Parker Automotive Files for Chapter 11 Protection : Bankruptcy: The firm, which has never shown a profit, saw its troubles multiply in the face of litigation and indictments.
Parker Automotive Corp., a troubled maker of equipment for cleaning car and truck engines, has filed for bankruptcy.
The company, in a Chapter 11 filing Friday in U.S. Bankruptcy Court in Santa Ana, is seeking protection from creditors’ claims while it attempts to reorganize. The filing lists liabilities of $9.2 million and assets of $6.5 million.
The 4-year-old company has never turned an annual profit. Parker’s troubles deepened last year when Columbia Savings & Loan in Beverly Hills sued company chairman Michael E. Parker, saying he defrauded the thrift of up to $13 million.
Parker has since been indicted in that case by a federal grand jury, which charged him in February with racketeering, money laundering and other federal crimes. His trial is scheduled to begin Sept. 3 in federal court in Los Angeles.
Late last year, a few months after the Columbia lawsuit, creditors of another Parker company, which had filed for bankruptcy in 1989, seized control of Parker Automotive for a few days.
Then, earlier this year, a struggle for control of the company erupted between Parker, 43, and Texas businessman Connie C. Armstrong. Armstrong, 36, bailed out Parker Automotive this spring with a $3-million loan that could be converted to stock. In return, Parker gave Armstrong control of the roughly 40% of the company’s stock which Parker owns or controls.
Armstrong insisted that Parker resign from the company’s board because of his legal problems.
But a few weeks after that deal was signed, news reports revealed that Armstrong himself was accused in a lawsuit of defrauding Federal Express and other blue-chip companies of tens of millions of dollars.
Armstrong owns a San Francisco concern called Hamilton Taft & Co. that paid employee withholding taxes for big corporate clients such as American Express.
Hamilton Taft diverted $95 million from these clients to Armstrong’s own investments, a federal court trustee reported in May. Among the diverted money was the $3 million that Armstrong had put into Parker Automotive, the trustee said. (A lawyer for Armstrong said he had clients’ tacit approval to use the funds.)
After the news stories came out, Parker went on the offensive against Armstrong: The same day in March that Parker was released from jail on $1-million bail, he sent a letter to Armstrong revoking the deal. He never would have agreed to do business with Armstrong, Parker said, had he known about the Hamilton Taft case.
Meanwhile, Armstrong was accusing Parker of chicanery, too. In an April filing with the Securities and Exchange Commission, Armstrong alleged that Parker executives cooked the books at Parker Automotive by recording sales that didn’t actually occur. For three quarters in 1990, Armstrong told the SEC, Parker Automotive had overstated profits and understated losses. Michael Parker, in a recent letter to one of the company’s directors, denied inflating sales figures. He couldn’t be reached for comment Tuesday.
Armstrong resigned as Parker Automotive’s chairman in June, but executives whom he appointed remain in charge of the company--Byron Romig as chairman and Dennis McCarter as acting president.
The company has moved its corporate offices from a Costa Mesa industrial park to its factory in Fountain Valley and is a mere shadow of what it was a year ago. People familiar with the concern say that most manufacturing ceased months ago while suppliers clamored for payment.
In its bankruptcy filing, Parker Automotive lists as its largest unsecured creditors:
* Triangle Corp. of Stamford, Conn., which sued Parker Automotive in 1989, alleging that Parker’s engine-cleaning equipment infringed on Triangle’s patents. Last year, Parker Automotive agreed to pay Triangle $2 million for the patents, which Parker says are “essential” to its business. But the company told the SEC in April that it had missed the Dec. 1 payment to Triangle and was “in default” on the settlement agreement. Parker Automotive’s bankruptcy filing lists a debt of $2.5 million to Triangle.
* A partnership between the Koll Co. and Zenitaka Corp., a big Japanese general contractor, which Parker Automotive lists in its bankruptcy filing as a $2.1-million creditor. The partnership owns several office buildings near John Wayne Airport. Parker Automotive reached a deal with Koll, a major Newport Beach developer, to rent one floor of office space in one of the buildings but never moved in for reasons neither side would discuss. The case is still in court, and presumably the $2.1 million is what Parker expects to pay to settle the suit.
* TRW International in Geneva, Switzerland, is owed $1.5 million. TRW had agreed to distribute Parker’s engine-cleaning devices. A company spokesman declined to elaborate on the nature of the debt.
Meanwhile, the company said, a court-appointed receiver for Hamilton Taft & Co. in San Francisco got a court order Friday restricting Parker from doing anything with his stock in Parker Automotive.
