Gulf & Western Industries Inc. and two of its top officers were charged yesterday with widespread violations of federal securities law ranging from misusing pension funds to using millions of corporate dollars secretly to inflate the books of the Dominican Republic's central bank.
In a broad civil complaint filed in U.S. District Court here, the Securities and Exchange Commission also alleged that G&W violated antifraud and antimanipulation regulations over the last decade by failing to disclose certain corporate activities -- including massive investments in the sugar futures market -- to the SEC and the company's stockholders and board of directors.
In a statement released at its New York corporate headquarters, G&W, the nation's 39th largest corporation in assets, called the allegations "unwarranted and outrageous." The company has hired attorney Edward Bennett Williams to defend it against the charges.
The company, its chairman and chief executive officer, Charles Bluhdorn, and executive vice president Don Gaston were charged with dozens of violations in the 60-page SEC filing.
The SEC charged G&W with transferring millions of dollars to the Dominican Republic at the end of each year, for several years, to help it inflate dollar reserves on its central bank's financial statement.
In exchange, the SEC contends, the Dominican Republic allowed G&W, in January of each following year, to withdraw and return to the United States more than the allowable amount of dollars from its earnings there.
The SEC also accused Bluhdorn of committing millions of dollars of G&W funds, through a Bahamian subsidiary, to transactions in the highly risky sugar futures market without informing even his own board.
The SEC alleged that Bluhdorn, again without the knowledge or approval of his companyS board or the stockholders, arranged to have the Dominican Republic participate with G&W in sugar futures speculation. Although the sugar futures activity brought G&w an estimated $65 million in profits, it is unclear how much was, or will be, given to the Dominican government, the complaint alleges.
The SEC alleged that Bluhdorn deceived Dominican officials into thinking that their share of the profits on certain sugar futures contracts was $19 million instead of about $38 million. It also alleged that Gaston and another G&W official told company auditors that the Dominicans had agreed to reducing their profits from $38 million to $19 million for other considerations to aid the country's economic development.
In facr, G&W has spent $8 million on such projects as the establishment of a Dominican Tourist Information Center in New York City, financial aid for the 1977 Miss Universe Beauty Pageant in the Dominican Republic, and the construction of an artists' colony and baseball stadium in the tiny country, the SEC said.
The SEC also charged that Bluhdorn and Gaston were reimbursed for expenses without providing adequate documentation to determine if they were business-related. The officers used corporate airplanes and limousines for personal purposes and used G&w employes for personal tax, legal and financial services, the SEC alleged.
The SEC accused the company, Bluhdorn and Gaston of using the huge G&W pension fund "to make inappropriate investments in securities owned or issued by G&w or in which G&w or its officers had an interest."
"These investments," the SEC alleged, "were made for the purposes of furthering the interest of G&W, or one of its officers and not for the benefit of the pension fund," which, the SEC said "incurred substantial losses."
G&W was also charged with overstating the value of assets on several occasions to avoidd showing losses.
In one case, the SEC alleged, the company sold $460,000 worth of Resorts International stock -- which it had purchased for about $6 million -- back to Resorts for land in the Bahamas. But rather than showing that land to be worth the estimated half million dollars the Bahamian tax authorities had assessed it at, G&W allegedly valued the land at $6 million, thus avoiding recognition of a loss.
And in 1969, the SEC charged, a G&W subsidiary, Paramount Pictures Corp., transferred to Commonwealth United Corp. the rights to proceeds from the movie "Darling Lili" in return for $31.2 million in Commonwealth debentures. Commonwealth had financial difficulities, and G&W failed to properly disclose that the debentures were nearly worthless.
Similar allegations were made about other G&W ransactions, including some involving companies affiliated with financier Michele Sindona.
The allegations grew out of a 3 1/2 year SEC investigation. In its complaint, the SEC seeks an injunction against future activities such as the ones described in its filing, and calls on the court to appoint someone to investigate the company's operations and determine if corrective measures are needed.
Many of the charges were the subject of an investigative series in The New York Times in July 1977.The newspaper reported that several former G&W officials were cooperating with the SEC in its probe.
G&W, the nation's 20th largest employer with 106,000 workers, made $180 million in profit on sales of $4.3 billion in 1978. Its various properties and subsidiaries include the Madison Square Garden Corp., owner of the pro basketball New York Knicks and pro hockey New York Rangers; Paramount Pictures, huge real estate holdings, and the world's largest sugar mill.
"The company is thriving," said Williams, its attorney. "It is more successful than it has ever been in its history. And as far as I know, no one has been hurt by the conduct of its officers."