Investors Suing Parker Auto, Bank, Auditor
About three dozen investors in troubled Parker Automotive Corp. sued the maker of engine-cleaning equipment and its investment bank and auditor, claiming that they were bilked out of $5.3 million.
The investors--many of them from Northern California--allege that Parker, the investment banker Cruttenden & Co. and the accounting firm of Ernst & Young lied to them when the investors bought Parker Automotive stock through a private placement in summer and fall of 1990.
Parker Automotive filed for protection under Chapter 11 of the federal bankruptcy laws in July and the investors’ stock is now “virtually worthless,” the suit says.
Despite the bright picture that the company painted in the summer of 1990, Parker Automotive was actually a “fledgling, undercapitalized corporation which . . . was having difficulty paying its bills and not achieving product sales” that it had claimed, according to the suit, filed Friday in Orange County Superior Court.
The investors allege that they were told that their money would be used to buy raw materials so Parker Automotive could fill millions of dollars worth of orders for its product: machines that clean car and truck engines, and related cleaning agents.
Instead, the suit says, many of those sales claims turned out to be exaggerated. Already pressed for cash, the company didn’t buy raw material but instead used the investors’ money for “existing accounts payable, executive salaries, overhead expense and other pre-existing debt,” the suit says.
Cruttenden and Ernst & Young knew about the company’s tenuous financial shape and didn’t tell the investors about it, the suit alleges. Most of those suing are San Francisco investment advisers and money managers and their clients. They are asking for their money back plus damages.
The suit also names several individuals, including former Parker Chairman Michael E. Parker of Newport Beach, who is charged in a separate, criminal case with defrauding the failed Columbia Savings & Loan in Beverly Hills of up to $11 million through another company he managed; Timothy L. Strader, a prominent local developer who was a Parker Automotive director and who was the company’s president briefly last year; former Chief Financial Officer Eric A. McAfee; former Vice President and Controller Stephen J. Corradi; Diane M. Parker, former vice president of corporate communications and Michael Parker’s sister, and Robert S. London, director of institutional sales for Cruttenden, an Irvine investment bank.
The defendants could not be reached for comment Tuesday or did not return phone calls to them or their lawyers.
