The biggest stake holder in Tustin-based Ocean Pacific Sunwear Ltd. has sued the surf-wear company for fraud, contending that it is “hopelessly insolvent.” OP officials Friday insisted that the company is healthy.
Elaine M. Ornitz, who owns more than 30% of the partnership that controls the company, alleged in a lawsuit that “nothing short of a sale” or massive cash infusion can save the partnership from bankruptcy.
The suit, filed Wednesday in Orange County Superior Court in Santa Ana, accuses five OP partners of having “acted fraudulently, maliciously and oppressively, with spite and ill will toward (Ornitz), and with intent to defraud and deceive.” It seeks more than $10 million in damages and dissolution of the partnership.
The suit drew a sharp response Friday from Jim Jenks, founder and president of OP, one of the nation’s largest and best-known surf-wear companies.
“The charges leveled against me and the company are blanketed with inaccuracies and innuendoes,” he said in a statement. “Reviewing complete financial information, not just the bits and pieces filed in the lawsuit, will prove that OP is a solvent, progressive company.”
The suit contends that Jenks told Ornitz that he deliberately planted a false story in a trade publication. The suit said he told a reporter last August that OP had enlisted the help of an unidentified New York bank to reorganize its capital structure in order to buy out Ornitz’s interest. Ornitz said the story damaged efforts to sell her stake.
OP officials denied that Jenks planted a phony story in the trade journal. The suit further alleges that the company’s financial condition has deteriorated in recent months. Earlier this month, the suit says, the partners were shown draft financial documents indicating that OP had a negative net worth of nearly $2 million.
The partnership has had its financial difficulties, said Michael Balmages, an OP vice president, but it is far from insolvent. The value of the OP trademark alone, which is generally not included in financial documents, was recently appraised at $25 million, he said.
“The company is on solid ground,” Balmages said.