D. A. Probes Claim That Photo Firm Bounced Paychecks : Bankruptcy: Some salesmen accuse Traditional Industries of reneging on $13,000 before it filed for Chapter 11.

The Los Angeles district attorney’s office says it is investigating complaints by some salesmen for Traditional Industries Inc. that the Agoura Hills company intentionally sent them at least $13,000 in worthless paychecks in the weeks just before Traditional’s bankruptcy filing.

Writing checks with the knowledge that there’s no money behind them is an intent to defraud, a violation of state law that could be a felony if that much money is involved, said Larry Mulligan, head of the district attorney’s bad-check enforcement program.

But Arland D. Dunn, Traditional’s founder and its chairman until he resigned when the photo supplies company filed for Chapter 11 bankruptcy protection March 28, denied any wrongdoing. He said the company had enough cash underlying the checks, but that the checks bounced after a creditor of the company forced its lenders to freeze the company’s bank accounts.

“I don’t believe it’s a criminal situation, and I don’t think the district attorney will either,” Dunn said.

Traditional marketed photo supplies and services directly to consumers with the help of hundreds of independent salespeople nationwide, whom Traditional called “dealers.” Several salesmen filed complaints last week with the district attorney’s office, and left copies of $13,000 worth of bounced checks issued by Traditional subsidiaries, Mulligan said.

The salesmen said the actual amount they are owed totals more than $30,000. One of the salesmen was Dean Darrow, who said he has sold Traditional’s packages in California, Florida and North Carolina. Another was Gerry Stein, who sold packages in Southern California. “The main allegation is that we had received bad checks and they knew there was no money in the account,” Stein said.

Richard Wentz, an Atlanta dealer who was not part of the group that filed the complaint but who claims to be one of Traditional’s major salesmen, said he and his employees received more than $100,000 worth of Traditional checks that bounced in February and March.

“We’ll investigate it and look at the bank records,” Mulligan said. He said some of the checks were returned because of insufficient funds in Traditional’s bank accounts, and others because the accounts had been closed.

The checks were issued in February and early March, and some were intended as “replacement” checks for earlier paychecks that had bounced. The salesmen contended the replacements also bounced, Mulligan said.

Traditional entered bankruptcy court as the apparent victim of its own rapid growth. The company’s revenue soared to $62 million in its fiscal year ended June 30, 1989. That compares with $13 million four years earlier. Traditional, however, suffered from a severe cash drain. When it filed for bankruptcy protection, Traditional listed total debts of $48 million.

The company allowed customers to finance their purchases--which totaled $900 on average--over two or three years, but many of the customers defaulted, forcing Traditional to reserve millions of dollars for the bad loans. Also, on all sales, Traditional had to buy the photo equipment, pay the salespeople their commissions and pay its own overhead up front, then wait months to receive all its income from customers.

According to Dunn, the salespeople’s commission checks bounced after William Walsh, a Menlo Park investor and an ex-director of Traditional who was owed $3.5 million by the company, went to court in February to get his money.

Walsh got a court order attaching Traditional’s assets, including its deposits at Traditional’s two main lenders, Imperial Bank and Sanwa Bank. The two banks were listed as Traditional’s biggest creditors in its bankruptcy filing, and are owed a combined $24 million.

Walsh’s lawyer, Michael H. Kalkstein, confirmed that Walsh had been granted the attachment by a Superior Court in San Jose. He said Walsh earlier had guaranteed a $3.5-million loan to Traditional and that, after Traditional defaulted on the loan, Walsh had to pay it off. Walsh then went to court to get his money from Traditional, Kalkstein said.

A lawyer for Imperial, who asked not to be identified, said that once Walsh got his court order it “required us to either pay Mr. Walsh or take the money and apply it to Traditional’s loans” to Imperial. Imperial chose the latter, “and that required the returning of checks” because Traditional no longer had money in its account, the Imperial lawyer said.

Dunn said Traditional then wrote replacement checks for its salespeople on another account it had at Bank of America. But Imperial claimed that under prior agreements it had with Traditional, the company was not entitled to the cash deposited at Bank of America. So Imperial got a Superior Court in Los Angeles to appoint a receiver who took possession of the Bank of America deposits, the Imperial lawyer said.

Dunn said that action also caused the replacement checks to bounce.

Meanwhile, Dunn is moving on. He has started another company, Lifeprints Inc., which is selling similar photo supplies from the same office building that houses Traditional.

Dunn also said he’s attempting to get Bankruptcy Court approval to buy the sales contracts held by the disgruntled salesmen so that his new company can make good on the bad checks. “They deserve to be paid,” he said.