as a CD you are an AMA representative. if you ask some one to stop flying in a way you feel is unsafe for that event , you can tell them that and that is now the rule for that event.
Club rules or not, you can make the rules for the event. Some thing goes wrong.. the first person they will come after is YOU. you were in charge. you assigned the people to do jobs and if you didn't trust them.. your call.
why do you think you have to fill out the sanction and the report ?
as for breaking club rules.. he can fly that during non events. During an event (especially one with spectators(public)) you don't need any negative action against THE CLUB, AMA, Or you.. and those that allow BS at an event.. flyers remember that and may not return.
AND YES, SUSTAINED FLIGHT toward the pits/spectators is unsafe. things go wrong and where is the plane going to go? ask those full scale pilots that have witnessed full scale flight INTO the crowd.
Ask Your self this, If that plane came into the crowd and hit a person, or a child, or a toddler, a baby in a carriage? could you live with the fact you said nothing , or let him continue flying after you said something at an event you were in charge of ?