Huntway Investigates Financial Statements : Valencia: Liquid asphalt maker suspends its chief financial officer, and is looking into whether checks were written on insufficient funds.

In a disclosure that jolted analysts and sent its stock plunging, Huntway Partners LP. of Valencia last week suspended its chief financial officer after uncovering irregularities in its books.

Huntway, a maker of liquid asphalt and other oil products that has been losing money this year because of rising crude prices, said its 1992 financial statements may have been misrepresented.

Compounding problems, the partnership said it is also in violation of its credit agreement with a New York bank.

It was a week ago Monday that Huntway relieved Douglas C. Hansen, one of the firm’s founding partners, of his duties as CFO.

Three days later, a special committee at Huntway said Hansen may have written checks on company accounts for which there were insufficient funds.

As a result, the committee said it was probing into whether Huntway’s 1992 financial reports “may have overstated the cash and trade payable accounts, thereby presenting a more favorable liquidity position.”

Huntway said there is no current evidence that any funds were diverted for personal benefit. However, the company said its investigations into this and other matters were continuing and that the committee had reported its preliminary findings to “appropriate government authorities.”

After the disclosure, a Huntway stockholder filed suit against the partnership for allegedly misleading the public. Huntway said it was aware of the suit, filed last Wednesday in federal court in Los Angeles, but declined to comment. Huntway has about 2,000 stockholders, of which the biggest is First Chicago Investment Corp.

Hansen, 44, did not respond to calls placed through the company’s offices. Terry Stringer, a Huntway executive vice president, said the company is continuing to operate as usual. A Huntway investor who has been in touch with management said Monday that he expected further public announcements from the company early this week.

While Stringer declined to elaborate on the investigations, an investors’ report issued last week by analyst Daniel Carrasso, with Goldman, Sachs & Co., said his discussions with Huntway management suggested that the “accounting irregularities may be limited to the last several months.”

As of Sept. 30, Huntway had only $78,000 in cash, plus $12.7 million in accounts receivables, according to the firm’s latest quarterly filings with the Securities and Exchange Commission.

Some sources speculated that Huntway’s books may have been misstated so as to meet a $41-million credit agreement with Bankers Trust New York Corp. Huntway said last week that it was in violation of that agreement and that it was now discussing the problem with Bankers Trust.

That credit agreement calls for Huntway to maintain certain liquidity conditions, and it was renegotiated last year after Huntway defaulted on the agreement in late 1990.

Huntway owns and runs three crude oil refineries that mainly produce liquid asphalt for road construction and repair. The firm, which has 115 employees, lost $1.9 million on sales of $80 million for the nine months ended Sept. 30, in contrast to earnings of $3.8 million on revenue of $89 million a year earlier.

Hansen, who remains on Huntway’s payroll, has been with the firm since its founding in 1979, along with Juan Y. Forster, Huntway’s president and chief executive officer. Huntway went public in November, 1988, raising $29.7 million from the stock offering and enriching Forster and Hansen, as each received more than $1 million for selling part of their ownership.

Forster did not return messages left at the company and at his home in Santa Ana. Stringer said Forster is close to Hansen. “Personally, it’s been devastating to him,” Stringer said.

On the day of last week’s disclosure, Huntway’s preferred units, traded on the New York Stock Exchange, plunged by 46% to $1.625 per unit. Huntway’s units closed on Monday at $1.88 per unit.

Huntway, which is organized as a master limited partnership--or a partnership with a widespread investor base--went public at $11.50 a unit. But its preferred units, which are similar to shares of stock, had dropped to $4.13 in the third quarter of 1990 and has never quite recovered.

Andre Danesh, an investor in Brookline, Mass., whose group holds about 7.7% of Huntway’s shares, said he was shocked by the news. Danesh said he believed Hansen was “very competent” and he described him as a devout Mormon.

“I know someone has talked to Hansen, and he’s very furious about the management action,” said Danesh.

Danesh said he remained optimistic about Huntway’s future, especially in light of the recent decline in crude oil prices. After climbing to more than $16 a barrel, the price of heavy crude that Huntway uses has since dropped to about $12, according to James McDonald, an independent oil analyst in San Marino.

That and the expected increase in demand for federal construction work in California appear to bode well for Huntway, McDonald said.

However, analysts said the company’s prospects in the near-term are not promising.

Carrasso, in his investors’ report, said October was a bad month for Huntway. And given the importance of those results, he said, “this does not appear to bode well for a near-term recovery at Huntway.”