Things Go From Bad to Worse for Y&A; : Disappearance: The once-booming engineering firm ran into cash-flow problems, then its stock price tumbled and now its president has vanished.

Things were already going badly for the engineering company Y&A; Group when President Malcolm Cheek flew to New York last month on a business trip.

Now that he’s vanished, things are even worse.

Shareholders have dumped their stock, the company has reported a $7-million loss for 1990, and people from Alaska to New York have been asking: What happened to Malcolm Cheek?

“To say it was a complete shock is an understatement,” said Michael Ginsburg, a New York attorney who was scheduled to meet with Cheek on March 5, the day he was reported missing.

“You read about people who just disappear--like they walk off the face of the earth, but you never think you’ll know one of them.”

Adding to the intrigue was news that the 41-year-old Cheek, his wife, Stephanie, and other family members were pulling up stakes in St. Louis and heading to Atlanta weeks before the disappearance.

The Cheeks had their newly built $1.7-million mansion on the market in February. They withdrew their teen-age son from a private school in St. Louis at the end of January and asked that his records be sent to a military school in Georgia, according to John Johnson, headmaster of Country Day School.

Y&A; officials have said when they need to reach Mrs. Cheek they have called an Atlanta area phone number.

Another son, Malcolm (Mac) Cheek Jr., and his wife, Deborah, also put their home on the market and told associates that they were moving to Atlanta.

Cheek reportedly left behind more than $3 million in personal debts, including a $350,000 advance from Y&A;, $1.6 million in notes and a home equity line of credit from four banks, a $210,000 loan from an investment manager the day before his disappearance and mortgages of $1.2 million on his home.

Three banks and the company have asked a judge to force Cheek into personal bankruptcy.

Speculation, from foul play to a flight to points unknown, has been making the rounds. Before disappearing, Cheek reportedly checked into a New York hotel, unpacked his bags and telephoned a few people, including his wife.

Family members reached by the Associated Press have declined to discuss Cheek, including his mother, the Rev. Allison Cheek at the Episcopal Divinity School in Cambridge, Mass.

But D. Ralph Young, Y&A; chairman and the man who hired Cheek as a chief financial officer when Young was president of Lemco Engineers of St. Louis during the 1980s, has stopped trying to figure out what happened to his good friend.

“I’m not sure I would even come close if I tried,” Young said. “Now I’m trying to speculate and think about how we can continue to function and bounce back from this.”

Associates describe Cheek, who grew up in suburban Washington, as an unpretentious, likable person and comment on his youthful appearance relative to his accomplishments.

Since the bizarre turn of events Y&A; has fired Cheek. At least half a dozen lawsuits have been filed by investors or creditors.

“This company had been saying all along it was profitable and was making optimistic statements and then all of a sudden they’re losing $7 million. It’s phenomenal,” said Steve Tole, a Washington attorney who filed one of the lawsuits alleging fraud and misrepresentation.

The company’s stock, which soared to $42 a share early in 1990, has since been delisted by the National Assn. of Securities Dealers and now trades at $2 to $3 a share.

FBI agents have searched Cheek’s office and are conducting an investigation into the disappearance.

H. Bernhard Engel, the new president of Y&A; who was hired March 19, said he’s spent most of his time trying to gather facts and figure out where the company stands.

“It appears that Malcolm did many things on his own, and we’re attempting to find out as much as we can,” Engel said.

He said auditors are poring over the company’s books and changes are being made every day in the way the company is run. He said he couldn’t elaborate on the company’s problems.

“I just don’t have enough facts,” Engel said.

St. Louis-based Y&A; Group, which has about 250 employees, specializes in the design of electricity transmission and distribution systems for utilities. It has offices in Florida, Alaska and Thailand.

Previously known as D. Ralph Young & Associates, the company was started in 1985 by Young, Cheek and four other associates.

By 1988 the company had $4.6 million in revenue, $200,000 in profit and was looking to expand. The following year it merged with Highland Capital, a New York-based investment firm, renamed itself Y&A; Group and began acquiring companies.

It acquired a partnership of three engineering companies later that year and in 1990 bought five small firms involved in environmental engineering, surveying and inventory control.

Last year its revenue grew to $10.5 million, and the company said profit was up 129%.

But the company’s explosive growth--for which Cheek was “totally responsible,” according to Young--was catching up to it last year.

In mid-1990 the company had its revolving credit line doubled to $5 million only to exhaust all of it a month later. Cheek loaned the company $250,000 to help pay expenses.

Then Y&A; planned a stock offering at the end of July. The company would sell 1 million shares of new common stock and executives also would sell 600,000 shares to help raise around $18 million.

But the company’s stock price began sliding along with the rest of Wall Street when Iraq invaded Kuwait. The price quickly fell from $20.50 a share to $12 a share, and the stock offering was canceled.

That left the company with mounting expenses and no way to pay them.

During all this, Cheek was assuring stockholders that the company was profitable.

He was able to do this because of an accounting method the company used called “percentage of completion.” The system allows a company to take credit for earnings on work as it’s performed even if the money hasn’t been received. This meant Y&A; could take profits on work for clients who hadn’t even been sent a bill.

The percentage of completion accounting system is widely used in the utility and construction industry, where projects can stretch out over years.

The lawsuit filed by Tole also names the Y&A;’s former accounting firm, Deloitte & Touche, which was fired in November because of a dispute about the certification of the 1989 financial results.

The firm refused to certify the books even after Y&A; agreed to restate its 1989 profit for the year from $394,000 to $194,000.