned several condominiums, and Buckley's children and parents also used the corporate jets, the SEC said.
In a related administrative proceeding, the SEC charged former Allegheny chief administrative officer Clayton A. Sweeney and former president Graemer K. Hilton with failing to keep adequate corporate records of their jet travel and other corporate perks. Both men settled without admitting or denying the charges by agreeing to comply with reporting rules in the future.
One of the most unusual allegations in the SEC suits involves the 239 cases of wine. The SEC alleged that in 1981, Allegheny purchased 200 cases of wine for about $60,000. No records were kept for the wine, which was stored under Buckley's name and some of which was later shipped to his home, the SEC said. In 1985, Allegheny purchased 39 cases of more expensive wine for $53,000, or about $1,359 a case. Buckley controlled the use of the wine, for which no corporate records were kept, the SEC said. Hilton and other Allegheny executives allegedly consumed some of the wine.
The SEC also charged that Buckley and other executives benefited from real estate investments made by Allegheny. In 1985, Allegheny purchased the Hunt Club Condominium near Ligonier, Pa., for about $650,000. The SEC said it appears that no corporate events took place at the condominium, which was used only by Buckley and his family. In addition, Allegheny purchased a $1.45 million majority interest in the limited partner of a condominium development in Vero Beach where Buckley and other company executives owned units. The Allegheny purchase was not approved by the company's board of directors, as required, the SEC said.
In addition, the SEC said that in 1981, at Buckley's direction, Allegheny purchased the Dover Hotel in New York for $10.5 million. Buckley failed to tell the board of directors that renovation of the hotel had cost overruns of about $8 million, and the company lacked effective internal cost controls with respect to the project, the SEC said.
In 1985, Buckley appointed his son, Christopher, resident manager of the Dover at a salary of $27,000 a year plus free accommodations in the hotel's penthouse. The penthouse had been renovated at a cost to Allegheny of more than $1 million, the SEC said, and no information about the overall arrangement was disclosed, as required, to Allegheny shareholders, the agency said.
Regarding its settlement of the SEC charges, Allegheny said yesterday that, "The settlement of the SEC matter is in the best interest of Allegheny International. It is one less distraction for current management as it goes about the task of returning the company to a stable, profitable business."
Allegheny, which was involved in an unsuccessful attempt earlier this year to take the company private through a management buyout, lost $67.9 million in the first half of 1987