SEC Says Expenses Misstated : 3 Ex-Officers of Video Chain Face Fraud Suit
Federal regulators filed securities fraud charges Thursday against three former top officers of Video Station Inc., a Los Angeles firm that was a pioneer in videocassette rental stores.
Named defendants in the civil suit in U.S. District Court in Los Angeles are George Atkinson, 52, founder and former president of the company; his brother, Edward J. Atkinson, 49, former secretary-treasurer, and Keith Bjelajac, 31, former chief financial officer.
The three left the company in 1983, and subsequent management filed Chapter 11 bankruptcy proceedings in December, 1984.
The firm, now headquartered in Canoga Park, has been operating under a court-approved reorganization plan since August, 1985. No complaint was made against the firm itself or its present management.
Video Station was formed in 1977 and grew to become one of the country’s major video rental firms. At its peak, it had 550 outlets operated by individual store owners authorized to use the name.
False Figures Alleged
Its troubles began in April, 1982, according to the Securities and Exchange Commission suit, when owners George and Edward Atkinson sold some of their stock in an initial public offering.
The suit alleges that the Atkinsons filed a false registration statement for the offering, understating expenses connected with the firm’s state tax liability.
Bjelajac, with approval and encouragement of the Atkinsons, subsequently concealed at least $300,000 in accounts payable invoices, the complaint says.
The three defendants later signed a 1982 annual report to the SEC giving false figures on expenses totaling more than $800,000, according to the suit.
Pair Resigned
The suit also alleges that Edward Atkinson avoided losses of at least $65,529 on further sales of company stock in early 1983 while in possession of inside information on the firm’s condition. The SEC suit seeks disgorgement of these “illegal profits.”
Edward Atkinson and Bjelajac resigned as officers and directors on March 24, 1983, on the advice of the firm’s outside counsel and “at the insistence” of other board members, the suit says.
The following day, the complaint says, Video Station issued a press release reporting that the firm had overstated its net worth by about $1 million at the end of fiscal 1982. The suit says George Atkinson gave up his job as president in September, 1983, and left the board two months later.
Along with the suit, the SEC filed Bjelajac’s consent to a permanent injunction against violating securities laws. He did not admit or deny the allegations of the complaint. The suit seeks a ruling that the Atkinsons committed the alleged violations and asks for similar injunctions against them.
