Orange County Business : Reno Air Accused of Inflating Value of Its Stock : Finance: Stockholder’s lawsuit alleges deceptive practices. Airline says action ‘has no merit.’

A lawsuit has been filed in federal court against Reno Air Inc. and two of the company’s former executives, charging that the value of the company stock was inflated through deceptive financial statements.

Stockholder Gerald Adelman filed the suit Tuesday in U.S. District Court on behalf of investors who bought the stock from March, 1993, to March, 1994.

Reno Air spokeswoman Sue Putnam said the company believes “the suit has no merit and we will fight it.”

The suit contends that the company misrepresented its financial condition and failed to list in company reports the depreciation of its aircraft.

Reno Air hopes to bring its low-fare service to John Wayne Airport next week. The carrier had planned to take over as many as six of American Airlines’ flights between Orange County and San Jose as early as Thursday, but questions from the Federal Aviation Administration and competitor United Airlines delayed the launch.

The Orange County Board of Supervisors approved Reno Air’s plan in concept last week. At the request of the FAA, however, airport officials withdrew the final contract from the board’s agenda this week and postponed discussion on it until next Tuesday.

The lawsuit alleges that Reno Air reported a net loss of $1.7 million for 1992, but was “forced to restate” losses at nearly $2.2 million after an investigation of accounting practices by the Securities and Exchange Commission.

The suit contends that, in mid-1993, the company published in the Wall Street Journal a net loss of $1.2 million for the quarter, but the loss was later placed at $2.5 million.

Reno Air General Counsel Robert M. Rowen confirmed that earnings were revised following an accounting change in March. The change was made to alter the method of accounting on aircraft lease rates.

Melissa Emert, an attorney for the investors, said the shifting figures “had the effect of destroying the company’s credibility in the investment community.”

The suit names as defendants former chief executive officer Jeffrey Erickson and former vice president Roderick Leith, both of whom left the company in March.

A judge must approve class-action status before investors other than Adelman can become part of the suit.

Reno Air serves San Jose, Ontario, Burbank, Los Angeles and San Diego in California; Phoenix and Tucson in Arizona; Portland, Ore.; Seattle, Las Vegas and Reno.

The company operates a fleet of 17 140-seat McDonnell Douglas MD-80 jets.