Problem-Plagued MiniScribe Seeks Bankruptcy Shield

MiniScribe, a troubled Longmont, Colo., computer disk-drive maker formerly headed by Q. T. Wiles of Sherman Oaks, said Tuesday that it has filed for Chapter 11 bankruptcy protection. The bankruptcy action, filed Monday in the U.S. Bankruptcy Court in Denver, was necessary because of 13 investor lawsuits pending against the company, MiniScribe said.

“We believe that this is the only practical step the company can take to solve its many legal problems,” said Richard P. Rifenburgh, who replaced Wiles as MiniScribe’s chairman and chief executive last February.

MiniScribe, which said its debts exceeded its assets by $150 million as of Oct. 1, appeared to be a fast-growing, profitable company after Wiles became chairman in 1985. Wiles, 70, was a turnaround specialist for the San Francisco investment company Hambrecht & Quist. He used to be known as “Dr. Fix-It” because of his successful rescues of sick high-tech companies such as San Jose semiconductor maker Silicon General and Rexon, a Manhattan Beach data storage business.

For a while, his efforts at MiniScribe seemed to be working. The company reported that its sales soared from $115 million in 1985 to $603 million in 1988; meanwhile, it went from a loss of $16.8 million to earnings of $25.8 million. But after Wiles resigned in February, MiniScribe’s new management said the company’s financial reports for 1985 through 1988 were inaccurate due to “a massive fraud” that had occurred during Wiles’ tenure.

The fraud, according to a report prepared by MiniScribe, included falsified shipments and doctored accounting records. At one point, bricks were packaged and shipped as disk drives in order to temporarily boost sales and inventory figures. MiniScribe and Wiles have since been named in 13 class-action and individual lawsuits filed by shareholders and debenture holders, which allege, among other things, that MiniScribe executives made false and misleading statements to inflate the company’s stock.

Wiles also resigned from Hambrecht & Quist in February and has since closed his Sherman Oaks office. Reached by telephone at his home Tuesday, Wiles would not comment on MiniScribe’s bankruptcy filing.

MiniScribe’s stock, which traded as high as $13.75 a share in 1988, closed Monday at 38 cents.

MiniScribe said the Chapter 11 filing does not include its Far East subsidiaries, where most of its products are manufactured. The company last month said it was phasing out its domestic manufacturing operations and expects that by the end of first quarter 1990 it will have only pilot production, sales and marketing, research and development and its headquarters remaining at Longmont.

MiniScribe, which has retained Merrill Lynch Capital Markets to formulate a reorganization and restructuring plan, said Tuesday that the reorganization might take the form of a purchase of the operating assets of the company by investors, who would create a new company.

Also Tuesday, MiniScribe said it filed with the Securities and Exchange Commission its annual report for 1988 and financial results for the first three quarters of 1989. For all of 1988, MiniScribe said it lost $109.6 million on revenue of $531 million.

For the first nine months of 1989, the company lost $116 million on revenue of $350 million. Because of continuing losses during the fourth quarter of last year, MiniScribe said its negative net worth--$150 million as of Oct. 1--would increase.

It also said its lending bank, Standard Chartered of Hong Kong, agreed in principle to allow MiniScribe to use the bank’s collateral and to provide financing of up to $20 million, subject to bankruptcy court approval.