Down, but Not Out : Acting President Still Sees HTP as Viable Concern

Despite probes by securities regulators and the FBI, and a barrage of lawsuits from creditors that forced his company to take shelter in bankruptcy court this week, the man now at the helm of HTP International Inc. says he still thinks he has a viable business.

Irwin Zucker, 48, who took over six months ago in the wake of allegations that HTP had inflated its sales by millions of dollars, says he has cut the staff by a third, to about 115, cleaned up the accounting system and improved purchasing, automation and other elements of the 4-year-old public company.

“Our plans are to continue to improve operations and sales. Given the right circumstances, it can turn around,” Zucker said in an interview Friday. But he also said that the other option is to sell HTP’s operations and cut its losses.

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In fact, the manufacturer of home theater electronics products and furniture said this week it agreed to sell its multidisc changer technology for an undisclosed sum. Also, HTP just hired Barrington Associates, a Los Angeles investment banking firm, to help it restructure and work with potential buyers.

Chuck Troe, Barrington’s senior vice president, said several businesses have inquired about HTP’s assets, but he declined to comment further.

Troe said that despite HTP’s troubles, the company has several things going for it: established products with a recognized name (its speakers are marketed under the Paramount Pictures label), and valuable technology and a strong distribution channel. The company’s products are sold at some 2,000 outlets, including Sam’s Club, Brookstone and Target stores.

Even so, Zucker has a daunting task.

By Zucker’s own accounts, the company formerly known as Home Theater Products is currently losing about $100,000 a month. And since January, nine creditors have filed lawsuits against the company, which Zucker said was what pushed cash-short HTP to file for Chapter 11 reorganization Wednesday in U.S. Bankruptcy Court in Santa Ana.

HTP’s bankruptcy attorney, Joseph Eisenberg, said creditor information will be filed next week. But company officials said HTP’s liabilities total $15 million, its assets about $10 million.

Of more than 50 creditors, HTP’s biggest debt, about $13 million, is owed to Bank of America. Last September, the bank sued HTP demanding payment of about $15 million in loans.

Lisa Lewis, a B of A spokeswoman, said Friday that the bank was aware of the Chapter 11 filing, which puts the bank’s suit on hold. But she declined comment about HTP’s plans or recent progress.

Zucker, an industry veteran who came to HTP from Harman International Industries, became HTP’s acting president six months ago largely by default. Then new to the company, he was the only director left after others resigned or quit amid disclosures that HTP had inflated its sales.

HTP’s independent auditor, Jaak Olesk, resigned and alleged that management had created phony accounts receivables of $9 million in order to report a $4-million profit.

That triggered a dizzying chain of events at the company. Nasdaq suspended trading of stock in HTP, the Securities and Exchange Commission and the FBI began investigations, and HTP’S two top officers, Paul Safronchik and Jerome Adamo, left the company.

Zucker said Friday that HTP has completed an internal audit, but said he could not disclose the findings because of the pending federal investigations. Zucker said the audit found no clear evidence of any stolen products or money, but last month HTP sued Olesk, Adamo, Safronchik as well as two of Safronchik’s relatives, alleging fraud and breach of fiduciary duty.

Zucker said he has stayed at HTP because he believes the company has value and can be turned around.

But, he added: “It’s an absolutely massive job.”

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HTP International’s Dilemma

Details on the firm and key events of the alleged fraud.

COMPANY AT A GLANCE

* Headquarters: Anaheim

* Former name: Home Theater Products

* Acting president: Irwin Zucker

* Business: Home theater cabinets and components

* Founded: 1992

* Employees: 115

KEY EVENTS

1995

* Sept. 5: HTP’s independent auditor, Jaak Olesk, resigns and renounces his audit statements for the previous three years. In documents filed with the SEC, he alleges weak internal controls and questionable management integrity at HTP.

* Sept. 18: Olesk’s departure becomes public; HTP denies his allegations.

* Sept. 20: Olesk alleges he resigned after discovering management had created phony accounts receivable of $9 million in order to report a $4-million profit when, in fact, it had lost $5 million; HTP begins an internal investigation.

* Sept. 25: At HTP’s request, Nasdaq stock market officials suspend trading stock, which had fluctuated between $2 and $7.

* Sept. 26: Federal securities officials begin investigation; Bank of America files lawsuit against HTP seeking repayment of $14.4 million in loans.

* Sept. 27: Shareholders committee formed to seek answers from HTP.

* Oct. 5: HTP removed from Nasdaq at the company’s request; filings with SEC reveal its second auditor, Oscar Sendowski, has resigned.

* Oct. 9: HTP says chairman and chief financial officer Paul Safronchik will resign and Jerome A. Adamo, president, will retire.

* Oct. 16: HTP officials admit 1995 revenue figures were overstated.

1996

* March 18: Company files suit against Safronchik and Adamo; former auditor Olesk is accused of negligence in suit.

* April 3: HTP, now under investigation by FBI, files for bankruptcy reorganization.

Sources: Times reports, Bloomberg Business News; Researched by JANICE L. JONES / Los Angeles Times