Electronic Clearing House Still Facing Hurdles : Agoura Hills: Most recently the troubled company has had problems with merchants, with an allegation that four were making use of stolen credit cards.

Electronic Clearing House Inc. is a small Agoura Hills company that routinely fails to earn a profit--or to clear away its checkered history. This year is proving no exception.

The company provides small- and medium-size retailers and other merchants with products and services that enable the store owners to quickly approve their customers’ purchases by credit card and check.

Electronic Clearing, which also wires cash from the credit cards’ sponsoring banks to the stores, counts more than 3,200 merchants among its clients.

But the company, whose fiscal year ends Sept. 30, hasn’t earned an annual profit since fiscal 1988, and in fiscal 1991 it lost $1.5 million on revenue of $9.03 million. Its outside auditor, Price Waterhouse, said in its last annual audit a year ago that there was “substantial doubt” about Electronic Clearing’s “ability to continue as a going concern.”

Then, in the nine months that ended on June 30, the company lost an additional $722,000 on revenue of $8.11 million. Its common stock, which climbed as high as $4 a share in late 1988, now trades for only 38 cents on the NASDAQ market. With roughly 6.6 million shares outstanding, that gives Electronic Clearing a total market value of only $2.5 million.

And in the final quarter of fiscal 1992, Electronic Clearing encountered another problem. The company will take a charge of about $150,000 against earnings because of problems with several of its merchant customers.

Four of the merchants allegedly were making use of stolen credit cards, and several others “had greater than usual charge-back activity,” Electronic Clearing said. The U. S. Secret Service, which often investigates significant credit-card fraud, has been called in and one arrest was made in October by the Los Angeles County Sheriff’s Department.

Donald R. Anderson, Electronic Clearing’s president and chief operating officer, declined to elaborate on the investigation.

It’s the kind of unusual setback that has periodically dogged Electronic Clearing.

The company traces its roots to a company named Electronic Financial Systems Inc. and headed by Thomas E. Skala, who had been convicted of mail fraud in 1975 and fined $5,000.

He also filed for protection from creditors in bankruptcy court in 1980. In 1986, EFS merged with a company named Bio Recovery Technology Inc., and the new entity changed its name to Electronic Clearing House.

Yet a few months later, a special committee of Electronic Clearing’s directors found that “millions of dollars were diverted from EFS/ECH to Mr. Skala and entities related to Mr. Skala,” according to the company’s annual 10-K report to the Securities and Exchange Commission.

The findings spawned an agreement between the company and Skala whereby Skala, among other things, agreed to divest his stock in the company and to resign, which he did in April, 1987, according to the 10-K report. He was replaced by Joel M. Barry, who remains chairman and chief executive today.

At the same time, Anderson became president.

Then in May, 1990, Electronic Clearing was charged by the SEC with being late in filing several financial documents required by the agency. In a consent agreement, the company was barred from further violations of federal securities regulations, and Anderson said then that Electronic Filing had been late because of its financial problems.

Three months later, the SEC charged Barry with repeated tardiness in filing SEC-required disclosures about his holdings of the company’s stock.

At the time, he was president of Basics Financial Planning & Investments Inc., a firm that then owned 42% of Electronic Clearing’s stock.

Barry reached a similar consent agreement with the SEC, in which he did not admit or deny the charges.

His equity stake now is only 3.5%, according to Electronic Clearing’s most recent proxy statement, in July, and Basics Financial was dissolved in June, 1991.

Amid most of these distractions, Electronic Clearing’s business has been static and awash in red ink.

The company’s $722,000 loss in the nine months ended June 30 included a $521,000 loss from its operations, the biggest portion of which ($447,000) was incurred by Electronic Clearing’s ECHO Payment Services Inc. unit, which leases and sells credit-authorization terminals and other equipment.

Electronic Clearing House Inc. at a Glance Electronic Clearing House Inc. provides credit-card authorizations and check-guarantee services for merchants, banks and other customers. The Agoura Hills company also sells and rents “point-of-sale” terminals and other equipment used by merchants to process credit-card transactions. Source: Company Reports