HTP International Files for Bankruptcy Protection

Troubled HTP International Inc. has filed for bankruptcy protection as federal investigators probe allegations that former executives inflated sales by millions of dollars.

HTP, formerly known as Home Theater Products, is the subject of a criminal investigation by the FBI, the company’s acting president, Irwin Zucker, told Bloomberg Business News. The Securities and Exchange Commission is conducting a separate probe.

The Anaheim firm, which sells products for home entertainment centers, has about $10 million in assets and $15 million in liabilities, said Chuck Troe, a Los Angeles financial advisor who has been hired to help the company reorganize or sell its operations. Bank of America, which is owed about $13 million, is the largest creditor.

No schedules of assets and liabilities were included with the bankruptcy papers, which were filed Wednesday in Santa Ana.

Zucker said the company still has about $500,000 in cash, but has been losing about $100,000 a month. The company, which had about 150 workers last September, has reduced its work force substantially in the last four months.

The company’s stock was suspended from trading on the Nasdaq market in September after its outside auditor resigned and withdrew his audits going back to 1992.

Auditor Jaak (Jack) Olesk of Beverly Hills said he uncovered $9.3 million in nonexistent sales that had allowed the company to post a profit of $4 million for its 1995 fiscal year. The company actually lost $5 million for the year, he said.

Olesk said he discovered the company’s executives had invented millions of dollars in phony receivables owed by nonexistent customers, using mail drops around the country.

HTP’s two top executives resigned in October in the wake of the auditor’s allegations. On March 18, Home Theater sued its former president, Jerome Adamo, and its former chief executive officer, Paul Safronchik, for fraud and breach of fiduciary duty in state court, said Zucker.

He said Olesk was accused of negligence in the suit. Olesk said Thursday that accusation is “completely without merit,” and that he will shortly file a counterclaim for fees owed.

Neither Adamo nor Safronchik was immediately available for comment.