SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
Form 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): July 10, 2000
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Continental Investment Corporation
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(Exact Name of Registrant as Specified in Its Charter)
Georgia
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(State or Other Jurisdiction of Incorporation)
0-3743 58-0705228
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(Commission File Number) (IRS Employer Identification Number)
10254 Miller Road, Dallas, TX 75238
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(Address of Principal Executive Offices) (Zip Code)
(214) 691-1100
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(Registrant's Telephone Number, Including Area Code)
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(Former Name or Former Address, if Changed Since Last Report)
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FORWARD-LOOKING STATEMENTS
This Report contains forward-looking statements that involve risks and
uncertainties that could cause results of operations or financial condition of
Continental Investment Corporation to differ materially from those expressed or
implied by the forward-looking statements. These risks include uncertainties
attendant to bankruptcy proceedings, possible inaccuracy of prior published
financial information about the Registrant and its subsidiaries, the
uncertainties of litigation, a lack of certainty as to the amounts that can be
realized on sales of certain of the company's assets, and the long-term effects
of the bankruptcy reorganization on the operations of the Registrant and its
subsidiaries.
Item 5. Other Events.
Litigation Initiated by Stewart Rahr and the Registrant. As previously
reported on October 8, 1998, Stewart Rahr, who was then a holder of the
Registrant's common stock, filed a lawsuit in the U.S. District Court for the
Eastern District of New York. This lawsuit was subsequently removed to the
Northern District of Texas, Dallas, Division, where it is currently styled
Stewart Rahr v. R. Dale Sterritt, et al. (Civil Action No. 3:99-V-0628-G) (the
"Sterritt Litigation"). The Third Amended Complaint alleged securities fraud,
common law fraud, conspiracy and related claims against the defendants in
connection with Mr. Rahr's purchase of the Registrant's common stock and certain
loans. The Registrant intervened in the Sterritt Litigation, asserting fraud,
breach of fiduciary duty, conspiracy and related claims against the defendants
in connection with the siphoning of assets from the Registrant and the diversion
of corporate opportunities.
A jury trial in this case began on June 12, 2000 and ended June 26,
2000. At that time, the jury entered a verdict in favor of the plaintiffs
against the following defendants: R. Dale Sterritt, Jr. ("Dale Sterritt"),
Richard D. Sterritt, Sr. ("Dick Sterritt"), Edward W. Roush, Jr. ("Roush"),
Freddie Joe Royer, Jr. ("Royer"), Malcolm M. Kelso ("Kelso"), Larry Wayne
Sterritt ("Larry Sterritt"), Richard Straza ("Richard Straza"), Robyn Ann
Straza-Sterritt ("Robyn Straza-Sterritt"), Sterritt Properties, Inc. ("Sterritt
Properties") and 20th Century Holdings, Inc. ("20th Century"). On July 10, 2000,
the court entered a final judgment (the "Final Judgment") for the plaintiffs.
The Final Judgment contains the following findings:
"As part of its verdict, the jury found that the following
defendants engaged in conduct constituting fraud: Dale Sterritt, Dick
Sterritt, Roush, Royer, Larry Sterritt, Sterritt Properties, and 20th
Century. In addition to these defendants, the jury also found that the
following defendants engaged in conduct constituting conspiracy to
commit fraud: Malcolm Kelso, Richard Straza, and Robyn Straza-Sterritt.
"The jury also found that the harm experienced by CIC from the
failure to comply with a fiduciary duty and/or conspiracy was the
result of malice or fraud on the part of the following defendants: Dale
Sterritt, Dick Sterritt, Roush, Royer, Kelso, Larry Sterritt, and
Sterritt Properties.
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<TABLE>
<CAPTION>
"In addition, the jury found that the following defendants
committed theft: Dale Sterritt, Dick Sterritt, Roush, Royer, and Kelso.
"Finally, the jury found that certain defendants were
responsible for the conduct of the following corporations: (1) for
Kelso & Roush, Inc.: Kelso and Roush; (2) for Nikko Trading of America
Corporation: Dale Sterritt, Dick Sterritt, Roush, Royer, and Kelso; (3)
for Woodland Ventures, Inc.: Dale Sterritt, Dick Sterritt, Roush, and
Kelso; (4) for Swan Financial Services, Inc.: Dale Sterritt and Dick
Sterritt; (5) for Atremo Holdings, Inc., S.A.: Dale Sterritt, Dick
Sterritt, Roush, and Royer; and (6) for Wallenberg Financial, Inc.,
S.A.: Dale Sterritt, Dick Sterritt, Roush, and Royer.
"The Court now renders judgment for Plaintiffs based on the
jury's verdict and incorporates the jury's findings for the purpose of
this judgment."
The Final Order entered judgment against the defendants in the amounts
indicated below.
Actual Damages & Profits Wrongfully Exemplary
Defendants Interest Obtained Damages
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<S> <C> <C> <C>
Dale Sterritt, Dick Sterritt, $33,584,229 2
Roush, Royer, Kelso, Larry
Sterritt, Richard Straza,
Robyn Straza-Sterritt, Sterritt
Properties, and 20th Century 1
R. Dale Sterritt, Jr. $8,000,000 $100,000,000
Richard D. Sterritt, Sr. $3,000,000 $20,000,000
Edward W. Roush, Jr. $10,000,000
Freddie Joe Royer, Jr. $10,000,000
Malcolm M. Kelso $10,000,000
Larry Wayne Sterritt $1,000,000 $10,000,000
Sterritt Properties, Inc. $12,000,000 $16,000,000
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Total $33,584,229 $24,000,000 $176,000,000
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</TABLE>
The total award of the Final Judgment was $233,584,229 before the
addition of post-judgment interest. As previously reported, the Registrant and
Mr. Rahr have entered into agreements that, among other things, provide that
eighty-five percent (85%) of any amounts collected will be paid to Mr. Rahr with
the remaining fifteen percent (15%) going to the Registrant. The Final Judgment
is presently subject to rights of appeal by the defendants, if they elect to
perfect those rights.
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1 These defendants are jointly and severally liable for this amount.
2 These defendants were found liable for a total of $27,831,712 of actual
damages and $5,752,517 of pre-judgment interest. Post-judgment interest will
accrue against the defendants as provided by law.
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The Registrant is unable to predict what amounts, if any, will be
collected pursuant to the Final Judgment. Since, however, the amount which can
be collected will depend, in part, on the financial resources of the defendants
against whom the Judgment was entered. The Registrant believes that it is
unlikely that more than a small fraction of the amounts awarded in the Final
Judgment will be collected.
In addition, the Registrant and Mr. Rahr presented evidence at the
trial, including expert testimony, that the Registrant's previously published
financial information materially overstated the value of certain of the
Registrant's assets. Both the jury's verdict and the Final Judgment are
consistent with this evidence.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf of the
undersigned hereunto duly authorized.
CONTINENTAL INVESTMENT CORPORATION
Date: August 3, 2000 BY: /s/ J. B. Morris
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J. B. Morris, President
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EXHIBITS
99.1 Order of Final Judgment, dated July 10, 2000, entered in Stewart Rahr,
et. al. v. R. Dale Sterritt et. al., in the U.S. District Court for the
Northern District of Texas, Dallas Division (Civil Action No.
3:99-CV-0628-G).
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